================================================================================
                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549

                                     FORM 10-Q

[X]   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 For the Quarterly Period Ended September 30, 1998

[ ]   Transition report pursuant to Section 13 or 15(d) of the
      Securities Exchange Act of 1934 For the transition period from
      __________ to ___________


                       Commission file number: 000-24207

                                  ABGENIX, INC.
             (Exact name of registrant as specified in its charter)

                DELAWARE                               94-3248826
     (State or other jurisdiction of                (I.R.S. Employer
     incorporation or organization)              Identification Number)

                              7601 DUMBARTON CIRCLE
                            FREMONT, CALIFORNIA 94555
                    (Address of principal executive offices)

                         TELEPHONE NUMBER (510) 608-6500
              (Registrant's telephone number, including area code)

        Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                               Yes [X ]   No [ ]

As of November 1, 1998 there were 11,082,506 shares of the Registrant's Common
Stock outstanding.

================================================================================




<PAGE>




                           ABGENIX, INC.

                            FORM 10-Q

                              INDEX





Cover Page

Index

PART I - Financial Information

   Item 1 - Financial Statements

       Condensed Balance Sheets - September 30, 1998,
             and December 31, 1997

       Condensed Statements of Operations - Three and nine months ended
             September 30, 1998 and 1997

       Condensed Statements of Cash Flows - Nine months ended
             September 30, 1998 and 1997

       Notes to Condensed Financial Statements

   Item 2 - Management's Discussion and Analysis of Financial Condition
             and Results of Operations

PART II - Other Information

   Item 1 - Legal Proceedings

   Item 2 - Changes in Securities and Use of Proceeds

   Item 3 - Defaults Upon Senior Securities

   Item 4 - Submission of Matters to a Vote of Security Holders

   Item 5 - Other Information

   Item 6 - Exhibits and Reports on Form 8-K

SIGNATURES





<PAGE>



                                  ABGENIX, INC.

                            CONDENSED BALANCE SHEETS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
                                                     September 30, December 31,
                                                     1998          1997
                                                     ------------  ------------
<S>                                                  <C>           <C>
                         ASSETS                      (Unaudited)     (Note 1)
Current assets:
  Cash and cash equivalents .........................     $2,283        $4,617
  Short-term investments ............................     22,290        10,704
  Prepaid expenses and other current assets .........        370           550
                                                     ------------  ------------
  Total current assets ..............................     24,943        15,871
Property and equipment, net .........................      5,418         5,776
Deposits and other assets ...........................        420           437
                                                     ------------  ------------
                                                         $30,781       $22,084
                                                     ============  ============
   LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
  Short-term payable to affiliate ...................        $34          $212
  Payable to Xenotech for cross-license
    and settlement obligation .......................      3,750         3,750
  Accounts payable ..................................        474           426
  Accrued stock issuance costs ......................      --            1,200
  Other accrued liabilities .........................      1,135         2,000
  Current portion of long-term debt .................      1,694         1,646
                                                     ------------  ------------
  Total current liabilities .........................      7,087         9,234
Long-term debt ......................................      2,710         3,979
Commitments
  Redeemable convertible preferred stock,
    $0.0001 par value; 20,000,000 shares
    authorized, 0 and 7,263,209 shares
    issued and outstanding at September 30,
    1998 and December 31, 1997, at amount
    paid in; aggregate redemption and
    liquidation value of approximately $45,003
    at  December 31, 1997............................      --           31,189
  Redeemable convertible preferred stock
    subscription receivable .........................      --           (2,737)
  Redeemable convertible preferred
    stock issuable ..................................      --            2,737
Stockholders' equity (net capital deficiency):
  Common stock, $0.0001 par value; 50,000,000
    shares authorized, 11,054,431 and 233,542
    shares issued and outstanding at September
    30, 1998 and December 31, 1997,
    respectively; at amount paid in .................     55,506           351
  Contributions from parent .........................     29,277        29,277
  Additional paid-in capital ........................      2,296         1,776
  Deferred compensation .............................     (1,320)       (1,248)
  Accumulated deficit ...............................    (64,775)      (52,474)
                                                     ------------  ------------
  Total stockholders' equity (net capital deficiency)     20,984       (22,318)
                                                     ------------  ------------
                                                         $30,781       $22,084
                                                     ============  ============
</TABLE>
                             See accompanying notes.
<PAGE>


                                  ABGENIX, INC.

                       CONDENSED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                      Three Months Ended   Nine Months Ended
                                        September 30,        September 30,
                                     -------------------  ---------------------
                                     1998      1997       1998      1997
                                     --------- ---------  --------- -----------
<S>                                  <C>       <C>        <C>       <C>
Revenues:
  Revenue under collaborative
  agreements from related parties
  (net of equity in losses of
  Xenotech of $210 and $343 for the
  three months ended September 30,
  1998 and 1997 and $520 and $990 for
  the nine months ended September 30,
  1998 and 1997, respectively) .....     $212      $345       $710      $1,109
  Contract revenue .................      175        --      1,298           0
                                     --------- ---------  --------- -----------
Total revenues .....................      387       345      2,008       1,109
                                     --------- ---------  --------- -----------
Operating expenses:
  Research and development .........    3,120     3,726     11,976       8,787
  General and administrative .......      782       692      2,562       1,966
  Charge for cross-license and
    settlement-amount allocated
    from Cell Genesys ..............       --        --         --      11,250
  Equity in losses from the
    Xenotech joint venture (charge
    for cross-license and
    settlement) ....................       --     3,750         --       7,500
                                     --------- ---------  --------- -----------
Total operating expenses ...........    3,902     8,168     14,538      29,503
                                     --------- ---------  --------- -----------
Operating loss .....................   (3,515)   (7,823)   (12,530)    (28,394)
Other income and expenses:
  Interest income ..................      328        61        657         274
  Interest expense .................     (118)     (217)      (428)       (480)
                                     --------- ---------  --------- -----------
Net loss ...........................  ($3,305)  ($7,979)  ($12,301)   ($28,600)
                                     ========= =========  ========= ===========

Basic and diluted net loss per share   ($0.31) ($383.88)    ($3.27) ($2,576.11)
                                     ========= =========  ========= ===========
Shares used in computing basic and
  diluted net loss per share ......    10,716        21      3,767          11
                                     ========= =========  ========= ===========
</TABLE>
                          (See accompanying notes.)
<PAGE>

                                  ABGENIX, INC.

                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                             Nine Months Ended
                                                               September 30,
                                                            -------------------
                                                            1998      1997
                                                            --------- ---------
<S>                                                         <C>       <C>
OPERATING ACTIVITIES:
Net loss .................................................  ($12,301) ($28,600)
Adjustments to reconcile net loss to net cash used by
  operating activities:
     Equity in losses of Xenotech (including the charge
         for cross-license and settlement) ...............       520     4,740
     Depreciation and amortization .......................     1,347       613
     Charge for cross-license and settlement .............       --     11,250
     Changes in certain assets and liabilities:
         Prepaid expenses and other current assets .......       180      (814)
         Deposits and other assets .......................      (100)     (100)
         Short-term payable to parent ....................      (178)   (2,429)
         Payable to Xenotech for cross-license and 
           settlement obligation..........................       --      3,750
         Accounts payable ................................        49       796
         Deferred revenue from related parties ...........       --       (376)
         Accrued stock issuance costs ....................    (1,200)      --
         Other accrued liabilities .......................      (866)     (677)
                                                            --------- ---------
Net cash used in operating activities ....................   (12,549)  (11,847)
                                                            --------- ---------
INVESTING ACTIVITIES
Purchases of short-term investments ......................   (26,148)   (4,979)
Sales of short-term investments at maturity ..............    14,562     7,961
Capital expenditures .....................................      (528)   (2,613)
Contributions to Xenotech ................................      (417)     (935)
                                                            --------- ---------
Net cash used in investing activities ......                 (12,531)     (566)
                                                            --------- ---------
FINANCING ACTIVITIES
Net proceeds from issuances of redeemable convertible
     preferred stock .....................................     3,936       --
Proceeds from long-term debt .............................       --      8,495
Payments under long-term debt ............................    (1,221)     (333)
Proceeds from issuance of common stock ...................    20,031        13
                                                            --------- ---------
Net cash provided by financing activities ................    22,746     8,175
                                                            --------- ---------
Net increase (decrease) in cash and cash equivalents .....    (2,334)   (4,238)
Cash and cash equivalents at the beginning of the period .     4,617     7,190
                                                            --------- ---------
Cash and cash equivalents at the end of the period .......    $2,283    $2,952
                                                            ========= =========
</TABLE>
                             See accompanying notes.
<PAGE>






                         ABGENIX, INC.

                 NOTES TO FINANCIAL STATEMENTS
                       September 30, 1998

1.      BASIS OF PRESENTATION

        The unaudited condensed financial statements of Abgenix, Inc. 
(the "Company" or "Abgenix") included herein has been prepared by the 
Company pursuant to the rules and regulations of the Securities and 
Exchange Commission. Certain information or footnote disclosure 
normally included in financial statements prepared in accordance with 
generally accepted accounting principles have been condensed or omitted 
pursuant to such rules and regulations. In the opinion of the Company, 
the accompanying unaudited condensed financial statements contain all 
adjustments, consisting only of normal recurring adjustments, necessary 
to present fairly the financial information included therein. While the 
Company believes that the disclosures are adequate to make the 
information not misleading, it is suggested that these financial 
statements be read in conjunction with the audited financial statements 
for the year ended December 31, 1997 and accompanying notes included in 
the Company's Prospectus dated July 2, 1998 filed as part of a 
Registration Statement on Form S-1 (Reg. No. 333-49415), as amended. 
The results of operations for the quarter ended September 30, 1998 are 
not necessarily indicative of the results to be expected for the full 
year.

        Reclassification

        Certain 1997 balances have been reclassified to conform to the 
1998 presentation.

2.      NET LOSS PER SHARE

        In 1997, the Company adopted Financial Accounting Standards 
Board Statement of Financial Accounting Standard No. 128, "Earnings Per 
Share" ("SFAS 128"). SFAS 128 replaced the calculation of primary and 
fully diluted earnings per share with basic and diluted earnings per 
share. Unlike primary earnings per share, basic earnings per share is 
computed using the weighted average number of common shares outstanding 
and excludes any dilutive effects of options, warrants and convertible 
securities. Diluted earnings per share is very similar to the 
previously reported fully diluted earnings per share. Potentially 
dilutive securities have been excluded from the computation of net loss 
per share for the periods presented as their effect is antidilutive.

        Pro forma net loss per share has been computed to give effect 
to the automatic conversion of redeemable convertible preferred stock 
into common stock upon completion of the Company's initial public 
offering (using the as-if-converted method) from the original date of 
issuance.





        A reconciliation of shares used in calculation of basic and 
diluted and pro forma net loss per share follows (in thousands except 
per share data):
<TABLE>
<CAPTION>
                                  Three Months Ended    Nine Months Ended
                                    September 30,         September 30,
                                --------------------- ----------------------
                                   1998       1997       1998       1997
                                ---------- ---------- ---------- -----------
<S>                             <C>        <C>        <C>        <C>
Net loss ......................   ($3,305)   ($7,979)  ($12,301)   ($28,600)
                                ========== ========== ========== ===========
Basic:
   Weighted-average shares of
    common stock outstanding
    used in computing basic
    and diluted net loss
    per share ..........           10,716         21      3,767          11
                                ========== ========== ========== ===========
Basic net loss per share ......    ($0.31)  ($383.88)    ($3.27) ($2,576.11)
                                ========== ========== ========== ===========
Pro forma:
   Shares used in computing
     basic net loss per share
     (from above) .............    10,716         21      3,767          11
   Adjusted to reflect the
     effect of the assumed
     conversion of preferred
     stock from the date of
     issuance .................       171      3,750      5,280       3,750
                                ---------- ---------- ---------- -----------
   Weighted-average shares
     used in computing pro
     forma net loss per share .    10,886      3,771      9,047       3,761
                                ========== ========== ========== ===========
Pro forma net loss per share ..    ($0.30)    ($2.12)    ($1.36)     ($7.60)
                                ========== ========== ========== ===========
</TABLE> 
        Diluted net loss per share has not been presented separately 
as, due to the Company's net loss position, it is antidilutive.


3.      COLLABORATION AGREEMENT WITH XENOTECH

        In 1991, Cell Genesys, Inc. and JT America, Inc. formed 
Xenotech, L.P. ("Xenotech") to develop genetically modified strains of 
mice which can produce human monoclonal antibodies and to commercialize 
products generated from these mice. Upon the creation of Abgenix, Cell 
Genesys, Inc.'s rights in the joint venture were assigned to the 
Company. Xenotech funds its research, which is generally conducted by 
Abgenix, through capital contributions from the partners. The Company 
paid and expensed as research and development $0, $45,000, $195,000 and 
$45,000 related to licensing the rights to this technology from 
Xenotech for the three months ended September 30, 1998 and 1997 and the 
nine months ended September 30, 1998 and 1997,respectively.

        The Company is obligated to pay 50% of all Xenotech's funding 
requirements. The Company accounts for its investment in Xenotech under 
the equity method; 50% of Xenotech's net loss up to the Company's 
investment amount. Details are as follows:
<TABLE>
<CAPTION>
                                  Three Months Ended    Nine Months Ended
                                    September 30,         September 30,
                                --------------------- ----------------------
                                   1998       1997       1998       1997
                                ---------- ---------- ---------- -----------
<S>                             <C>        <C>        <C>        <C>
Abgenix's share of
  Xenotech losses .............      $208     $4,221       $520      $8,315

Losses associated with
  cross-license and settlement.       --      (3,750)       --       (7,500)

Unabsorbed losses .............         2        --         --         --

Difference due to timing and
  change in deferred revenue ..       --        (128)       --          175
                                ---------- ---------- ---------- -----------
Equity in losses of Xenotech ..      $210       $343       $520        $990
                                ========== ========== ========== ===========
</TABLE>
       The Company recognized revenue of $212,000, $345,000, $710,000 
and $1,109,000 for the three months ended September 30, 1998 and 1997 
and the nine months ended September 30, 1998 and 1997, respectively, 
net of its own payments to the joint venture related to this revenue.

       Summary unaudited financial information for Xenotech is as 
follows:
<TABLE>
<CAPTION>
                                  Three Months Ended    Nine Months Ended
                                    September 30,         September 30,
                                --------------------- ----------------------
                                   1998       1997       1998       1997
                                ---------- ---------- ---------- -----------
<S>                             <C>        <C>        <C>        <C>
Research and license revenues
  from partners ...............     $ --         $47       $310         $72
Expenses:
  Research and development ....       415        981      1,273       1,648
  General and administrative ..         1         12         77          64
  Cross-license and settlement
    expense ...................       --       7,500        --       15,000
                                ---------- ---------- ---------- -----------
Total expenses ................       416      8,493      1,350      16,712
Interest income ...............       --           3        --            9
                                ---------- ---------- ---------- -----------
Net loss ......................     ($416)   ($8,443)   ($1,040)   ($16,631)
                                ========== ========== ========== ===========
</TABLE>
4.  Stockholders' Equity

In July 1998, the Company completed its initial public offering 
and issued 2,500,000 shares of its common stock to the public at a 
3price of $8.00 per share.  The Company received cash of $18.6 million, 
after deducting underwriting discounts and commissions and before 
deducting expenses payable by the Company.  Upon the closing of the 
initial public offering, each outstanding share of the Company's then 
outstanding convertible redeemable preferred stock was automatically 
converted into one share of common stock.  On July 27, 1998 the 
Company's underwriters exercised an option to purchase an additional 
375,000 shares of common stock at a price of $8.00 per share to cover 
over-allotments.  The Company received cash of approximately $2.8 
million, net of underwriting discounts and commissions.

5.     SUBSEQUENT EVENT

       In October 1998, Abgenix established its second research 
collaboration with Millennium BioTherapeutics, Inc. ("Millennium 
BioTherapeutics")in which Millennium BioTherapeutics will make payments 
to the Company for performance of research activities. In addition, the 
agreement provides Millennium BioTherapeutics with an option, for a 
limited time, to enter into a research license and option agreement 
that provides Millennium BioTherapeutics with an option to obtain a 
license to develop, make, use and sell antibody products derived from 
the research collaboration. If the option is exercised, the research 
license and option agreement may provide Abgenix with up to 
approximately $7.5 million in license fees and milestone payments to be 
made in the future upon completion of certain milestones, including 
completion of research, clinical trials and the receipt of regulatory 
approvals. Additionally, if a product receives marketing approval from 
the FDA or equivalent foreign agency, the Company is entitled to 
receive royalties on future product sales by Millennium 
BioTherapeutics.

Also, in October 1998, Pfizer has exercised its option to expand its 
research collaboration with the Company to include a second undisclosed 
antigen target in the field of cancer and has an option for a third 
antigen target.  After the exercise of an option by Pfizer, the Company 
could receive potential license fees and milestone payments of up to 
approximately $8.0 million per antigen upon the completion of certain 
milestones, including preclinical and clinical trials and receipt of 
regulatory approval.  Additionally, if a product receives marketing 
approval from the FDA or an equivalent foreign agency, the Company is 
entitled to receive royalties on future product sales by Pfizer.  
Pfizer will be responsible for manufacturing, product development and 
marketing of any products developed through this collaboration.









                          ABGENIX, INC.

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
AND RESULTS OF OPERATIONS

        The following Management's Discussion and Analysis of Financial 
Condition and Results of Operations contains forward-looking statements 
within the meaning of Section 27A of the Securities Act of 1933, as 
amended, and Section 21E of the Securities Exchange Act of 1934, as 
amended. These statements include the statements in paragraph two under 
"Overview", as amended, regarding the Company's commercialization 
strategy, the statements in paragraph four under "Overview" regarding 
future revenues from current and potential future collaborative 
arrangements, the statements in paragraph five under "Overview" 
regarding the expectation and fluctuation of operating losses in future 
periods, the statements in paragraph eight and paragraph nine under 
"Results of Operations" regarding future increases in research and 
development and general and administrative expenses, respectively, the 
statements in paragraph four under "Liquidity and Capital Resources" 
regarding the Company's use of available resources during future 
periods, the statements in paragraph five under "Liquidity and Capital 
Resources" regarding the sufficiency of the Company's available 
resources to meet working capital and capital expenditure requirements, 
the statements under "Year 2000" regarding the impact of computer 
system failures on the Company's business and the statements below 
under "Additional Factors Affecting Future Operating Results", among 
others. These forward-looking statements are based on current 
expectations and entail various risks and uncertainties that could 
cause actual results to differ materially from those projected in the 
forward-looking statements. Such risks and uncertainties are set forth 
in this Management's Discussion and Analysis of Financial Condition and 
Results of Operations and below under "Additional Factors Affecting 
Future Operating Results".

OVERVIEW

        The business and operations of Abgenix commenced in 1989 and 
were initially conducted within Cell Genesys, Inc. ("Cell Genesys"). On 
June 24, 1996, Abgenix was incorporated and subsequently on July 15, 
1996 was organized pursuant to a Stock Purchase and Transfer Agreement 
between the Company and Cell Genesys. The agreement set forth the terms 
and conditions for the transfer of the antibody business unit within 
Cell Genesys to Abgenix.

        Abgenix develops and intends to commercialize antibody 
therapeutic products for the prevention and treatment of a variety of 
disease conditions, including transplant-related diseases, inflammatory 
and autoimmune disorders, and cancer. The Company has developed 
XenoMouse technology; a proprietary technology that it believes enables 
it to quickly generate high affinity, fully human antibody product 
candidates to essentially any disease target appropriate for antibody 
therapy. Abgenix intends to use its XenoMouse technology to build and 
commercialize a large and diversified product portfolio through the 
establishment of corporate collaborations and internal product 
development programs. The Company has established collaborative 
arrangements with Pfizer Inc. ("Pfizer"), Schering-Plough Research 
Institute ("Schering-Plough"), Genentech, Inc. ("Genentech") and 
Millennium BioTherapeutics, Inc. ("Millennium BioTherapeutics"). In 
certain instances, the Company intends to commercialize select products 
on its own in niche markets such as Graft Versus Host Disease ("GVHD"). 
In addition, the Company has four proprietary antibody product 
candidates that are under development internally, two of which are in 
human clinical trials.

        In 1991, Cell Genesys and JT America, Inc. ("JT America") 
formed Xenotech, L.P. ("Xenotech"), an equally owned joint venture, to 
develop genetically modified strains of mice which can produce human 
monoclonal antibodies and to commercialize products generated from 
these mice. Upon the organization of Abgenix, Cell Genesys assigned its 
rights in Xenotech to Abgenix. Xenotech funds its research and 
development activities through capital contributions from the Company 
and JT America and the Company is obligated to fund 50% of all Xenotech 
expenses. Pursuant to contractual arrangements, the Company performs 
research for the joint venture and receives payments for such research. 
The Company accounts for its investment in Xenotech under the equity 
method of accounting.

        The Company expects that substantially all of its revenues for 
the foreseeable future will result from payments under collaborative 
arrangements, including fees upon signing, reimbursement for research 
and development and milestone payments. The Company has established 
collaborative arrangements with Pfizer, Schering-Plough, Genentech and 
Millennium BioTherapeutics.

Pursuant to the Company's research collaboration with Pfizer, 
Pfizer may make additional payments to the Company upon completion of 
certain research milestones. Pfizer has exercised its option to expand 
the research collaboration to include a second undisclosed antigen 
target in the field of cancer and has an option for one additional 
antigen target. After the exercise of an option by Pfizer, the Company 
could receive potential license fees and milestone payments of up to 
approximately $8.0 million per antigen target upon the completion of 
certain milestones. Additionally, if a product receives marketing 
approval from the United States Food and Drug Administration ("FDA") or 
an equivalent foreign agency, the Company is entitled to receive 
royalties on future product sales by Pfizer.

Pursuant to the Company's research collaboration with Schering-
Plough, Schering-Plough will be obligated to make additional payments 
to the Company upon completion of the research. In addition, the 
agreement provides Schering-Plough with an option, for a limited time, 
to enter into a research, option and license agreement. If the option 
is exercised, the research, option and license agreement may provide 
the Company with up to approximately $8.0 million in additional 
research fees and milestone payments upon the completion of certain 
milestones. Additionally, if a product receives marketing approval from 
the FDA or an equivalent foreign agency, the Company is entitled to 
receive royalties on future product sales by Schering-Plough.

Pursuant to the Company's research collaboration with Genentech, 
Genentech is obligated to make payments to the Company for performance 
of research activities. In addition, the agreement provides Genentech 
with options, for a limited time, to enter into product license 
agreements with respect to each of two antigens. If an option is 
exercised, a product license agreement may provide Abgenix with up to 
approximately $5.5 million per antigen target in license fees and 
milestone payments to be made upon completion of certain milestones. 
Additionally, if a product receives marketing approval from the FDA or 
an equivalent foreign agency, the Company is entitled to receive 
royalties on future product sales by Genentech.

Pursuant to the Company's research collaboration with Millennium 
BioTherapeutics entered into in July 1998, Millennium BioTherapeutics 
will make payments to the Company for performance of research 
activities. In addition, the agreement provides Millennium 
BioTherapeutics with an option, for a limited time, to enter into a 
research license and option agreement that provides Millennium 
BioTherapeutics with an option to obtain a license to develop, make, 
use and sell antibody products derived from the research collaboration. 
If the option is exercised, the research license and option agreement 
may provide Abgenix with up to approximately $7.5 million in license 
fees and milestone payments to be made in the future upon completion of 
certain milestones, including completion of research, clinical trials 
and the receipt of regulatory approvals. Additionally, if a product 
receives marketing approval from the FDA or equivalent foreign agency, 
the Company is entitled to receive royalties on future product sales by 
Millennium BioTherapeutics. Payments under these collaborative 
arrangements will be subject to significant fluctuation in both timing 
and amount and therefore the Company's revenues and results of 
operations for any period may not be comparable to the revenues or 
results of operations for any other period. To date, all of the 
Company's revenues have resulted primarily from research and 
development funding and milestone payments and may not be indicative of 
the Company's future performance or the ability of the Company to 
continue to achieve such milestones.

        Since inception, the Company has funded its research and 
development activities primarily through contributions from Cell 
Genesys, revenues from collaborative arrangements, private placements 
of preferred stock, equipment leaseline financings and loan facilities 
and most recently through an initial public offering in July 1998 
yielding $21.4 million, net of underwriting fees. The Company has 
incurred operating losses in each of the last three years of operation, 
including net losses of approximately $8.3 million, $7.1 million, $35.9 
million and $12.3 million in the years ended December 31, 1995, 1996 
and 1997 and the nine months ended September 30, 1998, respectively, 
and as of September 30, 1998, had an accumulated deficit of 
approximately $64.8 million. The Company's losses have resulted 
principally from costs incurred in performing research and development 
to develop its XenoMouse technology and subsequent antibody product 
candidates, from the non-recurring cross-license and settlement charge 
(described below) and from general and administrative costs associated 
with the Company's operations. The Company expects to incur additional 
operating losses until at least the year 2000 as a result of its 
expenditures for research and product development, including costs 
associated with conducting preclinical testing and clinical trials. The 
Company expects the amount of such losses will fluctuate significantly 
from quarter to quarter as a result of increases or decreases in the 
Company's research and development efforts, the execution or 
termination of collaborative arrangements, or the initiation, success 
or failure of clinical trials.

        In 1994, Cell Genesys and GenPharm International, Inc., a 
subsidiary of Medarex, Inc. ("GenPharm"), and, beginning in 1996, 
Abgenix became involved in litigation primarily related to intellectual 
property rights associated with a method for inactivating a mouse's 
antibody genes and technology pertaining to transgenic mice capable of 
producing human antibodies. Rather than endure the cost and business 
interruption of protracted litigation, on March 27, 1997, Cell Genesys 
announced, along with Abgenix, Xenotech and Japan Tobacco, that it had 
signed a comprehensive patent cross-license and settlement agreement 
with GenPharm that resolved all related litigation and claims between 
the parties. Under the cross-license and settlement agreement, the 
Company has licensed on a non-exclusive basis certain patents, patent 
applications, third party licenses and inventions pertaining to the 
development and use of certain transgenic rodents including mice that 
produce fully human antibodies. The Company uses its XenoMouse 
technology to generate fully human antibody products and has not 
licensed the use of, and does not use, any transgenic rodents developed 
or used by GenPharm. As initial consideration for the cross-license and 
settlement agreement, Cell Genesys issued a note to GenPharm due 
September 30, 1998 for $15.0 million payable by Cell Genesys and 
convertible into shares of Cell Genesys common stock. Of this note, 
approximately $3.8 million satisfied certain of Xenotech's obligations 
under the agreement. Japan Tobacco also made an initial payment. During 
1997, two patent milestones were achieved and Xenotech was obligated to 
pay $7.5 million for each milestone. Xenotech paid $7.5 million to 
satisfy the first milestone and has recorded a payable to GenPharm for 
the remaining $7.5 million. The Company has recorded a liability of 
approximately $3.8 million in its balance sheet representing its share 
of the Xenotech obligation. The payable is due in November 1998. No 
additional payments will accrue under this agreement. The Company has 
recognized, as a non-recurring charge for cross-license and settlement, 
a total of $22.5 million. The Company concluded that the cost of the 
cross-license and settlement agreement was properly expensed under 
Statement of Financial Accounting Standards No. 2, "Accounting for 
Research and Development Costs" because the cross-license received by 
the Company from GenPharm is non-exclusive and has no alternative 
future uses for the Company. The Company does not have any future 
financial obligations under the cross-license and settlement agreement.

        In connection with the grant of stock options since the 
Company's organization on July 15, 1996, the Company has recorded 
aggregate deferred compensation of approximately $2.3 million through 
September 30, 1998, representing the difference between the deemed fair 
value of the common stock for accounting purposes and the option 
exercise price at the date of grant. These amounts are presented as a 
reduction of stockholders' equity and are amortized ratably over the 
vesting period of the applicable options, generally four years. These 
valuations resulted in charges to operations of $528,000 and $448,000 
in the year ended December 31, 1997 and the nine months ended September 
30, 1998, respectively.


RESULTS OF OPERATIONS

Three Months Ended September 30, 1998 and 1997

        Revenue under collaborative agreements from related parties 
consists of revenue derived principally from performing research for 
Xenotech. See "Nine Months Ended September 30, 1998 and 1997." Revenues 
from Xenotech decreased from $345,000 in the three months ended 
September 30, 1997 to $212,000 in the three months ended September 30, 
1998.  Revenues from Xenotech decreased because Xenotech's research 
related to developing the genetically modified mice was essentially 
completed during 1996.

        Contract revenue of $175,000 in the three months ended 
September 30, 1998 consisted of fees paid for the achievement of 
research milestones under collaborative agreements.

        Research and development expenses consist primarily of 
compensation and other expenses related to research and development 
personnel, costs associated with preclinical testing and planned 
clinical trials of the Company's product candidates and facilities 
expenses. Research and development expenses decreased from $3.7 million 
in the three months ended September 30, 1997 to $3.1 million in the 
three months ended September 30, 1998. The decrease in research and 
development expenses reflected decreased expenses primarily for the 
manufacture of antibody products in connection with the preparation for 
and the initiation of clinical trials of ABX-CBL and ABX-IL8.

        General and administrative expenses include compensation and 
other expenses related to finance and administrative personnel, 
professional services expenses and facilities expenses. General and 
administrative expenses increased from $692,000 in the three months 
ended September 30, 1997 to $782,000 in the three months ended 
September 30, 1998. The  increase in general and administrative 
expenses reflected the hiring of two additional finance  and 
administration employees and increased financing activity, primarily 
related to the Company's initial public offering.

        Other income and expenses consist of interest income from cash, 
cash equivalents and short-term investments and interest expense 
incurred in connection with equipment lease line financing and loan 
facilities maintained by the Company.  Interest income increased due to 
higher average balances of short-term investments and interest expense 
declined due to lower average balances of debt.

Nine Months Ended September 30, 1998 and 1997

        Revenue under collaborative agreements from related parties 
consists of revenue derived principally from performing research for 
Xenotech. Revenues from the Xenotech joint venture are recognized when 
earned, net of the Company's cash contributions to Xenotech, under the 
terms of the related agreements. Research and development funding 
received in advance under these agreements is recorded as deferred 
revenue. Revenues from the achievement of milestone events are 
recognized when the milestones have been achieved. Revenues from 
Xenotech decreased from $1.1 million in the nine months ended September 
30, 1997 to $0.7 million in the nine months ended September 30, 1998. 
Revenues from Xenotech decreased because Xenotech's research related to 
developing the genetically modified mice was essentially completed 
during 1996.

        Contract revenues of $1.3 million in the nine months ended 
September 30, 1998 consisted principally of non-refundable signing fees 
paid in connection with the execution of collaborative agreements and 
fees paid for the achievement of research milestones under existing 
collaborative agreements.

        Research and development expenses consist primarily of 
compensation and other expenses related to research and development 
personnel, costs associated with preclinical testing and planned 
clinical trials of the Company's product candidates and facilities 
expenses. Research and development expenses increased from $8.8  
million in the nine months ended September 30, 1997 to $12.0 million in 
the nine months ended September 30, 1998. The increase in research and 
development expenses reflected increased expenses primarily for the 
manufacture of antibody products in connection with the preparation for 
and the initiation of clinical trials of two of the Company's antibody 
product candidates under development, ABX-CBL and ABX-IL8, in addition 
to the expenses of conducting these trials. The Company anticipates 
that research and development expenses will increase in future periods 
as it expands research and development efforts and clinical trials.

        General and administrative expenses include compensation and 
other expenses related to finance and administrative personnel, 
professional services expenses and facilities expenses. General and 
administrative expenses increased from $2.0 million in the nine months 
ended September 30, 1997 to $2.6 million in the nine months ended 
September 30, 1998. The increase in general and administrative expenses 
reflected the hiring of four finance personnel to take over the 
administrative functions formerly performed for the Company by Cell 
Genesys and increased financing activity, primarily related to the 
Company's initial public offering. The Company anticipates that general 
and administrative expenses will increase in the future as additional 
personnel are added to support the Company's operations.

        The aggregate nonrecurring charge for cross-license and 
settlement of $18.8 million in the nine months ended September 30, 1997 
relates to the initial payment of $15.0 million and one additional $3.8 
million payment under the comprehensive patent cross-license and 
settlement agreement. The Company recorded the initial settlement 
amount of $15.0 million in March 1997 and the additional $3.8 million 
payment in September 1997. The remaining $3.8 million was recorded in 
December 1997. See "Overview".

        Other income and expenses consist of interest income from cash, 
cash equivalents and short-term investments and interest expense 
incurred in connection with equipment leaseline financing and loan 
facilities maintained by the Company.  Interest income increased due to 
higher average balances of short-term investments and interest expense 
declined due to lower average balances of debt.


LIQUIDITY AND CAPITAL RESOURCES

        Since formation, the Company has financed its operations 
primarily through capital contributions by, and borrowings from Cell 
Genesys, revenue from collaborative arrangements, private placements of 
preferred stock, equipment leaseline financings and loan facilities and 
an initial public offering of its common stock. Through September 30, 
1998, the Company has received net cash of $77.1 million from financing 
activities, consisting principally of approximately $14.3 million from 
contributions by Cell Genesys, $31.1 million from private placements of 
Preferred Stock, $4.3 million from construction financing, $2.0 million 
in lease financing, $4.0 million borrowed from Cell Genesys and 
converted to Preferred Stock and $21.4 million from the Company's 
initial public offering in July 1998. Cell Genesys is not obligated to 
provide any future funding to the Company.

        The Company's net cash used in operating activities was $12.5 
million and $11.8 million for the nine months ended September 30, 1998 
and 1997, respectively. The cash used for operations was primarily to 
fund research and development expenses and manufacturing costs related 
to the development of new products.

        As of September 30, 1998, the Company had cash, cash 
equivalents and short-term investments of $24.6 million. The Company 
has an agreement with a financing company under which the Company has 
financed purchases of about $2.0 million of its laboratory and office 
equipment. The lease term is 48 months and bears interest at rates 
ranging from 12.5% to 13.0%, which are based on the change in the five 
year U.S. Treasury rate. The Company also has a construction financing 
line with a bank in the amount of $4.3 million that was used to finance 
construction of leasehold improvements at its current facility. The 
line matures in January 2001, bears interest at a rate of prime plus 
one percent (9.25% at September 30, 1998). As of September 30, 1998, no 
further borrowings were available under the construction financing 
line.

        Over the next 15 months, the Company intends to use the net 
proceeds of its initial public offering, together with the Company's 
previous cash balances, cash equivalents, short term investments and 
cash generated from collaborative arrangements as follows: (i) 
approximately $24.0 million for research and development, including the 
performance of preclinical and clinical trials; and (ii) approximately 
$3.75 million for the final cross-license and settlement payment 
reflected as a short-term payable to related party on the Company's 
balance sheet as of September 30, 1998. The balance of the net proceeds 
from the initial public offering, together with the Company's previous 
cash balances, cash equivalents, short term investments and cash 
generated from collaborative arrangements will be used for working 
capital and for other general corporate purposes over such 15 month 
period and thereafter. The amounts actually expended for each purpose 
and the timing of such expenditures may vary significantly depending 
upon numerous factors, including the results of clinical trials and 
preclinical testing, the achievement of milestones under collaborative 
arrangements, the ability of the Company to maintain existing and 
establish additional collaborative arrangements, the timing and outcome 
of regulatory actions regarding the Company's potential products, the 
costs and timing of expansion of marketing, sales and manufacturing 
activities, the costs involved in preparing, filing, protecting, 
maintaining and enforcing patent claims and other intellectual property 
rights and competing technological and market developments. Pending the 
foregoing uses, the Company has invested the net proceeds of the 
initial public offering in short-term, interest-bearing, investment 
grade securities.

        The Company plans to continue to expend substantial resources 
for the expansion of research and development, including costs 
associated with conducting preclinical testing and clinical trials. The 
Company may be required to expend greater-than-anticipated funds if 
unforeseen difficulties arise in the course of completing required 
additional development of product candidates, manufacturing of product 
candidates, performing preclinical testing and clinical trials of such 
product candidates, obtaining necessary regulatory approvals or other 
aspects of the Company's business. The Company's future liquidity and 
capital requirements will depend on many factors, including continued 
scientific progress in its research and development programs, the size 
and complexity of these programs, the scope and results of preclinical 
testing and clinical trials, the time and expense involved in obtaining 
regulatory approvals, if any, competing technological and market 
developments, the establishment of further collaborative arrangements, 
if any, the time and expense of filing and prosecuting patent 
applications and enforcing patent claims, the cost of establishing 
manufacturing capabilities, conducting commercialization activities and 
arrangements, product in-licensing and other factors not within the 
Company's control. Although the Company believes that the proceeds from 
the initial public offering, together with the Company's previous cash 
balances, cash equivalents, short-term investments and cash generated 
from collaborative arrangements will be sufficient to meet the 
Company's operating and capital requirements through 1999, there can be 
no assurance that the Company will not require additional financing 
within this timeframe. The Company may be required to raise additional 
funds through public or private financing, collaborative relationships 
or other arrangements. There can be no assurance that such additional 
funding, if needed, will be available on terms attractive to the 
Company, if at all. Furthermore, any additional equity financing may be 
dilutive to stockholders, and debt financing, if available, may involve 
restrictive covenants. Collaborative arrangements, if necessary to 
raise additional funds, may require the Company to relinquish its 
rights to certain of its technologies, products or marketing 
territories. The failure of the Company to raise capital when needed 
could have a material adverse effect on the Company's business, 
financial condition and results of operations.

        As of December 31, 1997, the Company had federal net operating 
loss carryforwards of approximately $15.4 million. The Company's net 
operating loss carryforwards exclude losses incurred prior to the 
organization of Abgenix in July 1996. Further, the amounts associated 
with the cross-license and settlement have been expensed for financial 
statement accounting purposes and have been capitalized and amortized 
over a period of approximately fifteen years for tax purposes. The net 
operating loss and credit carryforwards will expire in the years 2011 
through 2012, if not utilized. Utilization of the net operating losses 
and credits may be subject to a substantial annual limitation due to 
the "change in ownership" provisions of the Internal Revenue Code of 
1986 and similar state provisions. The annual limitation may result in 
the expiration of net operating losses and credits before utilization.


YEAR 2000

        The Year 2000 Issue is the result of computer programs being 
written using two digits rather than four to define the applicable 
year.  Any of the Company's computer programs or hardware that have 
date-sensitive software or embedded chips may recognize a date using 
"00" as the year 1900 rather than the year 2000.  This could result in 
a system failure or miscalculations causing disruptions of operations, 
including, among other things, a temporary inability to receive 
supplies from our venders, or operate our accounting systems covering 
the general ledger, options and payroll.

          The Company's plan to resolve the Year 2000 Issue is based on a 
recently completed assessment of its exposure.  All of the Company's 
time-sensitive software is widely used and purchased from major 
vendors, all of whom have announced that their software is either 
currently Year 2000 compliant or will be made so with upgrades before 
the end of 1999.  The Company has already purchased the Year 2000-
compliant upgrade of its accounting system.  The Company will be 
testing each of its 60 personal computers over the next three months 
and will replace the BIOS of those that are non-compliant.  In 
addition, the Company will be gathering information about the Year 2000 
compliance status of its significant suppliers.  None of the Company's 
systems interface with third parties.  

          Upgrading the accounting system was already planned in order to 
acquire the benefits of its improved features, and was not accelerated 
by Year 2000 issues.  The replacement of the BIOS of personal 
computers, if needed, will be done by current employees, and the cost 
will not be material, even if all computers are affected.

          Management of the Company believes it has an effective program 
in place to resolve the Year 2000 issue in a timely manner.  However, 
should our software vendors be wrong about the Year 2000 compliance of 
their products, or our suppliers' operations be disrupted by the Year 
2000 issue, then the Company's ability to serve its customers and 
develop its products may be materially and adversely impacted.  The 
Company's contingency plans for minimizing the impact include 
increasing inventories, establishing accounts with alternative vendors, 
and temporarily employing manual accounting systems until alternative 
systems can be installed.

ADDITIONAL FACTORS AFFECTING FUTURE OPERATING RESULTS

        Since Abgenix became a public company in July 1998, included 
here are risk factors as updated from the Company's Prospectus dated 
July 2, 1998, as amended. The following factors represent current 
challenges to the Company which create risk and uncertainty. Failure to 
adequately overcome any of the following challenges, either singularly 
or in combination, could have a material adverse effect on the 
Company's results of operations, business, or financial position.

UNCERTAINTY ASSOCIATED WITH XENOMOUSE TECHNOLOGY

        The Company's XenoMouse technology is a new approach to the 
generation and development of antibody therapeutic products. To date, 
the Company has not commercialized any antibody products based on its 
XenoMouse technology. In addition, the Company is not aware of any 
commercialized antibody therapeutic product that has been generated or 
developed from any transgenic technologies. Current antibody product 
candidates based on, utilizing or derived from XenoMouse technology are 
at a very early stage of development. To date, the Company has begun 
clinical trials with respect to only one such antibody product 
candidate. While to date XenoMouse technology has been able to generate 
antibodies against the antigens to which it had been exposed, there can 
be no assurance that it will be able to do so with respect to all 
future antigens. Failure of the Company's XenoMouse technology to 
generate antibody product candidates that lead to the successful 
development and commercialization of products would have a material 
adverse effect on the Company's business, financial condition and 
results of operations. Although the Company believes that its XenoMouse 
technology offers certain advantages, there can be no assurance that 
these advantages will be realized or, if realized, that XenoMouse 
technology will result in any meaningful benefits to current or 
potential collaborative partners or patients. There can be no assurance 
that the Company's XenoMouse technology will enable the Company or any 
of its collaborative partners to identify, generate, develop or 
commercialize antibody therapeutic products or product candidates in an 
efficient and timely manner, if at all.

EARLY STAGE OF DEVELOPMENT; HISTORY OF LOSSES AND UNCERTAINTY OF FUTURE
PROFITABILITY

        The Company is at an early stage of development and must be 
evaluated in light of the uncertainties and complexities present in an 
early stage biopharmaceutical company. The product candidates under 
development by the Company are in the research or preclinical 
development stage or are in the early stage of clinical trials. 
Significant investment in additional research and development, 
preclinical and clinical testing, regulatory and sales and marketing 
activities will be necessary in order for the Company to commercialize 
its current and any future product candidates. There can be no 
assurance that the Company's product candidates under development will 
be successfully developed or that such product candidates, if 
successfully developed, will generate sufficient or sustainable 
revenues to enable the Company to be profitable.

        Since inception, the Company has funded its research and 
development activities primarily through contributions from Cell 
Genesys, revenues from collaborative arrangements, private placements 
of preferred stock, equipment leaseline financings and loan facilities 
and most recently through an initial public offering in July 1998 
yielding $21.4 million, net of underwriting fees. The Company has 
incurred net losses in each of the last three years of operation, 
including net losses of approximately $8.3 million, $7.1 million, $35.9 
million and $12.3 million in the years ended December 31, 1995, 1996 
and 1997 and the nine months ended September 30, 1998, respectively, 
and as of September 30, 1998, had an accumulated deficit of 
approximately $64.8 million. The Company's losses have resulted 
principally from costs incurred in performing research and development 
to develop its XenoMouse technology and subsequent antibody product 
candidates, from the non-recurring cross-license and settlement charge 
and from general and administrative costs associated with the Company's 
operations. The Company expects to incur additional operating losses 
until at least the year 2000 as a result of increases in its 
expenditures for research and product development, including costs 
associated with conducting preclinical testing and clinical trials. The 
Company expects that the amount of such losses will fluctuate 
significantly from quarter to quarter as a result of increases or 
decreases in the Company's research and development efforts, the 
execution or termination of collaborative arrangements, or the 
initiation, success or failure of clinical trials.

        The Company expects that substantially all of its revenues for 
the foreseeable future will result from payments under collaborative 
arrangements, including fees upon signing, reimbursement for research 
and development and milestone payments. To date, all of the Company's 
revenues have resulted primarily from research and development funding 
and milestone payments and may not be indicative of the Company's 
future performance or of the ability of the Company to continue to 
achieve such milestones. The Company's ability to generate revenue or 
achieve profitability depends in part on its ability to enter into 
further collaborative or licensing arrangements, successfully complete 
preclinical or clinical trials, obtain regulatory approval for its 
product candidates and develop the capacity, either alone or through 
third parties, to manufacture, market and sell its products. Payments 
under the Company's existing and any future collaborative arrangements 
will be subject to significant fluctuation in both timing and amount 
and therefore the Company's revenues and results of operations for any 
period may not be comparable to the revenues or results of operations 
for any other period. There can be no assurance that the Company will 
enter into further collaborative arrangements, successfully complete 
preclinical or clinical trials, obtain required regulatory approvals, 
or successfully develop, manufacture and market product candidates. 
Failure to do so will have a material adverse effect on the Company's 
business, financial condition, and results of operations. There can be 
no assurance that the Company will ever achieve product revenues or 
profitability.


NO ASSURANCE OF SUCCESSFUL PRODUCT DEVELOPMENT

        All of the Company's product candidates are in the early stages 
of research and development and only ABX-CBL and ABX-IL8 have been used 
in human clinical trials. All of the Company's product candidates will 
require significant additional preclinical or clinical testing prior to 
obtaining regulatory approval for commercial use. In addition, the 
Company must file a product approval application with the United States 
Food and Drug Administration (the "FDA") prior to commercialization of 
any of the Company's products. The Company currently does not expect to 
file a product approval application with the FDA or corresponding 
regulatory filings in Europe for its product candidates prior to at 
least 1999 and does not expect to have any products commercially 
available prior to at least 2000, if at all.

        In addition, the Company's strategy includes building a large 
and diversified product portfolio, including a mix of out-licensed and 
internally developed product candidates. There can be no assurance that 
the Company will be able to implement this strategy or that current or 
future product candidates will ever result in viable commercial 
products. In order to develop a single product, the Company must 
develop and test multiple product candidates. Development of the 
Company's current and any future product candidates are subject to the 
risks of failure inherent in the development of new pharmaceutical 
products and products based on new technologies. These risks include 
the possibility that the Company will experience delays in development, 
manufacturing, testing or marketing, that such development, testing or 
marketing will result in unplanned expenditures or in expenditures 
above those anticipated by the Company, that the Company's products 
will not be proven safe or effective, that the Company's product 
candidates will not be easy to use or cost-effective, that third 
parties will develop and market superior or equivalent products, that 
any or all of the Company's product candidates will fail to receive any 
necessary regulatory approvals, that such product candidates will be 
difficult or uneconomical to manufacture on a commercial scale, that 
proprietary rights of third parties will preclude the Company or its 
collaborative partners from marketing such products and that the 
Company's products will not achieve market acceptance. As a result of 
these risks, there can be no assurance that research and development 
efforts conducted by the Company or its collaborative partners will 
result in any commercially viable products. If a significant portion of 
the Company's development programs are not successfully completed, 
required regulatory approvals are not obtained, or any approved 
products are not commercially successful, there will be a material 
adverse effect on Company's business, financial condition and results 
of operations.

DEPENDENCE ON COLLABORATIVE ARRANGEMENTS

        The Company's strategy for the development and 
commercialization of antibody therapeutic products depends, in large 
part, upon the formation and maintenance of collaborative and licensing 
arrangements with several corporate partners. In order to successfully 
develop and commercialize new products and product candidates, the 
Company must enter into such collaborations, including collaborations 
with pharmaceutical and biotechnology companies, academic institutions 
and other entities to access proprietary antigens, to fund and complete 
its research and development activities, preclinical and clinical 
testing and manufacturing, to seek and obtain regulatory approvals and 
to achieve successful commercialization of existing and future product 
candidates. The Company has entered into collaborative arrangements 
with Pfizer, Schering-Plough, Genentech and Millennium BioTherapeutics 
to generate fully human antibodies to specific antigens in the fields 
of cancer, inflammation, growth factor modulation, cardiovascular 
disease and autoimmune disease, respectively. To date, only a limited 
number of antibody product candidates have been generated pursuant to 
such collaborations, and there can be no assurance that any such 
collaboration will be successful. There can also be no assurance that 
the Company will be able to establish additional collaborative or 
licensing arrangements, that any such arrangements or licenses will be 
on terms favorable to the Company, that any such collaborative 
arrangements or licenses will result in commercially successful 
products or that the current or any future collaborative or licensing 
arrangements will ultimately be successful. Failure of the Company to 
maintain its significant collaborative arrangements or enter into 
additional collaborative arrangements would have a material adverse 
effect on the Company's business, financial condition and results of 
operations.

        The Company's dependence on collaborative and licensing 
arrangements with third parties subjects it to a number of risks. 
Agreements with collaborative partners typically allow such partners 
significant discretion in electing whether to pursue any of the planned 
activities. The Company cannot control the amount and timing of 
resources its collaborative partners may devote to the product 
candidates, and there can be no assurance that such partners will 
perform their obligations as expected. Business combinations or 
significant changes in a corporate partner's business strategy may 
adversely affect such partner's ability to complete its obligations 
under the arrangements. If any collaborative partner were to terminate 
or breach its agreement with the Company, or otherwise fail to complete 
its obligations in a timely manner, such conduct could have a material 
adverse effect on the Company's business, financial condition and 
results of operations. To the extent that the Company is not able to 
establish further collaborative arrangements or that any or all of the 
Company's existing collaborative arrangements are terminated, the 
Company would be required to seek new collaborative arrangements or to 
undertake product development and commercialization at its own expense, 
which could significantly increase the Company's capital requirements, 
place additional strain on its human resource requirements and limit 
the number of product candidates which the Company would be able to 
develop and commercialize. In addition, there can be no assurance that 
existing and future collaborative partners will not pursue alternative 
technologies or develop alternative products either on their own or in 
collaboration with others, including the Company's competitors. There 
can also be no assurance that disputes will not arise in the future 
with respect to the ownership of rights to any technology or products 
developed with any future collaborative partner. Lengthy negotiations 
with potential new collaborative partners or disagreements between 
established collaborative partners and the Company could lead to delays 
or termination in the research, development or commercialization of 
certain product candidates or result in litigation or arbitration, 
which would be time consuming and expensive. Failure by any 
collaborative partner to develop or commercialize successfully any 
product candidate to which it has obtained rights from the Company or 
the decision by a collaborative partner to pursue alternative 
technologies or develop alternative products, either on their own or in 
collaboration with others, could have a material adverse effect on the 
Company's business, financial condition and results of operations. The 
Company has an option to obtain licenses from Xenotech to commercialize 
antibody products generated by XenoMouse technology. Such option is for 
a certain number of targets each year. There can be no assurance that 
in any year the Company will exercise its rights for the full number of 
targets subject to such option or that such option will not limit the 
Company's ability to fully realize the commercial potential of its 
XenoMouse technology. In addition, disputes with Japan Tobacco could 
result in the loss of the right to commercialize a product candidate by 
either party.

UNCERTAINTIES RELATED TO CLINICAL TRIALS

        Before obtaining regulatory approvals for the commercial sale 
of any products, the Company must demonstrate through preclinical 
testing and clinical trials that its product candidates are safe and 
effective for use in the target disease indication. With the exception 
of the multi-center confirmatory Phase II trial in Graft Versus Host 
Disease ("GVHD"), clinical trials of the Company's ABX-CBL product 
candidate were conducted by third parties prior to the Company 
obtaining license rights to technologies related to this product 
candidate. As of September 30, 1998, ABX-CBL had only been administered 
to a total of 121 patients in GVHD and organ transplant rejection 
indications, and Phase I clinical trials for ABX-IL8 in psoriasis 
commenced in April 1998. As a result, patient follow up has been 
limited and clinical data obtained thus far have been insufficient to 
demonstrate safety and efficacy under applicable FDA guidelines to 
support an application for regulatory approval. In addition, the 
results from preclinical testing and early clinical trials may not be 
predictive of results obtained in later clinical trials. A number of 
new drugs and biologics have shown promising results, even in later 
stage clinical trials, but subsequently failed to establish sufficient 
safety and efficacy data to obtain necessary regulatory approvals in 
advanced clinical trials. There can be no assurance that clinical 
trials conducted by the Company or by third parties on behalf of the 
Company will demonstrate sufficient safety and efficacy to obtain the 
requisite regulatory approvals for ABX-CBL or ABX-IL8. In addition, the 
Company's other two product candidates are still in preclinical 
development. The Company has not submitted investigational new drug 
applications ("IND") nor begun clinical trials for these two product 
candidates. No assurance can be given that any of the Company's 
preclinical or clinical development programs will be successfully 
completed, that any further IND will be filed or become effective, that 
additional clinical trials will be allowed by the FDA or other 
regulatory authorities, or that clinical trials will commence as 
planned.

        The commencement and rate of completion of clinical trials 
conducted by the Company may be delayed by many factors, including 
inability to manufacture sufficient quantities of materials used for 
clinical trials, slower than expected rate of patient recruitment, 
inability to adequately follow patients after treatment, unforeseen 
safety issues or any other adverse event reported during the clinical 
trials. The Company has limited experience in conducting or managing 
clinical trials and relies, and will continue to rely, on third parties 
to assist the Company in managing and monitoring clinical trials. 
Dependence on such third parties may result in delays in completing, or 
failure to complete, such trials if such third parties fail to perform 
under their agreements with the Company. Completion of trials may take 
several years or more, and the length of time generally varies 
substantially with the type, complexity, novelty and intended use of 
the product candidate. Data obtained from preclinical and clinical 
activities are susceptible to varying interpretations, which could 
delay, limit or prevent regulatory approval. In addition, delays or 
rejections by regulatory authorities may be encountered as a result of 
many factors, including changes in regulatory policy during the period 
of product development. There can be no assurance that the Company will 
be permitted by regulatory authorities to undertake any additional 
clinical trials for its potential products or, if such additional 
trials are conducted, that any of the Company's product candidates will 
prove to be safe and efficacious or will receive regulatory approvals. 
In addition, the Company's clinical trials are often conducted with 
patients who have failed conventional treatments and, in the case of 
GVHD, patients are often in the most advanced stages of the disease. 
During the course of treatment, these patients can die or suffer 
adverse medical effects for reasons that may not be related to the 
pharmaceutical agent being tested but which can nevertheless adversely 
affect the interpretation of clinical trial results. Failure of the 
Company's product candidates to demonstrate safety and efficacy in 
clinical trials could result in delays in developing other product 
candidates and conducting related preclinical testing and clinical 
trials, as well as a potential need for additional financing, any or 
all of which would have a material adverse effect on the Company's 
business, financial condition and results of operations. Furthermore, 
any delays in, or termination of, the Company's clinical trials would 
also have a material adverse effect on the Company's business, 
financial condition and results of operations. There can be no 
assurance that the Company will be permitted by regulatory authorities 
to undertake any additional clinical trials for its product candidates 
or, if such additional trials are conducted, that any of the Company's 
product candidates will prove to be safe and efficacious or will 
receive regulatory approvals.

UNCERTAINTY OF PATENT POSITION AND DEPENDENCE ON PROPRIETARY RIGHTS

        The Company's success depends in part on its ability to obtain 
patents, protect trade secrets, operate without infringing upon the 
proprietary rights of others and prevent others from infringing on the 
proprietary rights of the Company. The Company's policy is to seek to 
protect its proprietary position by, among other methods, filing United 
States and foreign patent applications related to its proprietary 
technology, inventions and improvements that are important to the 
development of its business. Proprietary rights relating to the 
Company's technologies will be protected from unauthorized use by third 
parties only to the extent that they are covered by valid and 
enforceable patents or are effectively maintained as trade secrets. 
There can be no assurance that any patents owned by, or licensed to, 
the Company will afford protection against competitors or that any 
pending patent applications now or hereafter filed by, or licensed to, 
the Company will result in patents being issued. In addition, the laws 
of certain foreign countries do not protect the Company's intellectual 
property rights to the same extent as do the laws of the United States. 
The patent position of biopharmaceutical companies involves complex 
legal and factual questions and, therefore, their enforceability cannot 
be predicted with certainty. There can be no assurance that any of the 
Company's patents or patent applications, if issued, will not be 
challenged, invalidated or circumvented, or that the rights granted 
thereunder will provide proprietary protection or competitive 
advantages to the Company against competitors with similar technology. 
Furthermore, there can be no assurance that others will not 
independently develop similar technologies or duplicate any technology 
developed by the Company.

        While the Company has multiple patent applications pending in 
the United States, to date, the Company has no United States patents 
relating to XenoMouse technology. One issued European Patent owned by 
the Company relating to XenoMouse technology is currently undergoing 
opposition proceedings within the European Patent Office, and no 
assurance can be given regarding the outcome of this opposition. The 
Company intends to continue to file patent applications as appropriate 
for patents covering both its product candidates and processes. There 
can be no assurance that patents will issue from any of these 
applications, that any patent will issue on technology arising from 
additional research or that patents that may issue from such 
applications will be sufficient to protect the Company's technologies.

        Pursuant to the cross-license and settlement agreement with 
GenPharm, the Company entered into a cross-license agreement with Cell 
Genesys, Xenotech, Japan Tobacco and GenPharm, whereby the Company has 
licensed on a non-exclusive basis certain patents, patent applications, 
third party licenses, and inventions pertaining to the development and 
use of certain transgenic rodents  including mice that produce fully 
human antibodies that are integral to the Company's products and 
business. The Company uses its XenoMouse technology to generate fully 
human antibody products and has not licensed the use of, and does not 
use, any transgenic rodents developed or used by GenPharm. Breach of 
the cross-license agreement would have a material adverse effect on the 
Company's business, financial condition and results of operations.

        Research has been conducted for many years in the antibody 
field. This has resulted in a substantial number of issued patents and 
an even larger number of patent applications. Patent applications in 
the United States are, in most cases, maintained in secrecy until 
patents issue, and publication of discoveries in the scientific or 
patent literature frequently occurs substantially later than the date 
on which the underlying discoveries were made. The commercial success 
of the Company depends significantly on its ability to operate without 
infringing the patents and other proprietary rights of third parties. 
There can be no assurance that the Company's technologies do not and 
will not infringe the patents or violate other proprietary rights of 
third parties. In the event of such infringement or violation, the 
Company and its corporate partners may be enjoined from pursuing 
development or commercialization of their products. Such action would 
have a material adverse affect on the Company's business, financial 
condition and results of operations.

        The biotechnology and pharmaceutical industries have been 
characterized by extensive litigation regarding patents and other 
intellectual property rights, and the Company, together with Cell 
Genesys, Xenotech and Japan Tobacco, recently settled litigation with 
GenPharm regarding certain patents and other intellectual property 
rights. See "Management's Discussion and Analysis of Financial 
Condition and Results of Operations", paragraph six under the caption 
`Overview'. The defense and prosecution of intellectual property suits, 
United States Patent and Trademark Office ("USPTO") interference 
proceedings and related legal and administrative proceedings in the 
United States and internationally involve complex legal and factual 
questions. As a result, such proceedings are costly and time-consuming 
to pursue and their outcome is uncertain. Litigation may be necessary 
to enforce patents issued or licensed to the Company, to protect trade 
secrets or know-how owned by or licensed by the Company or to determine 
the enforceability, scope and validity of the proprietary rights of 
others. Any litigation, interference or other administrative 
proceedings will result in substantial expense to the Company and 
significant diversion of effort and resources by the Company's 
technical and management personnel. An adverse determination in such 
proceedings to which the Company may become a party could subject the 
Company to significant liabilities to third parties or require the 
Company to seek licenses which may not be available from third parties 
or prevent the Company from selling its products in certain markets, if 
at all. Although patent and intellectual property disputes are often 
settled through licensing or similar arrangements, costs associated 
with such arrangements may be substantial and could include ongoing 
royalties. Furthermore, there can be no assurance that the necessary 
licenses would be available to the Company on satisfactory terms, if at 
all. Adverse determinations in a judicial or administrative proceeding 
or failure to obtain necessary licenses could restrict or prevent the 
Company from manufacturing and selling its products, if any, which 
would have a material adverse effect on the Company's business, 
financial condition and results of operations.

        In addition to patents, the Company relies on trade secrets and 
proprietary know-how, which it seeks to protect, in part, through 
confidentiality and proprietary information agreements. There can be no 
assurance that such confidentiality or proprietary information 
agreements will provide meaningful protection or adequate remedies for 
the Company's technology in the event of unauthorized use or disclosure 
of such information, that the parties to such agreements will not 
breach such agreements or that the Company's trade secrets will not 
otherwise become known to or be independently developed by competitors.

INTENSE COMPETITION; RAPID TECHNOLOGICAL CHANGE

        The biotechnology and pharmaceutical industries are highly 
competitive and subject to significant and rapid technological change. 
The Company is aware of several pharmaceutical and biotechnology 
companies, which are actively engaged in research and development in 
areas related to antibody therapy, that have commenced clinical trials 
of antibody therapeutics products or have successfully commercialized 
antibody products. Many of these companies are addressing diseases and 
disease indications that are being targeted by the Company or its 
collaborative partners. Certain of these competitors have specific 
expertise or technology related to antibody development, such as 
Centocor, Inc., Protein Design Labs, Inc., IDEC Pharmaceuticals 
Corporation, Cambridge Antibody Technology Group, Inc. and GenPharm. 
Certain of the Company's competitors are developing or testing product 
candidates that may be directly competitive with the Company's product 
candidates. For example, the Company is aware that several companies, 
including Genentech, Inc., have potential product candidates that may 
inhibit the activity of interleukin-8 ("IL-8"). Furthermore, the 
Company is aware that ImClone Systems, Inc., has a potential product 
candidate in clinical development that may inhibit the activity of 
epidermal growth factor ("EGF"). Many of these companies and 
institutions, either alone or together with their corporate partners, 
have substantially greater financial resources and larger research and 
development staffs than the Company. In addition, many of these 
competitors, either alone or together with their corporate partners, 
have significantly greater experience than the Company in developing 
products, undertaking preclinical testing and human clinical trials, 
obtaining FDA and other regulatory approvals of products and 
manufacturing and marketing products. Accordingly, the Company's 
competitors may succeed in obtaining patent protection, receiving FDA 
approval or commercializing products more rapidly than the Company. If 
the Company commences commercial sales of products, it will be 
competing against companies with greater marketing and manufacturing 
capabilities, areas in which it has limited or no experience.

        In addition to biotechnology and pharmaceutical companies, the 
Company faces, and will continue to face, competition from academic 
institutions, government agencies and research institutions. There are 
numerous competitors working on products to treat each of the diseases 
for which the Company is seeking to develop therapeutic products. In 
addition, any product candidate successfully developed by the Company 
may compete with existing therapies that have long histories of safe 
and effective use. Competition may also arise from other drug 
development technologies and methods of preventing or reducing the 
incidence of disease and new small molecule or other classes of 
therapeutic agents. There can be no assurance that developments by 
others will not render the Company's product candidates or technologies 
obsolete or noncompetitive. The Company faces and will continue to face 
intense competition from other companies, including Japan Tobacco, for 
collaborative arrangements with pharmaceutical and biotechnology 
companies, for establishing relationships with academic and research 
institutions, and for licenses to proprietary technology. These 
competitors, either alone or with their corporate partners, may succeed 
in developing technologies or products that are more effective than 
those of the Company. The Company's collaborative partners may elect to 
develop other antibody products which compete with the Company's 
products.

SIGNIFICANT GOVERNMENT REGULATIONS; NO ASSURANCE OF REGULATORY 
APPROVALS

        All new biopharmaceutical products, including the Company's 
product candidates under development and anticipated future products, 
are subject to extensive and rigorous regulation by the federal 
government, principally the FDA, under the Federal Food, Drug and 
Cosmetic Act (the "FD&C Act") and other laws including the Public 
Health Service Act, and by state and local governments. Such 
regulations govern, among other things, the development, testing, 
manufacture, safety, efficacy, record keeping, labeling, storage, 
approval, advertising, promotion, sale and distribution of such 
products. If biopharmaceutical products are marketed abroad, they also 
are subject to extensive regulation by foreign governments. To date, 
none of the Company's product candidates has been approved for sale in 
the United States or any foreign market. The regulatory review and 
approval process, which includes preclinical studies and clinical 
trials of each product candidate, is lengthy, expensive and uncertain. 
Securing FDA approvals requires the submission of extensive preclinical 
and clinical data and supporting information to the FDA for each 
indication to establish the product candidates' safety and efficacy. 
The approval process takes many years, requires the expenditure of 
substantial resources, involves post-marketing surveillance, and may 
involve ongoing requirements for post-marketing studies. Delays in 
obtaining regulatory approvals could adversely affect the successful 
commercialization of any drugs developed by the Company or its 
collaborative partners, impose costly procedures upon the Company's or 
its collaborative partners' activities, diminish any competitive 
advantages that the Company or its collaborative partners may attain 
and adversely affect the Company's receipt of revenues or royalties. 
There can be no assurance that regulatory approval will be obtained for 
any therapeutic product candidate developed by the Company or its 
collaborative partners. Furthermore, regulatory approval may entail 
limitations on the indicated uses of a drug. Product approvals, if 
granted, can be withdrawn for failure to comply with ongoing regulatory 
requirements or upon the occurrence of unforeseen problems following 
initial marketing.

        Certain material changes to an approved product such as 
manufacturing changes or additional labeling claims are subject to 
further FDA review and approval. There can be no assurance that any 
approvals that are required, once obtained, will not be withdrawn or 
that compliance with other regulatory requirements can be maintained. 
Further, failure to comply with applicable FDA and other regulatory 
requirements at any stage during the regulatory process can result in 
sanctions being imposed on the Company or the manufacturers of its 
products, including delays, warning letters, fines, product recalls or 
seizures, injunctions, refusal of the FDA to review pending market 
approval applications or supplements to approval applications, total or 
partial suspension of production, civil penalties, withdrawals of 
previously approved marketing applications and criminal prosecutions. 
The Company may rely on its collaborative partners to file INDs and 
generally direct the regulatory approval process. There can be no 
assurance that the Company's collaborative partners will be able to 
conduct clinical testing or obtain necessary approvals from the FDA or 
other regulatory authorities for any product candidates. Failure to 
obtain required governmental approvals will delay or preclude the 
Company's collaborative partners from marketing drugs or diagnostic 
products developed through the Company's research or limit the 
commercial use of such product candidates and could have a material 
adverse effect on the Company's business, financial condition and 
results of operations.

        Manufacturers of biopharmaceutical products also are required 
to comply with the applicable FDA current good manufacturing practice 
("cGMP") regulations, which include requirements relating to quality 
control and quality assurance as well as the corresponding maintenance 
of records and documentation. Manufacturing facilities are subject to 
inspection by the FDA, including unannounced inspection, and must be 
approved before they can be used in commercial manufacturing of the 
Company's products. There can be no assurance that the Company or its 
suppliers will be able to comply with the applicable cGMP requirements 
and other FDA regulatory requirements. Such failure would have a 
material adverse effect on the Company's business, financial condition 
and results of operations.

NO ASSURANCE OF MARKET ACCEPTANCE

        There can be no assurance that the Company's product candidates 
will gain any significant degree of market acceptance among physicians, 
patients, healthcare payors and the medical community in general even 
if clinical trials demonstrate safety and efficacy and necessary 
regulatory and reimbursement approvals are obtained. The degree of 
market acceptance of any product candidates developed by the Company 
will depend on a number of factors, including the establishment and 
demonstration of the clinical efficacy and safety as well as cost-
effectiveness of the product candidates, their potential advantage over 
alternative treatment methods and reimbursement policies of government 
and third-party payors. Physicians will not recommend therapies using 
the Company's products until such time, if at all, as clinical data or 
other factors demonstrate the efficacy of such procedures as compared 
to conventional drug and other treatments. Even if the clinical 
efficacy of therapies using the Company's products were established, 
physicians may elect not to recommend the therapies for any number of 
other reasons. The Company's product candidates, if successfully 
developed, will compete with a number of alternative drugs and 
therapies manufactured and marketed by major pharmaceutical and other 
biotechnology companies, and possibly new products currently under 
development by such companies and others. There can be no assurance 
that physicians, patients, third-party payors or the medical community 
in general will accept and utilize any product candidates that may be 
developed by the Company or its collaborative partners. Failure of the 
Company's products to achieve significant market acceptance would have 
a material adverse effect on the Company's business, financial 
condition and results of operations.

LIMITED MANUFACTURING EXPERIENCE

        The Company currently has limited experience in manufacturing 
its product candidates and lacks the resources or capability to 
manufacture any of its products on a commercial scale. While the 
Company currently manufactures limited quantities of antibody products 
for preclinical testing, the Company relies on contract manufacturers 
to produce ABX-CBL and ABX-IL8. With respect to products other than 
ABX-CBL and ABX-IL8, the Company will either be responsible for 
manufacturing or contract out manufacturing to third parties.

        The Company's contract manufacturers have limited experience in 
manufacturing ABX-CBL and ABX-IL8 in quantities sufficient for 
conducting clinical trials. Contract manufacturers often encounter 
difficulties in scaling up production, including problems involving 
production yields, quality control and quality assurance and shortage 
of qualified personnel. Furthermore, there are only a limited number of 
other third-party contract manufacturers who have the ability and 
capacity to produce the Company's product candidates. Failure by any 
contract manufacturer to deliver the required quantities of the 
Company's product candidates for either clinical or commercial use on a 
timely basis and at commercially reasonable prices and failure by the 
Company to find a replacement manufacturer would have a material 
adverse affect on the Company's business, financial condition and 
results of operations.

        In addition, the Company and its third party manufacturers are 
required to register their manufacturing facilities with the FDA and 
foreign regulatory authorities. The facilities will then be subject to 
inspections confirming compliance with cGMP established by the FDA or 
corresponding foreign regulations. Failure to maintain compliance with 
the cGMP requirements would materially adversely effect the Company's 
business, financial condition and results of operations.

NO MARKETING AND SALES EXPERIENCE

        The Company has no experience in marketing or selling 
pharmaceutical products and currently does not have a marketing, sales 
or distribution capability. The Company intends to enter into 
arrangements with third parties to market and sell most of its 
products. For select products, the Company may establish an internal 
marketing and sales force. There can be no assurance that the Company 
will be able to enter into marketing and sales arrangements with others 
on acceptable terms, if at all. To the extent that the Company enters 
into marketing and sales arrangements with other companies, any 
revenues to be received by the Company will be dependent on the efforts 
of others. There can be no assurance that such efforts will be 
successful. If the Company is unable to enter into such third party 
arrangements, then the Company must develop a marketing and sales 
force, which may be substantial in size, in order to achieve commercial 
success for any product candidate approved by the FDA. There can be no 
assurance that the Company will successfully develop such experience or 
have sufficient resources to do so. If the Company develops its own 
marketing and sales capabilities, it will compete with other companies 
that have experienced and well-funded marketing and sales operations. 
The Company's failure to establish successful marketing and sales 
capabilities or to enter into successful marketing arrangements with 
third parties would have a material adverse effect on the Company's 
business, financial condition and results of operations.

DEPENDENCE ON KEY PERSONNEL; NEED TO ATTRACT AND RETAIN KEY EMPLOYEES 
AND CONSULTANTS

        The Company is highly dependent on the principal members of its 
scientific and management staff. The loss of any of these persons could 
have a material adverse effect on the Company's business, financial 
condition and results of operations. In order to pursue its product 
development, marketing and commercialization plans, the Company will be 
required to hire additional qualified scientific personnel to perform 
research and development, as well as personnel with expertise in 
clinical testing, government regulation, manufacturing and marketing. 
Attracting and retaining qualified personnel will be critical to the 
Company's success. There can be no assurance that the Company will be 
able to attract and retain personnel on acceptable terms given the 
competition for such personnel among biotechnology, pharmaceutical and 
healthcare companies, universities and non-profit research 
institutions. In addition, the Company relies on members of its 
Scientific and Medical Advisory Boards and other consultants to assist 
the Company in formulating its research and development strategy. All 
of the Company's consultants and the members of the Company's 
Scientific and Medical Advisory Boards are employed by entities other 
than the Company, and may have commitments to, or advisory or 
consulting agreements with, other entities that may limit their 
availability to the Company. The loss of services of any of these 
personnel could impede the achievement of the Company's development 
objectives and could have a material adverse effect on the Company's 
business, financial condition and results of operations.

SIGNIFICANT INFLUENCE BY CELL GENESYS, INC.

        Cell Genesys beneficially owns 40.5% of the outstanding capital 
stock as of November 1, 1998. As a result, Cell Genesys will have 
significant influence over all matters requiring the approval of the 
Company's stockholders, including the election of the Company's Board 
of Directors and changes in control of the Company. Cell Genesys and 
the Company have entered into a governance agreement, as amended (the 
"Governance Agreement"), which provides that so long as Cell Genesys or 
a group to which it belongs owns (i) a majority of the outstanding 
voting stock of the Company, Cell Genesys or the group shall have the 
right to nominate four out of the seven directors of the Company, (ii) 
less than a majority but greater than 25% of the outstanding voting 
stock of the Company, then Cell Genesys or such group shall have the 
right to nominate three out of the seven directors of the Company, or 
(iii) less than 25% but greater than 15% of the outstanding voting 
stock of the Company, then Cell Genesys or such group shall have the 
right to nominate one out of the seven directors of the Company. The 
Governance Agreement also provides that Cell Genesys and each officer 
and director of the Company who owns voting stock shall agree to vote 
for the persons nominated as set forth above. There can be no assurance 
that the Company will not be adversely impacted by the significant 
influence which Cell Genesys will have with respect to matters 
affecting the Company.

CONTROL BY DIRECTORS, EXECUTIVE OFFICERS, PRINCIPAL STOCKHOLDERS AND 
AFFILIATED ENTITIES

        The Company's directors, executive officers, principal 
stockholders and affiliated entities, in the aggregate, beneficially 
own approximately 54.1% of the Company's outstanding Common Stock as of 
November 1, 1998. These stockholders, if acting together, would be able 
to control substantially all matters requiring approval by the 
stockholders of the Company, including the election of directors and 
the approval of mergers or other business combination transactions. 
There can be no assurance that the Company will not be adversely 
impacted by the control which such stockholders will have with respect 
to matters affecting the Company.


FUTURE CAPITAL REQUIREMENTS

        The Company plans to continue to expend substantial resources 
for the expansion of research and development, including costs 
associated with conducting preclinical testing and clinical trials. The 
Company may be required to expend greater-than-anticipated funds if 
unforeseen difficulties arise in the course of completing required 
additional development of product candidates, manufacturing of product 
candidates,  performing preclinical testing and clinical trials of such 
product candidates, obtaining necessary regulatory approvals or other 
aspects of the Company's business. The Company's future liquidity and 
capital requirements will depend on many factors, including continued 
scientific progress in its research and development programs, the size 
and complexity of these programs, the scope and results of preclinical 
testing and clinical trials, the time and expense involved in obtaining 
regulatory approvals, if any, competing technological and market 
developments, the establishment of further collaborative arrangements, 
if any, the time and expense of filing and prosecuting patent 
applications and enforcing patent claims, the cost of establishing 
manufacturing capabilities, conducting commercialization activities and 
arrangements, product in-licensing and other factors not within the 
Company's control. Although the Company believes that its current cash 
balances, cash equivalents, and short-term investments as well as cash 
generated from collaborative arrangements will be sufficient to meet 
the Company's operating and capital requirements through 1999, there 
can be no assurance that the Company will not require additional 
financing within this timeframe. The Company may be required to raise 
additional funds through public or private financing, collaborative 
relationships or other arrangements. There can be no assurance that 
such additional funding, if needed, will be available on terms 
attractive to the Company, if at all. Furthermore, any additional 
equity financing may be dilutive to stockholders, and debt financing, 
if available, may involve restrictive covenants. Collaborative 
arrangements, if necessary to raise additional funds, may require the 
Company to relinquish its rights to certain of its technologies, 
products or marketing territories. The failure of the Company to raise 
capital when needed could have a material adverse effect on the 
Company's business, financial condition and results of operations.

UNCERTAINTY RELATING TO REIMBURSEMENT; UNCERTAINTY RELATING TO 
HEALTHCARE REFORM

        In both domestic and foreign markets, sales of the Company's 
potential products will depend in part upon the availability of 
reimbursement from third-party payors, such as government health 
administration authorities, managed care providers, private health 
insurers and other organizations. These third-party payors are 
increasingly challenging the price and examining the cost effectiveness 
of medical products and services. In addition, significant uncertainty 
exists as to the reimbursement status of newly approved healthcare 
products. The Company may need to conduct post-marketing studies in 
order to demonstrate the cost-effectiveness of its products. Such 
studies may require significant amount of resources to be provided by 
the Company. There can be no assurance that the Company's product 
candidates will be considered cost effective or that adequate third-
party reimbursement will be available to enable the Company to maintain 
price levels sufficient to realize an appropriate return on its 
investment in product development. Both federal and state governments 
in the United States and foreign governments continue to propose and 
pass legislation designed to reduce the cost of healthcare. 
Accordingly, legislation and regulations affecting the pricing of 
pharmaceuticals may change before the Company's proposed products are 
approved for marketing. Adoption of such legislation could further 
limit reimbursement for pharmaceuticals. If adequate coverage and 
reimbursement rates are not provided by the government and third-party 
payors for the Company's potential products, the market acceptance of 
these products could be adversely affected, which would have a material 
adverse effect on the Company's business, financial condition and 
results of operations.

POTENTIAL PRODUCT LIABILITY EXPOSURE AND LIMITED INSURANCE COVERAGE

        The use of any of the Company's product candidates in clinical 
trials, and the sale of any approved products, may expose the Company 
to liability claims resulting from such use or sale of its products. 
These claims might be made directly by consumers, healthcare providers 
or by pharmaceutical companies or others selling such products. There 
can be no assurance that the Company will not experience financial 
losses in the future due to product liability claims. Abgenix has 
obtained limited product liability insurance coverage for its clinical 
trials in the amount of $5.0 million per occurrence and $5.0 million in 
the aggregate. The Company intends to expand its insurance coverage to 
include the sale of commercial products if marketing approval is 
obtained for product candidates in development. However, insurance 
coverage is becoming increasingly expensive and no assurance can be 
given that the Company will be able to maintain insurance coverage at a 
reasonable cost or in sufficient amounts to protect the Company against 
losses. A successful product liability claim or series of claims 
brought against the Company for uninsured liabilities or in excess of 
insured liabilities could have a material adverse effect on its 
business, financial condition and results of operations.

HAZARDOUS AND RADIOACTIVE MATERIALS; ENVIRONMENTAL MATTERS

        The Company's research and development processes involve the 
controlled use of hazardous and radioactive materials, chemicals and 
waste products. The Company is subject to federal, state and local laws 
and regulations governing the use, manufacture, storage, handling and 
disposal of such materials and waste products. The risk of accidental 
contamination or injury from these materials and waste products cannot 
be completely eliminated and the Company does not expect to make 
material capital expenditures for environmental control facilities in 
the near-term. There can be no assurance that the Company will not be 
required to incur significant costs to comply with environmental laws 
and regulations in the future, or that the operations, business or 
assets of the Company will not be materially adversely affected by the 
costs of compliance with current or future environmental laws or 
regulations.

VOLATILITY OF COMMON STOCK PRICE

        The market prices for securities of biotechnology and 
pharmaceutical companies have historically been highly volatile, and 
the market has from time to time experienced significant price and 
volume fluctuations that are unrelated to the operating performance of 
particular companies. Factors such as fluctuations in the Company's 
operating results, announcements of technological innovations or new 
therapeutic products by the Company or others, clinical trial results, 
developments concerning strategic alliance agreements, government 
regulation, developments in patent or other proprietary rights, public 
concern as to the safety of products developed by the Company or 
others, future sales of substantial amounts of Common Stock by existing 
stockholders, comments by securities analysts and general market 
conditions can have an adverse effect on the market price of the Common 
Stock. In addition, the realization of any of the risks described in 
these "ADDITIONAL FACTORS AFFECTING FUTURE OPERATING RESULTS" could 
have a dramatic and adverse impact on market price of the Company's 
Common Stock.

ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER AND BYLAW PROVISIONS AND 
DELAWARE LAW

        Certain provisions of the Company's Certificate of 
Incorporation and Bylaws may make it more difficult for a third party 
to acquire, or discourage a third party from attempting to acquire, 
control of the Company. Such provisions could limit the price that 
certain investors might be willing to pay in the future for shares of 
the Company's Common Stock. Certain of these provisions allow the 
Company to issue up to 5,000,000 shares of Preferred Stock without any 
vote or further action by the stockholders, eliminate the right of 
stockholders to act by written consent without a meeting, specify 
procedures for director nominations by stockholders and submission of 
other proposals for consideration at stockholder meetings. In addition, 
the Company is subject to certain provisions of Delaware law, including 
Section 203, which prohibits a Delaware corporation from engaging in 
any business combination with any interested stockholder for a period 
of three years unless certain conditions are met. The possible issuance 
of Preferred Stock, the elimination of the right of stockholders to act 
by written consent without a meeting, the procedures required for 
director nominations and stockholder proposals and Delaware law could 
have the effect of delaying, deferring or preventing a change in 
control of the Company, including without limitation, discouraging a 
proxy contest or making more difficult the acquisition of a substantial 
block of the Company's Common Stock. These provisions could also limit 
the price that investors might be willing to pay in the future for 
shares of the Company's Common Stock.

ABSENCE OF DIVIDENDS

        The Company has never declared or paid any cash dividends and 
does not anticipate paying cash dividends in the foreseeable future.




PART II

        ITEM 1 - LEGAL PROCEEDINGS

        Not applicable.

        ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

        In July 1998, the Company closed an initial public offering of 
2,875,000 shares of its Common Stock at a per share price of $8.00 
pursuant to a Registration Statement on Form S-1 (Registration No. 333-
49415), which was declared effective on July 2, 1998. The Company's 
managing underwriters for the offering were BancAmerica Robertson 
Stephens (now BancBoston Robertson Stephens) and Lehman Brothers Inc. 
Of the $23,000,000 in gross proceeds raised in connection with the 
offering, (i) $1,610,000 was paid to the managing underwriters in 
connection with underwriting discounts and (ii) approximately 
$1,359,000 was paid by the Company in connection with expenses, 
including legal, printing and filing fees, in connection with the 
offering. Of the remaining net proceeds, the Company has reserved 
$3,750,000 for payment of the cross-license and settlement with 
GenPharm. There were no direct or indirect payments to directors or 
officers of the Company or to any other person or entity. None of the 
proceeds from the offering have been used for the construction of 
plant, building or facility or installation of machinery or equipment, 
or the purchases of real estate or the acquisition of other businesses. 
The Company is currently investing the remaining net proceeds from the 
offering for future use as additional working capital. Such remaining 
net proceeds have been invested in highly liquid instruments, such as 
commercial paper and U.S. Government obligations, with an average 
maturity of twelve months or less. A portion of those net proceeds may 
be used for the acquisition of businesses, products and technologies 
that are complimentary to those of the Company. During the three months 
ended September 30, 1998, approximately $2.7 million of the net 
proceeds have been spent on research and development activities. 

        ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

        Not applicable.

        ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

        With respect to stockholder proposals not included in the 
Company's proxy statement for the 1999 Annual Meeting of Stockholders, 
the persons named in management's proxy for the 1999 Annual Meeting of 
Stockholders will be entitled to exercise the discretionary voting 
power conferred by such proxy under the circumstances specified in Rule 
14a-4(c) under the Securities Exchange Act of 1934, as amended, 
including with respect to proposals received by the Company after April 
1, 1999.

        ITEM 5 - OTHER INFORMATION

        Not applicable.

        ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

               (a)    Exhibits

<TABLE>
<CAPTION>
<S>          <C>
   3.1  (12) Certificate of Incorporation of the Registrant, as 
currently in effect.

   3.2  (12) Bylaws of the Registrant, as currently in effect.

  10.1  (12) Form of Indemnification Agreement between the Registrant 
and each of its directors and officers.

  10.2  (12) 1996 Incentive Stock Plan and form of agreement 
thereunder.

  10.3  (12) 1998 Employee Stock Purchase Plan and form of agreement 
thereunder.

  10.4  (12) 1998 Director Option Plan and form of agreement 
thereunder.

  10.5  (12) Warrant dated January 23, 1997 exercisable for shares of 
Series A Preferred Stock.

  10.6  (12) Warrant dated March 27, 1997 exercisable for shares of 
Series A Preferred Stock.

+ 10.7   (1) Joint Venture Agreement dated June 12, 1991 between Cell 
Genesys and JT Immunotech USA Inc.

+ 10.7A  (4) Amendment No. 1 dated January 1, 1994 to Joint Venture 
Agreement.

+ 10.7B  (7) Amendment No. 2 dated June 28, 1996 to Joint Venture 
Agreement.

+ 10.8   (1) Collaboration Agreement dated June 12, 1991 among Cell 
Genesys, Xenotech, Inc. and JT Immunotech USA Inc.

+ 10.8A  (3) Amendment No. 1 dated June 30, 1993 to Collaboration 
Agreement.

  10.8B (11) Amendment No. 2 dated January 1, 1994 to Collaboration 
Agreement.

+ 10.8C  (5) Amendment No. 3 dated July 1, 1995 to Collaboration 
Agreement.

+ 10.8D  (7) Amendment No. 4 dated June 28, 1996 to Collaboration 
Agreement.

+ 10.8E (12) Amendment No. 5 dated November 1997 to Collaboration 
Agreement.

+ 10.9   (1) Limited Partnership Agreement dated June 12, 1991 among 
Cell Genesys, Xenotech, Inc. and JT Immunotech USA Inc.

+ 10.9A  (4) Amendment No. 2 dated January 1, 1994 to Limited 
Partnership Agreement.

  10.9B  (6) Amendment No. 3 dated July 1, 1995 to Limited Partnership 
Agreement.

  10.9C  (8) Amendment No. 4 dated June 28, 1996 to Limited Partnership 
Agreement.

  10.10  (2) Field License dated June 12, 1991 among Cell Genesys, JT
Immunotech USA Inc. and Xenotech, L.P.

  10.10A (8) Amendment No. 1 dated March 22, 1996 to Field License.

  10.10B (8) Amendment No. 2 dated June 28, 1996 to Field License.

+ 10.11  (1) Expanded Field License dated June 12, 1991 among Cell 
Genesys, JT Immunotech USA Inc. and Xenotech, L.P.

  10.11A (8) Amendment No. 1 dated June 28, 1996 to Expanded Field 
License.

+ 10.12 (12) Amended and Restated Anti-IL-8 License Agreement dated 
March 19, 1996 among Xenotech, L.P., Cell Genesys and Japan Tobacco 
Inc.

+ 10.13  (7) Master Research License and Option Agreement dated June 
28, 1996 among Cell Genesys, Japan Tobacco Inc. and Xenotech, L.P.

+ 10.13A(12) Amendment No. 1 dated November 1997 to the Master Research 
License and Option Agreement.

+ 10.14 (12) Stock Purchase and Transfer Agreement dated July 15, 1996 
by and between Cell Genesys and the Registrant.

  10.15 (12) Governance Agreement dated July 15, 1996 between Cell 
Genesys and the Registrant.

  10.15A(12) Amendment No. 1 dated October 13, 1997 to the Governance 
Agreement.

  10.15B(12) Amendment No. 2 dated December 22, 1997 to the Governance
Agreement.

  10.16 (12) Tax Sharing Agreement dated July 15, 1996 between Cell 
Genesys and the Registrant.

+ 10.17 (12) Gene Therapy Rights Agreement effective as of November 1, 
1997 between the Registrant and Cell Genesys.

+ 10.18 (12) Patent Assignment Agreement dated July 15, 1996 by Cell 
Genesys in favor of the Registrant.

  10.19  (9) Lease Agreement dated July 31, 1996 between John 
Arrillaga, Trustee, or his Successor Trustee, UTA dated 7/20/77 
(Arrillaga Family Trust) as amended, and Richard T. Peery, Trustee, or 
his Successor Trustee, UTA dated 7/20/77 (Richard T. Peery Separate 
Property Trust) as amended, and the Registrant.

  10.20 (12) Loan and Security Agreement dated January 23, 1997 between 
Silicon Valley Bank and the Registrant.

  10.21 (12) Master Lease Agreement dated March 27, 1997 between 
Transamerica Business Credit Corporation and the Registrant.

+ 10.22 (12) License Agreement dated February 1, 1997 between Ronald J. 
Billing, Ph.D. and the Registrant.

+ 10.23 (10) Release and Settlement Agreement dated March 26, 1997 
among Cell Genesys, the Registrant, Xenotech, L.P., Japan Tobacco Inc. 
and GenPharm International, Inc.

+ 10.24 (10) Cross License Agreement effective as of March 26, 1997, 
among Cell Genesys, the Registrant, Xenotech, L.P., Japan Tobacco Inc. 
and GenPharm International, Inc.

+ 10.25 (10) Interference Settlement Procedure Agreement, effective as 
of March 26, 1997, among Cell Genesys, the Registrant, Xenotech, L.P.,
Japan Tobacco Inc. and GenPharm International, Inc.

+ 10.26 (12) Agreement dated March 26, 1997 among Xenotech, L.P., 
Xenotech, Inc., Cell Genesys, the Registrant, Japan Tobacco Inc. and JT 
Immunotech USA Inc.

+ 10.27 (12) Collaborative Research Agreement dated December 22, 1997 
between Pfizer, Inc. and the Registrant.

  10.28 (12) Amended and Restated Stockholder Rights Agreement dated 
January 12, 1998 among the Registrant and certain holders of the
Registrant's capital stock.

+ 10.29 (12) Collaborative Research Agreement effective as of January 
28, 1998 between Schering-Plough Research Institute and the Registrant.

  10.30 (12) Excerpts from the Minutes of a Meeting of the Board of 
Directors of the Registrant, dated October 23, 1996.

  10.31 (12) Excerpts from the Minutes of a Meeting of the Board of 
Directors of the Registrant, dated October 22, 1997.

+ 10.32 (12) Exclusive Worldwide Product License dated November 1997 
between Xenotech, L.P. and the Registrant.

+ 10.33 (12) Research License and Option Agreement effective as of 
April 6, 1998 between the Registrant and Genentech, Inc.

+ 10.33 A(12)Amendment No. 1 effective as of June 18, 1998 to Research 
License and Option Agreement between the Registrant and Genentech, Inc.

++10.34 (13) Research Collaboration Agreement dated July 15, 1998 
between Millennium BioTherapeutics, Inc. and the Registrant.

  27.1       Financial Data Schedule.
______________

*    Previously filed.

+    Confidential treatment granted for portions of these exhibits.

++   Confidential treatment requested for portions of this exhibit.

(1)     Incorporated by reference to the same exhibit filed with Cell 
Genesys's Registration Statement on Form S-1 (File No. 33-46452), 
portions of which have been granted confidential treatment.

(2)     Incorporated by reference to the same exhibit filed with Cell 
Genesys's Registration Statement on Form S-1 (File No. 33-46452).

(3)     Incorporated by reference to the same exhibit filed with Cell 
Genesys's Quarterly Report on Form 10-Q for the quarter ended June 30, 
1993, portions of which have been granted confidential treatment.

(4)     Incorporated by reference to the same exhibit filed with Cell 
Genesys's Annual Report on Form 10-K for the year ended December 31, 
1993, portions of which have been granted confidential treatment.

(5)     Incorporated by reference to the same exhibit filed with Cell 
Genesys's Quarterly Report on Form 10-Q for the quarter ended June 30, 
1995, portions of which have been granted confidential treatment.

(6)     Incorporated by reference to the same exhibit filed with Cell 
Genesys's Quarterly Report on Form 10-Q for the quarter ended June 30, 
1995.

(7)     Incorporated by reference to the same exhibit filed with Cell 
Genesys's Quarterly Report on Form 10-Q for the quarter ended June 30, 
1996, portions of which have been granted confidential treatment.

(8)     Incorporated by reference to the same exhibit filed with Cell 
Genesys's Quarterly Report on Form 10-Q for the quarter ended June 30, 
1996.

(9)     Incorporated by reference to the same exhibit filed with Cell 
Genesys's Quarterly report on Form 10-Q for the quarter ended September 
30, 1996.

(10)    Incorporated by reference to the same exhibit filed with Cell 
Genesys's Annual Report on Form 10-K for the year ended December 31, 
1996, as amended, portions of which have been granted confidential 
treatment.

(11)    Incorporated by reference to the same exhibit filed with Cell 
Genesys's Annual Report on Form 10-K for the year ended December 31, 
1993.

(12)    Incorporated by reference to the same exhibit filed with the 
Registrant's Registration Statement on Form S-1 (File No. 333-49415).

(13)    Incorporated by reference to the same exhibit filed with the 
Registrant's Current Report on Form 8-K filed with the Commission on 
July 17, 1998.

(b)     Reports on Form 8-K

The Company filed a report on form 8-K on July 17, 1998 relating 
to the agreement between the Company and Millennium BioTherapeutics, 
Inc.



                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, 
the registrant has duly caused this report to be signed on its behalf 
by the undersigned thereunto duly authorized.

Dated: November 13, 1998

ABGENIX, INC.
(Registrant)

/S/ R. SCOTT GREER
-----------------------------------
R. Scott Greer
President and Chief Executive 
Officer
(Principal Executive Officer)


/S/ KURT LEUTZINGER
-----------------------------------
Kurt Leutzinger
Vice President and Chief Financial 
Officer 
(Principal Financial and Accounting 
Officer)

                                INDEX TO EXHIBITS


</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
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<S>     <C>
27.1    Financial Data Schedule
</TABLE>