Abginemax

 XenoMouse: Produces antibodies for disease targets  Benefits: Longer therapy, fewer side effects, faster drug development
Abgenix & the Xenomouse

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Case Questions
• Which of the three alternatives would you recommend to the company?
1. A Pharmacol “hand-off” deal (who is Pharmacol)? 2. A Biopart “hand-in” deal (who is Biopart)? 3. “Go-it-alone” through Phase II & then decide a development strategy?

• What are the direct financial implications of your answer? • What are the strategic implications of your answer?
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Abgenix: Key Issues
• Financial assessment
– Option NPVs: Basic approach – I will post more complex examples

• Strategic assessment of Abgenix’s capabilities & needs • Licensing trends

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Option 1: Pharmacol (Aventis?)
D1 Year PHARMACOL OPTION Fees to Abgenix Probability Probability-adjusted fees Sales Royalty (10%) Probability-adjusted royalty (40%) Probability-adjusted fees & royalty Adjusted NPV D2 D3 D4 D5 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sign P2 P3 FDA 5 1 5 0 $35 $49 5 1 5 0 0 0 0 8 0.75 6 0 0 0 0 10 0.4 4 20 2

$14

70 7

135 14

250 25

330 33

450 45

540 54

620 62

700 70

700 70

Assumptions Discount rate=.13 Approval likelihood=0.4 Probability of 2nd year in P2=.85 "Highly likely" P3 = 0.75 Time to market=5 years D5 costs incurred only if reach FDA approval

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Option 2: Biopart (Immunex)
Year BIOPART OPTION Fees to Abgenix Probability Probability-adjusted fees Costs Abgenix share of costs (.5) Probability Probability-adjusted costs Sales (.8 * Pharmacol) COGS (.10) SGA (.25) Operating contribution (Sales - COGS - SGA) Abgenix share (.5) Probability-adjusted sales share (40%) Probability-adjusted fees, costs, & sales Adjusted NPV 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sign P2 P3 FDA 5 1 5 10 5 1 5 5 1 5 20 10 1 10 $8

($33)

25 35 13 18 0.85 0.75 11 13

35 18 0.4 7

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