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CAT Chooses OGS for its Dowry

Executive Summary

The merger of Cambridge Antibody Technology and Oxford GlycoSciences won't, in the short term, solve many of the problems that both share--namely, a lack of products, scant clinical development capabilities and a non-existent sales and marketing infrastructure. It does, however, create a financially stronger potential acquiror in a European biotech industry in need of consolidation.

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The financial markets are having a tough time understanding the combination of biotech companies Enzon and NPS Pharmaceuticals, perhaps because it doesn't follow the typical rationale for intra-biotech mergers. That is, it doesn't join competitors working with similar technologies or disease states. Rather, the companies have little overlap, an attraction they argue will result in a balanced, somewhat synergistic product portfolio. Still, they face the challenge of convincing divergent investor groups--earnings-oriented shareholders of Enzon and growth-chasing investors in NPS--that the resulting new company wo'n't be a hodge-podge of diverse technologies.

Biotechs on the Brink Choose Last-Minute Deals, Not Liquidation

Many biotechs, facing crisis situations in the fall of 2002, opted for deals that kept them alive but hardly offered much hope for upside. But in the coming months, boards may need to be far more realistic about their long-term prospects and consider a full range of options, including liquidation, when assessing a company's future.

How Much for That Money in the Window?

Cambridge Antibody Technology PLC's January £55 million share-for-share offer for Drug Royalty demonstrates not only CAT's growth in the last decade but also a willingness by biotech companies to indulge in a little creative financing. The move will help CAT reduce its cash burn and ratchet up its R&D spending at a time when the pace of more traditional methods of raising cash remains sluggish. And not least important, the deal illustrates how a transparent financing transaction to improve biotech P&L can be a straightforward alternative to today's obfuscating accounting practices which, in the current climate, look disturbingly Enronian.

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