UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
 FORM 10–Q 
  (Mark One) xQuarterly
  report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
  1934
 For the period ended March 31, 2001 OR  ̈Transition
  report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
  1934
  Commission file number: 000–24207  ABGENIX,
INC.(Exact name of registrant as specified in its charter)  DELAWARE
  
  94–3248826(State
  or other jurisdiction of incorporation or organization)
  
  (I.R.S.
  Employer Identification Number)
  6701
Kaiser Drive
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.  Yesx                   No  ̈ As of April
30, 2001 there were 85,936,370 shares of the Registrants Common Stock
outstanding.   ABGENIX,
INC.Form 10–QINDEX



PART I – Financial InformationITEM 1 – Financial StatementsCondensed
  Consolidated Balance Sheets  March 31, 2001 and December 31, 2000Condensed
  Consolidated Statements of Operations – Quarter ended March 31, 2001
  and March 31, 2000Condensed
  Consolidated Statements of Cash Flows – Quarter ended March 31, 2001
  and March 31, 2000Notes
  to Condensed Consolidated Financial StatementsITEM 2 –
  Managements Discussion and Analysis of Financial Condition and Results of
  OperationsITEM 3 
  Quantitative and Qualitative Disclosures about Market RiskPART II – Other InformationITEM 1 – Legal ProceedingsITEM 2 –
  Changes in Securities and Use of ProceedsITEM 3 –
  Defaults upon Senior SecuritiesITEM
  4 – Submission of Matters to a Vote of Security HoldersITEM 5 – Other InformationITEM 6 –
  Exhibits and Reports on Form 8–KSIGNATURES

ABGENIX, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except share and per share
data)March
  31,
  2001
  December
  31,
  2000(unaudited)ASSETSCurrent assets:Cash and cash equivalents
  $181,745
  $167,242Marketable securities
  449,833
  525,641Interest receivable
  7,113
  9,793Accounts receivable
  1,643
  3,397Prepaid expenses and other
  current assets
  12,857
  11,965Total current assets
  653,191
  718,038Property and equipment, net
  25,975
  18,374Long-term investments
  64,084
  79,181Intangible assets, net of accumulated amortization
  115,950
  117,997Deposits and other assets
  6,468
  3,210$865,668
  $936,800LIABILITIES
  AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable
  $2,318
  $6,339Deferred revenue
  5,554
  6,978Accrued product development
  costs
  1,119
  2,338Accrued employee benefits
  1,434
  2,034Other accrued liabilities
  4,519
  3,124Current portion of long-term
  debt
  227
  316Acquisition liability
  31,660
  75,429Total current liabilities
  46,831
  96,558Deferred rent
  722
  567CommitmentsStockholders' equity:Preferred stock, $0.0001 par
  value; 5,000,000 shares authorized;             none issued or outstanding
  -
  -Common stock, $0.0001 par value; 220,000,000 shares              authorized; 85,795,184 and
  85,401,548 shares issued and              outstanding at March 31,
  2001 and December 31, 2000,              respectively, at amount
  paid in
  907,184
  906,358Additional paid-in capital
  32,849
  32,849Deferred compensation
  (145)
  (234)Accumulated other comprehensive income/(loss)
  (15,536)
  (705)Accumulated deficit
  (106,237)
  (98,593)Total stockholders'
  equity
  818,115
  839,675$865,668
  $936,800

See
accompanying notes.

ABGENIX, INC.CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS(in thousands, except per share data)
(unaudited)


Quarter Ended
  March 31,2001
  2000Revenues:Contract revenue
  $4,176
  $1,965Interest income
  10,306
  4,341Total revenues
  14,482
  6,306Costs and expenses:Research and development
  16,760
  7,214Amortization of intangible assets, related to         research and development
  2,046
  777General and administrative
  3,065
  1,584Interest expense
  255
  114Total costs and expenses
  22,126
  9,689Net loss
  $(7,644)
  $(3,383)Basic and diluted net
  loss per share
  $(0.09)
  $(0.05)Shares used in computing basic and diluted
  netloss
  per share
  85,661
  74,772See
accompanying notes.

ABGENIX,
INC.CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS(in thousands)
(unaudited)


Quarter Ended 
  March 31,2001
  2000Operating activitiesNet loss
  $(7,644)
  $(3,383)Adjustments to
  reconcile net loss to net cash provided by             (used in) operating
  activities:Depreciation and amortization
  2,989
  1,257Stock options issued to consultants
  -
  576Changes for certain assets and
  liabilities:Interest receivable
  2,680
  -Accounts receivable
  1,754
  3,900Prepaid expenses and other current
  assets
  (892)
  678Deposits and other assets
  (3,263)
  5Accounts payable
  (4,021)
  837Deferred revenue
  (1,424)
  600Accrued product development costs
  (1,219)
  (1,222)Accrued employee benefits
  (600)
  (535)Other accrued liabilities
  1,395
  187Deferred rent
  155
  34Net cash provided by
  (used in) operating activities
  (10,090)
  2,934Investing activitiesPurchases of
  marketable securities
  (295,017)
  (212,061)Maturities of
  marketable securities
  371,091
  14,199Capital expenditures
  (8,449)
  (303)Payments under
  acquisition liability
  (43,858)
  -Net cash provided by
  (used in) investing activities
  23,767
  (198,165)Financing activitiesNet proceeds from
  issuances of common stock
  826
  498,687Payments on long-term
  debt
  -
  (434)Net cash provided by
  financing activities
  826
  498,253Net increase in cash
  and cash equivalents
  14,503
  303,022Cash and cash
  equivalents at the beginning of the period
  167,242
  13,366Cash and cash
  equivalents at the end of the period
  $181,745
  $316,388See
accompanying notes.ABGENIX,
INC.NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 20011.Basis of Presentation and Summary of Significant
Accounting Policies

Basis of Presentation -The unaudited condensed financial
statements of Abgenix, Inc.  (the
"Company" or "Abgenix") included herein have 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 has been condensed or omitted pursuant to such rules and
regulations. In the opinion of the Company, the accompanying unaudited
condensed consolidated financial statements contain all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the financial
information included therein. These financial statements should be read in
conjunction with the audited financial statements for the year ended December
31, 2000 and accompanying notes included in the Company's Annual Report as
filed on Form 10-K with the Securities and Exchange Commission on April 2,
2001. The results of operations for the three months ended March 31, 2001 are
not necessarily indicative of the results to be expected for the full year or
for any other future period.Revenue Recognition
- The Company receives payments from customers for licenses, options and
services. These payments are generally non-refundable but are reported as
deferred revenue until they are recognizable as revenue. The Company has
followed the following principles in recognizing revenue:
  Research
  license fees: Fees to license the use of the Companys XenoMouseTMproprietary technology in research performed by customers of the Company are
  generally recognized only after the license period has commenced and the
  technology has been delivered. If Abgenix is obligated to provide significant
  assistance to enable the customer to utilize the license, the revenue is
  recognized over the period of such obligation.
  Product
  license fees: Fees to license the production, use and sale of an antibody
  generated by the XenoMouse technology are generally recognized only after the
  license period has commenced and the technology has been delivered. If
  Abgenix is obligated to provide significant assistance to enable the customer
  to utilize the license, the revenue is recognized over the period of such
  obligation.
  Option
  fees: Fees for granting options to customers to obtain a license to develop a
  product are recognized as revenue when the option is exercised or when the
  option period expires, whichever occurs first.
  Payments
  for research services performed by Abgenix are recognized ratably over the
  period during which these services are performed. However, fees earned for
  research services under co-development arrangements are recorded as contract
  revenues in the period services are rendered, net of fees payable by Abgenix
  to such co-developers for reimbursements of research and development costs.
  Milestone
  payments are recognized as revenue when the milestone is achieved.Earningsper Share -Net loss per share is based on the weighted average
common shares outstanding.  Potentially
dilutive securities have been excluded from the computation, as their effect is
antidilutive.Stock splits
The accompanying financial statements have been restated to reflect a
two-for-one stock split effective on July 7, 2000.2.Comprehensive Income (Loss)

Other
comprehensive income/(loss) consists of unrealized gains or losses on
available-for-sale securities. Comprehensive loss was $22.5 million for the
quarter ended March 31, 2001, and comprehensive income was $6.7 million for the
quarter ended March 31, 2000.

3.Acquisition of Abgenix Biopharma Inc. (formerly known
as ImmGenics Pharmaceuticals, Inc.)

In
November 2000, the Company acquired all of the voting stock of Abgenix
Biopharma Inc. (formerly known as ImmGenics Pharmaceuticals Inc.), a Canadian
biotechnology company. Under the terms of the agreement, Abenix Biopharma
special shares were issued to former common and preferred shareholders and
debenture holders of Abgenix Biopharma. The special shares of Abgenix Biopharma
would have been convertible into common shares of the Company if the common
shares were included in a registration statement that was declared effective by
the Securities and Exchange Commission. In the absence of an effective
registration statement, the special shareholders have the right to put their
shares to the Company for cash. Their put rights will be fully vested on May
12, 2001 and will expire March 31, 2002. In February 2001, the Company notified
the holders of Abgenix Biopharma special shares that the purchase price would
be settled in cash. As of March 31, 2001, approximately 8.8 million Abgenix
Biopharma special shares had been exchanged for $43.9 million and approximately
4.9 million special shares were still outstanding.

4.Facility Lease and Letter of Credit

In
February 2001, the Company signed an operating lease for an additional facility
for research and development activities. The lease expires in April 2011. As a
condition to the lease, the Company provided a stand-by letter of credit for
$3.0 million to the lessor, as security for its obligations under the lease.
The letter of credit is secured by $3.3 million of cash and marketable
securities in an investment account which the Company must maintain for the
term of the lease. The investment account is classified as deposits and other
assets on the balance sheet. Future minimum payments under this non-cancelable
operating lease are as follows (in thousands): 2001$1,981; 2002$3,049;
2003$3,171; 2004$3,298; 2005$3,430; and thereafter $20,732.

ITEM 2 – MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND   RESULTS OF OPERATIONSThe following management's discussion and analysis of
financial condition and results of operations contains forward-looking
statements based upon current expectations that involve risks and
uncertainties. When used in this quarterly report on form 10-Q, the words
"intend," "anticipate," "believe,"
"estimate," "plan" and "expect" and similar
expressions as they relate to Abgenix are included to identify forward-looking
statements. Our actual results and the timing of certain events could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth below and under the
heading "Additional factors that might affect future results".OverviewWe are a biopharmaceutical company
that develops and intends to commercialize antibody therapeutic products for
the treatment of a variety of disease conditions, including transplant–related
diseases, inflammatory and autoimmune disorders, cardiovascular disease,
infectious diseases and cancer. We have developed our XenoMouseTM
technology, a proprietary technology that facilitates rapid generation of
highly specific, fully human antibody product candidates that bind to virtually
any disease target appropriate for antibody therapy. In addition, we believe
our technology offers advantages in product development and flexibility in
manufacturing. We intend to use XenoMouse technology to build a large and
diversified product portfolio that we plan to develop and commercialize through
licensing arrangements with pharmaceutical companies and others, through joint
development and through internal product development programs. We have entered
into a variety of contractual arrangements with multiple pharmaceutical,
biotechnology and genomics companies involving our XenoMouse technology. One of
our customers, Pfizer, Inc., has initiated clinical trials with a XenoMouse
generated antibody. In addition, we have three proprietary antibody product
candidates currently in clinical trials, two of which we have agreed to
co-develop and commercialize with others.As of March 31, 2001 we have
entered into contracts to use our XenoMouse technology to produce and/or
develop the resulting fully human antibodies with twenty-five customers
covering numerous antigen targets. Pursuant to these contracts, we and our
customers intend to generate antibody product candidates for the treatment of
cancer, inflammation, autoimmune diseases, transplant rejection, cardiovascular
disease, growth factor modulation, neurological diseases and infectious
diseases. We expect that substantially all of our revenues for the foreseeable
future will result from payments under these and other contracts. The terms of
these arrangements vary, but can generally be categorized as follows:
  Antigen Target Sourcing
  ContractsWe have
  entered into several target sourcing contracts with genomics and
  biopharmaceutical companies that may enable us to generate a pipeline of
  proprietary fully human antibody product candidates. Typically, these
  contracts provide for Abgenix to make fully human antibodies to the antigen
  targets provided or identified by the contract counterparty. The contracts
  typically contain provisions that allow either Abgenix or the other contract
  party to evaluate and select particular antibodies from the pool of generated
  antibodies for further development and commercialization. The party selecting
  a product candidate for further development or commercialization will
  generally pay to the other party, in exchange for rights to develop and
  commercialize the product, license fees, milestone payments and royalty
  payments on any eventual product sales.
  Proprietary Product
  LicensingIn July
  and August 2000, we entered into two joint development and
  commercialization agreements. The first is with Immunex Corporation for
  ABX-EGF, a fully human antibody created by us. Under the agreement, Immunex
  agreed to make an initial license fee payment to us at signing and that we
  would earn a second license fee payment upon commencement of Phase II clinical
  trials of ABX-EGF. Development costs will be shared equally, as would any
  potential profits from sales of collaboration products. We and Immunex share
  responsibility for product development. We will be responsible for completing
  the ongoing Phase I trials, and if the Phase I trials are successful, both
  companies will share responsibility for the execution of Phase II trials
  across a variety of indications. Immunex will have primary responsibility for
  Phase III clinical trials and will market any potential product, while we
  will retain co-promotion rights. The second agreement is with SangStat
  Medical Corporation for ABX-CBL, an antibody developed by us. Under that
  agreement, SangStat made an initial license fee payment and has agreed to
  make additional milestone payments. Development costs will be shared equally,
  as would any potential profits from sales of collaboration products. We and
  SangStat share responsibility for product development, including the ongoing
  Phase II/III clinical trials. SangStat will market any potential product and
  we will be responsible for manufacturing ABX-CBL.We
  intend to build our product portfolio by generating antibodies to antigen
  targets that we source, self-funding clinical activities to determine
  preliminary safety and efficacy, and entering into more development and
  commercialization agreements with pharmaceutical and biotechnology companies.
  These arrangements may or may not involve joint sharing of costs and profits.
  Technology LicensingWe also license ourXenoMouse
  technology to third parties for the purpose of generating fully human
  antibody product candidates to one or more specific antigen targets provided
  by the customer. In most cases, we provide our mice to the customers who then
  carry out immunizations with their specific antigen targets. In other cases,
  we immunize the mice with the customers' antigen targets for additional
  compensation. The customer generally has an option for a period of time to
  acquire a product license for any antibody product identified through the
  XenoMouse technology that the customer wishes to develop and commercialize.
  The financial terms of these agreements may include license fees, option fees
  and milestone payments paid to us by the customers. Based on our agreements,
  these payments and fees would average $8.0 to $10.0 million per antigen
  target if our customer takes the antibody product candidate into development
  and ultimately to commercialization. Additionally, our license agreements
  entitle us to receive royalties on any future product sales by the customer.Our
dependence on contracts with third parties subjects us to a number of risks and
uncertainties. Agreements with licensees typically allow the licensees
significant discretion in electing whether to pursue any of the planned
activities. Wecannot control the amount or timing of resources our
licensees may devote to the product candidates. Even if we fulfill our
obligations under an agreement, the licensee can terminate the agreement at any
time following proper written notice. If any licensee were to terminate or
breach its agreement with us, or otherwise fail to complete its obligations in
a timely manner, our business, financial condition and results of operations
may be materially harmed.We
have three proprietary antibody product candidates that are currently in
clinical trials, two of which are now being co-developed with our
collaborators, as follows:
  ABX-IL8-Generated using
  XenoMouse technology, ABX-IL8 is our fully human antibody candidate for the treatment
  of psoriasis and rheumatoid arthritis. The status of clinical trials for
  ABX-IL8 is as follows:
  Psoriasis-We
  have completed Phase I, Phase I/II and Phase IIa clinical trials. We
  initiated Phase IIb clinical trials in February 2001 and enrollment is
  ongoing.
  Rheumatoid
  arthritis-We initiated a Phase IIa clinical trial in December 2000 and
  enrollment is ongoing.
  ABX-EGF-Generated using
  XenoMouse technology, ABX-EGF is our fully human antibody candidate for the
  treatment of a variety of cancers. In July 2000, we entered into the
  joint development and commercialization agreement with Immunex Corporation
  for ABX-EGF described above. The status of clinical trials for ABX-EGF is as
  follows:
  Various Cancers - We
  initiated a Phase I clinical trial for ABX-EGF in cancer in July 1999 and
  enrollment is ongoing.
  Kidney cancer- We
  initiated a Phase II clinical trial for ABX-EGF in kidney cancer in April
  2001 and enrollment is ongoing. In May 2001, we received the second milestone
  payment from Immunex contemplated by the agreement described above.
  ABX-CBL-We developed
  ABX-CBL, an in-licensed mouse antibody, for the treatment of a transplant–related
  disease known as graft versus host disease, or GVHD. We have completed a
  multi–center Phase II clinical trial for ABX-CBL and initiated a Phase
  II/III clinical trial in December 1999 in which enrollment is ongoing.
  In August 2000, we entered into the joint development and
  commercialization agreement with SangStat Medical Corporation for ABX-CBL
  described above.In addition to our proprietary antibody product
candidates in clinical trials, there is one customer-developed antibody
generated with XenoMouse technology in clinical trials as follows:
  Pfizer, Inc.-We
  generated a XenoMouse derived antibody for treating cancer, which Pfizer has
  advanced into clinical trials.We will expend significant capital
to conduct clinical trials for our
proprietary product candidates, including several Phase II clinical trials we
plan to initiate in 2001. We believe that more extensive clinical data will
enable us to enter into additional contractual arrangements related to those
proprietary product candidates. We expect that this will substantially increase
our capital needs over the next few years and increase our operating losses.
However, we believe that we will be able to receive more favorable fees and
payments from our contract parties if we have completed significant development
of these products.Results of OperationsQuarter Ended March 31, 2001
and 2000Contract revenue totaled $4.2
million in the quarter ended March 31, 2001 compared to $2.0 million, in the
comparable 2000 period. The primary components for both periods were as
follows:
  A
  total of $2.6 million was recognized in the quarter ended March 31, 2001
  under joint development and commercialization agreements with Immunex and
  SangStat for the development of ABX-EGF and ABX-CBL, respectively, as
  discussed above. As the agreements were executed in the third quarter of
  2000, no revenue was recognized related to these agreements in the first
  quarter of 2000. Under these agreements, we recognize license fees ratably
  over the minimum periods we are obligated to share in development costs.
  Under the Immunex agreement, this is the 17-month period ended December 31,
  2001 and the amount recognized in the quarter ended March 31, 2001 was $0.9
  million. Under the SangStat agreement, this was the six-month period ended
  January 31, 2001, and the amount recognized in the quarter ended March 31,
  2001 was $0.3 million. Additionally, in the quarter ended March 31, 2001, we
  recognized $1.4 million as revenue from SangStat, which represents 50% of the
  development costs of ABX-CBL we incurred and recorded as expense in the
  quarter ended March 31, 2001, net of 50% of the development costs incurred by
  SangStat. Development costs of ABX-EGF incurred by Immunex exceeded
  development costs incurred by us, in the quarter ended March 31, 2001, and
  therefore we recorded our 50% share of the excess as additional research and
  development expense.
  Milestones
  fees from Pfizer, Inc. totaling $0.7 million were recognized in the quarter
  ended March 31, 2001 as compared to fees from Pfizer for certain research
  work of $0.2 million in the quarter ended March 31, 2000.
  Research
  and license fees of $1.0 million were recognized in the quarter ended March
  31, 2000, under an agreement with Millennium Pharmaceuticals Inc. in which we
  granted several licenses to make, use and sell antibodies generated with our
  XenoMouse technology. Payments totaling $10.0 million were received in the
  first quarter of 2000 representing a research license fee, product license
  fees and service fees to establish XenoMouse technology at Millennium. We
  recognized these fees ratably each month over the period ended December 31,
  2000, during which we fulfilled our obligation to assist in establishing
  XenoMouse technology at Millennium, enabling Millennium to practice the
  research license and product licenses. No such fees were recognized in the
  quarter ended March 31, 2001.
  Two
  product license fees were received and recognized in the quarter ended March
  31, 2000 from Japan Tobacco under an existing collaboration agreement. No
  such fees were recognized in the quarter ended March 31, 2001.
  Additionally,
  research license fees were recognized in the quarter ended March 31, 2001,
  related to expanded agreements with Chiron Corporation and Amgen, Inc. and
  research funding fees were recognized in both quarters ended March 31, 2001
  and 2000.Interest income consists primarily
of interest from cash, cash equivalents and marketable securities. Interest
income increased to $10.3 million in the quarter ended March 31, 2001 from $4.3
million in the comparable 2000 period. This increase is a result of higher
average balances of our marketable securities and cash equivalents as a result
of the investment of $717.1 million of net proceeds from a follow-on offering
and a private placement in 2000.Research
and development expenses consist primarily of compensation and other expenses
related to research and development personnel, costs associated with
pre-clinical testing and clinical trials of our product candidates, including
the costs of manufacturing the product candidates, and facilities expenses.  Research and development expenses increased
to $16.8 million in the quarter ended March 31, 2001 from $7.2 million in the
comparable period in 2000. The increase is primarily due to costs associated
with the following:
  Increased
  personnel  Staffing at March 31, 2001 increased by approximately 130% from
  March 31, 2000. The increase in staff is to support the increased level of
  product development activities, including new target validation, process
  sciences, manufacturing and increased clinical activities. Also, the increase
  includes the new staff as a result of our acquisition of our Canadian
  subsidiary, Abgenix Biopharma Inc. (formerly ImmGenics Pharmaceuticals Inc.)
  in November 2000. Included in the increase are salary and related fringe
  benefits, recruiting and relocation costs. We expect personnel costs to
  increase further as we continue to build our organization.
  Facility costs-
  Related to the increased staffing, we acquired new facilities and related
  leasehold, furniture and fixtures. As a result, rent, depreciation and
  utilities have increased in the quarter ended March 31, 2001 as compared to
  the same quarter in 2000. We expect facility costs to increase in future
  periods as a result of our capital expansion plans.
  Research Costs- In the
  first quarter of 2001, we entered into an agreement with Impath Inc., in
  which Impath will evaluate target expression by performing certain tissue
  studies, enabling us to better identify potential diagnostic and therapeutic
  products. The agreement includes a monthly fee payable over 13 months. Also,
  research costs and lab supplies costs have increased in the first quarter of
  2001 in comparison to the first quarter of 2000 as a result of the
  acquisition of Abgenix Biopharma as well as increased research activity and
  staff in the United States.
  Clinical Costs-
  Clinical costs have increased in 2001 as we have initiated new clinical
  trials and progressed to later stage clinical trials for our three product
  candidates, ABX-CBL, ABX-IL8 and ABX-EGF. The costs of such trials include
  the clinical investigator site fees, monitoring costs and data management
  costs. Additionally, such costs include the costs of manufacturing the
  antibody used in clinical trials. In July and August 2000, we entered into
  separate agreements with Immunex and SangStat to share equally in the costs
  of developing and commercializing ABX-EGF and ABX-CBL, respectively. However,
  we expect clinical costs will increase in the future as we enter additional
  clinical trials for both new and existing product candidates.
  Toxicology Costs-
  Related to our increased clinical trial activity, we incurred higher costs
  for toxicology studies in the quarter ended March 31, 2001 in comparison to
  the quarter ended March 31, 2000.Amortization of intangible assets
relates to existing technology (including patents and certain royalty rights),
goodwill and assembled workforce acquired through the acquisitions of Abgenix
Biopharma and IntraImmune Therapies, Inc. in November 2000 and Xenotech in
December 1999. As a result of the acquisitions in 2000, amortization increased
to $2.0 million in the quarter ended March 31, 2001 from $0.8 million in the
comparable 2000 period.General and administrative expenses
include compensation and other expenses related to finance and administrative
personnel, professional services and facilities. General and administrative
expenses increased to $3.1 million in the quarter ended March 31, 2001 from
$1.6 million in the comparable period in 2000. The increase reflects increased
personnel costs, including recruiting costs and incentive compensation and
additional consulting costs associated with our Information Services group. The
increase is also related to the acquisition of Abgenix Biopharma. We expect
personnel costs to increase further as we continue to build our organization,
including consulting costs associated with new information systems.Liquidity and Capital ResourcesAt March 31, 2001, we had cash,
cash equivalents and marketable securities of approximately $631.6 million. We
invest our cash equivalents and marketable securities in highly liquid,
interest bearing, investment grade and government securities in order to
preserve principal.Net cash used in operating
activities was $10.1 million for the quarter ended March 31, 2001, and net cash
provided by operating activities was $2.9 million for the quarter ended March
31, 2000. In the quarter ended March 31, 2001, cash was provided by interest
income of $13.0 million in comparison to $4.3 million in the quarter ended
March 31, 2000, both net of the change in interest receivable. Additionally, in
the quarter ended March 31, 2001, customers provided cash of $4.5 million in
comparison to $6.5 million in the quarter ended March 31, 2000, both net of the
change in accounts receivable and deferred revenue. Cash was used for
operations in both periods primarily to fund research and development expenses
and manufacturing costs related to the development of new products.
Additionally, cash was used in the quarter ended March 31, 2001 for a security
deposit related to a new facility lease and the pay down of accounts payable.Net cash provided by investing
activities was $23.8 million for the quarter ended March 31, 2001, and net cash
used in investing activities for the quarter ended March 31, 2000 was $198.2
million. For the quarter ended March 31, 2001, we received cash from our
investment activities as certain of our marketable securities matured in
comparison to the quarter ended March 31, 2000, in which cash received from our
follow-on public offering in February 2000 was invested in marketable
securities. For the quarter ended March 31, 2001, we made an aggregate cash
payment of $43.9 million to the holders of the Abgenix Biopharma special shares
in connection with our acquistion of Abgenix Biopharma. Additionally, in the
first quarter of 2001, cash in the amount of $8.4 million was used for the
acquisition of property and equipment, primarily leasehold improvements related
to our new facility and computer equipment, in comparison to the first quarter
of 2000, in which $0.3 million was spent on such items.During the quarter ended March 31,
2001, net cash provided by financing activities was $0.8 million, consisting
primarily of the proceeds from the exercise of stock options. This compares to
the quarter ended March 31, 2000, in which net cash provided by financing
activities was $498.3 million, consisting primarily of the proceeds of our
follow-on public offering in February 2000, in which we raised $496.5 million.
Additionally, in the quarter ended March 31, 2000, we received cash proceeds
for the exercise of warrants by Cell Genesys and additional cash proceeds from
the exercise of stock options.In March 2000 and February 2001, we
obtained stand-by letters of credit for $2.0 and $3.0 million, respectively,
from a commercial bank as security for our obligations on the leases on our two
new leased facilities. The stand-by letters of credit are secured by an
investment account, in which we must maintain a $5.5 million balance.
Additionally, we have a leasing agreement with a financing company under which
we have financed purchases of approximately $2.0 million of our laboratory and
office equipment. The lease term is 48 months and bears interest at rates
ranging from 12.5% to 13.0%. We also had a construction financing line with a
bank in the amount of $4.3 million that was used to finance construction of
leasehold improvements at our first facility. The line was paid off in May
2000.We plan to make significant
expenditures to establish our own manufacturing facility and expand our
research and development activities, including pre-clinical product development
and clinical trials. We will also continue to look for new technology suppliers
as potential acquisitions or alliance collaborators. Over the next two years,
we estimate that we will spend approximately $180.0-$200.0 million on leasehold
improvements and equipment for our new manufacturing and research and
development facilities. Additionally, we expect to spend approximately $10.0
million on new computer hardware and software, including the acquisition of a
new enterprise resource planning system. We also plan to spend significant
amounts to develop, on a proprietary or co-developed basis, investigational new
drug applications (INDs) for up to three product candidates annually, beginning
in 2002. We believe that the annual goals of our customers and collaborators
for 2002 and beyond include up to five INDs for additional product candidates
based on our XenoMouse technology. If unforeseen difficulties arise in the
course of developing product candidates, manufacturing product candidates,
performing pre-clinical development and clinical trials of such product
candidates, obtaining necessary regulatory approvals, or in other aspects of
our business, we may be required to make further substantial expenditures. Our
future liquidity and capital requirements will depend on many factors,
including:
  the scope and results
  of pre-clinical testing and clinical trials;
  the retention of
  existing and establishment of further licensing and other agreements, if any;
  continued scientific
  progress in our research and development programs;
  the size and
  complexity of these programs;
  the cost of
  establishing our manufacturing capabilities, and conducting commercialization
  activities and arrangements;
  the time and expense
  involved in seeking regulatory approvals;
  competing
  technological and market developments;
  the time and expense
  of filing and prosecuting patent applications and enforcing patent claims;
  our investment in, or
  acquisition of, other companies;
  the amount of product
  in-licensing in which we engage; and
  other factors not
  within our control.We believe that our current cash
balances, cash equivalents, marketable securities, and the cash generated from
our licensing and contractual agreements will be sufficient to meet our
operating and capital requirements for at least one year. However, we may
choose to obtain additional financing from time to time. We may choose to raise
additional funds through public or private financing, licensing and contractual
agreements or other arrangements. We cannot be sure that any additional
funding, if needed, will be available on terms favorable to us. Furthermore,
any additional equity financing may be dilutive to our shareholders, and debt
financing, if available, may involve restrictive covenants. Licensing and other
contractual agreements may require us to relinquish our rights to certain of
our technologies, products or marketing territories. Our failure to raise
capital when needed would harm our business, financial condition and results of
operations.We
have incurred net losses in each of the last five years of operation, including
net losses of  $7.1 million in
1996, $35.9 million in 1997, $16.8 million in 1998,
$20.5 million in 1999, $8.8 million in 2000 and $7.6 million in the
quarter ended March 31, 2001. As of March 31, 2001, our accumulated deficit was
$106.2 million. Our losses to date have resulted principally from:
  research and development
  costs relating to the development of our XenoMouse technology and antibody
  product candidates;
  costs associated with
  certain agreements with Japan Tobacco and certain 1997 settlement and
  cross-licensing agreements with GenPharm International, Inc.;
  in-process research and development costs and
  amortization of intangible assets associated with our acquisitions of Abgenix
  Biopharma, IntraImmune and Xenotech;
  general and administrative costs relating to our
  operations.We
expect to incur additional losses for the foreseeable future as a result of
increases in our research and development costs, including costs associated
with conducting pre-clinical development and clinical trials, and charges
related to purchases of technology or other assets. We intend to invest
significantly in our products prior to entering into licensing agreements. This
may increase our need for capital and will result in losses for several years.
We expect that the amount of operating losses will fluctuate significantly from
quarter to quarter as a result of increases or decreases in our research and
development efforts, the execution or termination of licensing and contractual
agreements, and the initiation, success or failure of clinical trials.As of
December 31, 2000, we had federal net operating loss carryforwards of
approximately $148.0 million. Our net operating loss carryforwards exclude
losses incurred prior to our formation in July 1996. Further,
the amounts associated with the 1997 cross-license and settlement that have
been expensed for financial statement accounting purposes have been capitalized
and are being amortized over a period of approximately 15 years for tax
purposes. The net operating loss and credit carryforwards will expire in the
years 2011 through 2020, 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.ADDITIONAL
FACTORS THAT MIGHT AFFECT FUTURE
RESULTSRisks Related to the Development and Commercialization of our ProductsOur XenoMouse
technology may not produce safe, efficacious or commercially viable products.Our
XenoMouse technology is a new approach to the generation of antibody
therapeutic products. We have not commercialized any antibody products based on
XenoMouse technology.  Moreover, we are
not aware of any commercialized, fully human antibody therapeutic products that
have been generated from any technologies similar to ours. Our antibody product
candidates are still at an early stage of development. Clinical trials have
begun with respect to only three fully human antibody product candidates
generated by XenoMouse technology. We cannot be certain that XenoMouse
technology will generate antibodies against every antigen to which it is exposed
in an efficient and timely manner, if at all. Furthermore, XenoMouse technology
may not result in any meaningful benefits to our current or potential customers
or be safe and efficacious for patients. If XenoMouse technology fails to
generate antibody product candidates that lead to the successful development
and commercialization of products, our business, financial condition and
results of operations will be materially harmed.Successful development of our products is uncertain.Our
development of current and future product candidates is subject to the risks of
failure inherent in the development of new pharmaceutical products and products
based on new technologies. These risks include:
  delays
  in product development, clinical testing or manufacturing;
  unplanned
  expenditures in product development, clinical testing or manufacturing;
  failure
  in clinical trials or failure to receive regulatory approvals;
  emergence
  of superior or equivalent products;
  inability
  to manufacture on our own, or through others, product candidates on a
  commercial scale;
  inability
  to market products due to third-party proprietary rights;
  election
  by our customers not to pursue product development;
  failure
  by our customers to develop products successfully; and
  failure
  to achieve market acceptance.Because
of these risks, our research and development efforts or those of our customers
may not result in any commercially viable products. To date, our customers'
right to obtain a product license has been exercised for only six product
candidates. If a significant portion of these development efforts is not
successfully completed, required regulatory approvals are not obtained or any
approved products are not commercially successful, our business, financial
condition and results of operations will be materially harmed.Clinical trials for our product candidates will be expensive
and their outcome is uncertain.Conducting
clinical trials is a lengthy, time-consuming and expensive process. Before
obtaining regulatory approvals for the commercial sale of any products, we must
demonstrate through pre-clinical testing and clinical trials that our product
candidates are safe and effective for use in humans. We will incur substantial
expense for, and devote a significant amount of time to, pre-clinical testing
and clinical trials.Historically,
the results from pre-clinical testing and early clinical trials have often not
been predictive of results obtained in later clinical trials. A number of new
drugs and biologics have shown promising results in clinical trials, but
subsequently failed to establish sufficient safety and efficacy data to obtain
necessary regulatory approvals. Data obtained from pre-clinical and clinical
activities are susceptible to varying interpretations, which may delay, limit
or prevent regulatory approval. In addition, regulatory delays or rejections
may be encountered as a result of many factors, including changes in regulatory
policy during the period of product development.As of
March 31, 2001, three of our proprietary product candidates, ABX-CBL, ABX-IL8
and ABX-EGF, were in clinical trials. Patient follow-up for these clinical
trials has been limited. To date, data obtained from these clinical trials has
been insufficient to demonstrate safety and efficacy under applicable Federal
Drug Administration, or FDA, guidelines. As a result, this data will not
support an application for regulatory approval without further clinical trials.
Clinical trials conducted by us or by third parties on our behalf may not
demonstrate sufficient safety and efficacy to obtain the requisite regulatory
approvals for ABX-CBL, ABX-IL8, ABX-EGF and/or any other potential product
candidates. Regulatory authorities may not permit us to undertake any
additional clinical trials for our product candidates.In
addition, our other product candidates are in pre-clinical development, but we
have not submitted investigational new drug applications nor begun clinical
trials for these product candidates. Our pre-clinical or clinical development
efforts may not be successfully completed, we may not file further
investigational new drug applications and clinical trials may not commence as
planned.Completion
of clinical trials may take several years or more. The length of time generally
varies substantially according to the type, complexity, novelty and intended
use of the product candidate. Our commencement and rate of completion of
clinical trials may be delayed by many factors, including:
  inability to manufacture
  sufficient quantities of materials for use in clinical trials;
  slower than expected
  rate of patient recruitment;
  inability to adequately
  follow patients after treatment;
  unforeseen safety
  issues;
  lack of efficacy during the
  clinical trials; or
  government or regulatory
  delays.We
have limited experience in conducting and managing clinical trials. We rely on
third parties, including our customers, to assist us in managing and monitoring
clinical trials. Our reliance on these third parties may result in delays in
completing, or in failure to complete, these trials if the third parties fail
to perform under our agreements with them.Our
product candidates may fail to demonstrate safety and efficacy in clinical
trials. This failure may delay development of other product candidates and
hinder our ability to conduct related pre-clinical testing and clinical trials.
As a result of these failures, we may also be unable to obtain additional
financing. Any delays in, or termination of, our clinical trials could
materially harm our business, financial condition and results of operations.We currently rely on a sole source
third–party manufacturer.We
currently rely, and will continue to rely for at least the next five years, on
a single contract manufacturer, Lonza Biologics (Lonza), to produce ABX-CBL,
ABX-IL8 and ABX-EGF under good manufacturing practice regulations, for use in
our clinical trials. In December 2000, we entered into a manufacturing supply
agreement with Lonza, wherein Lonza will make available exclusively to us, for
a period of five years commencing approximately in the fall of 2001, a cell
culture production suite within its facility. As a result of this agreement, we
gain access to production capacity and scheduling flexibility similar to owning
the facility, while Lonza retains responsibility for staffing and operating the
facility. The term of the agreement is five years with an option to extend the
agreement. The dedicated cell culture production suite with associated
purification capacity is undergoing refurbishment and is expected to be
operational in the third quarter of 2001. Lonza has a limited number of
facilities in which our product candidates can be produced and has limited
experience in manufacturing ABX-CBL, ABX-IL8 and ABX-EGF in quantities
sufficient for conducting clinical trials or for commercialization. We
currently rely on Lonza to produce our product candidates under good
manufacturing practice regulations, which meet acceptable standards for our
clinical trials.Third-party
manufacturers often encounter difficulties in scaling up production, including
problems involving production yields, quality control and assurance, shortage
of qualified personnel, compliance with FDA regulations, production costs, and
development of advanced manufacturing techniques and process controls. Our
third-party manufacturer may not perform as agreed or may not remain in the
contract manufacturing business for the time required by us to successfully
produce and market our product candidates. If our third-party manufacturer
fails to deliver the required quantities of our product candidates for clinical
use on a timely basis and at commercially reasonable prices, and we fail to
find a replacement manufacturer or develop our own manufacturing capabilities,
our business, financial condition and results of operations will be materially
harmed.Our own ability to manufacture is
uncertain.We are
in the planning stages of establishing our own manufacturing facility for the
manufacture of products for clinical trials and early commercial launch, in
compliance with FDA good manufacturing practices. In May 2000, we signed a
long-term lease for a building to be built to contain this manufacturing
facility. Construction has started and this facility is expected to be
operational by year-end 2002. The costs of the facility, including design,
leasehold improvements and equipment, will approximate $120 million.
Construction of this facility may take longer than expected, and the planned
and actual construction costs of building and qualifying the facility for
regulatory compliance may be higher than expected. The process of manufacturing
antibody products is complex. We have no experience in the clinical or
commercial scale manufacturing of ABX-CBL, ABX-IL8 and ABX-EGF, or any other
antibody products. Such antibody products will also need to be manufactured in
a facility and by a process which comply with FDA and other regulations. It may
take a substantial period of time to begin producing antibodies in compliance
with such regulations. Our manufacturing operations will be subject to ongoing,
periodic unannounced inspection by the FDA and state agencies to ensure
compliance with good manufacturing practices. If we are unable to establish and
maintain a manufacturing facility within our planned time and cost parameters,
the development and sales of our products and our financial performance may be
materially harmed.We
also may encounter problems with the following:
  production yields;
  quality control and
  assurance;
  shortages of qualified
  personnel;
  on-going compliance with
  FDA regulations;
  production costs; and
  development of advanced
  manufacturing techniques and process controls.We are
currently evaluating our options for commercial production of our antibody
products, which include use of third-party manufacturers, establishing our own
commercial scale manufacturing facility or entering into a manufacturing joint
venture relationship with a third party. We are aware of only a limited number
of companies on a worldwide basis who operate manufacturing facilities in which
our product candidates can be manufactured under good manufacturing practice
regulations, a requirement for all pharmaceutical products. It would take a
substantial period of time for a contract manufacturing facility which has not
been producing antibodies to begin producing antibodies under good
manufacturing practice regulations. We may not be able to contract with any of
these companies on acceptable terms, if at all.In
addition, we and any third-party manufacturer will be required to register
manufacturing facilities with the FDA and other regulatory authorities. The
facilities will then be subject to inspections confirming compliance with FDA
good manufacturing practice or other regulations. If we or any of our
third-party manufacturers fail to maintain regulatory compliance, our business,
financial condition and results of operations will be materially harmed.We will need to find third parties to license and
develop many of our product candidates.Our
strategy for the development and commercialization of antibody therapeutic
products depends, in large part, upon the formation of collaboration agreements
with third parties. Potential third parties include pharmaceutical and
biotechnology companies, academic institutions and other entities. We must
enter into these agreements to successfully develop and commercialize product
candidates. These agreements are necessary in order for us to:
  access proprietary
  antigens for which we can generate fully human antibody products;
  fund our research and
  development activities;
  fund pre-clinical
  development, clinical trials and manufacturing;
  seek and obtain
  regulatory approvals; and
  successfully
  commercialize existing and future product candidates.Only a
limited number of fully human antibody product candidates have been generated
pursuant to our collaboration agreements, and only three antibody product
candidates generated with XenoMouse technology have entered clinical testing.
These product candidates may not result in commercially successful products.
Current or future collaboration agreements may not be successful. If we fail to
maintain our existing collaboration agreements or to enter into additional
agreements, our business, financial condition and results of operations will be
materially harmed.Our
dependence on licensing and other agreements with third parties subjects us to
a number of risks. These agreements may not be on terms favorable to us, and
collaborators typically are afforded significant discretion in electing whether
to pursue any of the planned activities. We cannot control the amount or timing
of resources our collaborators may devote to the product candidates, and
collaborators may not perform their obligations as expected. Additionally,
business combinations or significant changes in a collaborator's business
strategy may adversely affect a collaborator's willingness or ability to
complete its obligations under the arrangement. Even if we fulfill our
obligations under an agreement, typically our collaborators can terminate the
agreement at any time following proper written notice. If any of our
collaborators were to terminate or breach our agreement, or otherwise fail to
complete its obligations in a timely manner, our business, financial condition
and results of operations may be materially harmed. If we are not able to
establish further collaboration agreements or any or all of our existing agreements
are terminated, we may be required to seek new collaborators or to undertake
product development and commercialization at our own expense. Such an
undertaking may:
  limit the number of
  product candidates that we will be able to develop and commercialize;
  reduce the likelihood of
  successful product introduction;
  significantly increase our capital requirements; and
  place additional strain on our management's time.Existing
or future collaborators may pursue alternative technologies, including those of
our competitors. Disputes may arise with respect to the ownership of rights to
any technology or products developed with any current or future collaborator.
Lengthy negotiations with potential new collaborators or disagreements between
us and our collaborators may lead to delays or termination in the research,
development or commercialization of product candidates or result in
time-consuming and expensive litigation or arbitration. If any of our
collaborators pursue alternative technologies or fail to develop or
commercialize successfully any product candidate to which they have obtained
rights from us, our business, financial condition and results of operations may
be materially harmed.We do not have marketing and sales
experience.We do
not have marketing, sales or distribution experience or capability. For certain
products, we may establish an internal marketing and sales force. We intend to
enter into arrangements with third parties to market and sell most of our
products. We may not be able to enter into marketing and sales arrangements
with others on acceptable terms, if at all. To the extent that we enter into
marketing and sales arrangements with other companies, our revenues, if any,
will depend on the efforts of others. These efforts may not be successful. If
we are unable to enter into third-party arrangements, then we must develop a
marketing and sales force, which may need to be substantial in size, in order
to achieve commercial success for any product candidate approved by the FDA. We
may not successfully develop marketing and sales capabilities or have
sufficient resources to do so. If we do develop such capabilities, we will
compete with other companies that have experienced and well-funded marketing
and sales operations. If we fail to establish successful marketing and sales
capabilities or fail to enter into successful marketing arrangements with third
parties, our business, financial condition and results of operations will be
materially harmed.We are subject to extensive government
regulations and we may not be able to obtain regulatory approvals.Our
product candidates under development are subject to extensive and rigorous
domestic government regulation. The FDA regulates, among other things, the
development, testing, manufacture, safety, efficacy, record-keeping, labeling,
storage, approval, advertising, promotion, sale and distribution of
biopharmaceutical products. If our products are marketed abroad, they also are
subject to extensive regulation by foreign governments. None of our product
candidates has been approved for sale in the United States or any foreign
market. The regulatory review and approval process, which includes pre-clinical
studies and clinical trials of each product candidate, is lengthy, expensive
and uncertain. Securing FDA approval requires the submission of extensive
pre-clinical 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 may:
  adversely affect the
  successful commercialization of any drugs that we or our customers develop;
  impose costly procedures
  on us or our customers;
  diminish any competitive
  advantages that we or our customers may attain; and
  adversely affect our
  receipt of revenues or royalties.Certain
material changes to an approved product such as manufacturing changes or
additional labeling claims are subject to further FDA review and approval. Any
required approvals, once obtained, may be withdrawn. Compliance with other
regulatory requirements may not be maintained. Further, if we fail to comply
with applicable FDA and other regulatory requirements at any stage during the
regulatory process, we or our third-party manufacturers may be subject to
sanctions, 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.We
expect to rely on our customers to file investigational new drug applications
and generally direct the regulatory approval process for many of our products.
Our customers may not be able to conduct clinical testing or obtain necessary
approvals from the FDA or other regulatory authorities for any product
candidates. If we fail to obtain required governmental approvals, our customers
will experience delays in or be precluded from marketing products developed
through our research. In addition, the commercial use of our products will be
limited. Delays and limitations may materially harm our business, financial
condition and results of operations.We and
our third-party manufacturers also are required to comply with the applicable
FDA current good manufacturing practice regulations. Good manufacturing
practice regulations 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.
These facilities must be approved before we can use them in commercial
manufacturing of our products. We or our third-party manufacturers may not be
able to comply with the applicable good manufacturing practice requirements and
other FDA regulatory requirements. If we or our third-party manufacturers fail
to comply, our business, financial condition and results of operations will be
materially harmed.Market acceptance of our products is
uncertain.Our
product candidates may not gain market acceptance among physicians, patients,
healthcare payors and the medical community. We may not achieve market
acceptance even if clinical trials demonstrate safety and efficacy, and the
necessary regulatory and reimbursement approvals are obtained. The degree of
market acceptance of any product candidates that we develop will depend on a
number of factors, including:
  establishment and
  demonstration of clinical efficacy and safety;
  cost-effectiveness of
  our product candidates;
  their potential
  advantage over alternative treatment methods;
  reimbursement policies
  of government and third-party payors; and
  marketing and
  distribution support for our product candidates.Physicians
will not recommend therapies using our products until such time as clinical
data or other factors demonstrate the safety and efficacy of such procedures as
compared to conventional drug and other treatments. Even if the clinical safety
and efficacy of therapies using our antibody products is established,
physicians may elect not to recommend the therapies for any number of other
reasons, including whether the mode of administration of our antibody products
is effective for certain indications. For example, antibody products are
typically administered by infusion or injection, which requires substantial
cost and inconvenience to patients. Our product candidates, if successfully
developed, will compete with a number of drugs and therapies manufactured and
marketed by major pharmaceutical and other biotechnology companies. Our
products may also compete with new products currently under development by
others. Physicians, patients, third-party payors and the medical community may
not accept and utilize any product candidates that we or our customers develop.
If our products do not achieve significant market acceptance, our business,
financial condition and results of operations will be materially harmed.Risks Related to our FinancesWe are an early stage company.You
must evaluate us in light of the uncertainties and complexities present in an
early stage biopharmaceutical company. Our product candidates are in early
stages of development. We will require significant additional investment in
research and development, pre-clinical testing and clinical trials, regulatory
and sales and marketing activities to commercialize current and future product
candidates. Our product candidates, if successfully developed, may not generate
sufficient or sustainable revenues to enable us to be profitable.We have a history of losses.We
have incurred net losses in each of the last five years of operation, including
net losses of  $7.1 million in
1996, $35.9 million in 1997, $16.8 million in 1998,
$20.5 million in 1999, $8.8 million in 2000 and $7.6 million in the
quarter ended March 31, 2001. As of March 31, 2001, our accumulated deficit was
$106.2 million. Our losses to date have resulted principally from:
  research and development costs relating to the
  development of our XenoMouse technology and antibody product candidates;
  costs associated with certain agreements with Japan
  Tobacco and certain 1997 settlement and cross-licensing agreements with
  GenPharm International, Inc.;
  in-process research and development costs and
  amortization of intangible assets associated with our acquisitions of Abgenix
  Biopharma, IntraImmune and Xenotech;
  general and administrative costs relating to our
  operations.We
expect to incur additional losses for the foreseeable future as a result of
increases in our research and development costs, including costs associated
with conducting pre-clinical development and clinical trials, and charges
related to purchases of technology or other assets. We intend to invest
significantly in our products prior to entering into licensing agreements. This
may increase our need for capital and will result in losses for several years.
We expect that the amount of operating losses will fluctuate significantly from
quarter to quarter as a result of increases or decreases in our research and
development efforts, the execution or termination of licensing and contractual
agreements, and the initiation, success or failure of clinical trials.Our future profitability is uncertain.Prior
to June 1996, our business was owned by Cell Genesys, Inc. and operated as
a business unit of Cell Genesys. Since that time, we have funded our research
and development activities primarily from private placements and public
offerings of our securities and from revenues generated by our licensing and
contractual agreements.We
expect that substantially all of our revenues for the foreseeable future will
result from payments under licensing and other contractual arrangements and
from interest income. To date, payments under licensing and other agreements
have been in the form of option fees, reimbursement for research and
development expenses, license fees and milestone payments. Payments under our
existing and any future customer agreements will be subject to significant
fluctuation in both timing and amount. Our revenues may not be indicative of
our future performance or of our ability to continue to achieve such
milestones. Our revenues and results of operations for any period may also not
be comparable to the revenues or results of operations for any other period. We
may not be able to:
  enter into further licensing and other agreements;
  successfully complete pre-clinical development or
  clinical trials;
  obtain required regulatory approvals;
  successfully develop, manufacture and market product
  candidates; or
  generate additional revenues or profitability.If we
fail to achieve any of the above goals, our business, financial condition and
results of operations will be materially harmed.We may require additional financing.We
will continue to expend substantial resources for the expansion of research and
development, including costs associated with conducting pre-clinical
development and clinical trials. We will be required to expend substantial
funds in the course of completing required additional development, pre-clinical
testing and clinical trials of and regulatory approval for product candidates.
Our future liquidity and capital requirements will depend on many factors,
including:
  the scope and results of
  pre-clinical development and clinical trials;
  the retention of
  existing and establishment of further licensing and other agreements, if any;
  continued scientific
  progress in our research and development programs;
  the size and complexity
  of these programs;
  the cost of establishing
  manufacturing capabilities and conducting commercialization activities and
  arrangements;
  the time and expense
  involved in seeking regulatory approvals;
  competing technological
  and market developments;
  the time and expense of
  filing and prosecuting patent applications and enforcing patent claims;
  our investment in, or
  acquisition of, other companies;
  the amount of product
  in-licensing in which we engage; and
  other factors not within
  our control.We believe that our current cash
balances, cash equivalents, marketable securities, and the cash generated from
our licensing and contractual agreements will be sufficient to meet our
operating and capital requirements for at least one year. However, we may
choose to obtain additional financing from time to time. We may choose to raise
additional funds through public or private financing, licensing and contractual
agreements or other arrangements. We cannot be sure that any additional
funding, if needed, will be available on terms favorable to us. Furthermore,
any additional equity financing may be dilutive to our shareholders, and debt
financing, if available, may involve restrictive covenants. Licensing and other
contractual agreements may require us to relinquish our rights to certain of
our technologies, products or marketing territories. Our failure to raise
capital when needed would harm our business, financial condition and results of
operations.Risks Related to our
Intellectual PropertyOur patent position is uncertain and
our success depends on our proprietary rights.Our
success depends in part on our ability to:
  obtain patents;
  protect trade secrets;
  operate without
  infringing upon the proprietary rights of others; and
  prevent others from
  infringing on our proprietary rights.We
will be able to protect our proprietary rights from unauthorized use by third
parties only to the extent that our proprietary rights are covered by valid and
enforceable patents or are effectively maintained as trade secrets. We own five
issued patents in the United States, one granted patent in Europe, and three
granted patents in Japan, and we have several pending patent applications in
the United States and abroad, all relating to XenoMouse technology and products
generated by it. Our wholly-owned subsidiary, Xenotech, owns two issued U.S.
patents, one Australian patent, and several pending U.S. and foreign patent
applications related to methods of treatment of bone disease in cancer
patients. Our wholly-owned subsidiary, Abgenix Biopharma, is licensed under one
issued U.S. patent and one pending patent in Canada and Europe relating to the
Selected Lymphocyte Antibody Method (SLAM) technology. Our wholly owned
subsidiary, IntraImmune, is licensed under patents and pending applications in
the United States and in Europe related to intrabody technology. In addition,
we have seven issued U.S. patents and several pending patent applications in
the United States and abroad that are jointly owned with Japan Tobacco relating
to antibody technology or genetic manipulation. We attempt to protect our
proprietary position by filing U.S. and foreign patent applications related to
our proprietary technology, inventions and improvements that are important to
the development of our business. However, the patent position of
biopharmaceutical companies involves complex legal and factual questions, and,
therefore, enforceability cannot be predicted with certainty. Patents, if
issued, may be challenged, invalidated or circumvented. Thus, any patents that
we own or license from third parties may not provide any protection against
competitors. Our pending patent applications, those we may file in the future,
or those we may license from third parties, may not result in patents being
issued. Also, patent rights may not provide us with adequate proprietary
protection or competitive advantages against competitors with similar
technologies. The laws of certain foreign countries do not protect our
intellectual property rights to the same extent as do the laws of the United
States.In
addition to patents, we rely on trade secrets and proprietary know-how. We seek
protection, in part, through confidentiality and proprietary information
agreements. These agreements may not provide meaningful protection or adequate
remedies for our technology in the event of unauthorized use or disclosure of
confidential and proprietary information, and, in addition, the parties may
breach such agreements. Also, our trade secrets may otherwise become known to,
or be independently developed by, our competitors. Furthermore, others may
independently develop similar technologies or duplicate any technology that we
have developed.We may face challenges from third
parties regarding the validity of our patents and proprietary rights.Research
has been conducted for many years in the antibody and transgenic animal fields.
This has resulted in a substantial number of issued patents and an even larger
number of pending patent applications. The publication of discoveries in the
scientific or patent literature frequently occurs substantially later than the
date on which the underlying discoveries were made. Our commercial success
depends significantly on our ability to operate without infringing the patents
and other proprietary rights of third parties. Our technologies may
unintentionally infringe the patents or violate other proprietary rights of
third parties. In the event of such infringement or violation, we and our
customers may be prevented from pursuing product development or
commercialization. Such a result could materially harm our business, financial
condition and results of operations.In
March 1997, we entered into a cross-license and settlement agreement with
GenPharm International, Inc. to avoid protracted litigation. Under the
cross-license, we 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 our products and business. Our business,
financial condition and results of operations could be materially harmed if any
of the parties breaches the cross-license agreement.We
have one granted European patent relating to XenoMouse technology that is
currently undergoing opposition proceedings within the European Patent Office
and the outcome of this opposition is uncertain.GlaxoSmithKline,
plc (Glaxo) has a family of patents relating to certain methods for
generating monoclonal antibodies that Glaxo is asserting against Genentech,
Inc. in litigation that was commenced in 1999. On May 4, 2001, Genentech
announced that a jury had determined that Genentech had not infringed Glaxos
patents and that all of the patent claims asserted against Genentech are
invalid. An appeal by Glaxo is possible. If any of the claims of these patents
are finally determined in the litigation to be valid, and if we were to use
manufacturing processes covered by the patents to make our products, then we
may need to obtain a license should one be available. Should a license be
denied or unavailable on commercially reasonable terms, commercialization of
one or more of our products could be impeded in any territories in which these
claims were in force.Genentech,
Inc. owns a U.S. patent that relates to inhibiting the growth of tumor cells
involving an anti-EGF receptor antibody in combination with a cytotoxic factor.
ImClone Systems, Inc., owns or is licensed under a U.S. patent that issued in
April 2001, relating to inhibiting the growth of tumor cells involving an
anti-EGF receptor antibody in combination with an anti-neoplastic agent. We
believe there are strong arguments that all claims of both the Genentech Inc.
patent and the ImClone patent are invalid. We are continuing to analyze the
scope of these patents. We believe that currently all of the Companys
activities relating to anti-EGFr monoclonal antibodies are within the exemption
provided by the U.S. patent laws for uses reasonably related to obtaining FDA
approval of a drug. Based on our product development plans, we do not expect
the scope of our activities in this regard to change in the future prior to filing
an application for a biologic license with the FDA. If the claims of either the
Genentech patent or the ImClone patent are judicially determined to cover our
activities with ABX-EGF and are held valid, we may be required to obtain a
license to Genentechs or ImClones patent, as the case may be, to label and
sell ABX-EGF for some or all such combination indications. Should a license be
denied or unavailable on commercially reasonable terms, our commercialization
of ABX-EGF could be impeded in the United States.In
2000, the Japanese Patent Office granted a patent to Kirin Beer Kabushiki
Kaisha, one of our competitors, relating to non-human transgenic mammals. Kirin
has filed corresponding patent applications in Europe and Australia. Kirin may
also have filed a corresponding patent application in the United States. Our
licensee, Japan Tobacco, has filed opposition proceedings against the Kirin
patent. We cannot predict the outcome of those opposition proceedings, which
may take years to be resolved. We will analyze the patent to determine its
relevance to our business and if appropriate analyze the scope and validity of
its claims.As
discussed above, we own several patents in the United States, Japan and other
countries around the world. We also hold several pending patent applications.The
biotechnology and pharmaceutical industries have been characterized by
extensive litigation regarding patents and other intellectual property rights.
The defense and prosecution of intellectual property suits, United States
Patent and Trademark Office 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 that we
  own or license;
  protect trade secrets or
  know-how that we own or license; or
  determine the
  enforceability, scope and validity of the proprietary rights of others.If we
become involved in any litigation, interference or other administrative
proceedings, we could incur substantial expense and the efforts of our
technical and management personnel could be significantly diverted. An adverse
determination may subject us to loss of our proprietary position or to
significant liabilities, or require us to seek licenses that may not be
available from third parties. We may be restricted or prevented from
manufacturing and selling our products, if any, in the event of an adverse
determination in a judicial or administrative proceeding or if we fail to
obtain necessary licenses. Costs associated with these arrangements may be
substantial and may include ongoing royalties. Furthermore, we may not be able to
obtain the necessary licenses on satisfactory terms, if at all. These outcomes
will materially harm our business, financial condition and results of
operations.Risks Related to our IndustryWe face intense competition and rapid
technological change.The
biotechnology and pharmaceutical industries are highly competitive and subject
to significant and rapid technological change. We are aware of several
pharmaceutical and biotechnology companies that are actively engaged in
research and development in areas related to antibody therapy. These companies
have commenced clinical trials of antibody products or have successfully
commercialized antibody products. Many of these companies are addressing the
same diseases and disease indications as us or our customers. Also, we compete
with companies that offer antibody generation services to companies that have
antigens. These competitors have specific expertise or technology related to
antibody development and introduce new or modified technologies from time to
time. These companies include GenPharm International, Inc., a wholly-owned
subsidiary of Medarex, Inc.; Medarex's joint venture partner, Kirin
Brewing Co., Ltd.; Cambridge Antibody Technology Group plc; Protein Design
Labs, Inc. and MorphoSys AG.Some
of our competitors have received regulatory approval or are developing or
testing product candidates that may compete directly with our product
candidates. For example, SangStat Medical Corp., Novartis, Pharmacia
Corporation and Roche market organ transplant rejection products that may
compete with ABX-CBL, which is in clinical trials. In addition,
MedImmune, Inc. has a potential antibody product candidate in clinical
trials for graft versus host disease that may compete with ABX-CBL. We are also
aware that several companies, including Genentech, Inc. and Biogen, Inc.,
have potential product candidates that may compete with ABX-IL8, in the
treatment of psoriasis, which is in clinical trials. Furthermore, we are aware
that ImClone Systems, Inc., AstraZeneca PLC and OSI
Pharmaceuticals, Inc., have potential antibody and small molecule product
candidates in clinical development that may compete with ABX-EGF, which is also
in clinical trials.Many
of these companies and institutions, either alone or together with their
customers, have substantially greater financial resources and larger research
and development staffs than we do. In addition, many of these competitors,
either alone or together with their customers, have significantly greater
experience than we do in:
  developing products;
  undertaking pre-clinical
  testing and human clinical trials; and
  obtaining FDA and other
  regulatory approvals of products.Accordingly,
our competitors may succeed in obtaining patent protection, receiving FDA
approval or commercializing products before us. If we commence commercial
product sales, we will be competing against companies with greater marketing
and manufacturing capabilities, areas in which we have limited or no
experience.We
also face, 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 we are seeking to
develop therapeutic products. In addition, any product candidate that we
successfully develop 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;
  new small molecules; or
  other classes of
  therapeutic agents.Developments
by competitors may render our product candidates or technologies obsolete or
non-competitive. We face and will continue to face intense competition from
other companies for agreements 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 customers, may succeed in developing technologies or products that are
more effective than ours.We face uncertainty over reimbursement and healthcare reform.In
both domestic and foreign markets, sales of our product candidates will depend
in part upon the availability of reimbursement from third-party payors. Such
third-party payors include 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. We may need to conduct post-marketing studies in order to demonstrate
the cost-effectiveness of our products. Such studies may require us to provide
a significant amount of resources. Our product candidates may not be considered
cost-effective. Adequate third-party reimbursement may not be available to
enable us to maintain price levels sufficient to realize an appropriate return
on our investment in product development. Domestic 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 our proposed products are approved for
marketing. Adoption of such legislation could further limit reimbursement for
pharmaceuticals. If the government and third-party payors fail to provide
adequate coverage and reimbursement rates for our product candidates, the
market acceptance of our products may be adversely affected. If our products do
not receive market acceptance, our business, financial condition and results of
operations will be materially harmed.Other Risks Related to our CompanyWe acquired Abgenix Biopharma Inc., a
Vancouver-based biotechnology company in November 2000. We may experience
difficulty in the integration of this acquisition, or any future acquisition,
with the operations of our business.In
early November, we acquired all of the voting stock of Abgenix Biopharma, a
Canadian biotechnology company that develops and intends to commercialize
antibody-based therapeutic and diagnostic products for the treatment and
diagnosis of a variety of diseases, for an aggregate consideration of
approximately $77.2 million.We
have a limited history of operating the business of our company and Abgenix
Biopharma on a consolidated basis, and we have no prior experience operating a
business outside of the United States. We may have difficulty integrating
Abgenix Biopharmas research and development operations with our own.
Difficulty managing the integration of Abgenix Biopharma could result from many
factors, some of which are beyond our control, including the following:
  the geographic distance
  between our Fremont, California headquarters and our acquired Vancouver,
  British Columbia office;
  potential differences in
  research and development protocols between Abgenix Biopharma and ourselves; and
  the potential loss of
  personnel from our acquired operations.In the
future, we may from time to time seek to expand our business through additional
corporate acquisitions. Our acquisition of companies and businesses and
expansion of operations, including the recent acquisition of Abgenix Biopharma,
involve risks such as the following:
  the potential inability
  to identify target companies best suited to our business plan;
  the potential inability to successfully integrate
  acquired operations and businesses and to realize anticipated synergies,
  economies of scale or other expected value;
  incurrence of expenses attendant to transactions that
  may or may not be consummated; and
  difficulties in managing and coordinating operations
  at multiple venues, which, among other things, could divert our management's
  attention from other important business matters.In
addition, our acquisition of companies and businesses and expansion of
operations, including the recent acquisition of Abgenix Biopharma, may result
in dilutive issuances of equity securities, the incurrence of additional debt,
large one-time write-offs and the creation of goodwill or other intangible
assets that could result in amortization expense.We depend on key personnel and must continue to attract and
retain key employees and consultants.We are
highly dependent on the principal members of our scientific and management
staff. For us to pursue product development, marketing and commercialization
plans, we will need to hire additional qualified scientific personnel to
perform research and development. We will also need to hire personnel with
expertise in clinical testing, government regulation, manufacturing, marketing
and finance. Attracting and retaining qualified personnel will be critical to
our success. We may not 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. If we lose any of these persons, or are unable to attract and
retain qualified personnel, our business, financial condition and results of
operations may be materially harmed.In
addition, we rely on members of our Scientific Advisory Board and other consultants
to assist us in formulating our research and development strategy. All of our
consultants and the members of our Scientific Advisory Board are employed by
other entities. They may have commitments to, or advisory or consulting
agreements with, other entities that may limit their availability to us. If we
lose the services of these advisors, the achievement of our development
objectives may be impeded. Such impediments may materially harm our business,
financial condition and results of operations.We have implemented a stockholder
rights plan and are subject to other anti-takeover provisions.In
June 1999, our board of directors adopted a stockholder rights plan, which
was amended in November 1999. The stockholder rights plan provides for a
dividend distribution of one preferred share purchase right on each outstanding
share of our common stock. Each right entitles stockholders to buy 1/1000th of
a share of our Series A participating preferred stock at an exercise price
of $30.00. Each right will become exercisable following the tenth day after a
person or group, other than Cell Genesys or its affiliates, successors or
assigns, announces an acquisition of 15% or more of our common stock, or
announces commencement of a tender offer, the consummation of which would
result in ownership by the person or group of 15% or more of our common stock.
In the case of Cell Genesys, or its affiliates, successors or assigns, which
beneficially owned 10.44% of our outstanding common stock as of March 31, 2001,
each right will become exercisable following the tenth day after it announces
the acquisition of more than 25% of our common stock, or announces commencement
of a tender offer, the consummation of which would result in ownership by Cell
Genesys, or its affiliates, successors or assigns, of more than 25% of our
common stock. We will be entitled to redeem the rights at $0.01 per right at
any time on or before the close of business on the tenth day following
acquisition by a person or group of 15% or more, or in the case of Cell
Genesys, or its affiliates, successors or assigns, more than 25%, of our common
stock.The
stockholder rights plan and certain provisions of our amended and restated
certificate of incorporation and amended and restated bylaws may have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of us. This
could limit the price that certain investors might be willing to pay in the
future for our common stock. Certain provisions of our amended and restated
certificate of incorporation and amended and restated bylaws allow us to:
  issue 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; and
  eliminate cumulative
  voting in the election of directors.We are
subject to certain provisions of Delaware law which could also delay or make
more difficult a merger, tender offer or proxy contest involving us. In
particular, Section 203 of the Delaware General Corporation Law 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 stockholder rights plan, the possible issuance of preferred stock,
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 us, including, without limitation, discouraging a proxy
contest or making more difficult the acquisition of a substantial block of our
common stock. The provisions could also limit the price that investors might be
willing to pay in the future for shares of our common stock.We face product liability risks and may not be able to obtain
adequate insurance.The
use of any of our product candidates in clinical trials, and the sale of any
approved products, may expose us to liability claims resulting from such use or
sale of our products. These claims might be made directly by consumers,
healthcare providers or by pharmaceutical companies or others selling such
products. We may experience financial losses in the future due to product
liability claims. We have obtained limited product liability insurance coverage
for our clinical trials under which the coverage limits are $5.0 million
per occurrence and $5.0 million in the aggregate. We intend to expand our
insurance coverage to include the sale of commercial products if marketing
approval is obtained for product candidates in development. We may not be able
to maintain insurance coverage at a reasonable cost or in sufficient amounts to
protect us against losses. If a successful product liability claim or series of
claims is brought against us for uninsured liabilities or in excess of insured
liabilities, our business, financial condition and results of operations may be
materially harmed.Our operations involve hazardous
materials.Our
research and manufacturing activities involve the controlled use of hazardous
materials. We cannot eliminate the risk of accidental contamination or injury
from these materials. In the event of an accident or environmental discharge,
we may be held liable for any resulting damages, which may exceed our financial
resources and may materially harm our business, financial condition and results
of operations.We do not intend to pay cash dividends
on our common stock.We
intend to retain any future earnings to finance the growth and development of
our business and we do not plan to pay cash dividends on our common stock in
the foreseeable future.Our stock price is highly volatile.The
market price and trading volume of our common stock are volatile, and we expect
such volatility to continue for the foreseeable future. For example, during the
period between March 31, 2000 and March 31, 2001, our common stock
closed as high as $93.1875 per share and as low as $16.75 per share. This
may impact your decision to buy or sell our common stock. Factors affecting our
stock priceinclude:
  our financial results;
  fluctuations in our
  operating results;
  announcements of
  technological innovations or new commercial therapeutic products by us or our
  competitors;
  published reports by
  securities analysts;
  progress with clinical
  trials;
  government regulation;
  changes in reimbursement
  policies;
  developments in patent
  or other proprietary rights;
  developments in our
  relationship with customers;
  public concern as to the
  safety and efficacy of our products; and
  general market conditions.The state of California iscurrentlyexperiencing a shortage of electrical energy that may cause certain of
our operations to be suspended temporarily.Substantially all of our operations in Fremont,
California are run by electrical energy purchased from a local utility.  We have not experienced energy shortages and
do notanticipateany
significant difficulties in the foreseeable future.  We have limited back-up generating capacity.  Extended shortages of energy could slow our
research efforts and increase our operating costs.ITEM 3 –Quantitativeand
Qualitative Disclosures about Market Risk.Interest Rate Risk.  The objective of our investment
activities is to preserve principal, while at the same time maximizing yields
without significantly increasing risk. To achieve this objective, we invest in
highly liquid and high quality debt securities. Our investments in debt
securities are subject to interest rate risk. To minimize the exposure due to
an adverse shift in interest rates, we invest in short-term securities and
maintain an average maturity of one year or less. A hypothetical 1.0% per annum
increase in interest rates would result in a decrease in the fair value of our
debt securities of approximately $0.9 million, at March 31, 2001 and
approximately $1.1 million, at December 31, 2000.Equity Price Risk.  We are exposed to equity price risk on
strategic investments in CuraGen Corporation and Immunogen, Inc. We typically
do not attempt to reduce or eliminate our market exposure on these securities.
Assuming an adverse change of 30% in the market price of the CuraGen and
Immunogen stock, the fair value of these equity investments would decrease in
value by approximately $19.2 million and $23.8 million as of March 31, 2001 and
December 31, 2000, respectively.  This estimate
is not necessarily indicative of future performance and actual results
may differ materially.PART IIITEM 1 – Legal ProceedingsNot
applicable.ITEM 2 – Changes in
Securities and Use of ProceedsUse of
ProceedsNot
applicable.Recent
Sales of Unregistered SecuritiesNot
applicable.ITEM 3 - Defaults upon Senior
SecuritiesNot
applicable.ITEM 4 - Submission of Matters
to Vote of Security HoldersNot
applicable.ITEM 5 - Other InformationNot
applicable.ITEM 6 - Exhibits and Reports
on Form 8–K(a)
ExhibitsExhibit
  No.
  Caption*3.1(1)
  Amended and Restated Certificate
  of Incorporation of Abgenix, as currently in effect.*3.2(1)
  Amended
  and Restated Bylaws of Abgenix, as currently in effect.*4.1(1)
  Specimen
  Common Stock Certificate.*10.65(2)
  Lease Agreement dated
  February 14, 2001 between AMB Property L.P., a Delaware limited partnership,
  and Abgenix, Inc.*10.66(2)
  Product Supply
  Agreement by and between Lonza Biologics PLC and Abgenix, Inc. dated November
  30, 2000.*
  Portions
  of this exhibit have been omitted pursuant to a request for confidential
  treatment submitted to the Securities and Exchange Commission.(1)
  Incorporated
  by reference to the same exhibit filed with Abgenix's Registration Statement
  on Form S–1 (File No. 333–49415).(2)
  Filed
  herewith.

(b)
Reports on Form 8-KNot
applicable.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: May 15, 2001

ABGENIX,
  INC.(Registrant)/s/  
  R. Scott GreerR.
  Scott GreerChief
  Executive Officer(Principal
  Executive Officer)/s/   Kurt LeutzingerKurt LeutzingerVice
  President and Chief Financial Officer
  (Principal Financial and Accounting Officer)INDEX TO EXHIBITS

EXHIBITS10.65
  Lease
  Agreement dated February 14, 2001 between AMB Property L.P., a Delaware
  limited
  partnership, and Abgenix, Inc.*10.66
  Product
  Supply Agreement by and between Lonza Biologics PLC and Abgenix, Inc. dated
  November 30, 2000.



*Portions of this exhibit have been
omitted pursuant to a request for confidential treatment submitted to the
Securities and Exchange Commission.