By Lisa Seachrist

Abgenix Inc. signed a six-year, potential $120 million deal with Genentech Inc. to provide Genentech access to XenoMouse technology, to produce fully human antibodies and speed the production of therapeutic antibodies.

The deal is an expansion of an existing arrangement between South San Francisco-based Genentech and Fremont, Calif.-based Abgenix, which allows Genentech to use the XenoMouse technology in-house and covers 10 antigen targets.

"Our typical deal with the eight companies that we have collaborations with is a one- or two-target deal," said Scott Greer, president and CEO of Abgenix. "This is the first time where we've done a deal that allows them to bring the technology in-house. It allows them to incorporate the technology much earlier in the development process."

Under the terms of the agreement, Genentech has purchased 495,356 shares of Abgenix stock for $8 million. Included in the 10 targets are two in cancer and growth factor modulation that were part of previous agreements between the two companies. In addition to the initial equity investment, Genentech will pay up to $8 million per target in up-front licensing fees and milestone payments, plus any royalties for marketable products.

Deal A Model For Future Collaborations, Says CEO

At the end of the six year agreement, Genentech will have the option to extend the agreement for three more years and four more antigen targets. Should it exercise this option, Genentech will purchase $2.5 million in Abgenix stock at a 50 percent premium to the then-current market price, and pay up to $8 million for each antigen target.

"This deal expands on our business model of creating a large and diversified product portfolio from which we have a piece of that product's revenue," Greer said. "It's also representative of the types of deals we may sign in the future."

Abgenix's XenoMouse technology uses a strain of genetically engineered mice that, once immunized with an antigen, make entirely human antibodies. The technology allows researchers to isolate the gene that makes the antibody and scale up to manufacturing antibodies in two to four months. As a result, antibody therapeutics can move rapidly into clinical trials.

Abgenix has two products of its own in clinical trials. One of them, ABX-CBL, has recently completed Phase II trials as a therapy to treat steroid-resistant graft-vs.-host disease, a fatal and untreatable complication of allogeneic bone marrow transplants. The company will release the results of that trial in the next few months.

The other product, ABX-IL8, targets inflammation and is currently being tested in a Phase I/II trial involving patients with moderate to severe psoriasis.

In addition to the deal with Genentech, Abgenix said that it intended to file a registration with the Securities and Exchange Commission for a public offering of 3 million shares of common stock. The company will provide a 450,000 share overallotment for the managers of the offering - BancBoston Robertson Stephens, of New York; Lehman Brothers, of New York; and Pacific Growth Equities Inc., of San Francisco. The offering will not become effective until that registration is filed.

Abgenix's stock (NASDAQ:ABGX) closed Wednesday at $17, unchanged. n