Great Titchfield Street, London -- Cambridge Antibody Technology (LSE: CAT) have this morning announced an exciting partnership in the world of biotechnology. As with most announcements in this specialised sector, it is always a requirement, first and foremost, for an investor to have a deep understanding of the medical profession to grasp what is actually occurring.
CAT's press release is no different, describing the alliance as " A new initiative in cancer, linking high-throughput antibody generation with genomics-based target discovery and the development of novel human monoclonal antibody-based therapeutic products". Phew! Is there a doctor in the house?
The alliance is formed with Searle, the pharmaceutical business of Monsanto (NYSE: MTC), and is CAT's largest to date. CAT already have a number of licences and collaborative agreements in the world of biotechnology, with high profile names such as Pfizer (NYSE: PFE) and AstraZeneca (LSE: AZN), but today's deal represents their largest to date.
Combining CAT's expertise in antibody drugs and its proprietary ProAb technology, and Searle's skills in genomics and other drug development and its "target proteins", should bring a string of "antibody products for application in a wide range of clinical indications".
Financially, the partnership is initially funded over two stages. Firstly, Searle will take a US$12.5m stake in the company, purchasing nearly 1.9m CAT shares, subject to shareholder approval, at £4.15p. Although CAT state that this represents a 15% premium to their share price over the last 20 trading days, it currently represents a significant discount to the share price seen last night -- 491p. Did the market know something already?
Secondly, over the next three years, Searle will commit a minimum of US$14.5m. Searle also have the option of extending the deal to five years. Depending on CATs performance in developing the products, and meeting predefined research milestones, the company could be in line to receive a further US$35m.
But the real big money comes, of course, if the products ever get to the market. According to CAT, if all goes well and the antibody-based drugs are developed as expected and receive the obligatory regulatory approval, payments in region of US$150m could be expected. CAT also gets to receive royalties on sales. It goes without saying this deal could be "the one" for CAT, a company with sales of just £2m in their last reported financial year.
Two people who are in the know were understandably enthusiastic, both about the technology and each other. Philip Needleman, co-president of Searle, comments: "We are confident that this technology will deliver therapeutics of the highest quality as well as tools to enhance all stages of our drug discovery and development pipeline. We are happy to welcome CAT as a partner"
Dr David Chiswell, CEO of CAT comments: "It is fantastically exciting to combine these skills with Searle's outstanding capabilities in drug development to build a partnership dedicated to creating customised drugs for treatment of human disease".
As always with any exciting biotech announcement of possible new pipeline products, Fools should be careful if rushing in on mere hope. Investing on the back of this deal is probably best left to those who have a full understanding of "high-throughput antibody generation", "genomics" and "human monoclonal antibodies".
Other Breaking News
Cambridge Antibody Technology leapt 46.5p (9%) to 537.5.p on the above news.
Perkins Food (LSE: PRK) perked up in time for Christmas this morning on the news of two acquisitions and an announcement that a trade buyer may make a bid for the company. In the meantime Perkins has gobbled up Dutch firm Brink Pluimveerproduckten for £11.7m, a producer of chilled poultry and also put in an order Lenders Food for £1.6m, a specialist in stir fry food. Perkins shares rose 21p (20%) to 137p on the news.
And in more food related purchases in time for Christmas, Unilever (LSE: ULVR) were again loading their shopping basket. The Qualiport stalwart has purchased 65% of Rossell Industries an Indian tea company, and has the intention of making a public offer for the remaining shares. Total costs are £25m. The shares, in their usual way, shed a halfpenny to 443p.
And no Christmas cheer at Transtec (LSE: TTY) and for high profile ex-cabinet minister shareholder Geoffrey Robinson. The shares were suspended this morning. Just to add to the groups financial troubles, with an "orderly sale" of their subsidiaries now underway, it has now come to light that a claim of £11.2m was missed from their latest accounts. Two directors have already resigned.
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