UK, Tech ReviewUK

“CAT has retained its brand identity”

11.07.2007

AstraZeneca has been one of the most active pharma companies in terms of buying biotech firms. Just this year, the Anglo-Swedish pharma giant spent US$150 million on anti-infective specialist Arrow Therapeutics and took over the US biotech firm MedImmune for US$15.6 billion. Taken together with the US$1.3 billion the company paid for the Cambridge Antibody Technology (CAT) shares that it did not previously own, AstraZeneca paid approximately US$17 billion for its relatively late entry into the biotech sector. However, the proportion of biologics in AstraZeneca’s pipeline rose from 7% to 27%. The company now has more than 160 compounds under development and will invest in a 30,000-litre production plant that it gained through the acquisition of CAT. EuroBiotechNews spoke with Hamish Cameron, CEO of CAT, about the intensive work of integrating a biotech company into a large pharma conglomerate.

Hamish Cameron joined CAT as Chief Executive in 2006 following CAT’s acquisition by AstraZeneca. Dr Cameron, a physician by training, joins CAT following a number of senior research and development appointments in AstraZeneca, including Head of the Cardiovascular Therapy Area and Head of Medical Research in over 20 years with the company. He is a Fellow and past Board Member of the Faculty of Pharmaceutical Medicine. Cambridge Antibody Technology is a biopharmaceutical company specialised in the discovery and development of new antibody medicines. CAT has a proprietary platform technology for isolating human monoclonal antibodies using phage display and ribosome display systems. The company has large phage antibody libraries, currently incorporating more than 100 billion antibodies.

Euro|BioTech|News
Approximately one year ago, AstraZeneca (AZN) bought Cambridge Antibody (CAT) for a1 billion. How has CAT changed during this time?

Cameron:
It‘s important to remember that AstraZeneca bought CAT for what it was, and not to change it – CAT is not being turned into a typical AstraZeneca R&D site. However, CAT is likely to change over time as the company expands and takes on new staff, but AstraZeneca is working hard to retain what is so successful about CAT, namely its collaborative working style and its culture. Thus, CAT has retained its brand identity and local management structure. Since the acquisition, both companies have been very busy, building on the success of the alliance established in 2004. Initially, we spent time defining CAT’s responsibility within the AstraZeneca group and aligning the two organisations. Since then we have begun working towards joint goals and towards AstraZeneca’s stated ambition that, by 2010, 25% of its product development candidates will be biopharmaceutical products. With the acquisition of MedImmune, this aim has already been achieved. By the way, AstraZeneca is delighted with the progress being made: expansion plans have been announced and the first CAT-derived product candidate (from the collaboration) has been selected and has entered ‘scale-up’.

Euro|BioTech|News
Earlier this year, AstraZeneca acquired MedImmune. How does this affect your plans? How will CAT and MedImmune work together in the future?

Cameron:
AstraZeneca‘s acquisition of MedImmune represents a transformational step in delivering AstraZeneca’s biologics strategy: the combination of MedImmune with CAT creates, in one transaction, a fully integrated biologics and vaccines business within the AstraZeneca group. However, as the AstraZeneca acquisition of MedImmune was only completed on 18 June, the level of detail that can be disclosed at this time is very limited and AstraZeneca, together with MedImmune and CAT, are currently considering the ways in which the organisations will work together going forward. The structure, organisation and ‘operating model’ of this new organisation will become clearer over the next few weeks and months.

Euro|BioTech|News
There are numerous pitfalls in integrating a small biotech company into a large pharma conglomerate. What are the main difficulties and what are your solutions?

Cameron:
The companies were well known to each other, having worked well together since the alliance was established in 2004 – even so, there was an inevitable steep learning curve immediately following the acquisition, although we took great care not to overload people at the very beginning. The two organisations are (still) very different – a result of their relative sizes and varying ways of working. For example, CAT‘s structure is flatter and people have broader jobs than their colleagues at AstraZeneca. The main concerns have been retaining CAT‘s culture while expanding the organisation rapidly and extending CAT‘s expertise to a wider range of therapy areas. The increased level of interaction between the two organisations is being managed carefully, so as not to overload anyone with too much process or bureaucracy.

Euro|BioTech|News
How many key employees have left since the acquisition?

Cameron:
Following the acquisition, the three executive directors left the company, very amicably. This was unsurprising and is normal practice following such a significant transaction. In addition, another couple of ‘corporate’ staff left the organisation a few months after the acquisition. Aside from this, the great majority of our staff have remained and our staff turnover is steady.

Euro|BioTech|News
Will you be taking on new staff?

Cameron:
Yes, we have already begun recruiting additional staff and plan to double in size over the next few years. This means taking on around 300 new people in addition to the 300 or so we already have.

Euro|BioTech|News
There was criticism from analysts that the acquisition price of $1.3 billion that AstraZeneca paid for CAT was too high. What is your opinion on this after having accompanied the integration process for more than seven months?

Cameron:
AstraZeneca always believed it had paid a fair price for CAT. However, it is worth noting that any valuation of CAT at the time of the acquisition should include the Humira royalty stream. The disposal of this asset to Royalty Pharma alone stood for $700 million.

Euro|BioTech|News
Shortly before the acquisition, CAT announced that the company had to postpone the break-even. Additionally, competitors in the antibody market have outperformed CAT in recent years. What can AstraZeneca do to make CAT’s processes more efficient?

Cameron:
The acquisition will build on the success of the CAT-AstraZeneca alliance established in 2004 and which concentrated on inflammatory and respiratory disorders. Following the acquisition, CAT’s discovery expertise, early development capabilities and skills in collaborative working are being fully supported and exploited as well as extended across all AstraZeneca therapy areas. AstraZeneca’s global reach and capabilities are being combined with CAT’s know-how and biotechnology culture to create a world-leading combination. At the time of the acquisition, CAT had reported operating profits for both the first and the second quarter of 2006, had established a royalty stream from sales of Humira by Abbott and had a strong pipeline of antibody product candidates being developed by both CAT and its licensees.
Euro|BioTech|News
How much space is there left for CAT to conduct its own research programs?

Cameron:
As well as working collaboratively with AstraZeneca across all of AstraZeneca’s therapy areas, CAT is operating a ‘parallel stream’, which will account for approximately 10% of CAT’s R&D activities. This will help to retain the ‘biotech culture’ of innovation and creativity that makes CAT what it is and which made CAT attractive to AstraZeneca.

Euro|BioTech|News
Will AZN be conducting biotech activities outside of CAT?

Cameron:
The acquisition of CAT represents a major, long-term strategic investment by AstraZeneca in novel biological therapeutics. AstraZeneca intends to grow a leading biopharmaceuticals capability and CAT is the foundation of this long-term strategy.

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