CAT sues partner for bigger share of first drug royalties

Cambridge Antibody Technology is suing its partner Abbott Laboratories in the high court over its share of royalty payments for its first drug on the market, the rheumatoid arthritis treatment Humira.

An Abbott subsidiary bought the drug rights in 1995. CAT's agreement states it would get around 5%-6% of sales, but it contains a clause, disputed by CAT, that the payments can be reduced to less than 3% in certain circumstances. CAT also has to pay royalties to the Medical Research Council out of its share.

Humira was launched in the US, UK and Germany earlier this year. CAT received a royalty payment in October, although it contests it should be paid more. Abbott predicts that the sales of the product could reach a peak of $1bn for rheumatoid arthritis, and it is in clinical trials for other types of arthritis and Crohn's disease.

The case is likely to take 12 to 18 months to come to trial. "This will keep a lid on the stock because this will be hovering over it with success not guaranteed," said Howard Miller, an analyst at stockbroker Teather & Greenwood.

CAT made the disclosure yesterday in its final year results, which showed revenues from its licence fees and contract research work falling 8% to £8.7m and widening losses of £39m compared with £28m the year before, after a significant increase in spending on research and development. The chief executive, Peter Chambre, said the company has enough cash to last for three years but that it would require funding to take it through to profitability in 2008. It had cash resources of £108m at the end of September. Funding options include raising money on the Nasdaq market, for which it recently received registration to enable it to do so.

During the year CAT tried and failed to merge with Oxford Glycosciences and tried and failed to bid for Drug Royalty Corporation. It raised £23m from a placing of shares to US firm Genzyme, although it will use the money to develop two products they are collaborating on for the treatment of the lung disease idiopathic pulmonary fibrosis.