CAT reverses on profitability pledge

UK biotech firm Cambridge Antibody Technology (CAT) has abandoned its plan to reach profitability by 2008, insisting that doing so would severely limit its ability to invest in new drug candidates.

Chief executive Peter Chambre said the company, which signed a £75m research partnership with AstraZeneca last November, was seeking acquisition or product in-licensing opportunities.

ìHad we maintained our goal of profitability in 2008, it would have meant that we would not be able to have the opportunity on behalf of shareholders of investing in the clinical development, either early or late stage, with AstraZeneca,î he said.

He added that CAT was aiming for a ìsustainable positionî where all its drug programmes would be self-funding up to the point where their efficacy had been demonstrated in clinical trials.

This position, Chambre insisted, would be reached as long as an appeal by US partner Abbott over royalties for arthritis treatment Humira, was unsuccessful. In December, CAT won a High Court dispute over its share of revenues for Humira, which had sales of $852m last year and predicted sales of more than $1.3bn this year.

However, he also said CAT's new strategic goal did not depend on it buying new medicines, and said it was unlikely that the company would enter the competitive and expensive market for late stage clinical drugs.

While the news will disappoint some investors, analysts supported the move saying CAT needed to diversify out of antibodies if it was to be successful.

ìThe antibody area is too narrow to attract investor interest and the company has made one or two tentative efforts to diversify but has not succeeded,î said Robin Gilbert, analyst at Numis Securities.

The push back of profitability was described as a `minor negative' in a research note by Morgan Stanley analysts. `We are not too concerned if CAT is spending cash on developing clinical candidates,' it read.

Analyst John Senior, at Evolution Securities, said he was not surprised by CAT's decision to drop the profitability target: ìEverybody pretty much worked that out, given the company announced the suspension of trials for Trabio [glaucoma surgery treatment] in March.î

CAT announced a loss before tax of £16.3m ($30.3m) in the six months to March 31. It said its research programme with AZ was on track to start five drug discovery projects this year.