Non-traditional MAbs by “phage display” - Cambridge, UK-based Cambridge Antibody Technology (NASDAQ ADR: CATG) has proprietary methods for the engineering of bacteriophages (viruses that infect bacteria) to display human monoclonal antibodies on their surface which it uses in the design and development of antibody-based therapeutics, one of which is Humira for Rheumatoid arthritis sold by Abbott Labs (NYSE: ABT). 

The two companies have been in dispute since last year over the royalties Abbott pays to Cambridge Antibody. Abbot had interpreted a royalties agreement to mean it

should pay 2% of net sales, while Cambridge Antibody had claimed the deal meant it should receive 5% of net sales. This week, a U.K. High Court judge ruled in favor of Cambridge Antibody. Abbott said it will appeal the ruling but the appeal will not be heard until late January 2005.

Investment Opportunities in the Biotech-MAb Sector  - MEDX is one of the MAb sector's best performers this year with a year-to-date return of over 65 percent, compared to the 10 percent return of the AMEX Biotechnology Index (AMEX:$BTK.X). With a promising pipeline of Mederex's and its partners' antibodies in clinical trials as well as a stream of milestone payments and royalties from pharmaceutical and biotech firms, we believe that Mederex's shares could again outperform the AMEX BTK index next year.

Protein Design Labs is expected to narrow its losses to between $52 million to $57 million next year due in part to royalties from two potential blockbuster drugs, Avastin from Genentech and Tysabri, a multiple sclerosis drug from Biogen Idec (NASDAQ: BIIB). According Biogen Idec, Tysabri could expand the current MS market to $US 6 billion from $US 3.6 billion over time.

Tysabri is also currently in Phase III clinical trials for bowel disorder Crohn’s disease, and in Phase II for rheumatoid arthritis (RA). If the clinical trials  become successful, we believe that Tysabri could be a potential RA treatment with little or

no serious heart-related effects, substituting for drugs such as Vioxx, Celebrex and Naproxen. PDLI shares, which performed in-line with the AMEX BTK index this year, could rise substantially next year as the Tysabri drug establishes growing usage.

According to their recent SEC filing, Abgenix's net losses amounted to $102.2 million in the six months ending June 30, 2004. In October 2003, AstraZeneca entered a multi-year partnership with Abgenix for the joint discovery and development of therapeutic antibodies for up to 36 cancer targets. As part of the partnership agreement, AstraZeneca will make a $100 million investment in Abgenix convertible preferred stock, initially convertible into Abgenix common stock at $30 per share. Upon the achievement of certain milestones, Abgenix may also require AstraZeneca to invest an additional $60 million in Abgenix convertible preferred stock. This month, the company plans to sell $150 million worth of convertible senior notes due in 2011. 

Wall Street analysts believe that biotech companies such as Abgenix will become profitable, but not earlier than 2008. This year, Abgenix's shares underperformed the AMEX BTK Index by as much as 25% and currently have a "neutral" rating. Share prices could very much depend upon the successful development of ABX-EGF, a cancer drug in a market which is presently dominated by ImClone System's ERBITUX. (NASDAQ:IMCL).

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