Drug Royalty Corp. Inc. said Monday it signed a letter of intent withCambridge Antibody Technology Ltd. (CAT) in which it would giveCAT about $17 million (U.S.) over five years in exchange for royaltypayments over 15 years.The money from Drug Royalty, of Toronto, would go toward helpingfund CAT's development of therapeutic products using completelyhuman antibodies. CAT, of Cambridge, England, is applying itstechnology, which isolates the antibodies, against a number of diseases.Initially, Drug Royalty will pay CAT about $2.4 million in return forroyalty interest and other entitlements over 15 years. Drug Royalty alsohas an option to provide another $14.5 million over five years forfuture CAT projects on terms and conditions to be negotiated. Thetransaction is expected to close in May, subject to certain conditions."What we have, in effect, is a royalty interest for sales by CAT," AlanGrieve, president and chief executive officer of Drug Royalty, toldBioWorld. "Any revenue they get, we get a little piece of. We are not atliberty to disclose what the percentage is."Some of the revenue would come from sales based on technologypatented by Greg Winter, a founder of CAT and its research director,which will run out in 15 years.CAT's phase-display technology involves inserting the genes forhuman antibodies into bacteriophage (viruses that infect bacteria). CATisolates the antibody genes it wants using bacteriophage to mimic thehuman immune system. The process eliminates the need to use animalsas hosts."We have two specific therapeutic targets," and plans to start work on athird, said Grieve, who wouldn't disclose the targets.Drug Royalty (TSE:DRI), which raised $11.4 million upon completionof its initial public offering in January, acquires interests in royalties,licenses, development fees, and other entitlements in emerging andexisting drugs and technologies. As Grieve said, "Our business is todevelop cash flow for our company."He said that Drug Royalty's relationship with Peptide Technology Ltd.,an Australian pharmaceutical company that's a principal shareholder ofCAT, led to the proposed deal with CAT."They weren't out looking for money," Grieve said. "We came throughthe door. Our interest came as a result of what they're doing."He said another attraction was "getting involved with some of the bestbrains in the world" at CAT, which has the U.K.'s Medical ResearchCouncil _ the government's principal medical research body _ asanother shareholder. Nobel laureates Sir Aaron Klug and CesarMilstein are among those working with CAT.Drug Royalty has royalty interests in six drug products in development,and strategic partners in Australia, the U.K., and Denmark.

-- Jim Shrine

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