Abgenix Case Analysis

5730 words 23 pages
t@s$@ Harvard Business School

January 9,2001

Abgenix and the XenoMouse
Meet XenoMouse
"Meet XenoMoussrl\4/'headlined the piece frorn the Abgenix information kit. (See Exhibit 1.) wortl-r meeting, XenoMouse was probably it. While Lee Majors played bionic rnan, Steven Austin, in the popular Six Milliott Dollar Man television series in the 1970s, XenoMouse could well be termed the "Three Billion Dollar Mouse." XenoMouse lived at Abgenix in Frernont, California, just across the Dunbarton Bridge frorn Silicon Valley's farned Highway 101. While no product based on the genetically engineered XenoMouse had yet reached the market, he was the source of the company's near $3 billion rnarket capitalization of March 3L, 2000.

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Abgenix would participate in the upside potential by keeping with industry practice of structuring a deal involving its receiving royalty payments as a percentage of sales. While substantive discussions were in process with a number of firms on the developmental programs, no "sales" of programs had yet been made. The "sales cycle" for such a "product" was typically long as the buying company had to understand fully the test results so far and assess future prospects-all in an environment characterized by Ray Withy, Abgenix Chief Business Officer, as having "some element of unresolvable uncertainty." From its side, Abgenix had to scrutinize the "buyer" since the buyer's

Abgenix and the XenoMouse


degree of success would ultirnately deterrnine Abgenix's financial returns given the significance of the royalty rate on the sales piece of any deal.

in the negotiation

Seventeen partners' programs rnoving ahead, many nerv technology licensing collaborations

phase, and four promising proprietary developrnent progralns had made XenoMouse "The $3 Billion l\{ouse" in the eyes of the stock rnarket. Greer faced key challenges: (i) pick the right partners for collaboration, (ii) continue to develop Abgenix skills and capabilities for the long term, and (iii) properly balance risk and potential reward in negotiated deals. This was made all the more challenging given