ABGENIX INC, S-1/A, 1999-02-04

ABGENIX INC
S-1/A, 1999-02-04
BIOLOGICAL PRODUCTS, (NO DIAGNOSTIC SUBSTANCES)

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 4, 1999

REGISTRATION NO. 333-71289

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ABGENIX, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 2836 94-3248826
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

ABGENIX, INC.
7601 DUMBARTON CIRCLE
FREMONT, CALIFORNIA 94555
(510) 608-6500
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

R. SCOTT GREER
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
ABGENIX, INC.
7601 DUMBARTON CIRCLE
FREMONT, CALIFORNIA 94555
(510) 608-6500
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE OF PROCESS)

COPIES TO:

<TABLE>
<S> <C>
MARIO M. ROSATI, ESQ. ALAN C. MENDELSON, ESQ.
CHRIS F. FENNELL, ESQ. PATRICK A. POHLEN, ESQ.
WILSON SONSINI GOODRICH & ROSATI COOLEY GODWARD LLP
PROFESSIONAL CORPORATION FIVE PALO ALTO SQUARE
650 PAGE MILL ROAD 3000 EL CAMINO REAL
PALO ALTO, CA 94304 PALO ALTO, CA 94306
(650) 493-9300 (650) 843-5000
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.

CALCULATION OF REGISTRATION FEE

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<CAPTION>
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AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common stock, $0.0001 par value... 3,450,000 $15.625 $53,906,250 $14,986(3)
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</TABLE>

(1) Includes 450,000 shares which the underwriters have the option to purchase
to cover over-allotments, if any.

(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(c) of the Securities Act of 1933, as amended, based
on the average of the high and low sales price as reported by Nasdaq on
January 22, 1999.

(3) Previously paid.

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2

The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell securities, and we are not soliciting offers to buy these securities, in
any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED FEBRUARY 4, 1999

LOGO

3,000,000 SHARES

COMMON STOCK

Abgenix, Inc. is offering 3,000,000 shares of its common stock. Abgenix's
common stock is traded on the Nasdaq National Market under the symbol "ABGX."
The last reported sale price for the common stock on the Nasdaq National Market
on February 3, 1999 was $16.875 per share.

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INVESTING IN THE COMMON STOCK INVOLVES RISKS.

SEE "RISK FACTORS" BEGINNING ON PAGE 6.
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<TABLE>
<CAPTION>
PER
SHARE TOTAL
------- -----------
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to the Company..................................... $ $
</TABLE>

THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

Abgenix has granted the underwriters a 30-day option to purchase up to an
additional 450,000 shares of common stock to cover over-allotments. BancBoston
Robertson Stephens Inc. expects to deliver the shares of common stock to
purchasers on , 1999.
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BANCBOSTON ROBERTSON STEPHENS

LEHMAN BROTHERS
PACIFIC GROWTH EQUITIES, INC.

THE DATE OF THIS PROSPECTUS IS , 1999
<PAGE> 3

[ARTWORK]

Antibody products with human protein sequences may be desirable for therapy
in humans since they tend to minimize undesirable side effects. Various
approaches have evolved to engineer mouse antibodies so that they contain
proportionately more human protein sequences and thus appear more human-like to
a patient's immune system. Our XenoMouse technology has been developed to
produce antibodies with 100% human protein sequences.

[ARTWORK]
<PAGE> 4

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. THE SELLING STOCKHOLDERS ARE OFFERING TO SELL, AND
SEEKING OFFERS TO BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS
AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF
DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF THE COMMON STOCK. IN THIS
PROSPECTUS, REFERENCES TO "ABGENIX," "WE," "US" AND "OUR" REFER TO ABGENIX, INC.
AND ITS SUBSIDIARIES.

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TABLE OF CONTENTS

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PAGE
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<S> <C>
Summary..................................................... 3
Risk Factors................................................ 6
Special Note Regarding Forward-Looking Statements........... 20
Certain Information......................................... 21
Use of Proceeds............................................. 21
Price Range of Common Stock................................. 22
Dividend Policy............................................. 22
Capitalization.............................................. 23
Dilution.................................................... 24
Selected Financial Data..................................... 25
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 26
Business.................................................... 33
Management.................................................. 54
Certain Transactions........................................ 63
Principal Stockholders...................................... 67
Description of Capital Stock................................ 69
Shares Eligible for Future Sale............................. 71
Underwriting................................................ 73
Legal Matters............................................... 74
Experts..................................................... 74
Where You Can Find Additional Information................... 75
Index to Financial Statements............................... F-1
</TABLE>

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We own Abgenix and the Abgenix logo trademarks. We have rights to use
XenoMouse, a registered trademark of Xenotech, L.P., one of our subsidiaries.
This prospectus also includes trademarks owned by other companies.

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SUMMARY

Because this is only a summary, it does not contain all the information
that may be important to you. You should read the entire prospectus, especially
"Risk Factors" and the Financial Statements and Notes, before deciding to invest
in our common stock.

ABGENIX

We 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, and cancer. We have developed XenoMouse technology, a
proprietary technology which we believe enables quick generation of high
affinity, fully human antibody product candidates to essentially any disease
target appropriate for antibody therapy. We intend to use XenoMouse technology
to build a large and diversified product portfolio that we plan to commercialize
either through corporate collaborations or internal product development
programs.

OUR XENOMOUSE TECHNOLOGY COLLABORATIONS

We have established collaborative arrangements to use our XenoMouse
technology to produce fully human antibodies with eight companies covering at
least 11 antigen targets. Pursuant to these collaborations, we and our partners
intend to generate antibody product candidates for the treatment of cancer,
inflammation, transplant rejection, cardiovascular disease and growth factor
modulation. Our collaborative partners include Cell Genesys, Inc., Pfizer Inc.,
Schering-Plough Research Institute, Genentech, Inc., Millennium BioTherapeutics,
Inc., Research Corporation Technologies, Centocor, Inc. and AVI BioPharma, Inc.
Among our eight collaborative partners, Pfizer, Genentech and Millennium
BioTherapeutics have each entered into additional collaborations with us
specifying additional antigens for XenoMouse antibody development. The financial
terms of our existing collaborations typically include upfront payments,
potential license fees and milestone payments payable to us by the collaborative
partner. Additionally, if a product receives marketing approval from the FDA or
an equivalent foreign agency, we are entitled to receive royalties on any future
product sales by the collaborative partner.

OUR PROPRIETARY PRODUCTS

We also have four antibody product candidates that are under development
internally. Our lead product candidate, ABX-CBL, is an in-licensed mouse
antibody. We recently completed a multi-center confirmatory Phase II clinical
trial for ABX-CBL for the treatment of a transplant-related disease known as
graft versus host disease. Our other three product candidates were generated
using XenoMouse technology. We completed a Phase I clinical trial for our fully
human antibody product candidate in psoriasis, ABX-IL8, and began a Phase I/II
clinical trial in November 1998. In addition, we entered a Phase I clinical
trial for ABX-IL8 in rheumatoid arthritis in January 1999. We are in preclinical
development with two other fully human antibody product candidates: ABX-EGF for
use in the treatment of cancer; and ABX-RB2 for use in the treatment of chronic
immunological disorders. We expect to initiate Phase I clinical trials with
ABX-EGF in mid-1999.

RECENT DEVELOPMENTS

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<PAGE> 6

in previously published clinical trials conducted by third parties. The trial
was conducted at nine sites on 27 patients. Data from 23 of the 27 patients was
evaluated for efficacy at four dosing levels. A response rate of 73% was
reported among the 15 patients in the three highest dose groups. The remaining
eight patients reported a 25% response at the lowest dose. We believe the
treatment was safe and well tolerated except for temporary muscle pain. We will
submit the complete report to the FDA and, if approved, expect to commence a
pivotal Phase III clinical trial for ABX-CBL in mid-1999.

THE OFFERING

<TABLE>
<S> <C>
Common stock to be offered by Abgenix.................... 3,000,000 shares
Common stock outstanding after the offering.............. 14,615,649 shares
Use of proceeds.......................................... For research and development
activities, including preclinical
testing and clinical trials, and for
working capital and other general
corporate purposes. See "Use of
Proceeds."
Nasdaq National Market Symbol............................ ABGX
</TABLE>

Except as set forth in the Financial Statements, all share information
contained in this prospectus includes the sale on January 27, 1999 of 495,356
shares of common stock to Genentech at a per share price of $16.15.

Unless otherwise stated, all share information contained in this prospectus
excludes:

(1) 1,642,187 shares of common stock issuable upon exercise of stock
options at a weighted average exercise price of $2.44 per share
outstanding as of December 31, 1998;

(2) 121,667 shares of common stock issuable upon exercise of warrants with
an exercise price of $6.00 per share outstanding as of December 31,
1998; and

(3) 25,000 shares of common stock issuable pursuant to a license agreement
outstanding as of December 31, 1998.

4
<PAGE> 7

SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1994 1995 1996 1997 1998
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<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Total revenues(1)....................................... $ 6,200 $ 6,200 $ 4,719 $ 1,954 $ 3,842
Operating expenses:
Research and development.............................. 7,921 11,879 9,433 11,405 17,588
General and administrative............................ 1,955 2,603 2,565 3,525 3,405
Charge for cross-license and settlement amount
allocated from Cell Genesys(2)...................... -- -- -- 11,250 --
Equity in losses from the Xenotech joint venture
(charge for cross-license and settlement in
1997)(2)............................................ -- -- -- 11,250 107
----------- ----------- ----------- ----------- ---------
Total operating expenses........................ 9,876 14,482 11,998 37,430 21,100
----------- ----------- ----------- ----------- ---------
Operating loss.......................................... (3,676) (8,282) (7,279) (35,476) (17,258)
Interest income (expense), net.......................... -- -- 179 (404) 431
----------- ----------- ----------- ----------- ---------
Net loss................................................ $ (3,676) $ (8,282) $ (7,100) $ (35,880) $ (16,827)
=========== =========== =========== =========== =========
Net loss per share(3)................................... $(46,710.53) $ (1,032.70) $ (3.00)
=========== =========== =========
Shares used in computing net loss per share(3).......... 152 34,744 5,602,963
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1998
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PRO FORMA
ACTUAL PRO FORMA(4) AS ADJUSTED(5)
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<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 16,744 $24,744 $71,832
Working capital............................................. 13,101 21,101 68,189
Total assets................................................ 24,220 32,220 79,308
Long-term debt, less current portion........................ 2,180 2,180 2,180
Accumulated deficit......................................... (69,301) (69,301) (69,301)
Total stockholders' equity.................................. 16,959 24,959 72,047
</TABLE>

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(1) The statement of operations includes our revenues and expenses as a business
unit within Cell Genesys prior to July 15, 1996. During the years ended
December 31, 1994, 1995 and 1996, our revenues were derived principally from
Xenotech, L.P. for the development of XenoMouse technology, which was
essentially completed in 1996.

(2) In the year ended December 31, 1997, we incurred an aggregate non-recurring
charge for cross-license and settlement of $22.5 million. This amount
represents an allocation from Cell Genesys of $11.25 million and an entry of
$11.25 million to record the equity in the losses of Xenotech L.P., our
equally owned joint venture with JT America, Inc. See Note 6 of Notes to the
Financial Statements.

(3) Net loss per share data has not been presented prior to 1996 as there were
no equity securities outstanding prior to that date.

(4) Pro forma information gives effect to the sale of 495,356 shares of our
common stock to Genentech in January 1999 at a price per share of $16.15.

(5) Adjusted to reflect the proceeds from the sale of 3.0 million shares of
common stock by Abgenix at an assumed public offering price of $16.875 per
share after deducting the underwriting discount and estimated offering
expenses. See "Use of Proceeds" and "Capitalization."

5
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RISK FACTORS

An investment in this common stock offering is very risky. You should
carefully consider the following risk factors in addition to the remainder of
this prospectus before purchasing the common stock. This prospectus contains
forward-looking statements that involve risks and uncertainties. Many factors,
including those described below, may cause actual results to differ materially
from anticipated results.

OUR 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. 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 a very early stage
of development. We have begun clinical trials with respect to only one fully
human antibody product candidate, ABX-IL8. We cannot be certain that XenoMouse
technology will generate antibodies against all the antigens 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
collaborative partners 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 adversely
affected. See "Business -- The Abgenix Solution -- XenoMouse Technology."

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 preclinical 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,
preclinical testing and clinical trials.

Historically, the results from preclinical 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
preclinical 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.

Only two of our product candidates, ABX-CBL and ABX-IL8, are currently 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 FDA guidelines. As a result,
such data will not support an application for regulatory approval without
further clinical trials. Clinical trials conducted by Abgenix 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 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 preclinical development,
and we have not submitted investigational new drug applications nor begun
clinical trials for such product candidates. Our preclinical or clinical
development efforts may not be successfully completed. We may not file further
investigational new drug applications. Our clinical trials may not commence as
planned.

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<PAGE> 9

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 used for
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 collaborative partners, to assist us in managing
and monitoring clinical trials. Our reliance on such third parties may result in
delays in completing, or failing to complete, such trials if they fail to
perform under our agreements with them.

Our product candidates may fail to demonstrate safety and efficacy in
clinical trials. Such failure may delay development of other product candidates,
and hinder our ability to conduct related preclinical testing and clinical
trials. As a result of such failures, we may also be unable to obtain additional
financing. Our business, financial condition and results of operations will be
materially adversely affected by any delays in, or termination of, our clinical
trials.

THE CLINICAL SUCCESS OF ABX-CBL IS UNCERTAIN

We recently completed a multi-center confirmatory Phase II trial in graft
versus host disease, or GVHD. As of December 31, 1998, ABX-CBL had been
administered to a total of only 133 patients for GVHD and organ transplant
rejection indications. ABX-CBL was administered to a total of 85 of these 133
patients by third parties prior to Abgenix obtaining an exclusive license to
ABX-CBL. In our clinical trials, we administered ABX-CBL to only 48 of these
patients, 27 of which were used for our preliminary Phase II report submitted to
the FDA. We cannot rely on data obtained from patients studied prior to our
obtaining an exclusive license to ABX-CBL to support the efficacy of ABX-CBL in
an application for regulatory approval. In addition, our clinical trials are
being conducted with patients who have failed conventional treatments and who
are in the most advanced stages of GVHD. During the course of treatment, these
patients can die or suffer adverse medical effects for reasons that may not be
related to ABX-CBL. Such adverse effects may affect the interpretation of
clinical trial results.

As an extension to the original Phase II trial protocol, we filed for and
received permission from the FDA to enroll additional patients at a single dose.
This protocol remains open and continues to enroll patients. Our application to
the FDA for approval to advance to Phase III clinical trials will contain the
original Phase II data plus all additional data then available from the
extension protocol. There can be no assurance that the results of the extension
protocol will be favorable or will extend the findings of the original Phase II
study. In addition, the FDA may view our application as insufficient and require
additional clinical trials before allowing us to commence a Phase III clinical
trial. Additional clinical trials will be extensive, expensive and
time-consuming. If ABX-CBL fails to receive regulatory approval, our business,
financial condition and results of operations may be materially adversely
affected.

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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 product candidates on a commercial scale;

- inability to market products due to third-party proprietary rights;

- election by our collaborative partners not to pursue product development;

- failure by our collaborative partners to successfully develop products;
and

- failure to achieve market acceptance.

Because of these risks, our research and development efforts or those of our
collaborative partners may not result in any commercially viable products. To
date, none of our collaborative partners has exercised its right to obtain a
product license. 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 adversely affected. See
"Business -- Proprietary Product Development Programs."

WE 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, preclinical testing and clinical trials, regulatory
and sales and marketing activities to commercialize current and future product
candidates. We cannot assure you that such product candidates, if successfully
developed, will 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 four years of operation,
including net losses of approximately $8.3 million in 1995, $7.1 million in
1996, $35.9 million in 1997 and $16.8 million in 1998. As of December 31, 1998,
our accumulated deficit was approximately $69.3 million. Our losses have
resulted principally from:

- research and development costs relating to the development of our
XenoMouse technology and antibody product candidates;

- cross-license and settlement costs relating to our patent portfolio; and

- general and administrative costs relating to our operations.

We expect to incur additional operating losses until at least the year 2000
as a result of increases in our research and development costs, including costs
associated with conducting preclinical testing and clinical trials. 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 collaborative arrangements, or the
initiation, success or failure of clinical trials. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

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OUR FUTURE PROFITABILITY IS UNCERTAIN

Prior to June 1996, our business was owned by Cell Genesys and operated as
a business unit. Since that time, we have funded our research and development
activities primarily from contributions from Cell Genesys, private placements of
preferred stock, the initial public offering of our common stock, revenues
generated from our collaborative arrangements, equipment leaseline financings
and loan facilities. We expect that substantially all of our revenues for the
foreseeable future will result from payments under collaborative arrangements.
To date, such payments have been in the form of upfront payments, reimbursement
for research and development expenses and milestone payments, but may include
license fees in the future. Payments under our existing and any future
collaborative arrangements 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 cannot assure you that we
will:

- enter into further collaborative arrangements;

- successfully complete preclinical 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 adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Proprietary Product Development Programs."

WE WILL NEED TO FIND COLLABORATIVE PARTNERS TO 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 collaborative
arrangements with several collaborative partners. Potential collaborative
partners include pharmaceutical and biotechnology companies, academic
institutions and other entities. We must enter into these collaborations to
successfully develop and commercialize product candidates. Such collaborations
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 preclinical testing, 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 collaborations. None of these collaborative product
candidates has entered clinical testing and may not result in commercially
successful products. Current or future collaborative arrangements may not be
successful. If we fail to maintain our existing collaborative arrangements or to
enter into additional collaborative arrangements, our business, financial
condition and results of operations will be materially adversely affected.

Our dependence on collaborative arrangements with third parties subjects us
to a number of risks. Such collaborative arrangements may not be on terms
favorable to Abgenix. Agreements with collaborative partners typically allow
partners significant discretion in electing whether to pursue any of the planned
activities. We cannot control the amount and timing of resources our
collaborative partners may devote to the product candidates. Our partners may
not perform their obligations as expected. Business combinations or significant
changes in a collaborative partner's business strategy may adversely affect a
partner's

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<PAGE> 12

willingness or ability to complete its obligations under the arrangement. Even
if we fulfill our obligations under a collaborative agreement, our partner can
terminate the agreement at any time following proper written notice. If any
collaborative partner were to terminate or breach our agreement with it, or
otherwise fail to complete its obligations in a timely manner, our business,
financial condition and results of operations may be materially adversely
affected. If we are not able to establish further collaborative arrangements or
any or all of our existing collaborative arrangements are terminated, we may be
required to seek new collaborative arrangements 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 management's time.

Existing or future collaborative partners 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 collaborative partner. Lengthy negotiations with potential
new collaborative partners or disagreements between Abgenix and our
collaborative partners 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 our collaborative partners
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 adversely
affected.

OUR JOINT VENTURE WITH JT AMERICA, INC. MAY LIMIT OUR ABILITY TO DEVELOP PRODUCT
CANDIDATES

In 1991, Cell Genesys and JT America, Inc. formed Xenotech, L.P., an
equally-owned joint venture, to develop genetically modified strains of mice
which can produce fully human monoclonal antibodies, called XenoMouse
technology, and to commercialize products generated from XenoMouse technology.
Upon our organization, Cell Genesys assigned its rights in Xenotech to us.

We must obtain licenses from Xenotech to commercialize antibody products
generated by XenoMouse technology. We have the right to license the use of
XenoMouse technology from Xenotech to develop a certain number of antigen
targets each year. If we have used our yearly allotment of licenses to develop
antigen targets and desire to acquire a license to develop additional antigen
targets, we may have to negotiate with JT America or others to acquire such
rights. Disputes with JT America, or its parent company Japan Tobacco, Inc., may
result in the loss of the right to commercialize a product candidate by either
party. Limits on our ability to acquire additional licenses to develop antigen
targets, or disputes with JT America or Japan Tobacco, will limit our ability to
establish collaborations and fully realize the commercial potential of XenoMouse
technology. See "Business -- Joint Venture With Japan Tobacco."

WE 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 Abgenix or our collaborative partners.
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. These companies include GenPharm
International, Inc., a wholly-owned subsidiary of Medarex, Inc., Cambridge
Antibody Technology Group plc, Protein Design Labs, Inc. and MorphoSys AG.

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<PAGE> 13

Some of our competitors have received regulatory approval or are developing
or testing product candidates that may compete directly with our product
candidates. Recently, Sangstat Medical Corp. received approval for an organ
transplant rejection product that may compete with ABX-CBL, which is in clinical
trials. We are also aware that several companies, including Genentech, Inc.,
have potential product candidates that may compete with ABX-IL8. Furthermore, we
are aware that ImClone Systems, Inc., Medarex and OSI Pharmaceuticals, Inc. have
potential antibody and small molecule product candidates already in clinical
development that may compete with ABX-EGF, which is in preclinical development.
We may also compete with Japan Tobacco in supplying XenoMouse technology or
antibody product candidates to potential collaborative partners.

Many of these companies and institutions, either alone or together with
their collaborative partners, 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 collaborative partners, have
significantly greater experience than we do in:

- developing products;

- undertaking preclinical testing and human clinical trials;

- obtaining FDA and other regulatory approvals of products; and

- manufacturing and marketing 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 noncompetitive. We face and will continue to face intense
competition from other companies for collaborative arrangements with
pharmaceutical and biotechnology companies for establishing relationships with
academic and research institutions, and for licenses to proprietary technology.
These competitors, either alone or with their collaborative partners, may
succeed in developing technologies or products that are more effective than
ours.

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.

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<PAGE> 14

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 Abgenix or our collaborative
partners develop. If our products do not achieve significant market acceptance,
our business, financial condition and results of operations will be materially
adversely affected. See "Business -- Proprietary Product Development Programs,"
"-- Competition," and "-- Pharmaceutical Pricing and Reimbursement."

OUR 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. While we
have pending patent applications in the United States relating to XenoMouse
technology, no patents have been issued. We try to protect our proprietary
position by filing United States and foreign patent applications related to our
proprietary technology, inventions and improvements that are important to the
development of our business. 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 proprietary protection or competitive advantages against
competitors with similar technology. Furthermore, others may independently
develop similar technologies or duplicate any technology that we have developed.
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. The parties may breach such
agreements. Furthermore, our trade secrets may otherwise become known to, or be
independently developed by, our competitors. See "Business -- Intellectual
Property."

WE MAY FACE CHALLENGES FROM THIRD PARTIES REGARDING THE VALIDITY OF OUR PATENTS
AND PROPRIETARY RIGHTS

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<PAGE> 15

the patents or violate other proprietary rights of third parties. In the event
of infringement or violation, Abgenix and our collaborative partners may be
prevented from pursuing product development or commercialization. Such a result
will materially adversely affect our business, financial condition and results
of operations.

In March 1997, we entered into a cross-license and settlement agreement
with GenPharm 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 will be materially adversely affected if any
of the parties breaches the cross-license agreement. We have one issued 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. See "Business -- Intellectual Property -- Patent Cross-License and
Settlement Agreement with GenPharm."

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 our issued and licensed patents;

- 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 will incur substantial expense and the efforts of our technical
and management personnel will be significantly diverted. An adverse
determination may subject us 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 adversely affect our business, financial condition and
results of operations.

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 preclinical
studies and clinical trials of each product candidate, is lengthy, expensive and
uncertain. Securing FDA approval requires the submission of extensive
preclinical and clinical data and supporting information to the FDA for each
indication to establish the product candidates safety and efficacy. For example,
we have not received FDA approval to commence Phase III clinical trials for
ABX-CBL. 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
Abgenix or our collaborative partners develop;

- impose costly procedures on Abgenix or our collaborative partners;

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<PAGE> 16

- diminish any competitive advantages that Abgenix or our collaborative
partners 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, Abgenix or our contract 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 collaborative partners to file investigational new
drug applications and generally direct the regulatory approval process for many
of our products. Our collaborative partners 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 collaborative partners 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 adversely affect our business, financial condition
and results of operations.

Abgenix and our contract 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. Such facilities must be approved before we can use them in commercial
manufacturing of our products. Abgenix or our contract manufacturers may not be
able to comply with the applicable good manufacturing practice requirements and
other FDA regulatory requirements. If Abgenix or our contract manufacturers
fails to comply, our business, financial condition and results of operations
will be materially adversely affected. See "Business -- Government Regulation."

WE RELY ON A SOLE SOURCE THIRD-PARTY MANUFACTURER AND DO NOT HAVE COMMERCIAL
SCALE MANUFACTURING EXPERIENCE

We lack the resources and capability to manufacture our products on a
commercial scale. We currently manufacture only limited quantities of antibody
products for preclinical testing. While we maintain a limited inventory of
antibody products, we depend on a sole source contract manufacturer to produce
ABX-CBL, ABX-IL8 and ABX-EGF under good manufacturing practice regulations for
use in our clinical trials. Our contract manufacturer has a limited number of
facilities in which our product candidates can be produced. Our contract
manufacturer has limited experience in manufacturing ABX-CBL, ABX-IL8 and
ABX-EGF in quantities sufficient for conducting clinical trials or for
commercialization.

There are, on a worldwide basis, a limited number of contract facilities in
which our product candidates can be produced under good manufacturing practice
regulations for use in pharmaceutical drugs. It can also take a substantial
period of time for a contract facility to begin producing antibodies under good
manufacturing practice regulations. Accordingly, we depend on our contract
manufacturer to

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<PAGE> 17

produce our product candidates under good manufacturing practice regulations
which meet acceptable standards for our clinical trials.

Contract manufacturers often encounter difficulties in scaling up
production, including problems involving production yields, quality control and
quality assurance and shortage of qualified personnel. Our contract 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 contract 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 adversely affected.

In addition, Abgenix and our third-party manufacturer are required to
register manufacturing facilities with the FDA and foreign regulatory
authorities. The facilities will then be subject to inspections confirming
compliance with good manufacturing practice requirements established by the FDA
or corresponding foreign regulations. If Abgenix or our third-party manufacturer
fails to maintain compliance with the good manufacturing practice requirements,
our business, financial condition and results of operations will be materially
adversely affected. See "Business -- Manufacturing."

WE DO NOT HAVE MARKETING AND SALES EXPERIENCE

We do not have a marketing, sales or distribution 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 experience 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
adversely affected.

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. If we lose any of these persons, our business, financial
condition and results of operations may be materially adversely affected. 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.

In addition, we rely on members of our Scientific and Medical Advisory
Boards and other consultants to assist us in formulating our research and
development strategy. All of our consultants and the members of our Scientific
and Medical Advisory Boards 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 personnel,
the achievement of our development objectives may be impeded. Such impediments
may materially adversely affect our business, financial condition and results of
operations. See "Business -- Scientific and Medical Advisory Boards."

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<PAGE> 18

DIRECTORS, EXECUTIVE OFFICERS, PRINCIPAL STOCKHOLDERS AND AFFILIATED ENTITIES
OWN A SIGNIFICANT PERCENTAGE OF OUR CAPITAL STOCK

Upon completion of this offering, our directors, executive officers,
principal stockholders and affiliated entities will beneficially own, in the
aggregate, approximately 28.5% of our outstanding common stock. These
stockholders, if acting together, will be able to significantly influence all
matters requiring approval by our stockholders. Such matters include the
election of directors and the approval of mergers or other business combination
transactions. We may be adversely impacted by the control that such stockholders
will have with respect to matters affecting us. See "Principal Stockholders."

WE MAY REQUIRE ADDITIONAL FINANCING

We will continue to expend substantial resources for the expansion of
research and development, including costs associated with conducting preclinical
testing and clinical trials. We will be required to expend substantial funds in
the course of completing required additional development, preclinical 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 preclinical testing and clinical trials;

- the retention of existing and establishment of further collaborative
arrangements, if any;

- continued scientific progress in our research and development programs;

- the size and complexity of these programs;

- the time and expense involved in obtaining regulatory approvals, if any;

- competing technological and market developments;

- the time and expense of filing and prosecuting patent applications and
enforcing patent claims;

- the cost of establishing manufacturing capabilities, conducting
commercialization activities and arrangements and product in-licensing;
and

- other factors not within our control.

We believe that the proceeds from this offering, together with our current
cash balances, cash equivalents, short-term investments and cash generated from
our collaborative arrangements will be sufficient to meet our operating and
capital requirements for at least the next two years. However, we may need
additional financing within this timeframe. We may need to raise additional
funds through public or private financing, collaborative arrangements or other
arrangements. Additional funding may not be available to us on favorable terms,
if at all. Furthermore, any additional equity financing may be dilutive to
stockholders, and debt financing, if available, may involve restrictive
covenants. Collaborative arrangements may require us to relinquish our rights to
certain of our technologies, product candidates or marketing territories. If we
fail to raise additional funds when needed, our business, financial condition
and results of operations will be materially adversely affected.

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<PAGE> 19

CELL GENESYS EXERCISES SIGNIFICANT INFLUENCE OVER US

Upon completion of this offering, Cell Genesys will beneficially own 23.0%
of our outstanding capital stock. As a result, Cell Genesys will have
significant influence over all matters requiring the approval of our
stockholders. Such matters include the election of our Board of Directors and
changes in control of Abgenix. We have entered into a governance agreement with
Cell Genesys which provides that so long as Cell Genesys or a group to which it
belongs owns a specific percentage of our outstanding voting stock, Cell Genesys
or the group shall have the right to nominate a fixed number of directors to
serve on our Board. The details of this arrangement are set forth in the table
below:

<TABLE>
<CAPTION>
PERCENTAGE OWNERSHIP NUMBER OF DIRECTORS
-------------------- -------------------
<S> <C>
50% or more........................................ 4 out of 7
Less than 50% but greater than 25%................. 3 out of 7
Less than 25% but greater than 15%................. 1 out of 7
</TABLE>

The governance agreement also provides that Cell Genesys and each of our
officers and directors who owns voting stock shall agree to vote for the persons
nominated as set forth above. We may be adversely impacted by the significant
influence which Cell Genesys will have with respect to matters affecting us. See
"Certain Transactions" and "Management -- Board Composition."

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 adversely affected.

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. Our insurance 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. However, insurance coverage is
becoming increasingly expensive. 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
adversely affected.

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<PAGE> 20

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 adversely affect our business, financial
condition and results of operations.

OUR STOCK PRICE IS HIGHLY VOLATILE

The market price of our common stock has been highly volatile and is likely
to continue to be volatile. Factors affecting our stock price include:

- 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;

- governmental regulation;

- changes in reimbursement policies;

- developments in patent or other proprietary rights;

- developments in our relationship with collaborative partners;

- public concern as to the safety and efficacy of our products; and

- general market conditions.

SUBSTANTIAL SALES OF SHARES MAY IMPACT MARKET PRICE OF OUR COMMON STOCK

If our stockholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options and warrants, the market
price of our common stock may fall. Such sales also might make it more difficult
for us to sell equity or equity-related securities in the future at a time and
price that we deem appropriate. After completion of this offering, we will have
outstanding 14,615,649 shares of common stock, assuming no exercise of
outstanding options or warrants after December 31, 1998 and no exercise of the
underwriters' over-allotment option. Of these shares, the following are freely
tradeable:

- the 3,000,000 shares sold in this offering;

- the 1,146,300 shares that may be sold by certain individuals and entities
upon the effectiveness of a registration statement we filed with the
Securities and Exchange Commission on January 15, 1999;

- the 2,875,000 shares sold in our initial public offering in July 1998;
and

- an additional 2,771,302 shares, subject in certain instances to volume
re-sale limitations under Rule 144.

4,327,691 shares of common stock held by existing stockholders may not be
sold publicly unless they are registered under the Securities Act of 1933, as
amended, or are sold pursuant to Rule 144 or another exemption from
registration. These shares will become eligible for public resale at various
times over a period of less than one year following the completion of this
offering, subject to volume limitations.

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<PAGE> 21

demand rights are currently exercisable and expire in July 1999. In July 1999,
whether or not Genentech exercises its demand rights, we are obligated to
register the Genentech shares for public resale. Our registration of the
Genentech shares may have an adverse effect on our ability to raise capital.
Sales of the Genentech shares into the public market may have an adverse effect
on the market price of our common stock.

350,740 of the freely tradeable shares, all of the 4,327,691 restricted
shares and the 495,356 Genentech shares are subject to lock-up agreements under
which the holders have agreed not to sell their shares for a period of 90 days
after the date of this prospectus without the prior written consent of
BancBoston Robertson Stephens Inc.

In addition, the holders of 6,698,052 shares of common stock and 121,667
shares issuable upon the exercise of warrants will be entitled to certain demand
and piggyback rights with respect to registration of such shares under the
Securities Act. If such holders, exercising the demand registration rights,
cause a large number of securities to be registered and sold in the public
market, such sales may have an adverse effect on the market price for our common
stock. If we were to initiate a registration and include shares held by these
holders pursuant to the exercise of their piggyback registration rights, such
sales may have an adverse effect on our ability to raise capital.

WE ARE SUBJECT TO ANTI-TAKEOVER PROVISIONS

Our Amended and Restated Certificate of Incorporation and Amended and
Restated Bylaws contain provisions which may discourage takeover attempts,
including transactions in which stockholders might receive a premium for their
shares. This may limit stockholders' ability to approve a transaction that they
may think is in their best interest. Our Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws require that any action required
or permitted to be taken by our stockholders must be taken at a properly called
meeting of stockholders that may be called only by the Board of Directors, the
Chairman of the Board or the President. In addition, the Board of Directors has
the authority, without stockholder action, to fix the rights and preferences of
and issue shares of preferred stock, which may have the effect of delaying or
preventing a change in control. See "Description of Capital Stock -- Preferred
Stock" and "-- Certain Charter and Bylaw Provisions and Delaware Law."

WE DO NOT INTEND TO PAY DIVIDENDS

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 in the
foreseeable future.

WE FACE UNCERTAINTY WITH YEAR 2000 COMPLIANCE

The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of our computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This may
result in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to receive supplies from
our venders, or operate our accounting and other internal systems. If our
software vendors are unable to address the Year 2000 compliance of their
products, or should our suppliers' operations be disrupted by the Year 2000
Issue, then our ability to serve collaborative partners and develop products may
be materially adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

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<PAGE> 22

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this prospectus including, without
limitation, statements containing the words "believes," "anticipates," "expects"
and words of similar import, constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, or the Reform
Act. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such factors include, among others:

- our XenoMouse technology may not produce safe, efficacious or
commercially viable products;

- clinical trials will be expensive and their outcome is uncertain;

- the clinical success of ABX-CBL is uncertain;

- successful development of our products is uncertain;

- we are an early stage company;

- we have a history of losses;

- our future profitability is uncertain;

- we will need to find collaborative partners to develop many of our
product candidates;

- our joint venture with JT America, Inc. may limit our ability to develop
product candidates;

- we face intense competition and rapid technological change;

- market acceptance of our products is uncertain;

- our patent position is uncertain and our success depends on our
proprietary rights;

- we may face challenges from third parties regarding the validity of our
patents and proprietary rights;

- we are subject to extensive government regulations and we may not be able
to obtain regulatory approvals;

- we rely on a sole source third-party manufacturer and do not have
commercial scale manufacturing experience;

- we do not have marketing and sales experience; and

- other factors referenced in this prospectus.

Certain of these factors are discussed in more detail elsewhere in this
prospectus, including, without limitation, under the captions "Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business." Given these uncertainties, you should not
place undue reliance on such forward-looking statements. We disclaim any
obligation to update any such factors or to publicly announce the result of any
revisions to any of the forward-looking statements contained herein to reflect
future events or developments.

20
<PAGE> 23

CERTAIN INFORMATION

We were incorporated on June 24, 1996, and subsequently on July 15, 1996,
were organized pursuant to a stock purchase and transfer agreement with Cell
Genesys. Our business and operations were started in 1989 by Cell Genesys and
prior to our organization were conducted within Cell Genesys. In 1991, Cell
Genesys and JT Immunotech USA, Inc., the predecessor company to JT America and a
medical subsidiary of Japan Tobacco, formed Xenotech, an equally owned joint
venture, to develop genetically modified strains of mice known as XenoMouse
technology which can produce fully human monoclonal antibodies and to
commercialize products generated from these mice. Upon our organization, Cell
Genesys assigned to us substantially all of its rights in Xenotech.

Our principal executive offices are located at 7601 Dumbarton Circle,
Fremont, California 94555. Our telephone number is (510) 608-6500.

USE OF PROCEEDS

Our proceeds from the sale of the 3,000,000 shares of Common Stock we are
offering are estimated to be $47.1 million ($54.2 million if the underwriters'
over-allotment option is exercised in full) assuming a public offering price of
$16.875 per share and after deducting the underwriting discount and our
estimated offering expenses.

We intend to use the proceeds of the offering for research and development
including clinical trials and preclinical testing of our product candidates, and
for working capital and general corporate purposes. The amounts spent for each
purpose may vary significantly, depending on the progress of our product
development efforts, the results of clinical studies, the timing of regulatory
approvals, technological advances, determinations of the commercial potential of
our product candidates, status of competitive products, the rate at which
operating losses are incurred, the receipt of funding from collaborative
partners and other factors, many of which are beyond our control. We may also
use some of the proceeds to acquire other companies, technology or products that
complement our business, although we are not currently planning any of these
transactions. Pending these uses, the net proceeds of this offering will be
invested in short-term, interest-bearing securities.

21
<PAGE> 24

PRICE RANGE OF COMMON STOCK

Our common stock began trading publicly on the Nasdaq National Market on
July 2, 1998 under the symbol "ABGX." The following table lists quarterly
information on the price range of the common stock based on the high and low
reported last sale prices for our common stock as reported on the Nasdaq
National Market for the periods indicated below. These prices do not include
retail markups, markdowns or commissions.

<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Fiscal 1999:
First Quarter (through February 3, 1999)....... $18.125 $ 15.00
Fiscal 1998:
Fourth Quarter................................. $ 18.00 $ 6.00
Third Quarter.................................. 9.25 5.375
</TABLE>

As of December 31, 1998, there were approximately 162 holders of record of
the common stock. On February 3, 1999, the last reported sale price on the
Nasdaq National Market for the common stock was $16.875.

DIVIDEND POLICY

We have never declared or paid cash dividends on our capital stock. We
currently expect to retain our future earnings, if any, for use in the operation
and expansion of our business and do not anticipate paying any cash dividends in
the foreseeable future. Our loan and security agreement prohibits the payment of
dividends without the consent of the lender.

22
<PAGE> 25

CAPITALIZATION

The following table sets forth as of December 31, 1998 (1) our actual
capitalization (2) our capitalization on a pro forma basis to give effect to the
sale of 495,356 shares of our common stock to Genentech in January 1999 at a
purchase price of $16.15 per share and (3) our pro forma capitalization as
adjusted to reflect the proceeds from the sale of 3,000,000 shares of our common
stock offered hereby at an assumed public offering price of $16.875 per share
and after deducting the underwriting discount and estimated offering expenses.
You should read our capitalization information set forth below in conjunction
with our Financial Statements and Notes included elsewhere in this prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, less current portion...................... $ 2,180 $ 2,180 $ 2,180
Stockholders' equity:
Preferred stock, $0.0001 par value; 5,000,000 shares
authorized, none issued and outstanding.............. -- -- --
Common stock, $0.0001 par value; 50,000,000 shares
authorized, shares issued and outstanding, at amount
paid in(1):
Actual: 11,120,293 shares;
Pro forma: 11,615,649 shares; and
Pro forma as adjusted: 14,615,649 shares(1);......... 55,842 63,842 110,930
Contributions from parent............................... 29,277 29,277 29,277
Additional paid-in capital.............................. 2,311 2,311 2,311
Deferred compensation................................... (1,170) (1,170) (1,170)
Accumulated deficit..................................... (69,301) (69,301) (69,301)
-------- -------- --------
Total stockholders' equity...................... 16,959 24,959 72,047
-------- -------- --------
Total capitalization............................ $ 19,139 $ 27,139 $ 74,227
======== ======== ========
</TABLE>

- ---------------
(1) The number of shares of common stock outstanding at December 31, 1998
excludes:

(a) 1,642,187 shares of common stock issuable upon exercise of options
outstanding as of December 31, 1998, with a weighted average exercise
price of $2.44 per share;

(b) 121,667 shares of common stock issuable upon exercise of warrants
outstanding as of December 31, 1998, with an exercise price of $6.00 per
share; and

(c) 25,000 shares of common stock issuable pursuant to the terms of a
license agreement outstanding as of December 31, 1998.

23
<PAGE> 26

DILUTION

Our net tangible book value as of December 31, 1998 was approximately $17.0
million, or approximately $1.525 per share of common stock. Net tangible book
value per share represents the amount of tangible assets less total liabilities,
divided by 11,120,293 shares of common stock outstanding.

Net tangible book value dilution per share represents the difference
between the amount per share paid by purchasers of the 14,615,649 shares of
common stock outstanding immediately after this offering. After giving effect to
our sale of 3,000,000 shares of common stock in this offering at an assumed
public offering price of $16.875 per share and after deduction of the
underwriting discount and estimated offering expenses and after giving effect to
the sale of 495,356 shares at common stock to Genentech on January 27, 1999, our
pro forma net tangible book value as of December 31, 1998 would have been
approximately $72.0 million, or $4.930 per share. This represents an immediate
increase in pro forma net tangible book value of $3.405 per share to existing
stockholders and an immediate dilution in pro forma net tangible book value of
$11.945 per share to purchasers of common stock in this offering.

<TABLE>
<S> <C> <C>
Public offering price per share............................. $16.875
Net tangible book value per share before offering......... $ 1.525
Increase per share attributable to new investors.......... 3.405
-------
Pro forma net tangible book value per share after
offering.................................................. 4.930
-------
Net tangible book value dilution per share to new
investors................................................. $11.945
=======
</TABLE>

The following table sets forth the total consideration paid and the average
price per share paid by the existing stockholders and by new investors, before
deducting estimated underwriting discounts and commissions and offering expenses
payable by the Company at an assumed public offering price of $16.875 per share.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ----------------------- PRICE
NUMBER PERCENT NUMBER PERCENT PER SHARE
----------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 11,120,293 76.1% $ 60,249,007 50.7% $ 5.418
Genentech.................. 495,356 3.4% 8,000,000 6.7% $16.150
New investors.............. 3,000,000 20.5% 50,625,000 42.6% $16.875
----------- ----- ------------ -----
Total................. 14,615,649 100.0% $118,874,007 100.0%
=========== ===== ============ =====
</TABLE>

The foregoing computations excludes:

(1) 1,642,187 shares of common stock issuable upon exercise of stock
options at a weighted average exercise price of $2.44 per share
outstanding as of December 31, 1998;

(2) 121,667 shares of common stock issuable upon exercise of warrants with
an exercise price of $6.00 per share outstanding as of December 31,
1998; and

(3) 25,000 shares of common stock issuable pursuant to a license agreement
outstanding as of December 31, 1998.

24
<PAGE> 27

SELECTED FINANCIAL DATA

You should read the following selected financial data in conjunction with
our Financial Statements and Notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus. The statement of operations data for the years ended December 31,
1996, 1997, and 1998 and the balance sheet data as of December 31, 1997 and 1998
are derived from our Financial Statements that have been audited by Ernst &
Young LLP, independent auditors, and are included elsewhere in this prospectus.
The balance sheet data at December 31, 1996 and the statement of operations data
for the years ended December 31, 1994 and 1995 are derived from our Financial
Statements audited by Ernst & Young LLP that are not included in this
prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1994 1995 1996 1997 1998
------- ------- ----------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Revenues:
Revenue under collaborative agreements from related
parties................................................. $ 6,200 $ 6,200 $ 4,719 $ 1,343 $ 1,344
Contract revenue.......................................... -- -- -- 611 2,498
------- ------- ----------- ---------- ----------
Total revenues(1)................................... 6,200 6,200 4,719 1,954 3,842
Operating expenses:
Research and development.................................. 7,921 11,879 9,433 11,405 17,588
General and administrative................................ 1,955 2,603 2,565 3,525 3,405
Charge for cross-license and settlement -- amount
allocated from Cell Genesys(2).......................... -- -- -- 11,250 --
Equity in losses from the Xenotech joint venture (charge
for cross-license and settlement in 1997)(2)............ -- -- -- 11,250 107
------- ------- ----------- ---------- ----------
Total operating expenses............................ 9,876 14,482 11,998 37,430 21,100
------- ------- ----------- ---------- ----------
Operating loss.............................................. (3,676) (8,282) (7,279) (35,476) (17,258)
Interest income (expense), net.............................. -- -- 179 (404) 431
------- ------- ----------- ---------- ----------
Net loss.................................................... $(3,676) $(8,282) $ (7,100) $ (35,880) $ (16,827)
======= ======= =========== ========== ==========
Net loss per share(3)....................................... $(46,710.53) $(1,032.70) $ (3.00)
=========== ========== ==========
Shares used in computing net loss per share(3).............. 152 34,744 5,602,963
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1996 1997 1998
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 10,172 $ 15,321 $ 16,744
Working capital............................................. 5,564 6,637 13,101
Total assets................................................ 14,357 22,084 24,220
Long-term debt, less current portion........................ 1,757 3,979 2,180
Redeemable convertible preferred stock(4)................... 10,150 31,189 --
Accumulated deficit......................................... (16,594) (52,474) (69,301)
Total stockholders' equity (net capital deficiency)......... (2,316) (22,318) 16,959
</TABLE>

- ---------------

(1) Our statement of operations includes our revenues and expenses as a business
unit within Cell Genesys prior to July 15, 1996. During the years ended
December 31, 1994, 1995 and 1996, our revenues were derived principally from
Xenotech for the development of XenoMouse technology, which was essentially
completed in 1996.

(2) In 1997, we incurred a non-recurring charge for cross-license and settlement
of $22.5 million. This amount represents an allocation from Cell Genesys of
$11.25 million and an entry of $11.25 million to record the equity in the
losses of Xenotech L.P., our equally owned joint venture with JT America,
Inc. See Note 6 of Notes to our Financial Statements.

(3) Net loss per share data has not been presented prior to 1996 as there were
no equity securities outstanding prior to that date.

(4) In connection with the initial public offering of our common stock in July
1998, each outstanding share of preferred stock was converted into one share
of common stock.

25
<PAGE> 28

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements based upon current
expectations that involve risks and uncertainties. When used in this prospectus,
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 under "Risk
Factors" and elsewhere in this prospectus.

BASIS OF FINANCIAL STATEMENT PRESENTATION

Our business and operations commenced in 1989 and were initially conducted
as a business unit of Cell Genesys. On June 24, 1996, we were incorporated and
subsequently on July 15, 1996 were organized pursuant to a stock purchase and
transfer agreement with Cell Genesys. The agreement sets forth the terms and
conditions for the transfer of the antibody business unit within Cell Genesys to
us. Our accompanying financial statements include our operations since July 15,
1996, and the revenues and expenses of the Abgenix business unit within Cell
Genesys prior to July 15, 1996. The statements of cash flows do not reflect the
carve out balances before July 15, 1996, as such information would not be
meaningful. Prior to July 15, 1996, specifically identified revenues and
expenses such as research and development attributable to the antibody business
unit were allocated to us from Cell Genesys. General and administrative expenses
were allocated based on our research and development expenses as a percentage of
Cell Genesys' total research and development expenses. From July 16, 1996 to
July 31, 1997, Cell Genesys performed certain general and administrative
functions on our behalf. As of December 31, 1998, Cell Genesys beneficially
owned 30.2% of our outstanding capital stock.

OVERVIEW

We have established collaborative arrangements to use XenoMouse technology
to produce fully human antibodies with eight companies covering at least 11
antigen targets. Pursuant to these collaborations, we and our partners intend to
generate antibody product candidates for the treatment of cancer, inflammation,
transplant rejection, cardiovascular disease and growth factor modulation. Our
collaborative partners include Cell Genesys, Pfizer, Schering-Plough, Genentech,
Millennium BioTherapeutics, Research Corporation Technologies, Centocor and AVI
BioPharma. Among our eight collaborative partners, Pfizer, Genentech and
Millennium BioTherapeutics have each entered into additional collaborations with
us specifying additional antigens for XenoMouse antibody development. We expect
that substantially all of our revenues for the foreseeable future will result
from payments under collaborative arrangements. The terms of the collaboration
arrangements vary, reflecting the value we add to the development of any
particular product candidate. These collaborations typically provide our
collaborative partners with access to XenoMouse technology for the purpose of
generating fully human antibody product candidates to one or more specific
antigen targets provided by the collaborative partner. In most cases, we provide
our mice to collaborative partners who then carry out immunizations with their
specific antigen target. In other cases, we may immunize the mice with the
collaborative partner's antigen target for additional compensation. As an
extension of this concept, we may grant multi-antigen research licenses to
select collaborative partners, allowing them to incorporate XenoMouse technology
into early

26
<PAGE> 29

stages of their antibody product research efforts without specifically knowing
the antigens that they intend to target for XenoMouse antibody generation. These
collaborative partners will need to execute product licenses for any antibody
product they wish to develop and commercialize.

The financial terms of our existing collaborations typically include
upfront payments, potential license fees and milestone payments paid to us by
the collaborative partner. Based on our collaborative agreements entered into,
these payments and fees may approximate $8.0 million per antigen target assuming
our collaborative partner takes the antibody product candidate to
commercialization. In certain instances, the collaborative partner could make
reimbursement payments to us for research that we conduct on its behalf.
Additionally, if a product receives marketing approval from the FDA or an
equivalent foreign agency, we are entitled to receive royalties on any future
product sales by the collaborative partner. Furthermore, the collaborative
partner will be responsible for worldwide manufacturing, product development and
marketing of any product developed through the collaboration.

Our dependence on collaborative and licensing arrangements with third
parties subjects us to a number of risks. Agreements with collaborative partners
typically allow them significant discretion in electing whether to pursue any of
the planned activities. We cannot control the amount and timing of resources our
collaborative partners may devote to the product candidates. Even if we fulfill
our obligations under a collaborative agreement, the collaborative partner can
terminate the agreement at any time following proper written notice. If any
collaborative partner 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 adversely
affected.

In February 1999, we reported the preliminary results of our multi-center
confirmatory Phase II clinical trial for ABX-CBL in graft versus host disease.
This trial supports the safety and efficacy data seen in previously published
clinical trials conducted by third parties. The trial was conducted at nine
sites on 27 patients. Data from 23 of the 27 patients was evaluated for efficacy
at four dosing levels. A response rate of 73% was reported among the 15 patients
in the three highest dose groups. The remaining eight patients reported a 25%
response at the lowest dose. We believe the treatment was safe and well
tolerated except for temporary muscle pain. We will submit the complete report
to the FDA and, if approved, expect to commence a pivotal Phase III clinical
trial for ABX-CBL in mid-1999.

In 1991, Cell Genesys and JT America formed Xenotech, an equally owned
joint venture, to develop XenoMouse technology and to commercialize products
generated from XenoMouse technology. Upon the organization of Abgenix, Cell
Genesys assigned its rights in Xenotech to Abgenix. Xenotech funds its research
and development activities through capital contributions from Abgenix and JT
America, and

27
<PAGE> 30

Abgenix is obligated to fund 50% of all Xenotech expenses. During 1995, 1996 and
1997, Abgenix derived revenues principally from performing research for Xenotech
for the continued development of XenoMouse technology. During this three-year
period, Abgenix recognized aggregate revenues from Xenotech research in the
approximate amount of $12.3 million. The development of XenoMouse technology was
substantially completed in 1996 with modest ongoing research activities in 1997
and 1998. Therefore, Abgenix does not expect to recognize significant revenues
from research performed on behalf of Xenotech in the future. Abgenix accounts
for its investment in Xenotech under the equity method of accounting.

Since inception, we have funded our research and development activities
primarily through:

- contributions from Cell Genesys;

- revenues from collaborative arrangements;

- private placements of preferred stock;

- our initial public offering of common stock in July 1998 resulting in net
proceeds of $20.1 million; and

- equipment leaseline financings and loan facilities.

We have incurred operating losses in each of the last three years of
operation, including net losses of approximately $7.1 million in 1996, $35.9
million in 1997 and $16.8 million in 1998. As of December 31, 1998, we had an
accumulated deficit of approximately $69.3 million. Our losses have resulted
principally from costs incurred in performing research and development for our
XenoMouse technology and antibody product candidates, from the non-recurring
cross-license and settlement charge (described in the next paragraph) and from
general and administrative costs associated with our operations. We expect to
incur additional operating losses until at least the year 2000 as a result of
our expenditures for research and product development, including costs
associated with conducting preclinical testing and clinical trials. We expect
the amount of such 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 collaborative arrangements, or the initiation,
success or failure of clinical trials.

In 1994, Cell Genesys and GenPharm and, beginning in 1996, Abgenix, became
involved in litigation primarily related to intellectual property rights
associated with a method for inactivating a mouse's antibody genes and
technology pertaining to transgenic mice capable of producing fully human
antibodies. Rather than endure the cost and business interruption of protracted
litigation, in March 1997, Cell Genesys, along with Abgenix, Xenotech and Japan
Tobacco, signed a comprehensive patent cross-license and settlement agreement
with GenPharm that resolved all related litigation and claims between the
parties. Under the cross-license and settlement agreement, Abgenix has licensed
on a non-exclusive basis certain patents, patent applications, third-party
licenses and inventions pertaining to the development and use of certain
transgenic rodents including mice that produce fully human antibodies. We use
our XenoMouse technology to generate fully human antibody products and have not
licensed the use of, and do not use, any transgenic rodents developed or used by
GenPharm. As initial consideration for the cross-license and settlement
agreement, Cell Genesys issued a note to GenPharm due September 30, 1998 for
$15.0 million payable by Cell Genesys and convertible into shares of Cell
Genesys common stock. Of this note, approximately $3.8 million satisfied certain
of Xenotech's obligations under the agreement. Japan Tobacco also made an
initial payment. During 1997, two patent milestones were achieved by GenPharm,
and Xenotech was obligated to pay $7.5 million for each milestone. Xenotech paid
$7.5 million to satisfy the first milestone and has recorded a payable to
GenPharm for the remaining $7.5 million. We recorded a liability of
approximately $3.8 million in our balance sheet representing our equal share of
the Xenotech obligation. The obligation was paid in November 1998. No additional
payments will accrue under this agreement. We have recognized, as a
non-recurring charge for cross-license and settlement, a total of $22.5 million.
We concluded that the cost of the cross-license and settlement agreement was
properly expensed under Statement of Financial Accounting Standards No. 2,
"Accounting for Research and Development Costs" because the cross-license
received by us from GenPharm is non-exclusive and has no alternative future uses
for us. We also concluded that the $11.3 million was properly allocated from
Cell

28
<PAGE> 31

Genesys because it related to the technology Cell Genesys contributed to Abgenix
upon our organization. We do not have any future financial obligations under the
cross-license and settlement agreement.

In connection with the grant of stock options since our organization on
July 15, 1996, we have recorded aggregate deferred compensation of approximately
$2.3 million through December 31, 1998, representing the difference between the
deemed fair value of the common stock for accounting purposes and the option
exercise price at the date of grant. These amounts are presented as a reduction
of stockholders' equity and are amortized ratably over the vesting period of the
applicable options, generally four years. These valuations resulted in charges
to operations of $528,000 and $598,000 in the years ended December 31, 1997, and
1998, respectively.

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

During 1996, 1997 and 1998, we derived revenues principally from performing
research for Xenotech and from our XenoMouse technology collaborations. Revenues
from the joint venture are recognized when earned, net of our cash contributions
to Xenotech, under the terms of the related agreements. Research and development
funding received in advance under these agreements is recorded as deferred
revenue. Revenues from the achievement of milestone events are recognized when
the milestones have been achieved. Revenues from Xenotech decreased from $4.7
million in 1996 to $1.3 million in 1997 and to $1.3 million in 1998. Revenues in
1997 decreased because Xenotech's research related to developing XenoMouse
technology was essentially completed in 1996 with limited research activities in
1997 and 1998.

Contract revenues of $611,000 in 1997 consisted principally of
nonrefundable signing fees paid in connection with the execution of
collaborative agreements. Contract revenues of $2.5 million in 1998 consisted
principally of nonrefundable signing fees and fees paid for the achievement of
research milestones under collaborative agreements. No future obligations exist
for such fees.

Research and development expenses increased from $9.4 million in 1996 to
$11.4 million in 1997 and $17.6 million in 1998. The increase in research and
development expenses reflected increased expenses primarily for the manufacture
of antibody products in connection with the preparation for the initiation of
clinical trials of two of our antibody product candidates under development,
ABX-CBL and ABX-IL8, in addition to the expenses of conducting these trials. We
anticipate that research and development expenses will increase in future
periods as we expand research and development efforts and clinical trials.

General and administrative expenses increased from $2.6 million in 1996 to
$3.5 million in 1997 and decreased to $3.4 million in 1998. The increase in 1997
was primarily attributable to increased personnel levels associated with the
expansion of our operations, increased professional services expenses associated
with negotiation of Abgenix's collaborative arrangements and increased costs
associated with moving to our current facilities.

The aggregate non-recurring charge for cross-license and settlement of
$22.5 million in 1997 resulted from the execution of the comprehensive patent
cross-license and settlement agreement with GenPharm. See "Overview" and Note 6
of Notes to Abgenix's Financial Statements.

Other income and expenses consist of interest income from cash, cash
equivalents and short-term investments and interest expense incurred in
connection with our equipment leaseline financing and loan facilities. Interest
income increased in 1997 and 1998 due to higher average balances of short-term
investments and interest expense declined in 1998 due to lower average balances
of debt. Interest expense increased from 1996 to 1997 as a result of the
increased debt balances from our equipment leaseline financing and loan
facilities entered into in 1997.

29
<PAGE> 32

LIQUIDITY AND CAPITAL RESOURCES

Since formation, we have financed our operations primarily through capital
contributions by, and borrowings from Cell Genesys, revenue from collaborative
arrangements, private placements of preferred stock, an initial public offering
of common stock and equipment leaseline financings and loan facilities. Through
December 31, 1998, we received net cash of $75.8 million from financing
activities, consisting principally of approximately $14.3 million from
contributions by Cell Genesys, $31.1 million from private placements of
preferred stock, $20.1 million from our initial public offering in July 1998,
$4.3 million from construction financing, $2.0 million in lease financing, and
$4.0 million borrowed from Cell Genesys and converted to preferred stock. Cell
Genesys is not obligated to provide any future funding to us. In January 1999,
we received $8.0 million from the sale of 495,356 shares of our common stock to
Genentech.

Our net cash used in operating activities was $2.2 million in 1996, $10.2
million in 1997 and $20.0 million in 1998. The cash used for operations was
primarily to fund research and development expenses and manufacturing costs
related to the development of new products.

As of December 31, 1998, we had cash, cash equivalents and short-term
investments of $16.7 million. We have invested the net proceeds of our initial
public offering in short-term, interest-bearing, investment grade securities. We
have an agreement with a financing company under which we have financed
purchases of about $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%,
which are based on the change in the five year U.S. Treasury rate. We also have
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 current facility.
The line matures in January 2001, bears interest at a rate of prime plus one
percent (8.75% at December 31, 1998). As of December 31, 1998, no further
borrowings were available under the construction financing line.

Our proceeds from the sale of the 3,000,000 shares of Common Stock we are
offering are estimated to be $47.1 million ($54.2 million if the underwriters'
over-allotment option is exercised in full) after deducting the underwriting
discount and our estimated offering expenses.

We intend to use proceeds of the offering for research and development
including clinical trials and preclinical testing of our product candidates, and
for working capital and general corporate purposes. The amounts actually spent
for each purpose may vary significantly, depending on the progress of our
product development efforts, the results of clinical studies, the timing of
regulatory approvals, technological advances, determinations of the commercial
potential of our product candidates, status of competitive products, the rate at
which operating losses are incurred, the receipt of funding from collaborative
partners and other factors, many of which are beyond our control. We may also
use some of the proceeds to acquire other companies, technology or products that
complement our business, although we are not currently planning any of these
transactions. Pending these uses, the net proceeds of this offering will be
invested in short-term, interest-bearing securities.

We plan to continue to expend substantial resources for the expansion of
research and development, including costs associated with conducting preclinical
testing and clinical trials. We may be required to expend substantial funds if
unforeseen difficulties arise in the course of completing required additional
development of product candidates, manufacturing of product candidates,
performing preclinical testing and clinical trials of such product candidates,
obtaining necessary regulatory approvals or other aspects of our business. Our
future liquidity and capital requirements will depend on many factors,
including:

- continued scientific progress in our research and development programs;

- size and complexity of these programs;

- scope and results of preclinical testing and clinical trials;

- time and expense involved in obtaining regulatory approvals;

- competing technological and market developments;

- establishment of further collaborative arrangements;

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<PAGE> 33

- maintaining current collaborations;

- time and expense of filing and prosecuting patent applications and
enforcing patent claims;

- cost of establishing manufacturing capabilities, conducting
commercialization activities and arrangements;

- product in-licensing; and

- other factors not within our control.

We believe that the proceeds from this offering, together with our current cash
balances, cash equivalents, short-term investments and cash generated from our
collaborative arrangements will be sufficient to meet our operating and capital
requirements for at least the next two years. However, we may need additional
financing within this timeframe. We may need to raise additional funds through
public or private financing, collaborative relationships or other arrangements.
There can be no assurance that such additional funding, if needed, will be
available on terms favorable to us. Furthermore, any additional equity financing
may be dilutive to stockholders, and debt financing, if available, may involve
restrictive covenants. Collaborative arrangements may require us to relinquish
its rights to certain of our technologies, products or marketing territories.
Our failure to raise capital when needed may have a material adverse effect on
our business, financial condition and results of operations.

As of December 31, 1998 we had federal net operating loss carryforwards of
approximately $36.5 million. Our net operating loss carryforwards exclude losses
incurred prior to the organization of Abgenix in July 1996. Further, the amounts
associated with the cross-license and settlement that have been expensed for
financial statement accounting purposes have been capitalized and are being
amortized over a period of approximately fifteen years for tax purposes. The net
operating loss and credit carryforwards will expire in the years 2011 through
2018, if not utilized. Utilization of the net operating losses and credits may
be subject to a substantial annual limitation due to the "change in ownership"
provisions of the Internal Revenue Code of 1986 and similar state provisions.
The annual limitation may result in the expiration of net operating losses and
credits before utilization.

YEAR 2000 ISSUE

Our plan to resolve the Year 2000 Issue is based on a recently completed
assessment of our exposure. All of our time-sensitive software is widely used
and purchased from major vendors, all of whom have announced that their software
is either currently Year 2000-compliant or will be made so with upgrades before
the end of 1999. We have already purchased the Year 2000-compliant upgrade of
our accounting system. We will be testing each of our 60 personal computers and
will replace or repair those that are non-compliant. In addition, we will be
gathering information about the Year 2000 compliance status of third parties
with whom we have significant relationships to determine the extent to which our
operations are vulnerable to these third parties' failure to solve their own
Year 2000 issue. None of our systems interface with those of third parties.

Upgrading the accounting system was already planned in order to acquire the
benefits of its improved features, and was not accelerated by the Year 2000
Issue. We believe that the total cost of our compliance with the Year 2000 Issue
will be less than $50,000.

We believe we have an effective program in place to resolve the Year 2000
Issue in a timely manner. However, should our software vendors be unable to
address the Year 2000 compliance of their products, or should our suppliers'
operations be disrupted by the Year 2000 Issue, then our ability to serve our

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collaborative partners and develop products may be materially and adversely
impacted. Our contingency plans for minimizing the impact include increasing
supplies of materials used in clinical trials, establishing accounts with
alternative vendors, and temporarily employing manual accounting systems until
alternative systems can be installed.

RECENT ACCOUNTING PRONOUNCEMENTS

We have reviewed all recently issued, but not yet adopted, accounting
standards in order to determine their effects, if any, on our results of
operations or financial position. Based on the review, we believe that none of
these pronouncements will have a significant effect on current or future
earnings, operations or financial position.

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BUSINESS

The following description of our business should be read in conjunction
with the information included elsewhere in this prospectus. The description
contains certain forward-looking statements that involve risks and
uncertainties. When used in this prospectus, the words "intend," "anticipate,"
believe," "estimate," "plan" and "expect" and similar expressions as they relate
to us are included to identify forward-looking statements. Our actual results
could differ materially from the results discussed in the forward-looking
statements as a result of certain of the risk factors set forth below and
elsewhere in this prospectus.

OVERVIEW

We 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, and cancer. We have developed XenoMouse technology, a
proprietary technology which we believe enables quick generation of high
affinity, fully human antibody product candidates to essentially any disease
target appropriate for antibody therapy. We intend to use XenoMouse technology
to build and commercialize a large and diversified product portfolio through the
establishment of corporate collaborations and internal product development
programs.

We have established collaborative arrangements to use our XenoMouse
technology to produce fully human antibodies for eight companies covering at
least 11 antigen targets. Pursuant to these collaborations, we and our partners
intend to generate antibody product candidates for the treatment of cancer,
inflammation, transplant rejection, cardiovascular disease and growth factor
modulation. Our collaborative partners include Cell Genesys, Pfizer,
Schering-Plough, Genentech, Millennium BioTherapeutics, Research Corporation
Technologies, Centocor and AVI BioPharma. Among our eight collaborative
partners, Pfizer, Genentech and Millenium BioTherapeutics have each entered into
additional collaborations with us specifying additional antigens for XenoMouse
antibody development. The financial terms of the XenoMouse technology
collaborations typically include upfront payments, potential license fees and
milestone payments payable to us by the collaborative partner assuming the
partner takes the product candidate to commercialization. Additionally, if a
product receives marketing approval from the FDA or an equivalent foreign
agency, we are entitled to receive royalties on any future product sales by the
collaborative partner.

We also have four antibody product candidates that are under development
internally. Our lead product candidate, ABX-CBL, is an in-licensed mouse
antibody. We recently completed a multi-center confirmatory Phase II clinical
trial for ABX-CBL for the treatment of a transplant-related disease known as
graft versus host disease. Our other three antibody product candidates were
generated using XenoMouse technology. We completed a Phase I clinical trial for
our fully human antibody product candidate in psoriasis, ABX-IL8, and began a
Phase I/II clinical trial with psoriasis patients in November 1998. In addition,
we entered a Phase I clinical trial for ABX-IL8 in rheumatoid arthritis in
January 1999. We are in preclinical development with two other fully human
antibody product candidates: ABX-EGF for use in the treatment of cancer; and
ABX-RB2 for use in the treatment of chronic immunological disorders. We expect
to initiate Phase I clinical trials with ABX-EGF in mid-1999.

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BACKGROUND

THE NORMAL ANTIBODY RESPONSE

The human immune system protects the body against a variety of infections
and other illnesses. Specialized cells, which include B cells and T cells, work
in concert with the other components of the immune system to recognize,
neutralize and eliminate from the body numerous foreign substances, infectious
organisms and malignant cells. In particular, B cells generally produce protein
molecules, known as antibodies, which are capable of recognizing substances
potentially harmful to the human body. Such substances are called antigens. Upon
being bound by an antibody, antigens can be neutralized and blocked from
interacting with and causing damage to normal cells. In order to effectively
neutralize or eliminate an antigen without harming normal cells, the immune
system must be able to generate antibodies that bind tightly (i.e., with high
affinity) to one specific antigen (i.e., with specificity).

All antibodies have a common core structure composed of four subunits, two
identical light (L) chains and two identical heavy (H) chains, named according
to their relative size. The heavy and light chains are assembled within the B
cell to form an antibody molecule which consists of a constant region and a
variable region. As shown in figure one, an antibody molecule may be represented
schematically in the form of a "Y" structure.

[FIGURE 1]

The base of the "Y," together with the part of each arm immediately next to
the base, is called the constant region because its structure tends to be very
similar across all antibodies. In contrast, the variable regions are at the end
of the two arms and are unique to each antibody with respect to their three
dimensional structures and protein sequences. Because variable regions define
the specific binding sites for a variety of antigens, there is a need for
significant structural diversity in this portion of the antibody molecule. Such
diversity is achieved in the body primarily through a unique mode of assembly
involving a

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<PAGE> 37

complex series of recombination steps for various gene segments of the variable
region, including the V, D and J segments (see figure two shown below).

[FIGURE 2]

The human body is repeatedly exposed to a variety of different antigens.
Accordingly, the immune system must be able to generate a diverse repertoire of
antibodies that are capable of recognizing these multiple antigen structures
with a high degree of specificity. The immune system has evolved a two-step
mechanism in order to accomplish this objective. The first step, immune
surveillance, is achieved through the generation of diverse circulating B cells,
each of which assembles different antibody gene segments in a semi-random
fashion to produce and display on its surface a specific antibody. As a result,
a large number of distinct, albeit lower affinity, antibodies are generated in
the circulation so as to recognize essentially any foreign antigen that enters
the body. While capable of recognizing the antigens as foreign, these lower
affinity antibodies are generally incapable of effectively neutralizing them.

This limitation of the immune surveillance process is generally overcome by
the normal immune system in a second step called "affinity maturation."
Triggered by the initial binding to a specific antigen, the small fraction of B
cells that recognize this antigen is then primed by the immune system to
progressively generate antibodies with higher and higher affinity through a
process of repeated mutation and selection. As a result, the reactive antibodies
develop increasingly higher specificity and affinity with the latter being
potentially a hundred to a thousand times higher than those generated in the
previous immune surveillance process. These more specific, higher affinity
antibodies have a greater likelihood of effectively neutralizing or eliminating
the antigen while minimizing the potential of damaging healthy cells.

ANTIBODIES AS PRODUCTS

Recent advances in the technologies for creating and producing antibody
products coupled with a better understanding of how antibodies and the immune
system function in key disease states have led to renewed interest in the
commercial development of antibodies as therapeutic products. According to a
recent survey by the Pharmaceutical Research and Manufacturers of America,
antibodies account for over 20% of all biopharmaceutical products in clinical
development. As of December 31, 1998, we are aware of eight antibody therapeutic
products approved for marketing in the United States for the treatment of a wide
range of medical disorders. These products are Orthoclone, ReoPro, Rituxan,
Zenapax, Herceptin, Synagis, Remicaid and Simulect. These products are currently
being marketed for a wide range of medical disorders such as transplant
rejection, cardiovascular disease, cancer and infectious diseases.

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We believe that, as products, antibodies have several potential clinical
and commercial advantages over traditional therapies. These advantages include
the following:

- faster product development;

- fewer unwanted side effects as a result of high specificity for the
disease target;

- greater patient compliance and higher efficacy as a result of favorable
pharmacokinetics;

- delivery of various payloads, including drugs, radiation and toxins, to
specific disease sites; and

- ability to elicit a desired immune response.

LIMITATIONS OF CURRENT APPROACHES TO DEVELOPMENT OF ANTIBODY PRODUCTS

Despite the early recognition of antibodies as promising therapeutic
agents, most approaches thus far to develop them as products have been met with
a number of commercial and technical limitations. Initial efforts were aimed at
the development of hybridoma cells, which are immortalized mouse antibody-
secreting B cells. Such hybridoma cells are derived from normal mouse B cells
which have been genetically manipulated so that they are capable of reproducing
over an indefinite period of time. They are then cloned to produce a homogeneous
population of identical cells which produce one single type of mouse antibody
capable of recognizing one specific antigen ("monoclonal antibody").

While mouse monoclonal antibodies can be generated to bind to a number of
antigens, they contain mouse protein sequences and tend to be recognized as
foreign by the human immune system. As a result, they are quickly eliminated by
the human body and have to be administered frequently. When patients are
repeatedly treated with mouse antibodies, they will begin to produce antibodies
that effectively neutralize the mouse antibody, a reaction referred to as a
Human Anti-Mouse Antibody, or HAMA, response. In many cases, the HAMA response
prevents the mouse antibodies from having the desired therapeutic effect and may
cause the patient to have an allergic reaction. The potential use of mouse
antibodies is thus best suited to situations where the patient's immune system
is compromised or where only short-term therapy is required. In such settings,
the patient is often incapable of producing antibodies that neutralize the mouse
antibodies or has insufficient time to do so.

Recognizing the limitations of mouse monoclonal antibodies, researchers
have developed a number of approaches to make them appear more human-like to a
patient's immune system. For example, improved forms of mouse antibodies,
referred to as "chimeric" and "humanized" antibodies, are genetically engineered
and assembled from portions of mouse and human antibody gene fragments. While
such chimeric and humanized antibodies are more human-like, they still retain a
varying amount of the mouse antibody protein sequence, and accordingly may
continue to trigger the HAMA response. Additionally, the humanization process
can be expensive and time consuming, requiring at least two months and sometimes
over a year of secondary manipulation after the initial generation of the mouse
antibody. Once the humanization process is complete, the remodeled antibody gene
must then be expressed in a recombinant cell line appropriate for antibody
manufacturing, adding additional time before the production of preclinical and
clinical material can be initiated. In addition, the combination of mouse and
human antibody gene fragments can result in a final antibody product which is
sufficiently different in structure from the original mouse antibody leading to
a decrease in specificity or a loss of affinity.

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[EVOLUTION OF ANTIBODY TECHNOLOGIES GRAPHIC]

HUMAN ANTIBODIES

The HAMA response can potentially be avoided through the generation of
antibody products with fully human protein sequences. Such fully human
antibodies may increase the market acceptance and expand the use of antibody
therapeutics. Several antibody technologies have been developed to produce
antibodies with 100% human protein sequences (see figure three shown above). One
approach to generating human antibodies, called "phage display" technology,
involves the cloning of human antibody genes into bacteriophage, viruses that
infect bacteria, in order to display antibody fragments on the surfaces of
bacteriophage particles. This approach attempts to mimic in vitro the immune
surveillance and affinity maturation processes that occur in the body. Because
phage display technology cannot take advantage of the naturally occurring in
vivo affinity maturation process, the antibody fragments initially isolated by
this approach are typically of moderate affinity. In addition, further genetic
engineering is required to convert the antibody fragments into fully assembled
antibodies and significant manipulation, taking from several months to a year,
may be required to increase their affinities to a level appropriate for human
therapy. Before preclinical or clinical material can be produced, the gene
encoding the antibody derived from phage display technology must, as with a
humanized antibody, be introduced into a recombinant cell line.

Two additional approaches involving the isolation of human immune cells
have been developed to generate human antibodies. One such approach is the
utilization of immunodeficient mice which lack both B and T cells. Human B cells
and other immune tissue are transplanted into these mice which are then
subsequently immunized with target antigens to stimulate the production of human
antibodies. However, this process is generally limited to generating antibodies
only to nonhuman antigens or antigens to which the human B cell donor had
previously responded. Accordingly, this approach may not be suitable for
targeting many key diseases such as cancer, and inflammatory and autoimmune
disorders where antibodies to human antigens may be required for appropriate
therapy. The other approach involves collecting human B cells which have been
producing desired antibodies from patients exposed to a specific virus or
pathogen. As with the previous approach, this process may not be suitable for
targeting diseases where antibodies to human antigens are required, and
therefore is generally limited to infectious disease targets which will be
recognized as foreign by the human immune system.

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THE ABGENIX SOLUTION -- XENOMOUSE TECHNOLOGY

Our approach to generating human antibodies with fully human protein
sequences is to use genetically engineered strains of mice in which mouse
antibody gene expression is suppressed and functionally replaced with human
antibody gene expression, while leaving intact the rest of the mouse immune
system. Rather than engineering each antibody product candidate, these
transgenic mice capitalize on the natural power of the mouse immune system in
surveillance and affinity maturation to produce a broad repertoire of high
affinity antibodies. By introducing human antibody genes into the mouse genome,
transgenic mice with such traits can be bred indefinitely. Importantly, these
transgenic mice are capable of generating human antibodies to human antigens
because the only human products expressed in the mice (and therefore recognized
as "self") are the antibodies themselves. Any other human tissue or protein is
thus recognized as a foreign antigen by the mouse and an immune response will be
mounted. Abnormal production of certain human proteins, such as cytokines and
growth factors or their receptors have been implicated in various human
diseases. Neutralization or elimination of these abnormally produced or
regulated human proteins with the use of human antibodies could ameliorate or
suppress the target disease. Therefore, the ability of these transgenic mice to
generate human antibodies against human antigens could offer an advantage to
drug developers compared with some of the other approaches described previously.
A challenge with this approach, however, has been to introduce enough of the
human antibody genes in appropriate configuration into the mouse genome to
ensure that these mice are capable of recognizing the broad diversity of
antigens relevant for human therapies.

To make our transgenic mice a robust tool capable of consistently
generating high affinity antibodies which can recognize a broad range of
antigens, we equipped the XenoMouse with approximately 80% of the human heavy
chain antibody genes and a significant amount of the human light chain genes. We
believe that the complex assembly of these genes together with their semi-random
pairing allows XenoMouse to recognize a diverse repertoire of antigen
structures. XenoMouse technology further capitalizes on the natural in vivo
affinity maturation process to generate high affinity, fully human antibodies.
In addition, we have developed multiple strains of XenoMouse, each of which is
capable of producing a different class of antibody to perform different
therapeutic functions. We believe that our various XenoMouse strains will
provide maximum flexibility for drug developers in generating antibodies of the
specific type best suited for a given disease indication.

XENOMOUSE TECHNOLOGY ADVANTAGES

We believe that our XenoMouse technology offers the following advantages:

Producing Antibodies With Fully Human Protein Sequences. Our XenoMouse
technology, unlike chimeric and humanization technologies, allows the generation
of antibodies with 100% human protein sequences. Antibodies created using
XenoMouse technology are not expected to cause a HAMA response even when
administered repeatedly to immunocompetent patients. For this reason, antibodies
produced using XenoMouse technology are expected to offer a better safety
profile and to be eliminated less quickly from the human body, reducing the
frequency of dosing.

Generating a Diverse Antibody Response to Essentially Any Disease Target
Appropriate for Antibody Therapy. Because a substantial majority of human
antibody genes has been introduced into XenoMouse, the technology has the
potential to generate high affinity antibodies that recognize more antigen
structures than other transgenic technologies. In addition, through immune
surveillance, XenoMouse technology is expected to be capable of generating
antibodies to almost any medically relevant antigen, human or otherwise. For a
given antigen target, having multiple antibodies to choose from could be
important in selecting the optimal antibody product.

Generating High Affinity Antibodies Which Do Not Require Further
Engineering. XenoMouse technology uses the natural in vivo affinity maturation
process to generate antibody product candidates usually in two to four months.
These antibody product candidates may have affinities as much as a hundred to a
thousand times higher than those seen in phage display. In contrast to
antibodies generated using humanization and phage display technology, XenoMouse
antibodies are produced without the need

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for any subsequent engineering, a process which at times has proven to be
challenging and time consuming. By avoiding the need to further engineer
antibodies, we reduce the risk that an antibody's structure and therefore
functionality will be altered between the initial antibody selected and the
final antibody placed into production.

Enabling More Efficient Product Development. In contrast to humanization or
phage display, which require the cloning of an antibody gene and the generation
of a recombinant cell line, the B cells generated in XenoMouse can be turned
directly into hybridoma cell lines for human antibody production. Therefore, a
supply of monoclonal antibodies can be produced quickly to allow the timely
initiation of preclinical and clinical studies. Furthermore, since XenoMouse
technology can potentially produce multiple product candidates more quickly than
humanization and phage display technology, preclinical testing can be conducted
on several antibodies in parallel to identify the optimal product candidate
which will be tested in clinical trials.

Providing Flexibility in Choosing Manufacturing Processes. Once an antibody
with the desired characteristics has been identified, preclinical material can
be produced either directly from hybridomas or from recombinant cell lines.
Humanized and phage display antibodies, having been engineered, cannot be
produced in hybridomas. In addition to potential time savings, production in
hybridomas avoids the need to license certain third party intellectual property
rights covering the production of antibodies in recombinant cell lines.

ABGENIX STRATEGY

Our objective is to be a leader in the generation, development and
commercialization of novel antibody-based biopharmaceutical products. Key
elements of our strategy to accomplish this objective include the following:

Building a Large and Diversified Product Portfolio. Utilizing our XenoMouse
technology, we intend to build a large and diversified product portfolio,
including a mix of out-licensed and internally developed product candidates. We
are targeting serious medical conditions including: cancer, inflammation,
transplant rejection, cardiovascular disease and growth factor modulation. For
our internal programs, we intend to collaborate with leading academic
researchers and companies involved in the identification and development of
novel antigens. We believe the speed and cost advantages of our technology will
enable us to make cost-effective use of available human and capital resources.
We can thus pursue multiple product candidates in parallel through the
preclinical and early clinical stages before entering into a corporate
collaboration to complete clinical and developmental stages and to bring the
product candidate to market. Thus, we believe we can create a package that
includes antigen rights, human antibodies, and preclinical and clinical data for
use by Abgenix or for marketing to potential collaborative partners.

Leveraging XenoMouse Technology Through Technology Collaborations. We
intend to diversify our product portfolio and generate revenues by licensing
XenoMouse technology to numerous pharmaceutical and biotechnology companies
interested in developing antibody-based products. We expect to enter into
several XenoMouse technology collaborations each year. These agreements
typically allow our collaborative partner to generate fully human antibodies to
one or more specific antigen targets provided by the collaborative partner. In
most cases, we provide our mice to collaborative partners who then carry out
immunizations with their specific antigen target. In other cases, we may
immunize the mice with the collaborative partner's antigen target for additional
compensation. As an extension of this concept, we may grant multi-antigen
research licenses to select collaborative partners, allowing them to incorporate
XenoMouse technology into early stages of their antibody product research
efforts without specifically knowing the antigens that they intend to target for
XenoMouse antibody generation. These collaborative partners would then need to
execute product licenses for any antibody product they wished to develop and
commercialize.

The financial terms of our XenoMouse technology collaborations typically
include upfront payments, potential license fees and milestone payments plus
royalties on any future product sales. We have established collaborative
arrangements with eight corporate partners covering at least 11 antigen targets.
To

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date, three of these collaborative partners have each entered into additional
collaborations specifying additional antigens for XenoMouse antibody
development.

Establishing Collaborations for Proprietary Product Candidates. We also
intend to build our product portfolio and generate revenues by licensing
proprietary product candidates. These proprietary product collaborations would
involve antibodies made to antigen targets that we source. We expect to enter
into at least one proprietary product collaboration each year. After generating
antibody product candidates and self funding preclinical and in some cases
clinical activities to determine preliminary safety and efficacy, we intend to
enter into development and commercialization agreements with collaborative
partners for these proprietary product candidates that we created. For some of
our products, we may enter into proprietary product collaborations at the
preclinical or early clinical development stage allowing the collaborative
partner to complete development and to market the product. For other products,
we may develop the product through clinical trials and license the product
candidate to a collaborative partner for marketing.

Current antibody candidates for potential proprietary product
collaborations include ABX-CBL, ABX-IL8, ABX-EGF and ABX-RB2. The financial
terms of these product collaborations could include license fees upon signing,
milestone payments, and reimbursement for research and development activities
that we perform plus royalties on future product sales, if any. Given our
greater investment in creating a proprietary product candidate, we expect that
an arrangement for these product candidates could afford higher payments and
royalty rates than a typical XenoMouse technology collaboration.

PROPRIETARY PRODUCT DEVELOPMENT PROGRAMS

We are currently developing antibody therapeutics for a variety of
indications. The table below sets forth the development status of our product
candidates as of January 31, 1999.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
PRODUCT
CANDIDATE INDICATION STATUS(1)
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
ABX-CBL GVHD Phase II
- ------------------------------------------------------------------------------------------------------------
Psoriasis Phase I/II
ABX-IL8 ----------------------------------------------------------------------------
Rheumatoid Arthritis Phase I
- ------------------------------------------------------------------------------------------------------------
ABX-EGF EGF-Dependent Cancers Preclinical
- ------------------------------------------------------------------------------------------------------------
Transplant Rejection Preclinical
ABX-RB2 ----------------------------------------------------------------------------
Autoimmune Disease Preclinical
- ------------------------------------------------------------------------------------------------------------
</TABLE>

- ---------------

(1) "Phase II" indicates safety, dosing and efficacy testing in a limited
patient population. "Phase I" indicates safety and proof of concept testing
in a limited patient population and toxicology testing in animal models.
"Preclinical" indicates that the product candidate selected for development
has met predetermined criteria for potency, specificity, manufacturability
and pharmacologic activity in animal and in vitro models.

ABX-CBL

The CBL antigen is selectively expressed on activated immune cells
including T cells, B cells and natural killer cells. To accelerate our
commercialization plans, we obtained an exclusive license to ABX-CBL in February
1997. We believe that a mouse antibody can be utilized to treat GVHD patients
because their immune system is either non-functioning or severely suppressed
and, therefore, no HAMA responses should be generated. We believe ABX-CBL has
the ability to destroy activated immune cells without affecting the rest of the
immune system.

Graft Versus Host Disease. We are developing ABX-CBL to reduce unwanted
immune responses that occur in GVHD. GVHD is a life-threatening complication
that frequently occurs following an

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allogeneic bone marrow transplant ("BMT"). BMTs are used in the treatment of
patients with end stage leukemia, certain other serious cancers and immune
system disorders. An allogeneic BMT procedure involves transferring marrow, the
graft, from a healthy person into an immunosuppressed patient, the host. The
transplant is intended to restore normal circulating immune cells to a patient
whose own immune system is functionally deficient or has been damaged by the
treatment of an underlying disease such as cancer and therefore does not have
the ability to mount a sufficient immune response. Often a portion of the graft
recognizes the host's own cells as foreign, becomes activated and attacks them,
resulting in GVHD. GVHD is graded based on clinical symptoms from I, which is
the mildest form, to IV, which is the most severe form. It typically involves
damage to multiple organ systems, including the skin, liver and intestines. GVHD
causes extreme suffering and is the primary cause of death in allogeneic BMT
patients. It is estimated that approximately 12,000 allogeneic BMTs were
performed worldwide in 1998, and this number has been growing at about 15% per
year. GVHD occurs in approximately 50% of allogeneic BMTs and the treatment
costs for GVHD in the United States are estimated to be about $80,000 per
patient. Based on a published clinical study, it is estimated that roughly 50%
of patients with GVHD fail to respond to current treatments, which consist of
steroid and other drug treatments to suppress the grafted immune cells. Less
than 15% of steroid-resistant GVHD sufferers survive for more than one year. We
believe that a safer and more effective treatment for GVHD could result in
increased use of BMTs.

Clinical Status. We recently completed a multi-center confirmatory Phase II
clinical trial for ABX-CBL for the treatment of steroid-resistant, grade II/IV
GVHD. In February 1999, preliminary results were reported for the trial, which
studied four escalating intravenous dose regimens. It was conducted at nine
sites and involved 27 patients evaluated for safety, 23 of which were also
evaluated for efficacy end points. A clinical response was defined as a
two-grade improvement in the International Bone Marrow Transplant Registry GVHD
Severity Scale. GVHD is graded based on clinical symptoms from grade I, which is
the mildest form, to grade IV, which is the most severe form. Two of eight
patients responded in the lowest dose cohort. Eleven of 15 patients responded
among the three highest doses. Temporary muscle pain during the infusions
determined the maximum tolerated dose. We believe the treatment was safe and
well tolerated except for the observed muscle pain.

In four separate clinical studies conducted prior to Abgenix obtaining an
exclusive license to ABX-CBL, a total of 25 patients with GVHD were treated with
the antibody. No safety concerns with ABX-CBL were identified in these studies.
One such trial, which has been published, was conducted on eleven patients at
St. Jude Hospital in Memphis, Tennessee. In this trial, ten patients with
steroid-resistant, Grade III to IV GVHD were treated with daily doses of ABX-CBL
for up to six weeks. The publication reported that five of ten patients had a
complete remission of GVHD, while four of ten had at least a two-grade
improvement in their GVHD score. Only one patient did not respond to the
therapy. Another patient who was treated at St. Jude Hospital after publication
of the study experienced a two-grade improvement in the patient's GVHD score
without adverse side effects. Six additional patients with GVHD were treated at
the University of Wisconsin and Cook-Ft. Worth Hospital. The reports from these
sites indicated that these patients showed similar results to those described in
the published trial conducted at St. Jude Hospital, with four of the six
patients showing at least a two grade improvement in their GVHD score. In
addition, eight other GVHD patients received treatment at Stanford University
and four of the patients were noted to have some improvement in their GVHD
score, despite using a dose of less than one-tenth of that employed at the other
sites. Immune reaction to the mouse antibody was assessed in several patients
and no HAMA response was detected clinically. Furthermore, no adverse clinical

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responses consistent with an antibody-induced allergic reaction were observed.
In addition, a number of patients were followed after the conclusion of the
study for as long as one year and no adverse ABX-CBL events were observed. There
can be no assurance that the results of our ABX-CBL clinical trials will
demonstrate the same levels of safety and efficacy as those shown by the
clinical trials completed prior to Abgenix obtaining an exclusive license to
ABX-CBL.

ABX-IL8

IL-8, an important inflammatory cytokine produced at sites of inflammation,
attracts and activates white blood cells that mediate the inflammation process.
A number of preclinical studies suggest that excess IL-8 may contribute to the
pathology and clinical symptoms associated with certain inflammatory disorders.
Clinical studies have demonstrated significantly increased levels of IL-8 in
plasma or other bodily fluids of patients with certain inflammatory diseases,
including psoriasis, rheumatoid arthritis, reperfusion injury and inflammatory
bowel disease. Antibodies to IL-8 have been shown to block immune cell
infiltration and the associated pathology in animal models of several of these
diseases. Using our XenoMouse technology, we have generated ABX-IL8, a
proprietary fully human monoclonal antibody, that binds to IL-8 with high
affinity. We in-licensed ABX-IL8 from Xenotech in March 1996. In exchange for a
license fee and royalty payments on future product sales, we received an
exclusive license to ABX-IL8 within the United States, its territories and
possessions, Canada and Mexico and a co-exclusive license with Japan Tobacco in
the rest of the world, excluding Japan, Taiwan and South Korea. We are
evaluating ABX-IL8 for possible use in the treatment of psoriasis and rheumatoid
arthritis.

Psoriasis. Psoriasis is a chronic disease that results in plaques, a
thickening and scaling of the skin accompanied by local inflammation. The
disease affects approximately four to five million patients in the United States
and can be debilitating in its most severe form. Approximately 500,000 psoriasis
patients suffer from a severe enough form of the disease to require systemic
therapy with immune suppressants and ultraviolet phototherapy. The risk of
serious adverse side effects associated with these therapies often requires the
patients to alternate these various therapeutic modalities as a precautionary
measure.

Scientific studies have shown that IL-8 concentrations can be elevated by a
factor of 150 in psoriatic plaques when compared to normal tissue. We believe
that IL-8 may promote psoriasis by contributing to three distinct
disease-associated processes. First, IL-8 is produced by a type of skin cell
called keratinocytes, and is a potent growth factor for these skin cells. It may
therefore contribute to the abnormal keratinocyte proliferation in psoriatic
plaques. Second, IL-8 attracts and activates immune cells which contribute to
the inflammation of the psoriatic plaque. Finally, IL-8 promotes angiogenesis
which augments the blood supply necessary for growth of the psoriatic plaque.

Clinical Status. We have completed a Phase I dose-escalating human clinical
trial examining the safety of administering a single intravenous infusion of
five different doses of ABX-IL8 to patients with moderate to severe psoriasis.
There were no serious or unexpected drug-related adverse events. In late 1998,
we initiated a multi-center, multi-dose, dose-escalating study in moderate to
severe psoriasis patients. This study is expected to be completed in the second
half of 1999 and data will be collected from 40 patients at eight sites.

Rheumatoid Arthritis. Rheumatoid arthritis is a chronic disease marked by
inflammation and pain in joints throughout the body. The disease affects over
two million people in the United States. Elevated levels of IL-8 in the synovial
fluid of rheumatoid arthritis patients have been reported to correlate with the
number of infiltrating immune cells. Third-party published studies have reported
that the injection of non-human antibodies to IL-8 into a rabbit model of
rheumatoid arthritis blocked immune cell infiltration and synovial membrane
damage.

Clinical Status. Because of the similarity in the histopathology of the
inflamed joint and that of the psoriatic plaque, we entered a Phase I clinical
trial for ABX-IL8 in rheumatoid arthritis in January 1999. ABX-IL8 will be
administered by injection to the inflamed knee joints of arthritis patients who
have undergone a pre-dose biopsy and a high resolution ultrasound scan.

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ABX-EGF

Tumor cells that overexpress epidermal growth factor receptors ("EGFr") on
their surface often depend on EGFr's activation for growth. EGFr is
overexpressed in a variety of cancers including lung, breast, ovarian, bladder,
prostate, colorectal, kidney and head and neck. This activation is triggered by
the binding to EGFr by EGF or Transforming Growth Factor alpha ("TGFa"), both of
which are expressed by the tumor or by neighboring cells. We believe that
blocking the ability of EGF and TGFa to bind with EGFr may offer a treatment for
certain cancers. ABX-EGF, a fully human monoclonal antibody generated using
XenoMouse technology, binds to EGFr with high affinity and has been shown to
inhibit tumor cell proliferation in vivo and cause eradication of EGF dependent
human tumors established in mouse models. We in-licensed ABX-EGF from Xenotech
in November 1997. In exchange for a license fee and royalty payments on future
product sales, we received an exclusive worldwide license to ABX-EGF. We are
conducting preclinical studies and assessing which tumor types to pursue as
possible targets for treatment with ABX-EGF. Studies have shown that ABX-EGF can
inhibit growth of EGF-dependent human tumors cells in mouse models. ABX-EGF has
also demonstrated the ability to reverse cancer cell growth and cause
eradication of established tumors in mice even when administered after
significant tumor growth has occurred. Furthermore, in these models where tumors
were eradicated, no relapse of the tumor was observed after discontinuation of
the antibody treatment. Based on the results seen to date in preclinical
studies, we plan to initiate clinical trials with ABX-EGF in mid-1999.

ABX-RB2

In certain immunological diseases where chronic administration of a drug
targeting the CBL antigen is desirable, it may be important to use a fully human
antibody to avoid the risk of a HAMA response. Such diseases include organ
transplant rejection, primarily kidney and corneal transplant rejection, as well
as autoimmune disorders.

Using our XenoMouse technology, we have generated ABX-RB2, a fully human
antibody which targets the CBL antigen, and we are conducting preclinical
studies on this product candidate. While no human data is available on ABX-RB2,
several clinical trials have been performed using ABX-CBL prior to Abgenix
obtaining an exclusive license to ABX-CBL, the first generation mouse antibody
to the CBL antigen, for the treatment of kidney and corneal transplant
rejection. Although there can be no assurance that the data observed with
ABX-RB2 in these indications will demonstrate the same degree of efficacy as the
data observed with ABX-CBL, we believe the ABX-CBL studies may assist in the
design of preclinical and clinical protocols for future development of ABX-RB2.

Organ Transplant Rejection. Each year there are approximately 11,000 kidney
transplants in the United States. Depending upon a variety of patient risk
factors, many of these procedures result in the patient's immune system
rejecting the organ. Current therapy for kidney transplant rejection involves
administering steroids or other immune system modulators to suppress the immune
system. These therapies suffer from suboptimal efficacy profiles or dose
limiting toxicities.

Prior to Abgenix obtaining an exclusive license to ABX-CBL, three clinical
trials had been conducted using ABX-CBL for the treatment of kidney transplant
rejection. In two trials conducted at Sendai Shakai Hoken Hospital in Japan,
ABX-CBL was administered intravenously daily for nine days to 41 patients whose
kidney transplant rejections were resistant to steroid therapy. In the first
trial, organ rejection was reversed in 17 of 19 patients. In the second trial,
organ rejection was reversed in a dose-dependent fashion in 18 of the 22
patients treated. A third clinical trial was conducted at the University of
California at Los Angeles. In this study, 13 of the 18 patients had cadaveric
donor transplants. This more refractory population responded to nine days of
ABX-CBL treatment with an overall response rate of 50%. Subset analysis
indicated that of the patients treated prior to severe renal failure, as many as
75% experienced reversal of the kidney rejections. No serious treatment-related
side effects were observed in any of the patients in these three trials.

In addition to the use of ABX-RB2 in kidney transplant rejection, we are
also exploring its potential use in corneal transplantation. In a clinical trial
conducted at the University of California at San Diego

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prior to Abgenix obtaining an exclusive license to ABX-CBL, six patients were
treated with ABX-CBL after the onset of rejection and four showed graft
preservation. No serious adverse side effects related to the infusion of ABX-CBL
or to an immune response were observed in any of the six patients.

Autoimmune Disease. In autoimmune disease, a subset of the patient's immune
cells react abnormally to a natural component of the patient's own tissue.
Because the CBL antigen is selectively expressed on activated immune cells
including T cells, B cells and natural killer cells, we believe that ABX-RB2 may
be effective in treating autoimmune disease. We intend to conduct preclinical
studies in a series of animal models of autoimmune disease, including rheumatoid
arthritis, lupus, multiple sclerosis, and diabetes.

XENOMOUSE TECHNOLOGY COLLABORATIONS

We have entered into multiple XenoMouse technology collaborations with
pharmaceutical and biotechnology companies. To date, we have collaborative
arrangements with eight companies covering at least 11 antigen targets. These
collaborations typically provide our collaborative partners with access to
XenoMouse technology for the purpose of generating fully human antibody product
candidates to one specific antigen target provided by the collaborative partner.
Some of these agreements involve multiple antigen targets. In most cases, we
provide our mice to collaborative partners who carry out immunizations with
their specific antigen target. In other cases, we may perform the immunizations
for the collaborative partner and receive additional compensation.

Our XenoMouse technology collaborations have similar structures. Our
collaborative partner first enters into a research collaboration agreement. This
agreement permits our collaborative partner to conduct limited research on a
specific antigen using our XenoMouse technology. Our collaborative partner may
then elect to enter into a research license and option agreement. If entered
into, this agreement allows our collaborative partner to conduct additional
research to develop antibody product candidates to a specific antigen target.
Generally, a research license and option agreement does not allow our
collaborative partner to initiate clinical trials with antibody product
candidates. To initiate clinical trials with antibody product candidates to a
specific antigen target, our collaborative partner must exercise the option to
enter into a product license agreement. If our collaborative partner exercises
its product license option, it has the right to conduct all clinical trials and
commercialize antibody product candidates. To date, none of our collaborative
partners has exercised its option to enter into a product license agreement and
none of these options has expired.

As an extension of this concept, we may grant multi-antigen research
licenses to select collaborative partners, allowing them to incorporate
XenoMouse technology into early stages of their antibody product research
efforts without specifically knowing the antigens that they intend to target for
XenoMouse antibody generation. These collaborative partners would then need to
execute product licenses for any antibody product they wished to develop and
commercialize.

The financial terms of our XenoMouse technology collaborations typically
include upfront payments, potential license fee and milestone payments. Based
upon our current collaborative agreements, these fees and payments may
approximate $8.0 million per antigen target assuming our collaborative partner
takes the antibody product candidate to commercialization. In certain instances,
the collaborative partner could make reimbursement payments to Abgenix for
research that we conduct on behalf of such partner. Additionally, if a product
receives marketing approval from the FDA or an equivalent foreign agency, we are
entitled to receive royalties on future product sales by the collaborative
partner, if any. Generally, the collaborative partner is responsible for and
bears the costs of product development, worldwide manufacturing and marketing of
product candidates generated under these collaborations.

Our dependence on collaborative arrangements with third parties subjects us
to a number of risks. Agreements with collaborative partners typically allow
such partners significant discretion in electing whether to pursue any of the
planned activities. We cannot control the amount and timing of resources our
collaborative partners may devote to the product candidates. Even if we fulfill
our obligations under a collaborative agreement, the collaborative partner can
terminate the agreement at any time following

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proper written notice. If any collaborative partner 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 adversely affected.

Among our eight collaborative partners, Pfizer, Genentech and Millennium
have each entered into additional collaborations specifying additional antigens
for XenoMouse antibody development. The following table lists our collaborations
as of January 31, 1999.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
PARTNER FIELD DATE
<S> <C> <C>
- -----------------------------------------------------------------------------------
Genentech Multiple Targets 1/99
Growth Factor Modulation 6/98*
Cardiovascular 4/98*
- -----------------------------------------------------------------------------------
AVI BioPharma Cancer 1/99
- -----------------------------------------------------------------------------------
Centocor Cardiovascular 12/98
- -----------------------------------------------------------------------------------
Research Corporation Technologies Transplant Rejection 12/98
- -----------------------------------------------------------------------------------
Pfizer Cancer 10/98
Cancer 12/97
- -----------------------------------------------------------------------------------
Millennium Inflammation 9/98
Inflammation 7/98
- -----------------------------------------------------------------------------------
Schering-Plough Inflammation 1/98
- -----------------------------------------------------------------------------------
Cell Genesys Gene Therapy 11/97
- -----------------------------------------------------------------------------------
</TABLE>

- -------------------------
* These agreements were superceded by the January 1999 multi-antigen agreement.

Genentech. In April 1998, we entered into a research license and option
agreement with Genentech to produce fully human antibodies to an antigen target
in the field of growth factor modulation. In June 1998, Genentech expanded its
research collaboration with us to include a second antigen target in the field
of cardiovascular disease.

In January 1999, we entered into a multi-antigen research license and
option agreement with Genentech. Under the agreement, we granted Genentech a
license to utilize XenoMouse technology in its antibody product research efforts
and an option to obtain product licenses for up to ten antigen targets, but not
more than two in any one year, over the agreement's six year term. Included in
the ten are the two previously identified antigen targets under the now
superceded research license and option agreement at the new option, license fee
and milestone payment levels. The agreement can be renewed by Genentech for up
to an additional four targets over a subsequent three year period. Genentech
acquired 495,356 shares of our common stock for an aggregate purchase price of
$8.0 million. To renew the agreement at the end of the sixth year, Genentech
must purchase an additional $2.5 million of our common stock at a 50% premium to
the then current market price. Genentech, of South San Francisco, California, is
a leading biotechnology company with extensive efforts in antibody-based
products.

AVI BioPharma. In January 1999, we entered into a research license and
option agreement with AVI to generate fully human antibodies to human chorionic
gonadotropin (hCG) for the treatment of various cancers. AVI has reported that a
therapeutic vaccine based on hCG has shown promise in Phase II clinical trials.
AVI, of Portland, Oregon, is a publicly traded biotechnology company.

Centocor. In December 1998, we entered into a research collaboration
agreement with Centocor to generate fully human antibodies to an undisclosed
Centocor antigen in the cardiovascular field. Centocor, of Malvern,
Pennsylvania, is a leading developer and marketer of antibody-based products.

Research Corporation Technologies. In December 1998, we entered into a
binding memorandum of understanding for a research collaboration agreement with
RCT to generate fully human antibodies to CD45rb. Resultant antibody product
candidates could potentially be used in treating organ transplant

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rejection and autoimmune disorders. RCT, of Tucson, Arizona, is a corporation
involved in technology transfer between universities and industry. Under the RCT
agreement, we may receive either a percentage of sublicense income received by
RCT or milestone and royalty payments on sales of products.

Pfizer. In December 1997, we entered into a research collaboration
agreement with Pfizer to generate fully human antibodies to an antigen target in
the cancer field. In October 1998, Pfizer exercised its option to expand its
research collaboration with us to include a second antigen target in the field
of cancer. Pfizer is paying us to perform the immunizations and to undertake
certain research activities. As part of this arrangement, in January 1998 Pfizer
purchased 160,000 shares of our series C preferred stock for $1.3 million and
received an option to collaborate with us on up to three antigen targets. These
shares converted into 160,000 shares of common stock at our initial public
offering. Pfizer, of Groton, Connecticut, is a leading global pharmaceutical
company.

Millennium BioTherapeutics. In July 1998, we entered into a research
collaboration agreement with Millennium BioTherapeutics to generate fully human
antibodies to an antigen target in the field of inflammation. In October 1998,
we entered into a research, license and option agreement with Millennium
BioTherapeutics covering the same antigen target. In September 1998, we entered
into a second research collaboration agreement with Millennium BioTherapeutics
covering a second antigen target in the field of inflammation. Millennium
BioTherapeutics, of Cambridge, Massachusetts, is a leading genomics company.

Schering-Plough. In January 1998, we entered into a research collaboration
agreement with Schering-Plough to generate fully human antibodies to an antigen
target in the field of inflammation. Under this agreement, Schering-Plough is
paying us to perform the immunizations and certain research activities.
Schering-Plough, of Kenilworth, New Jersey, is a leading global pharmaceutical
company.

Cell Genesys. In November 1997, we entered into the gene therapy rights
agreement (the "GTRA") with Cell Genesys. Cell Genesys received certain rights
to commercialize products based on antibodies generated with XenoMouse
technology in the field of gene therapy. Cell Genesys, of Foster City,
California, is a leading gene therapy company.

JOINT VENTURE WITH JAPAN TOBACCO

XENOTECH

In June 1991, Cell Genesys entered into several agreements with JT America
for the purpose of forming an equally owned limited partnership named Xenotech.
In connection with the formation of Xenotech, both Cell Genesys and JT America
contributed cash, and Cell Genesys contributed the exclusive right to certain of
its technology for the research and development of genetically modified strains
of mice that can produce fully human antibodies. Cell Genesys assigned its
rights in Xenotech to Abgenix in connection with the formation of Abgenix. As
part of the Xenotech relationship, Abgenix provides research and development on
behalf of Xenotech in exchange for cash payments. As of December 31, 1998,
Abgenix has made capital contributions to Xenotech of approximately $18.6
million and has received approximately $42.9 million in funding for research
related to the development of XenoMouse technology.

PRODUCT RIGHTS

Under the master research, license and option agreement among Abgenix,
Japan Tobacco and Xenotech (the "MRLOA"), Abgenix and Japan Tobacco have been
provided with colonies of transgenic mice that have been developed for Xenotech
pursuant to Abgenix's research and development efforts on behalf of Xenotech.
Under the MRLOA, Abgenix and Japan Tobacco have the right to use the transgenic
mice for research purposes. The right to commercialize medical products that
incorporate antibodies derived through the use of the transgenic mice can be
licensed from Xenotech by Abgenix and/or Japan Tobacco pursuant to a nomination
process. This process gives Abgenix and Japan Tobacco the right to select a
certain number of antigens per year and receive an option to the commercial
rights in antibodies that bind to the selected antigens. Both Abgenix and Japan
Tobacco are obligated to make royalty

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payments to Xenotech on revenues derived from the sale of such antibody
products. All payments to Xenotech are then shared equally by Abgenix and JT
America.

During the nomination process, if either Abgenix or Japan Tobacco, but not
both, selects an antigen, the selecting party receives an option to obtain an
exclusive worldwide license. If both Abgenix and Japan Tobacco select the same
antigen at the same time, each party has an option to an exclusive license in
its home territory and a co-exclusive license in the rest of the world. The
MRLOA defines the home territory of Japan Tobacco as Japan, Korea and Taiwan,
and the home territory of Abgenix as North America. In the former case where one
party selects an antigen, the nonselecting party has the opportunity to obtain
an option to an exclusive license to the selected antigen in the nonselecting
party's home territory by exercising its buy-in right within the allotted time.
Each party has a limited number of buy-in rights, and they cannot be exercised
by the nonselecting party if the antigen selected is subject to proprietary
rights of a third party and the third party is unwilling to license its rights
to the antigen to the nonselecting party.

We must obtain licenses from Xenotech to commercialize antibody products
generated by XenoMouse technology. If we have used our yearly allotment of
licenses to develop antigen targets and desire to acquire a license to develop
additional antigen targets, we may have to negotiate with JT America or others
to acquire such rights. Disputes with JT America or its parent company, Japan
Tobacco, may result in the loss of the right to commercialize a product
candidate by either party. Limits on our ability to acquire additional licenses
to develop antigen targets or disputes with JT America or Japan Tobacco will
limit our ability to establish collaborations and fully realize the commercial
potential of XenoMouse technology.

GENE THERAPY RIGHTS AGREEMENT WITH CELL GENESYS

As stated above, the GTRA provides Cell Genesys with certain rights to
commercialize products based on antibodies generated with XenoMouse technology
in the field of gene therapy. Under the GTRA, Cell Genesys has certain rights to
direct us to make antibodies to two antigens per year. In addition, Cell Genesys
has an option to enter into a license to commercialize antibodies binding to
such antigens in the field of gene therapy. Cell Genesys is obligated to make
certain payments to us for these rights including reimbursement of license fees
and royalties on future product sales payable to Xenotech under the MRLOA, and
Abgenix would then receive a portion of such royalties from Xenotech. The GTRA
also prohibits us from granting any third-party licenses for antibody products
based on antigens nominated by us for our own purposes where the primary field
of use is gene therapy. In the case of third-party licenses granted by us where
gene therapy is a secondary field, we are obligated to share with Cell Genesys a
portion of the cash milestone payments and royalties resulting from any products
in the field of gene therapy.

INTELLECTUAL PROPERTY

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.
While we have pending patent applications in the United States relating to
XenoMouse technology, no patents have issued. We try to protect our proprietary
position by filing United States and foreign patent applications related to our
proprietary technology, inventions and improvements that are important to the
development of our business. 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 proprietary protection or competitive advantages against
competitors with similar technology. Furthermore, others may independently
develop similar technologies or duplicate any technology that we have developed.
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.

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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
such information. The parties to these agreements may breach them. Furthermore,
our trade secrets may otherwise become known to, or be independently developed
by, our competitors.

Research has been conducted for many years in the antibody field. This has
resulted in a substantial number of issued patents and an even larger number of
patent applications. Patent applications in the United States are, in most
cases, maintained in secrecy until patents issue. 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
infringe the patents or violate other proprietary rights of third parties. In
the event of infringement or violation, Abgenix and our collaborative partners
may be prevented from pursuing product development or commercialization. Such a
result will materially adversely affect our business, financial condition and
results of operations.

In March 1997, we entered into a cross-license and settlement agreement
with GenPharm to avoid protracted litigation. See "-- Patent Cross-License and
Settlement Agreement with GenPharm." Abgenix has one issued 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.

- enforce our issued and licensed patents;

- 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 will incur substantial expense and the efforts of our technical
and management personnel will be significantly diverted. An adverse
determination may subject us 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 such 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 adversely affect our business, financial condition and
results of operations.

PATENT CROSS-LICENSE AND SETTLEMENT AGREEMENT WITH GENPHARM

In 1994, Cell Genesys and GenPharm and, beginning in 1996, Abgenix became
involved in litigation primarily related to intellectual property rights
associated with a method for inactivating a mouse's antibody genes and
technology pertaining to transgenic mice capable of producing fully human
antibodies. Rather than endure the cost and business interruption of protracted
litigation, in March 1997, Cell Genesys, along with Abgenix, Xenotech and Japan
Tobacco, signed a comprehensive patent cross-license and settlement agreement
with GenPharm that resolved all related litigation and claims between the
parties. Under the cross-license and settlement agreement, Abgenix has licensed
on a non-exclusive basis certain patents, patent applications, third-party
licenses and inventions pertaining to the development and use of certain
transgenic rodents including mice that produce fully human antibodies. We use
our XenoMouse technology to generate fully human antibody products and have not
licensed the use of, and

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do not use, any transgenic rodents developed or used by GenPharm. As initial
consideration for the cross-license and settlement agreement, Cell Genesys
issued a note to GenPharm due September 30, 1998 for $15.0 million payable by
Cell Genesys and convertible into shares of Cell Genesys common stock. Of this
note, approximately $3.8 million satisfied certain of Xenotech's obligations
under the agreement. Japan Tobacco also made an initial payment. During 1997,
two patent milestones were achieved by GenPharm, and Xenotech was obligated to
pay $7.5 million for each milestone. Xenotech paid $7.5 million to satisfy the
first milestone and has recorded a payable to GenPharm for the remaining $7.5
million. We recorded a liability of approximately $3.8 million in our balance
sheet representing our equal share of the Xenotech obligation. The obligation
was paid in November 1998. No additional payments will accrue under this
agreement. We have recognized, as a non-recurring charge for cross-license and
settlement, a total of $22.5 million. We concluded that the cost of the
cross-license and settlement agreement was properly expensed under Statement of
Financial Accounting Standards No. 2, "Accounting for Research and Development
Costs" because the cross-license received by us from GenPharm is non-exclusive
and has no alternative future uses for us. We also concluded that the $11.3
million was properly allocated from Cell Genesys because it related to the
technology Cell Genesys contributed to Abgenix upon our organization. We do not
have any future financial obligations under the cross-license and settlement
agreement.

GOVERNMENT REGULATION

Abgenix believes its antibody products will be classified by the FDA as
"biologic products" as opposed to "drug products." The steps ordinarily required
before a biological product may be marketed in the United States include: (1)
preclinical testing; (2) the submission to the FDA of an investigational new
drug application ("IND"), which must become effective before clinical trials may
commence; (3) adequate and well-controlled clinical trials to establish the
safety and efficacy of the biologic; (4) the submission to the FDA of a
Biologics License Application; and (5) FDA approval of the application,
including approval of all product labeling.

Preclinical testing includes laboratory evaluation of product chemistry,
formulation and stability, as well as animal studies to assess the potential
safety and efficacy of each product. Preclinical safety tests must be conducted
by laboratories that comply with FDA regulations regarding good laboratory
practices. The results of the preclinical tests together with manufacturing
information and analytical data are submitted to the FDA as part of the IND and
are reviewed by the FDA before the commencement of clinical trials. Unless the
FDA objects to an IND, the IND will become effective 30 days following its
receipt by the FDA. If we submit an IND, our submission may not result in FDA
authorization to commence clinical trials. Also, the lack of an objection by the
FDA does not mean it will ultimately approve an application for marketing
approval. Furthermore, we may encounter problems in clinical trials that cause
us or the FDA to delay, suspend or terminate our trials.

Clinical trials involve the administration of the investigational product
to humans under the supervision of a qualified principal investigator. Clinical
trials must be conducted in accordance with Good Clinical Practices under
protocols submitted to the FDA as part of the IND. In addition, each clinical
trial must be approved and conducted under the auspices of an Institutional
Review Board ("IRB") and with patient informed consent. The IRB will consider,
among other things, ethical factors, the safety of human subjects and the
possibility of liability of the institution conducting the trial.

Clinical trials are conducted in three sequential phases which may overlap.
Phase I clinical trials may be performed in healthy human subjects or, depending
on the disease, in patients. The goal of a Phase I

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clinical trial is to establish initial data about safety and tolerance of the
biologic agent in humans. In Phase II clinical trials, evidence is sought about
the desired therapeutic efficacy of a biologic agent in limited studies of
patients with the target disease. Efforts are made to evaluate the effects of
various dosages and to establish an optimal dosage level and dosage schedule.
Additional safety data are also gathered from these studies. The Phase III
clinical trial program consists of expanded, large-scale, multi-center studies
of persons who are susceptible to or have developed the disease. The goal of
these studies is to obtain definitive statistical evidence of the efficacy and
safety of the proposed product and dosage regimen.

Historically, the results from preclinical 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
preclinical and clinical activities are susceptible to varying interpretations,
which could delay, limit or prevent regulatory approval. In addition, delays or
rejections by regulatory authorities may be encountered as a result of many
factors, including changes in regulatory policy during the period of product
development.

Our other product candidates are still in preclinical development, and we
have not submitted INDs or begun clinical trials for these product candidates.
Our preclinical or clinical development efforts may not be successfully
completed. Further INDs may not be filed. Clinical trials may not commence as
planned.

- inability to manufacture sufficient quantities of materials used for
clinical trials;

- slower than expected rate of patient recruitment;

- inability to adequately follow patients after treatment;

- unforeseen safety issues;

- 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 collaborative partners, to assist us in managing
and monitoring clinical trials. Our reliance on third parties may result in
delays in completing, or failing to complete, clinical trials if they fail to
perform under our agreements with them.

Abgenix and our contract manufacturer also are required to comply with the
applicable FDA current good manufacturing practice ("cGMP") regulations. cGMP
regulations include requirements relating to quality control and quality
assurance as well as the corresponding maintenance of records and

50
<PAGE> 53

documentation. Manufacturing facilities are subject to inspection by the FDA.
The facilities must be approved before they can be used in commercial
manufacturing of our products. Abgenix or our contract manufacturer may not be
able to comply with the applicable cGMP requirements and other FDA regulatory
requirements. If Abgenix or our contract manufacturer fails to comply, our
business, financial condition and results of operations will be materially
adversely affected.

For clinical investigation and marketing outside the United States, we may
be subject to the regulatory requirements of other countries, which vary from
country to country. The regulatory approval process in other countries includes
requirements similar to those associated with FDA approval set forth above.

COMPETITION

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 Abgenix or our collaborative partners.
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. These companies include GenPharm,
Cambridge Antibody Technology Group plc, Protein Design Labs, Inc. and MorphoSys
AG.

- developing products;

- undertaking preclinical testing and human clinical trials;

- obtaining FDA and other regulatory approvals of products; and

- manufacturing and marketing products.

- other drug development technologies and methods of preventing or reducing
the incidence of disease;

51
<PAGE> 54

- new small molecules; or

- other classes of therapeutic agents.

Developments by others may render our product candidates or technologies
obsolete or noncompetitive. We face and will continue to face intense
competition from other companies for collaborative arrangements with
pharmaceutical and biotechnology companies for establishing relationships with
academic and research institutions, and for licenses to proprietary technology.
These competitors, either alone or with their collaborative partners, may
succeed in developing technologies or products that are more effective than
ours.

PHARMACEUTICAL PRICING AND REIMBURSEMENT

In both domestic and foreign markets, sales of our product candidates will
depend in part upon the availability of reimbursement from third-party payors.
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. These 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 adversely affected.

MANUFACTURING

We lack the resources and capability to manufacture our products on a
commercial scale. We currently manufacture only limited quantities of antibody
products for preclinical testing. While we maintain a limited inventory of
antibody products, we depend on a sole source contract manufacturer to produce
ABX-CBL, ABX-IL8 and ABX-EGF under cGMP regulations for use in our clinical
trials. Our contract manufacturer has a limited number of facilities in which
our product candidates can be produced. Our contract manufacturer has limited
experience in manufacturing ABX-CBL, ABX-IL8 and ABX-EGF in quantities
sufficient for conducting clinical trials or for commercialization.

There are, on a worldwide basis, a limited number of contract facilities in
which our product candidates can be produced under cGMP regulations for use in
pharmaceutical drugs. It can also take a substantial period of time for a
contract facility to begin producing antibodies under cGMP regulations.
Accordingly, we depend on our contract manufacturer to produce our product
candidates under cGMP regulations which meets acceptable standards for our
clinical trials.

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<PAGE> 55

In addition, Abgenix and our third-party manufacturer are required to
register manufacturing facilities with the FDA and foreign regulatory
authorities. The facilities will then be subject to inspections confirming
compliance with good manufacturing practice requirements established by the FDA
or corresponding foreign regulations. If Abgenix or our third-party manufacturer
fail to maintain compliance with the good manufacturing practice requirements,
our business, financial condition and results of operations will be materially
adversely affected.

EMPLOYEES

As of December 31, 1998, we employed 61 persons, of whom 16 hold Ph.D. or
M.D. degrees and 11 hold other advanced degrees. Approximately 49 employees are
engaged in research and development, and 12 support administration, finance,
management information systems and human resources.

Our success will depend in large part upon our ability to attract and
retain employees. We face competition in this regard from other companies,
research and academic institutions, government entities and other organizations.
We believe that we maintain good relations with our employees.

FACILITIES

We are currently leasing 52,400 square feet of office and laboratory
facilities in Fremont, California. During 1997, we built out approximately
46,000 square feet of laboratory and office space at the Fremont site. Abgenix
believes this facility, with potential additional build-outs, will meet its
space requirements for research and development and administration for the next
several years. Our lease expires in the year 2007 with options to extend.

LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

SCIENTIFIC AND MEDICAL ADVISORY BOARDS

We have established Scientific and Medical Advisory Boards to provide
specific expertise in areas of research and development relevant to our
business. The Scientific and Medical Advisory Boards meet periodically with our
scientific and development personnel and management to discuss our present and
long-term research and development activities. Scientific and Medical Advisory
Board members include:

<TABLE>
<S> <C>
Frederick Applebaum, M.D. ................... Director, Clinical Research Division, Fred Hutchinson
Cancer Research Center
Benedict Cosimi, M.D. ....................... Professor of Surgery, Harvard Medical School, and
Chief of Transplant Unit, Massachusetts General
Hospital
Anthony DeFranco, M.D., Ph.D. ............... Professor, Biochemistry and Biophysics, University of
California, San Francisco
John Gallin, M.D. ........................... Director, Warren Grant Magnusen Clinical Center, NIH
Raju S. Kucherlapati, Ph.D. ................. Professor and Chair, Molecular Genetics, Albert
Einstein College of Medicine
Michele Nussenswieg, M.D., Ph.D. ............ Professor, Molecular Immunology, The Rockefeller
University
Matthew Scharff, M.D. ....................... Professor of Medicine, Albert Einstein College of
Medicine
Lee Simon, M.D. ............................. Professor of Medicine, Harvard Medical School
David Yocum, M.D. ........................... Professor of Medicine, University of Arizona Medical
School
</TABLE>

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<PAGE> 56

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth, as of December 31, 1998, certain
information concerning our executive officers and directors:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
R. Scott Greer.......................... 40 President, Chief Executive Officer and Director
C. Geoffrey Davis, Ph.D. ............... 47 Vice President, Research
Kurt W. Leutzinger...................... 47 Vice President, Finance and Chief Financial Officer
John A. Lipani, M.D. ................... 58 Vice President, Clinical Development
Raymond M. Withy, Ph.D. ................ 43 Vice President, Corporate Development
Stephen A. Sherwin, M.D.(1)(2).......... 50 Chairman of the Board
M. Kathleen Behrens, Ph.D.(2)........... 46 Director
Raju S. Kucherlapati, Ph.D. ............ 55 Director
Mark B. Logan(1)(2)..................... 60 Director
Joseph E. Maroun........................ 69 Director
</TABLE>

- ---------------
(1) Member of the Compensation Committee

(2) Member of the Audit Committee

R. Scott Greer has served as our President and Chief Executive Officer and
as one of our directors since June 1996. He also serves as a director of
Xenotech. From July 1994 to July 1996, Mr. Greer was Senior Vice President of
Corporate Development at Cell Genesys. From April 1991 to July 1994, Mr. Greer
was Vice President of Corporate Development and from April 1991 to September
1993 was Chief Financial Officer of Cell Genesys. From 1986 to 1991, Mr. Greer
held various positions at Genetics Institute, Inc., a biotechnology company,
including Director, Corporate Development. Mr. Greer received a B.A. in
economics from Whitman College and an M.B.A. from Harvard University and is a
certified public accountant.

C. Geoffrey Davis, Ph.D., has served as our Vice President, Research since
June 1996. From January 1995 to June 1996, Dr. Davis was Director of Immunology
at the Xenotech Division of Cell Genesys. From November 1991 to December 1994,
he served at Repligen Corporation, a biotechnology company, first as Principal
Investigator and then as Director of Immunology. Dr. Davis received a B.A. from
Swarthmore College and a Ph.D. in immunology from the University of California,
San Francisco.

Kurt W. Leutzinger has served as our Vice President, Finance and Chief
Financial Officer since July 1997. From June 1987 to July 1997, Mr. Leutzinger
was a Vice President of General Electric Investments and a portfolio manager of
the $27 billion General Electric Pension Fund. There, he was responsible for
private equity investments with a focus on medical technology. He also serves as
a director of C3, Inc. Mr. Leutzinger received a B.A. in economics from
Fairleigh Dickinson University and an M.B.A. in finance from New York University
and is a certified public accountant.

John A. Lipani, M.D., has served as our Vice President, Clinical
Development since April 1997. From 1992 to April 1997, Dr. Lipani was Group
Director of Inflammation and Tissue Repair at SmithKline Beecham Corporation, a
pharmaceutical company. From 1989 to 1992, Dr. Lipani held clinical development
positions at various biopharmaceutical companies, including Immunex Corporation,
Norwich Eaton Pharmaceuticals, Inc. and Centocor, Inc. He received a B.A. from
Villanova University and an M.D. from Tulane Medical School.

Raymond M. Withy, Ph.D., has served as our Vice President, Corporate
Development since June 1996. He also serves as a director of Xenotech. From May
1993 to June 1996, Dr. Withy served in various positions at Cell Genesys, most
recently as Director of Business Development. From 1991 to May 1993, Dr. Withy
was a private consultant to the biotechnology industry in areas of strategic
planning, business

54
<PAGE> 57

development and licensing. From 1984 to 1991, Dr. Withy was an Associate
Director and Senior Scientist at Genzyme Corporation, a biotechnology company.
Dr. Withy received a B.Sc. in chemistry and biochemistry and a Ph.D. in
biochemistry, both from the University of Nottingham.

Stephen A. Sherwin, M.D., has served as our Chairman of the Board since
June 1996. Since March 1990, Dr. Sherwin has served as President, Chief
Executive Officer and a director of Cell Genesys. Since March 1994, he has
served as Chairman of the Board of Cell Genesys. From 1983 to 1990, Dr. Sherwin
held various positions at Genentech, Inc., a biotechnology company, most
recently as Vice President, Clinical Research. Dr. Sherwin currently serves as a
Director of the California Healthcare Institute. Dr. Sherwin received a B.A. in
biology from Yale University and an M.D. from Harvard Medical School.

M. Kathleen Behrens, Ph.D., has served as one of our directors since
December 1997. Dr. Behrens joined Robertson Stephens Investment Management Co.
in 1983 and became a general partner in 1986 and a managing director in 1993. In
1988, Dr. Behrens joined the venture capital group of Robertson Stephens
Investment Management Co. and has helped in the founding of three biotechnology
companies: Mercator Genetics, Inc., Protein Design Laboratories, Inc. and COR
Therapeutics, Inc. Dr. Behrens is currently president and a director of the
National Venture Capital Association. Dr. Behrens received a Ph.D. in
microbiology from the University of California, Davis, where she performed
genetic research for six years.

Raju S. Kucherlapati, Ph.D., has served as one of our directors since June
1996. Dr. Kucherlapati was a founder of Cell Genesys and has served as a
director of Cell Genesys since 1988. Since July 1989, he has been the Saul and
Lola Kramer Professor and the Chairman of the Department of Molecular Genetics
at the Albert Einstein College of Medicine. Dr. Kucherlapati also serves as a
director of Megabios Corp. and Millennium Pharmaceuticals, Inc. Dr. Kucherlapati
received a B.S. in biology from Andhra University in India and a Ph.D. in
genetics from the University of Illinois, Urbana.

Mark B. Logan has served as one of our directors since August 1997. Mr.
Logan has served as Chairman of the Board, President and Chief Executive Officer
of VISX, Incorporated, a medical device company, since November 1994. From
January 1992 to October 1994, he was Chairman of the Board and Chief Executive
Officer of INSMED Pharmaceuticals, Inc., a pharmaceutical company. Previously,
Mr. Logan held several senior management positions at Bausch & Lomb, Inc., a
medical products company, including Senior Vice President, Healthcare and
Consumer Group and also served as a member of its board of directors. Mr. Logan
received a B.A. from Hiram College and a PMD from Harvard Business School.

Joseph E. Maroun has served as one of our directors since July 1996 and has
served as a director of Cell Genesys since June 1995. Mr. Maroun spent 30 years
with Bristol-Myers Squibb, a pharmaceuticals company, serving until his
retirement in 1990, at which time he was President of the International Group,
Senior Vice President of the corporation, and a member of its Policy Committee.
He also headed the U.S.-Japan Pharmaceutical Advisory Group. Mr. Maroun received
a B.A. from the University of Witwaterrand, Johannesburg.

COMMITTEES OF THE BOARD OF DIRECTORS

Our Compensation Committee consists of Dr. Sherwin and Mr. Logan. The
Compensation Committee makes recommendations regarding our various incentive
compensation and benefit plans and determines salaries for our executive
officers and incentive compensation for our employees and consultants.

Our Audit Committee consists of Dr. Sherwin, Mr. Logan and Dr. Behrens. The
Audit Committee makes recommendations to the Board of Directors regarding the
selection of our independent auditors, reviews the results and scope of the
audit and other services provided by our independent auditors and reviews and
evaluates our control functions.

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<PAGE> 58

BOARD COMPOSITION

Our Amended and Restated Bylaws provide that the number of members of our
Board of Directors shall be determined by the Board of Directors. The number of
directors is currently set at seven. All members of our Board of Directors hold
office until the next annual meeting of stockholders or until their successors
are duly elected and qualified. There are no family relationships among any of
our directors, officers or key employees.

We have entered into a governance agreement with Cell Genesys which
provides that so long as Cell Genesys or a group to which it belongs owns a
specific percentage of our outstanding voting stock, Cell Genesys or the group
shall have the right to nominate a fixed number of directors to serve on our
Board. The details of this arrangement are set forth in the table below:

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the members of our Compensation Committee was, at any time since
our formation, an officer or employee of Abgenix. None of our executive officers
serves as a member of the board of directors or compensation committee of any
entity that has one or more executive officers serving as a member of our Board
of Directors or Compensation Committee. See "Certain Transactions" for a
description of transactions between Abgenix and entities affiliated with members
of our Compensation Committee.

DIRECTOR COMPENSATION

Our non-employee directors currently receive $5,000 per year in retainer
plus $1,000 per Board meeting attended as cash compensation for their service as
members of our Board of Directors, and are reimbursed for certain expenses in
connection with attendance at our Board and committee meetings. We provide $500
per meeting as additional compensation for committee participation or special
assignments of the Board of Directors. From time to time, certain of our
directors have received grants of options to purchase shares of our common stock
pursuant to the 1996 Incentive Stock Plan. On June 4, 1997, R. Scott Greer,
Stephen A. Sherwin, Raju S. Kucherlapati and Joseph E. Maroun received options
to purchase 67,500, 10,000, 7,500, and 7,500 shares of our common stock,
respectively, at a per share exercise price of $2.50. On August 8, 1997, Mark B.
Logan received an option to purchase 30,000 shares of our common stock at a per
share exercise price of $4.00. On December 11, 1997, Raju S. Kucherlapati
received an option to purchase 20,000 shares of our common stock at a per share
exercise price of $5.00. There were no other director option grants in 1997. On
February 18, 1998, R. Scott Greer, Stephen A. Sherwin, M. Kathleen Behrens, Raju
S. Kucherlapati, Mark B. Logan and Joseph E. Maroun received options to purchase
40,000, 5,900, 30,000, 4,400, 3,200 and 4,400 shares of our common stock,
respectively, at a per share exercise price of $6.00. On June 15, 1998, Stephen
A. Sherwin received options to purchase 10,000 shares of our common stock at a
per share exercise price of $10.00. Beginning with the 1999 annual meeting of
stockholders, our non-employee directors are eligible to receive
nondiscretionary, automatic grants of options to purchase shares of our common
stock pursuant to the 1998 Director Option Plan. See "Management -- Stock
Plans -- 1998 Director Option Plan" and "Certain Transactions."

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<PAGE> 59

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid by us during the years
ended December 31, 1998 and 1997 to our President and Chief Executive Officer
and to our four other most highly compensated executive officers, each of whose
aggregate compensation during our last fiscal year exceeded $100,000 (the "Named
Executive Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS OPTIONS COMPENSATION
--------------------------- ----------- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
R. Scott Greer...................... 1998 $267,120 $ -- 40,000 $ --
President and Chief Executive
Officer 1997 252,000 55,200 67,500 4,112(1)
C. Geoffrey Davis, Ph.D............. 1998 165,350 -- 10,000 --
Vice President, Research 1997 152,250 21,750 25,500 1,974(2)
Kurt W. Leutzinger(3)............... 1998 179,830 -- 12,750 19,638(4)
Vice President, Finance and Chief 1997 81,555 -- 100,000 127,059(5)
Financial Officer
John A. Lipani, M.D.(6)............. 1998 180,147 -- 12,750 607(7)
Vice President, Clinical
Development 1997 131,250 -- 100,000 64,585(8)
Raymond M. Withy, Ph.D.............. 1998 165,350 -- 10,000 --
Vice President, Corporate
Development.................... 1997 152,250 21,750 25,500 --
</TABLE>

- ---------------
(1) Consists of imputed interest income on a loan from Abgenix to Mr. Greer.

(2) Consists of imputed interest income on a loan from Abgenix to Dr. Davis.

(3) Mr. Leutzinger has been our Vice President, Finance and Chief Financial
Officer since July 1997. His 1997 annualized salary was $175,000.

(4) Consists of $18,734 for reimbursement of relocation expenses and $904 for
imputed interest income on a loan from Abgenix to Mr. Leutzinger.

(5) Consists of $126,568 for reimbursement of relocation expenses and $491 for
imputed interest income on a loan from Abgenix to Mr. Leutzinger.

(6) Dr. Lipani has been our Vice President, Clinical Development since April
1997. His 1997 annualized salary was $175,000.

(7) Consists of imputed interest income on a loan from Abgenix to Dr. Lipani.

(8) Consists of $63,232 for reimbursement of relocation expenses and $1,353 for
imputed interest income on a loan from Abgenix to Dr. Lipani.

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<PAGE> 60

OPTION GRANTS IN LAST FISCAL YEAR

The following table provides information relating to stock options awarded
to each of the Named Executive Officers during the year ended December 31, 1998.
All such options were awarded under our 1996 Incentive Stock Plan.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED FOR OPTIONS TERM(4)
OPTIONS IN FISCAL EXERCISE EXPIRATION ---------------------
NAME GRANTED(1) 1998(2) PRICE(3) DATE 5% 10%
---- ---------- ------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
R. Scott Greer................ 40,000 11.3% $ 6.00 2/17/08 $150,935 $382,498
C. Geoffrey Davis, Ph.D....... 10,000 2.8 6.00 2/17/08 37,734 95,625
Kurt W. Leutzinger............ 12,750 3.6 6.00 2/17/08 48,110 121,921
John A. Lipani, M.D........... 12,750 3.6 6.00 2/17/08 48,110 121,921
Raymond M. Withy, Ph.D........ 10,000 2.8 6.00 2/17/08 37,734 95,625
</TABLE>

- ---------------
(1) The options granted to Mr. Greer and Drs. Davis and Withy became exercisable
as to 1/48th of the option shares on the date of grant and an additional
1/48th of the option shares become exercisable on the first day of each
calendar month thereafter, with full vesting occurring four years after the
date of grant. The options granted to Mr. Leutzinger and Dr. Lipani become
exercisable as to 25% of the option shares one year from the date of grant
and 1/48th of the option shares become exercisable on the first day of each
calendar month thereafter, with full vesting occurring four years after the
date of grant. In each case, vesting is subject to the optionee's continued
relationship with Abgenix. Such options expire ten years from the date of
grant, or earlier upon termination of employment. See "Stock Plans."

(2) Based on an aggregate of 353,551 options granted by Abgenix in the year
ended December 31, 1998 to our employees, non-employee directors of and
consultants, including the Named Executive Officers.

(3) Options were granted at an exercise price equal to the fair market value of
our common stock, as determined by our Board of Directors on the date of
grant.

(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance provided to any executive officer or any other holder of our
securities that the actual stock price appreciation over the option term
will be at the assumed 5% and 10% levels or at any other defined level.
Unless the market price of our common stock appreciates over the option
term, no value will be realized from the option grants made to the executive
officers. The potential realizable value is calculated by assuming that the
fair value of our common stock on the date of grant of $6.00 per share
appreciates at the indicated rate for the entire term of the option and that
the option is exercised at the exercise price and sold on the last day of
its term at the appreciated price. The potential realizable value
computation is net of the applicable exercise price, but does not take into
account applicable federal or state income tax consequences and other
expenses of option exercises or sales of appreciated stock.

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<PAGE> 61

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

The following table sets forth for each of the Named Executive Officers the
number of shares of common stock acquired and the dollar value realized upon
exercise of options during the year ended December 31, 1998 and the number and
value of securities underlying unexercised options held at December 31, 1998:

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1998 DECEMBER 31, 1998(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. Scott Greer............. 31,875 $207,189 63,744 179,641 $ 940,226 $2,571,888
C. Geoffrey Davis, Ph.D.... -- -- 73,009 62,491 1,109,914 908,211
Kurt W. Leutzinger......... -- -- 38,603 74,147 519,637 986,051
John A. Lipani, M.D........ -- -- 44,853 67,897 684,740 1,010,948
Raymond M. Withy, Ph.D..... 25,416 188,078 37,593 62,491 555,654 908,211
</TABLE>

- ---------------
(1) Value realized reflects the fair market value of our common stock underlying
the option on the date of exercise minus the aggregate exercise price of the
option.

(2) Value of unexercised in-the-money options are based on a value of $16.25 per
share, the closing price of our common stock on December 31, 1998. Amounts
reflected are based on the value of $16.25 per share, minus the per share
exercise price, multiplied by the number of shares underlying the option.

STOCK PLANS

1996 Incentive Stock Plan. As of December 31, 1998, a total of 2,891,250
shares of common stock have been authorized for issuance under our 1996
Incentive Stock Plan (the "1996 Plan"). Under the 1996 Plan, as of December 31,
1998, options to purchase an aggregate of 1,642,187 shares were outstanding,
386,810 shares of common stock had been purchased pursuant to exercises of stock
options and stock purchase rights and 862,253 shares were available for future
grant.

The 1996 Plan provides for the grant of incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, nonqualified stock
options and stock purchase rights to our employees, consultants and nonemployee
directors. Incentive stock options may be granted only to employees. The 1996
Plan is administered by the Board of Directors or a committee appointed by the
Board of Directors, which determines the terms of awards granted, including the
exercise price and the number of shares subject to the award and the
exercisability thereof. The exercise price of incentive stock options granted
under the 1996 Plan must be at least equal to the fair market value of our
common stock on the date of grant. However, for any employee holding more than
10% of the voting power of all classes of our stock, the exercise price will be
no less than 110% of the fair market value. The exercise price of nonqualified
stock options is set by the administrator of the 1996 Plan. However, for any
person holding more than 10% of the voting power of all classes of our stock,
the exercise price will be no less than 110% of the fair market value. The
maximum term of options granted under the 1996 Plan is ten years.

An optionee whose relationship with Abgenix or any related corporation
ceases for any reason, other than death or total and permanent disability, may
exercise options in the three-month period following such cessation, or such
other period of time as determined by the administrator, unless such options
terminate or expire sooner, or for nonstatutory stock options, later, by their
terms. The three-month period is extended to twelve months for terminations due
to death or total and permanent disability. In the event of a merger of Abgenix
with or into another corporation, any outstanding options may either by assumed
or an equivalent option may be substituted by the surviving entity or, if such
options are not assumed or substituted, such options shall become exercisable as
to all of the shares subject to the options, including shares as to which they
would not otherwise be exercisable. In the event that options become exercisable
in lieu of assumption or substitution, the Board of Directors shall notify
optionees that all options shall be fully exercisable for a period of 30 days,
after which such options shall terminate.

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<PAGE> 62

None of our employees may be granted, in any fiscal year, options to
purchase more than 750,000 shares, 1,500,000 shares in the case of a new
employee's initial employment with Abgenix. The 1996 Plan will terminate in June
2006, unless sooner terminated by the Board of Directors.

The Board of Directors may also grant stock purchase rights to employees
and consultants under the 1996 Plan. Such grants are made pursuant to a
restricted stock purchase agreement, and the price to be paid for the shares
granted thereunder is determined by the administrator. Abgenix is generally
granted a repurchase option exercisable on the voluntary or involuntary
termination of the purchaser's employment with Abgenix for any reason, including
death or disability. The repurchase price shall be the original purchase price
paid by the purchaser. The repurchase option shall lapse at a rate determined by
the administrator. Once the stock purchase right has been exercised, the
purchaser shall have the rights equivalent to those of a stockholder.

1998 Employee Stock Purchase Plan. We have adopted the 1998 Employee Stock
Purchase Plan, or the Purchase Plan, and have reserved a total of 250,000 shares
of common stock for issuance thereunder. The Purchase Plan also provides for an
annual increase, commencing in 1999, in the number of shares reserved for
issuance under the Purchase Plan equal to the lesser of 250,000, 1% of our
outstanding capitalization or a lesser amount determined by the Board, such that
the maximum number of shares which could be reserved under the Purchase Plan
over its term would be 2,500,000 shares. Under the Purchase Plan, as of December
31, 1998, 14,130 shares were issued and were outstanding, and 235,870 shares
were available for future issuance. The Purchase Plan, which is intended to
qualify under Section 423 of the Code, is administered by our Board of Directors
or by a committee appointed by the Board of Directors.

Under the Purchase Plan, Abgenix withholds a specified percentage, not to
exceed 15%, of each salary payment to participating employees over certain
offering periods. Any employee who is currently employed for at least 20 hours
per week and for at least five consecutive months in a calendar year, either by
Abgenix or by one of our majority-owned subsidiaries, is eligible to participate
in the Purchase Plan. Unless the Board of Directors or the committee determines
otherwise, each offering period will run for 24 months and will be divided into
consecutive purchase periods of approximately six months. The first offering
period and the first purchase period commenced on July 2, 1998. Thereafter, new
24-month offering periods commence every six months on each November 1 and May
1. In the event of a change in control of Abgenix, including a merger of Abgenix
with or into another corporation, or the sale of all or substantially all of our
assets, the offering and purchase periods then in progress will be shortened.

The price of common stock purchased under the Purchase Plan is equal to 85%
of the fair market value of the common stock on the first day of the applicable
offering period or the last day of the applicable purchase period, whichever is
lower. Employees may end their participation in the offering at any time during
the offering period, and participation ends automatically on termination of
employment with Abgenix. The maximum number of shares that a participant may
purchase on the last day of any offering period is determined by dividing the
payroll deductions accumulated during the purchase period by the purchase price.
However, no person may purchase shares under the Purchase Plan to the extent
such person would own 5% or more of the total combined value or voting power of
all classes of our capital stock or of any of our subsidiaries, or to the extent
that such person's rights to purchase stock under all employee stock purchase
plans would exceed $25,000 for any calendar year. The Board of Directors may
amend the Purchase Plan at any time. The Purchase Plan will terminate in March
2008, unless terminated earlier in accordance with the provisions of the
Purchase Plan.

1998 Director Option Plan. We have adopted the 1998 Director Option Plan,
or the Director Plan, and have reserved a total of 250,000 shares of common
stock for issuance thereunder. Each non-employee director who becomes an Abgenix
director after July 2, 1998 will be automatically granted a nonstatutory option
to purchase 30,000 shares of common stock on the date on which such person first
becomes a director. At each annual stockholders meeting beginning with the 1999
Annual Stockholders Meeting, each non-employee director will automatically be
granted a nonstatutory option to purchase 7,500 shares of common stock, 10,000
shares for the Chairman of the Board if a non-employee director. The exercise

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<PAGE> 63

price of options under the Director Plan will be equal to the fair market value
of the common stock on the date of grant. The maximum term of the options
granted under the Director Plan is ten years. Each initial grant under the
Director Plan will vest as to 25% of the shares subject to the option one year
after the date of grant and at a rate of 1/48th of the shares each month
thereafter. Each subsequent grant will vest as to 1/48th of the shares subject
to the option one month after the date of grant and at a rate of 1/48th of the
shares on the last day of each month thereafter. In the event we merge with or
into another corporation, all outstanding options may either be assumed or an
equivalent option may be substituted by the surviving entity or, if such options
are not assumed or substituted, such options shall become exercisable as to all
of the shares subject to the options, including shares as to which they would
not otherwise be exercisable. In the event that options become exercisable in
lieu of assumption or substitution, the Board of Directors shall notify
optionees that all options shall be fully exercisable for a period of 30 days,
after which such options shall terminate. In the event that a non-employee
director is involuntarily terminated following option assumption, the option
becomes fully vested and exercisable. The Director Plan will terminate in March
2008, unless terminated earlier in accordance with the provisions of the
Director Plan.

401(K) PLAN

All of our employees who are located in the United States and who work a
minimum of 30 hours per week are eligible to participate in our 401(k)
Retirement Plan (the "401(k) Plan"). Pursuant to the 401(k) Plan, employees may
elect to reduce their current compensation by up to the lesser of 15% of their
annual compensation or the statutorily prescribed annual limit allowable under
Internal Revenue Service Regulations and to have the amount of such reduction
contributed to the 401(k) Plan. The 401(k) Plan permits us, but does not require
us, to make additional matching contributions on behalf of all participants in
the 401(k) Plan. We have not made any contributions to the 401(k) Plan. The
401(k) Plan is intended to qualify under Section 401(k) of the Code so that
contributions to the 401(k) Plan by employees or by Abgenix, and the investment
earnings thereon, are not taxable to employees until withdrawn from the 401(k)
Plan, and that our contributions, if any, will be deductible by us when made.

CHANGE IN CONTROL ARRANGEMENTS

Our Board of Directors has approved a plan which provides that in the event
of a change in control of Abgenix, the options of each Abgenix employee whose
employment is terminated without cause within 24 months of the change in control
will become exercisable in full. For this purpose, a change in control includes:
(i) a person becoming the beneficial owner of 50% or more of our outstanding
voting securities, (ii) certain changes in the composition of our Board of
Directors occurring within a two-year period or (iii) a merger or consolidation
in which Abgenix stockholders immediately before the transaction own immediately
after the transaction less than a majority of the outstanding voting securities
of the surviving entity, or its parent.

LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS

Our Amended and Restated Certificate of Incorporation limits the liability
of directors to the maximum extent permitted by Delaware law. Delaware law
provides that directors of a corporation will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except
liability for (1) any breach of their duty of loyalty to the corporation or its
stockholders, (2) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) unlawful payments of
dividends or unlawful stock repurchases or redemptions or (4) any transaction
from which the director derived an improper personal benefit. Such limitation of
liability does not apply to liabilities arising under the federal securities
laws and does not affect the availability of equitable remedies such as
injunctive relief or rescission.

Our Amended and Restated Bylaws provide that we shall indemnify our
directors and executive officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law. We believe
that indemnification under our Amended and Restated Bylaws covers at least
negligence and gross negligence on the part of indemnified parties. Our Amended
and Restated

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<PAGE> 64

Bylaws also permit us to secure insurance on behalf of any officer, director,
employee or other agent for any liability arising out of his or her actions in
such capacity, regardless of whether the Amended and Restated Bylaws would
permit indemnification.

We have entered into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our Amended and
Restated Bylaws. These agreements, among other things, indemnify our directors
and executive officers for certain expenses, including attorneys' fees,
judgments, fines and settlement amounts incurred by any such person in any
action or proceeding, including any action by us arising out of such person's
services as our director or executive officer, any of our subsidiaries or any
other company or enterprise to which the person provides services at our
request. We believe that these provisions and agreements are necessary to
attract and retain qualified persons as directors and executive officers.

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<PAGE> 65

CERTAIN TRANSACTIONS

OUR INCORPORATION AND ORGANIZATION

Pursuant to the terms of the stock purchase and transfer agreement between
Abgenix and Cell Genesys, we issued 1,691,667 shares of series A senior
convertible preferred stock to Cell Genesys in exchange for $10 million, and we
issued 2,058,333 shares of series 1 subordinated convertible preferred stock to
Cell Genesys in exchange for research, development and manufacturing technology,
patents and other intellectual property specific to the antibody therapy
programs to be pursued by Abgenix, including Cell Genesys' interest in Xenotech,
and certain equipment, furniture and fixtures leased by Cell Genesys. We are
responsible for the remaining lease obligations for such capital equipment which
total approximately $30,000 per month. Cell Genesys also assigned us two notes
receivable totaling $150,000.

On July 15, 1996, Abgenix, in exchange for a loan in the principal amount
of up to $4,000,000, issued a convertible promissory note to Cell Genesys that
subsequently was converted into 666,667 shares of series A preferred stock at a
conversion price of $6.00 upon the closing of the series B preferred stock
financing in December 1997. Also, in connection with, and contemporaneous to,
the series B preferred stock financing, the shares of series A senior
convertible preferred stock, and the shares of series 1 subordinated convertible
preferred stock were converted into an aggregate 3,750,000 shares of series A
preferred stock. (See "Preferred Stock Financings").

Simultaneously with the execution of the stock purchase and transfer
agreement, we entered into a governance agreement, tax sharing agreement,
services agreement, and patent assignment agreement with Cell Genesys. In
addition, we entered into an immunization services agreement, gene therapy
agreement, and voting agreement with Cell Genesys. The immunization services
agreement, gene therapy agreement, and voting agreement were superceded by the
gene therapy rights agreement. See "Business -- Gene Therapy Rights Agreement
with Cell Genesys."

The governance agreement with Cell Genesys provides that so long as Cell
Genesys or a group to which it belongs owns a specific percentage of our
outstanding voting stock, Cell Genesys or the group shall have the right to
nominate a fixed number of directors to serve on our Board. The details of this
arrangement are set forth in the table below:

The governance agreement also provides that Cell Genesys and each of our
officers and directors who owns voting stock shall agree to vote for the persons
nominated as set forth above.

The tax sharing agreement provides for the allocation of federal and state
tax liabilities between Abgenix and Cell Genesys. Pursuant to the terms of the
agreement, we will pay to Cell Genesys the federal and state income and
franchise tax liability that we would have owed if Cell Genesys had filed a
separate tax return. If we realize a loss or credit that reduces the
consolidated tax liability of Cell Genesys, then Cell Genesys shall pay us the
amount of the reduction. The agreement shall remain in effect with respect to
any taxable year for which consolidated or combined returns are filed by Cell
Genesys as a common parent corporation and Abgenix is an includable party in
such consolidated return. As of December 31, 1998, Cell Genesys' ownership of
our outstanding capital stock was 30.2%. Therefore, a consolidated tax return
will not be filed for 1998.

Pursuant to the terms of the services agreement, Cell Genesys provided
certain administrative services for a quarterly fee. In fiscal 1997, these fees
totaled $60,000. No fees were incurred in 1998, and Cell Genesys no longer
provides services under this agreement.

Pursuant to the terms of the patent assignment agreement, Cell Genesys
assigned us all of its rights in and to certain patents and patent applications
related to antibody development.

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OTHER TRANSACTIONS WITH CELL GENESYS

On January 23, 1997 and March 27, 1997, we issued two warrants to purchase
an aggregate of 121,667 shares of series A preferred stock (convertible into
121,667 shares of common stock) to Cell Genesys at the exercise price per share
of $6.00 in return for providing guarantees for the Loan and Security Agreement
with Silicon Valley Bank and the Master Lease Agreement with Transamerica
Business Credit Corporation.

In October 1997, Cell Genesys extended a short-term, convertible line of
credit facility to Abgenix. The credit facility terminated in accordance with
its terms, without Abgenix drawing upon the credit facility, upon the closing of
the series B preferred stock financing in December 1997.

In November 1998, Cell Genesys sold 1,146,300 shares of Abgenix common
stock to certain individuals and entities in a private placement. Pursuant to
that sale, we agreed to register the shares under the Securities Act for resale
to the public. Under the registration rights agreement, we must use reasonable
efforts to cause this registration statement to be declared effective by the
Securities and Exchange Commission as soon as practicable and to keep this
registration statement, or a replacement, continuously effective under the
Securities Act until the earlier of (1) November 18, 2000 or (2) such time as
the selling stockholders have sold all shares offered by this prospectus, or a
replacement prospectus.

BANCBOSTON ROBERTSON STEPHENS INC. RELATIONSHIP

M. Kathleen Behrens, Ph.D., one of our directors, is also a managing
director of Robertson Stephens Investment Management Co. Robertson Stephens
Investment Management Co. was formerly affiliated with BancBoston Robertson
Stephens Inc. BancBoston Robertson Stephens Inc. acted as one of our placement
agents in the series B preferred stock financing in December 1997 and as the
managing underwriter for our initial public offering in July 1998. BancBoston
Robertson Stephens Inc. received approximately $759,000 in fees for services
provided in the private placement. Also, persons and entities currently or
formerly affiliated with Robertson Stephens Investment Management Co. and
BancBoston Robertson Stephens Inc. purchased, in the aggregate, 784,616 shares
of the series B preferred stock for an aggregate purchase price of approximately
$5.1 million. BancBoston Robertson Stephens Inc. together with the other
underwriters received approximately $1.6 million in discounts and commissions in
connection with its services as the managing underwriter of our initial public
offering. In connection with Cell Genesys' sale of shares of our common stock to
certain individuals and entities, BancBoston Robertson Stephens Inc. received
approximately $475,000 in fees in connection with its services as placement
agent. BancBoston Robertson Stephens Inc., together with the other underwriters,
will receive approximately 6% of the public offering price for underwriting
discounts and commissions in connection with its services as the managing
underwriter of this offering.

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PREFERRED STOCK FINANCINGS

In connection with the initial public offering of our common stock in July
1998, each outstanding share of preferred stock was converted into one share of
common stock. The following directors and holders of more than 5% of our
outstanding stock purchased the following shares of our preferred stock prior to
the consummation of our initial public offering.

<TABLE>
<CAPTION>
PREFERRED STOCK
---------------------
PREFERRED STOCKHOLDER SERIES A SERIES B
--------------------- --------- --------
<S> <C> <C>
Cell Genesys(1)............................................. 4,538,334 --
Robertson Stephens Investment Management Co. Entities(2).... -- 769,231
Stephen A. Sherwin, M.D.(3)................................. 4,538,334 --
M. Kathleen Behrens, Ph.D.(4)............................... -- 784,616
Raju Kucherlapati, Ph.D.(5)................................. 4,538,334 10,000
Joseph E. Maroun(6)......................................... 4,538,334 153,846
</TABLE>

- ---------------
(1) Includes 121,667 shares issuable pursuant to outstanding warrants to
purchase series A preferred stock.

(2) Includes 56,280 shares held by Bayview Investors, LTD, 224,145 shares held
by Crossover Fund II, L.P., 67,663 shares held by Crossover Fund IIA, L.P.,
334,079 shares held by Omega Ventures II, L.P., 87,064 shares held by Omega
Ventures II Cayman, L.P. (collectively, the "RSIM Shares"). Each of the
above entities is currently or formerly affiliated with Robertson Stephens
Investment Management Co.

(3) Includes 4,416,667 shares held by Cell Genesys and 121,667 shares issuable
pursuant to outstanding warrants to purchase series A preferred stock
(collectively, the "Cell Genesys Owned Shares"). Dr. Sherwin is an officer,
director and beneficial stockholder of Cell Genesys. As such, he may be
deemed to have voting and dispositive power over the Cell Genesys Owned
Shares. However, Dr. Sherwin disclaims beneficial ownership of the Cell
Genesys Owned Shares except to the extent of his pro rata pecuniary interest
therein.

(4) Includes the RSIM Shares. Dr. Behrens, a managing director of Robertson
Stephens Investment Management Co., disclaims beneficial ownership of the
RSIM Shares except to the extent of her pro rata pecuniary interest therein.
Currently, Crossover Fund II, Crossover Fund IIA, Omega Ventures II, L.P.
and Omega Ventures II Cayman, L.P. are no longer affiliated with Robertson
Stephens Investment Management Co.

(5) Includes the Cell Genesys Owned Shares. Dr. Kucherlapati is a director and
beneficial stockholder of Cell Genesys. As such, he may be deemed to have
voting power over the Cell Genesys Owned Shares. However, Dr. Kucherlapati
disclaims beneficial ownership of the Cell Genesys Owned Shares except to
the extent of his pro rata pecuniary interest therein.

(6) Includes the Cell Genesys Owned Shares. Mr. Maroun is a director and
beneficial stockholder of Cell Genesys. As such, he may be deemed to have
voting and dispositive power over the Cell Genesys Owned Shares. However,
Mr. Maroun disclaims beneficial ownership of the Cell Genesys Owned Shares
except to the extent of his pro rata pecuniary interest therein.

Certain holders of our common stock are entitled to certain registration
rights. See "Description of Capital Stock -- Registration Rights of Certain
Holders."

After the completion of this offering, Cell Genesys will beneficially own
approximately 23.0% of our outstanding capital stock. As a result, Cell Genesys
will have significant influence over all matters requiring the approval of our
stockholders, including the election of our Board of Directors. See "Risk
Factors -- Cell Genesys Exercises Significant Influence Over Us."

Three of our directors, Stephen A. Sherwin, M.D., Raju S. Kucherlapati,
Ph.D. and Joseph E. Maroun are also directors of Cell Genesys. Dr. Sherwin is
also the Chairman of the Board and Chief Executive Officer of Cell Genesys.

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<PAGE> 68

TRANSACTIONS WITH EMPLOYEES

On May 27, 1997, John A. Lipani, M.D. our Vice President, Clinical
Development, and Abgenix entered into a relocation loan agreement pursuant to
which we loaned $100,000 to Dr. Lipani in exchange for a promissory note secured
by a deed of trust. No interest accrues on the loan until May 27, 2002. The
outstanding principal balance as of December 31, 1998 was $100,000. In addition,
Dr. Lipani received a $35,000 loan from Abgenix to assist with relocation
expenses. The $35,000 loan, which is evidenced by a promissory note, was
forgiven in April 1998 when Dr. Lipani completed 12 months of employment with
Abgenix.

On December 2, 1992, R. Scott Greer, our President and Chief Executive
Officer, and Cell Genesys entered into a relocation loan agreement pursuant to
which Cell Genesys loaned $100,000 to Mr. Greer in exchange for an interest-free
promissory note secured by shares of Cell Genesys' common stock owned by Mr.
Greer. In June 1996, Cell Genesys assigned its rights under the promissory note
to Abgenix. Mr. Greer repaid the entire loan to Abgenix in September 1997.

On April 21, 1995, C. Geoffrey Davis, Ph.D. our Vice President, Research,
and Cell Genesys entered into a relocation loan agreement pursuant to which Cell
Genesys loaned $30,000 to Dr. Davis in exchange for a promissory note secured by
a deed of trust. No interest accrues on the loan until January 1, 2000. In June
1996, Cell Genesys assigned its rights under the promissory note to Abgenix. As
of December 31, 1998, the outstanding principal balance was $30,000.

On August 26, 1997, Mr. Leutzinger received a $25,000 loan from Abgenix to
assist with relocation expenses. The $25,000 loan, which is evidenced by a full
recourse promissory note, was forgiven in July 1998 when Mr. Leutzinger
completed 12 months of employment with Abgenix. On February 27, 1998, Mr.
Leutzinger and Abgenix entered into a relocation loan agreement pursuant to
which Abgenix loaned $100,000 to Mr. Leutzinger in exchange for a promissory
note secured by a deed of trust. No interest accrues on the loan until June 30,
2003. As of December 31, 1998, the outstanding principal balance of the
promissory note was $100,000.

We have entered into indemnification agreements with each of our directors
and executive officers. See "Management -- Limitations of Liability and
Indemnification Matters."

All future transactions, including any loans from Abgenix to our officers,
directors, principal stockholders or affiliates, will be approved by a majority
of the Board of Directors, including a majority of the independent and
disinterested members of the Board of Directors or, if required by law, a
majority of disinterested stockholders, and will be on terms no less favorable
to Abgenix than could be obtained from unaffiliated third parties.

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<PAGE> 69

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of December 31, 1998, and as
adjusted to reflect the sale of the common stock being offered hereby by (1)
each person, or group of affiliated persons, who is known by us to own
beneficially more than 5% of the common stock, (2) each of our directors, (3)
each of our executive officers and (4) all of our directors and executive
officers as a group. Except as otherwise noted, the persons or entities in this
table have sole voting and investing power with respect to all the shares of
common stock owned by them.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING OWNED AFTER OFFERING
------------------------ ----------------------
NUMBER PERCENT(1) NUMBER PERCENT(1)
---------- ----------- --------- ----------
<S> <C> <C> <C> <C>
BENEFICIAL OWNER
Cell Genesys(2)..................................... 3,392,034 30.2% 3,392,034 23.0%
342 Lakeside Drive
Foster City, CA 94404
Omega Venture Partners(3)........................... 851,351 7.7 851,351 5.8
555 California Street, Suite 2600
San Francisco, CA 94104
Joseph E. Maroun(4)................................. 3,569,911 31.7 3,569,911 24.2
Stephen A. Sherwin, M.D.(5)......................... 3,464,565 30.6 3,464,565 23.4
Raju S. Kucherlapati, Ph.D.(6)...................... 3,432,315 30.4 3,432,315 23.2
M. Kathleen Behrens, Ph.D.(7)....................... 148,540 1.3 148,540 1.0
R. Scott Greer(8)................................... 220,588 2.0 220,588 1.5
C. Geoffrey Davis, Ph.D.(9)......................... 79,395 * 79,395 *
Raymond M. Withy, Ph.D.(10)......................... 80,647 * 80,647 *
Kurt W. Leutzinger(11).............................. 45,737 * 45,737 *
John A. Lipani, M.D.(12)............................ 51,899 * 51,899 *
Mark B. Logan(13)................................... 12,250 * 12,250 *
All directors and executive officers as a group (10
persons)(14)...................................... 4,321,779 37.0% 4,321,779 28.5%
</TABLE>

- ---------------
* Represents beneficial ownership of less than one percent of the common
stock.

(1) Beneficial ownership is determined in accordance with the rules of
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as indicated by
footnote, and subject to community property laws where applicable, the
stockholders named in the table above have sole voting and investment power
with respect to all shares of common stock shown as beneficially owned by
them. Percentage of beneficial ownership is based on 11,120,293 shares of
common stock outstanding as of December 31, 1998 and 14,615,649 shares
outstanding after the completion of this offering, which includes 495,356
shares sold to Genentech in January 1999.

(2) Consists of 3,270,367 shares and 121,667 shares issuable pursuant to
warrants exercisable within 60 days of December 31, 1998 (the "CG Shares").

(3) Includes 362,545 shares held by Crossover Fund II, L.P., 67,663 shares held
by Crossover Fund IIA, L.P., 334,079 shares held by Omega Ventures II, L.P.
and 87,064 shares held by Omega Ventures II Cayman, L.P.

(4) Includes the CG Shares. Also includes 24,031 shares issuable upon exercise
of options exercisable within 60 days of December 31, 1998. Mr. Maroun is a
director and beneficial stockholder of Cell Genesys. As such, he may be
deemed to have voting and dispositive power over the CG Shares. However,
Mr. Maroun disclaims beneficial ownership of the CG Shares except to the
extent of his

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<PAGE> 70

pro rata pecuniary interest therein based upon his beneficial ownership of
the capital stock of Cell Genesys.

(5) Includes the CG Shares. Also includes, 72,531 shares issuable upon exercise
of options exercisable within 60 days of December 31, 1998. Dr. Sherwin is
an officer, director and beneficial stockholder of Cell Genesys. As such,
he may be deemed to have voting and dispositive power over the CG Shares.
However, Dr. Sherwin disclaims beneficial ownership of the CG Shares except
to the extent of his pro rata pecuniary interest therein based upon his
beneficial ownership of the capital stock of Cell Genesys.

(6) Includes the CG Shares. Also includes, 30,281 shares issuable upon exercise
of options exercisable within 60 days of December 31, 1998. Dr.
Kucherlapati is a director and beneficial stockholder of Cell Genesys. As
such, he may be deemed to have voting and dispositive power over the CG
Shares. However, Dr. Kucherlapati disclaims beneficial ownership of the
shares of the CG Shares except to the extent of his pro rata pecuniary
interest therein based upon his beneficial ownership of the capital stock
of Cell Genesys.

(7) Includes 56,280 shares held by Bayview Investors, LTD, 50,000 shares held
by The Robertson Stephens Orphan Fund, L.P. and 17,500 shares held by The
Robertson Stephens Orphan Offshore Fund, L.P. (the "Robertson Stephens
Investment Management Co. Shares"). Also includes 9,375 shares issuable
upon exercise of options exercisable within 60 days of December 31, 1998.
Dr. Behrens, a managing director of Robertson Stephens Investment
Management Co., disclaims beneficial ownership of the Robertson Stephens
Investment Management Co. Shares except to the extent of her pro rata
pecuniary interests therein.

(8) Includes 80,819 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998.

(9) Includes 79,395 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998.

(10) Includes 43,979 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998.

(11) Includes 45,649 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998.

(12) Includes 51,899 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998.

(13) Includes 12,250 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998.

(14) Includes 450,209 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1998 and 121,667 shares subject to warrants.

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<PAGE> 71

DESCRIPTION OF CAPITAL STOCK

GENERAL

Our Amended and Restated Certificate of Incorporation authorizes the
issuance of up to 50,000,000 shares of common stock, $0.0001 par value per share
and authorizes the issuance of 5,000,000 shares of preferred stock, $0.0001 par
value per share, the rights and preferences of which may be established from
time to time by our Board of Directors. As of December 31, 1998, 11,120,293
shares of common stock were issued and outstanding and held by 162 stockholders
and no shares of preferred stock were issued and outstanding.

COMMON STOCK

Each holder of common stock is entitled to one vote for each share held on
all matters to be voted upon by the stockholders and there are no cumulative
voting rights. Subject to preferences that may be applicable to any outstanding
preferred stock, holders of common stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. See "Dividend Policy." In the event of a liquidation,
dissolution or winding up of Abgenix, holders of common stock would be entitled
to share in our assets remaining after the payment of liabilities and the
satisfaction of any liquidation preference granted to the holders of any
outstanding shares of preferred stock. Holders of common stock have no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and nonassessable. The rights,
preferences and privileges of the holders of common stock are subject to, and
may be adversely affected by the rights of the holders of shares of any series
of preferred stock which we may designate in the future.

PREFERRED STOCK

Our Board of Directors is authorized, without any further action by the
stockholders, subject to any limitations prescribed by law, from time to time to
issue up to an aggregate of 5,000,000 shares of preferred stock, $0.0001 par
value per share, in one or more series, each of such series to have such rights
and preferences, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences, as shall be determined by our
Board of Directors. The rights of the holders of common stock will be subject
to, and may be adversely affected by, the rights of holders of any preferred
stock that may be issued in the future. Issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from attempting to
acquire, a majority of our outstanding voting stock. We have no present plans to
issue any shares of preferred stock.

WARRANTS AND OTHER OBLIGATIONS TO ISSUE CAPITAL STOCK

As of December 31, 1998, we have two outstanding warrants to purchase an
aggregate of 121,667 shares of common stock at an exercise price of $6.00 per
share. These warrants are currently exercisable in full. One warrant will expire
on January 23, 2000, and the other warrant will expire on March 27, 2000. Also,
as of December 31, 1998, we are obligated to issue 25,000 shares of the common
stock upon the occurrence of certain milestones pursuant to the terms of a
license agreement.

REGISTRATION RIGHTS OF CERTAIN HOLDERS

The holders of 6,698,052 shares of common stock and 121,667 shares of
common stock issuable upon exercise of outstanding warrants (the "Registrable
Securities") or their transferees are entitled to certain rights with respect to
the registration of such shares under the Securities Act. These rights are
provided under the terms of an agreement (the "Amended and Restated Stockholder
Rights Agreement") between Abgenix and the holders of the Registrable
Securities. The holders of at least 50% of the Registrable Securities may
require, subject to certain limitations in the Amended and Restated Stockholder
Rights

69
<PAGE> 72

Agreement, on two occasions, that we use our best efforts to register the
Registrable Securities for public resale. If we register any of our common stock
either for our own account or for the account of other security holders, other
than in connection with the registration of the shares offered hereby and
certain other exceptions, the holders of Registrable Securities are entitled to
include their shares of common stock in the registration. A holder's right to
include shares in an underwritten registration statement is subject to the right
of the underwriters to limit the number of shares included in the offering,
subject to certain limitations. The holders of Registrable Securities may also
require Abgenix, on no more than two occasions during any 12-month period, to
register all or a portion of their Registrable Securities on Form S-3 when use
of such form becomes available to Abgenix, provided, among other limitations,
that the proposed aggregate selling price, net of underwriting discounts and
commissions, is at least $500,000. All registration expenses will be borne by
Abgenix (subject to certain limitations) and all selling expenses relating to
Registrable Securities must be borne by the holders of the securities being
requested. If such holders, by exercising their demand registration rights,
cause a large number of securities to be registered and sold in the public
market, such sales could have an adverse effect on the market price for our
common stock. If we were to initiate a registration and include Registrable
Securities pursuant to the exercise of piggyback registration rights, the sale
of such Registrable Securities may have an adverse effect on our ability to
raise capital.

In November 1998, Cell Genesys sold 1,146,300 shares of Abgenix common
stock to certain individuals and entities. Pursuant to that sale, we agreed to
register the shares under the Securities Act for resale to the public. On
January 15, 1999, we filed a registration statement with the Securities and
Exchange Commission for the public resale of the shares. Under the registration
rights agreement, we must use reasonable efforts to cause this registration
statement to be declared effective by the Securities and Exchange Commission as
soon as practicable and to keep this registration statement, or a replacement,
continuously effective under the Securities Act until the earlier of (1)
November 18, 2000 or (2) such time as the selling stockholders have sold all
shares offered by this prospectus, or a replacement prospectus.

In January 1999, we sold 495,356 shares of common stock to Genentech. We
are obligated to register for public resale the 495,356 shares sold to Genentech
pursuant to the terms of a registration rights agreement. Genentech has certain
demand rights with respect to the registration of these shares. The demand
rights are currently exercisable and expire in July 1999. In July 1999, whether
or not Genentech exercises its demand rights, we are obligated to register the
Genentech shares for public resale.

CERTAIN CHARTER AND BYLAW PROVISIONS AND DELAWARE LAW

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 Abgenix. Such provisions could limit the price that
certain investors might be willing to pay in the future for shares of our common
stock. Certain of these provisions allow Abgenix 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 and eliminate
cumulative voting in the election of directors. These provisions may make it
more difficult for stockholders to take certain corporate actions and could have
the effect of delaying or preventing a change in control of Abgenix. In
addition, Abgenix is subject to Section 203 of the Delaware General Corporation
Law which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder, unless:
(1) prior to such date, the Board of Directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder; (2) upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder; the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding,
for purposes of determining the number of shares outstanding, those shares owned
by persons who are directors and also officers and by employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer; or (3) on or

70
<PAGE> 73

subsequent to such date, the business combination is approved by the Board of
Directors and authorized at an annual or special meeting of stockholders by the
affirmative vote of at least 66 2/3% of the outstanding voting stock which is
not owned by the interested stockholder.

Our Amended and Restated Certificate of Incorporation eliminates the right
of stockholders to call special meetings of stockholders or to act by written
consent without a meeting. The Amended and Restated Certificate of Incorporation
and Amended and Restated Bylaws do not provide for cumulative voting in the
election of directors. The authorization of undesignated preferred stock makes
it possible for the Board of Directors to issue preferred stock with voting or
other rights or preferences that could impede the success of any attempt to
change control of Abgenix. These and other provisions may have the effect of
deferring hostile takeovers or delaying changes in control or management of
Abgenix. The amendment of any of these provisions would require approval by
holders of at least 66 2/3% of the outstanding common stock.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common stock is ChaseMellon
Shareholder Services.

SHARES ELIGIBLE FOR FUTURE SALE

Future sales of substantial amounts of common stock in the public market
following this offering, including shares issued upon exercise of outstanding
options and warrants, could adversely affect market prices prevailing from time
to time and could impair our ability to raise capital through sale of our equity
securities. Sales of substantial amounts of our common stock in the public
market after the restrictions lapse could adversely affect the prevailing market
price and our ability to raise equity capital in the future.

Upon completion of this offering, we will have outstanding 14,615,649
shares of common stock, assuming no exercise of outstanding options or warrants
after December 31, 1998. Of these shares, the following are freely tradeable:

- the 3,000,000 shares sold in this offering;

- the 1,146,300 shares that may be sold by certain individuals and entities
upon the effectiveness of a registration statement we filed with the
securities and Exchange Commission on January 15, 1999;

- the 2,875,000 shares sold in our initial public offering in July 1998;
and

- an additional 2,771,302 shares, subject in certain instances to volume
re-sale limitations under Rule 144.

4,327,691 shares of common stock held by existing stockholders may not be
sold publicly unless they are registered under the Securities Act or are sold
pursuant to Rule 144 or another exemption from registration. These shares will
become eligible for public resale at various times over a period of less than
one year following the completion of this offering, subject to volume
limitations.

The remaining 495,356 shares were sold to Genentech in January 1999. We are
obligated to register for public resale the 495,356 shares sold to Genentech
pursuant to the terms of a registration rights agreement. Genentech has certain
demand rights with respect to the registration of these shares. The demand
rights are currently exercisable and expire in July 1999. In July 1999, whether
or not Genentech exercises its demand rights, we are obligated to register the
Genentech shares for public resale. Our registration of the Genentech shares may
have an adverse effect on our ability to raise capital. Sales of the Genentech
shares into the public market may have an adverse effect on the market price of
our common stock.

350,740 of the freely tradeable shares, all of the 4,327,691 restricted
shares and the 495,356 Genentech shares are subject to lock-up agreements under
which the holders have agreed not to sell their

71
<PAGE> 74

shares for a period of 90 days after the date of this prospectus without the
prior written consent of BancBoston Robertson Stephens Inc.

The holders of 6,698,052 shares of our common stock will be entitled to
certain demand and piggyback rights with respect to registration of such shares
under the Securities Act. If such holders exercise the demand registration
rights and cause a large number of securities to be registered and sold in the
public market, such sales may have an adverse effect on the market price for our
common stock. If we were to initiate a registration and include shares held by
such holders pursuant to the exercise of their piggyback registration rights,
such sales may have an adverse effect on our ability to raise capital.
Additionally, 121,667 shares issuable pursuant to warrants will also be entitled
to similar registration rights. The number of shares sold in the public market
could increase if such registration rights are exercised.

In connection with our initial public offering, a director and a certain
stockholder who, in the aggregate, hold 71,665 of the shares of common stock
outstanding immediately prior to the completion of this offering entered into
lock-up agreements under which they have agreed not to offer, sell, contract to
sell, grant any option to purchase or otherwise dispose of, or agree to dispose
of, directly or indirectly, any shares of common stock, options or warrants to
acquire shares of common stock or securities exchangeable for or convertible
into common stock owned by them until June 27, 1999, without the prior written
consent of BancBoston Robertson Stephens Inc. Upon expiration of the 360-day
lock-up agreements, all 71,655 of these shares will become eligible for public
resale, subject to volume limitations imposed by Rule 144.

On October 23, 1998 we filed a Registration Statement on Form S-8
registering 3,053,819 shares of common stock subject to outstanding options or
reserved for future issuance under our stock plans, thus permitting the resale
of such shares in the public market without restriction under the Securities Act
after expiration of any vesting restrictions. As of December 31, 1998, we are
obligated to issue 25,000 shares of common stock upon the occurrence of certain
milestones pursuant to the terms of a license agreement.

In general, under Rule 144 as currently in effect, a person or persons
whose shares are aggregated, who has beneficially owned shares for at least one
year, including the holding period of any prior owner except an affiliate, is
entitled to sell in "broker's transactions" or to market makers, a number of
shares during any three-month period that does not exceed the greater of (1) one
percent of the number of shares of common stock then outstanding, approximately
146,156 shares after completion of this offering, or (2) the average weekly
trading volume of the common stock during the four calendar weeks preceding the
required filing of a Form 144 with respect to such sale. Sales under Rule 144
are generally subject to certain manner of sale provisions and notice
requirements and to the availability of current public information about
Abgenix. Under Rule 144(k), a person who is not deemed to have been an affiliate
of Abgenix at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years, is
entitled to sell such shares without having to comply with the manner of sale,
public information, volume limitation or notice provisions of Rule 144. Under
Rule 701 of the Securities Act, persons who purchase shares upon exercise of
options granted prior to the effective date of our initial public offering are
currently entitled to sell such shares in reliance on Rule 144, without having
to comply with the holding period requirements of Rule 144 and, in the case of
non-affiliates, without having to comply with the public information, volume
limitation or notice provisions of Rule 144.

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<PAGE> 75

UNDERWRITING

The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Lehman Brothers Inc. and Pacific Growth
Equities, Inc., have severally agreed with Abgenix, subject to the terms and
conditions of the underwriting agreement, to purchase the number of shares of
common stock set forth opposite their respective names below. The underwriters
are committed to purchase and pay for all such shares, if any are purchased.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
BancBoston Robertson Stephens Inc...........................
Lehman Brothers Inc.........................................
Pacific Growth Equities, Inc................................
---------
Total............................................. 3,000,000
=========
</TABLE>

The representatives have advised us that the underwriters propose to offer
the shares of common stock to the public at the public offering price set forth
on the cover page of this prospectus and to certain dealers at such price less a
concession of not more than $ per share, of which $ may be reallowed to
other dealers. After the completion of this offering, the public offering price,
concession and reallowance to dealers may be reduced by the representatives. No
such reduction shall change the amount of proceeds to be received by us as set
forth on the cover page of this prospectus.

Over-Allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to 450,000 additional shares of common stock at the same price per
share as we will receive for the 3,000,000 shares that the underwriters have
agreed to purchase from us. To the extent that the underwriters exercise such
option, each of the underwriters will have a firm commitment to purchase
approximately the same percentage of such additional shares that the number of
shares of common stock to be purchased by it shown in the above table represents
as a percentage of the total number of shares offered hereby. If purchased, such
additional shares will be sold by the underwriters on the same terms as those on
which the shares are being sold.

Indemnity. The underwriting agreement contains covenants of indemnity among
the underwriters and Abgenix against certain civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.

Lock-Up Agreements. Pursuant to the terms of lock-up agreements, the
holders of 5,173,787 shares of our common stock, have agreed, for a period of up
to 90 days after the date of this prospectus, that, subject to certain
exceptions, they will not contract to sell or otherwise dispose of any shares of
common stock, any options to purchase shares of common stock or any securities
convertible into, or exchangeable for, shares of common stock, owned directly by
such holders or with respect to which they have the power of disposition,
without the prior written consent of BancBoston Robertson Stephens Inc. However,
BancBoston Robertson Stephens Inc. may, in its sole discretion, and at any time
or from time to time, without notice, release all or any portion of the
securities subject to lock-up agreements. All of the shares of common stock
subject to the lock-up agreements will be eligible for sale in the public market
upon the expiration of the lock-up agreements subject in the case of shares held
by affiliates pursuant to Rule 144.

Future Sales. In addition, we have agreed that until 90 days after the date
of this prospectus, we will not, without prior written consent of BancBoston
Robertson Stephens Inc., subject to certain exceptions, offer, sell, contract to
sell or otherwise dispose of any shares of common stock, any options to purchase
any share of common stock or any securities convertible into, exercisable for or
exchangeable for shares of common stock other than our sale of shares in this
offering, the issuance of shares of common stock upon the exercise of
outstanding options and the grant of options to purchase shares of common stock
under existing employee stock option or stock purchase plans. See "Shares
Eligible For Future Sale."

The underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.

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<PAGE> 76

Stabilization. The representatives have advised us that, pursuant to
Regulation M under the Exchange Act, certain persons participating in the
offering may engage in transactions, including stabilizing bids, syndicate
covering transactions or the imposition of penalty bids which may have the
effect of stabilizing or maintaining the market price of the common stock at a
level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of the common stock on behalf of
the underwriters for the purpose of fixing or maintaining the price of the
common stock. A "syndicate covering transaction" is the bid for or the purchase
of the common stock on behalf of the underwriters to reduce a short position
incurred by the underwriters in connection with the offering. A "penalty bid" is
an arrangement permitting the representatives to reclaim the selling concession
otherwise accruing to an underwriter or syndicate member in connection with the
offering if the common stock originally sold by such underwriter or syndicate
member is purchased by the representatives in a syndicate covering transaction
and has therefore not been effectively placed by such underwriter or syndicate
member. The representatives have advised us that such transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.

Passive Market Making. In connection with this offering, certain
underwriter and selling group members (if any) who are qualified market makers
on the Nasdaq National Market may engage in passive market making transactions
in the common stock on the Nasdaq National Market in accordance with Rule 103 of
Regulation M under the Exchange Act, during the business day prior to the
pricing of the offering, before the commencement of offers or sales of the
common stock. Passive market makers must comply with applicable volume and price
limitations and must be identified as such. In general, a passive market maker
must display its bid at a price not in excess of the highest independent bid for
such security; if all independent bids are lowered below the passive market
maker's bid, however, such bid must then be lowered when certain purchase limits
are exceeded.

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for
Abgenix by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. Certain legal matters with this offering will be passed upon
for the underwriters by Cooley Godward LLP, Palo Alto, California. As of
December 31, 1998, a certain investment partnership and members of Wilson
Sonsini Goodrich & Rosati, Professional Corporation, beneficially owned an
aggregate of 16,250 shares of common stock of Abgenix.

EXPERTS

The financial statements of Abgenix, Inc. at December 31, 1997 and 1998,
and for each of the three years in the period ended December 31, 1998 appearing
in this prospectus and registration statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

The financial statements of Xenotech, L.P. at December 31, 1997 and 1998
and for each of the three years in the period ended December 31, 1998 and for
the period from inception (June 12, 1991) to December 31, 1998, appearing in
this prospectus and registration statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

74
<PAGE> 77

WHERE YOU CAN FIND ADDITIONAL INFORMATION

Abgenix has filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act with respect to the
common stock offered hereby by the selling stockholders. This prospectus does
not contain all of the information set forth in the registration statement and
the exhibits and schedules thereto. For further information with respect to
Abgenix and our common stock, reference is made to the registration statement
and the exhibits and schedules filed as a part thereof. Statements contained in
this prospectus as to the contents of any contract or any other document
referred to are not necessarily complete. In each instance, reference is made to
the copy of such contract or document filed as an exhibit to the registration
statement, and each such statement is qualified in all respects by such
reference. Copies of the registration statement, including exhibits and
schedules thereto, may be inspected without charge at the Securities and
Exchange Commission's principal office in Washington, D.C., or obtained at
prescribed rates from the Public Reference Section of the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Securities and Exchange Commission maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Securities and Exchange
Commission. The address of the site is http://www.sec.gov.

Abgenix is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports, proxy statements
and other information with the Securities and Exchange Commission. Such reports,
proxy statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
following Regional Offices: Suite 1400, Northwest Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661; and 13th Floor, Seven World Trade
Center, New York, New York 10048. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549.

75
<PAGE> 78

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Abgenix, Inc., Financial Statements
Report of Ernst & Young LLP, Independent Auditors......... F-2
Balance Sheets............................................ F-3
Statements of Operations.................................. F-4
Statement of Changes in Redeemable Convertible Preferred
Stock and Stockholders' Equity (Net Capital
Deficiency)............................................ F-5
Statements of Cash Flows.................................. F-6
Notes to Financial Statements............................. F-7
Xenotech, LP, Financial Statements
Report of Ernst & Young LLP, Independent Auditors......... F-21
Balance Sheets............................................ F-22
Statements of Operations.................................. F-23
Statement of Partners' Capital............................ F-24
Statements of Cash Flows.................................. F-25
Notes to Financial Statements............................. F-26
</TABLE>

F-1
<PAGE> 79

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Abgenix, Inc.

We have audited the accompanying balance sheets of Abgenix, Inc. as of
December 31, 1997 and 1998, and the related statements of operations, changes in
redeemable convertible preferred stock and stockholders' equity (net capital
deficiency), and cash flows for each of the three years in the period ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Abgenix, Inc. at December
31, 1997 and 1998, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

Palo Alto, California
January 22, 1999

F-2
<PAGE> 80

ABGENIX, INC.

BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 4,617 $ 1,415
Short-term investments.................................... 10,704 15,329
Prepaid expenses and other current assets................. 550 1,438
-------- --------
Total current assets.............................. 15,871 18,182
Property and equipment, net................................. 5,776 5,435
Deposits and other assets................................... 437 603
-------- --------
$ 22,084 $ 24,220
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Short-term payable to related party....................... $ 212 $ 45
Payable to Xenotech for cross-license and settlement
obligation............................................. 3,750 --
Accounts payable.......................................... 426 394
Deferred revenue.......................................... -- 425
Accrued stock issuance costs.............................. 1,200 --
Accrued product development costs......................... 743 1,225
Other accrued liabilities................................. 1,257 1,293
Current portion of long-term debt......................... 1,646 1,699
-------- --------
Total current liabilities......................... 9,234 5,081
Long-term debt.............................................. 3,979 2,180
Commitments
Redeemable convertible preferred stock, $0.0001 par value;
20,000,000 shares authorized, 7,263,209 shares issued and
outstanding at December 31, 1997, and no shares issued and
outstanding at December 31, 1998; at amount paid in....... 31,189 --
Redeemable convertible preferred stock subscription
receivable................................................ (2,737) --
Redeemable convertible preferred stock issuable............. 2,737 --
Stockholders' equity (net capital deficiency):
Preferred stock, $0.0001 par value; 5,000,000 shares
authorized; none issued and outstanding at December 31,
1997 and 1998, respectively............................ -- --
Common stock, $0.0001 par value; 50,000,000 shares
authorized, 233,542 and 11,120,293 shares issued and
outstanding at December 31, 1997 and 1998,
respectively, at amount paid in........................ 351 55,842
Contributions from parent................................. 29,277 29,277
Additional paid-in capital................................ 1,776 2,311
Deferred compensation..................................... (1,248) (1,170)
Accumulated deficit....................................... (52,474) (69,301)
-------- --------
Total stockholders' equity (net capital
deficiency)..................................... (22,318) 16,959
-------- --------
$ 22,084 $ 24,220
======== ========
</TABLE>

See accompanying notes.
F-3
<PAGE> 81

ABGENIX, INC.

STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1996 1997 1998
----------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Revenue under collaborative agreements from related
parties (net of related contributions to Xenotech
of $3,866, $897 and $304 for the years ended
December 31, 1996, 1997 and 1998,
respectively).................................... $ 4,719 $ 1,343 $ 1,344
Contract revenue.................................... -- 611 2,498
----------- ---------- ----------
Total revenues.............................. 4,719 1,954 3,842
Operating expenses:
Research and development............................ 9,433 11,405 17,588
General and administrative.......................... 2,565 3,525 3,405
Charge for cross-license and settlement amount
allocated from Cell Genesys...................... -- 11,250 --
Equity in losses from the Xenotech joint venture
(excluding contributions) (charge for
cross-license settlement in 1997)................ -- 11,250 107
----------- ---------- ----------
Total operating expenses.................... 11,998 37,430 21,100
----------- ---------- ----------
Operating loss........................................ (7,279) (35,476) (17,258)
Other income and expenses:
Interest income..................................... 203 307 961
Interest expense.................................... (24) (711) (530)
----------- ---------- ----------
Net loss.............................................. $ (7,100) $ (35,880) $ (16,827)
=========== ========== ==========
Net loss per share.................................... $(46,710.53) $(1,032.70) $ (3.00)
=========== ========== ==========
Shares used in computing net loss per share........... 152 34,744 5,602,963
=========== ========== ==========
</TABLE>

See accompanying notes.
F-4
<PAGE> 82

ABGENIX, INC.

STATEMENT OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>

REDEEMABLE
CONVERTIBLE REDEEMABLE
REDEEMABLE PREFERRED CONVERTIBLE
CONVERTIBLE STOCK PREFERRED
PREFERRED SUBSCRIPTION STOCK
STOCK RECEIVABLE ISSUABLE
----------- ------------ -----------
<S> <C> <C> <C>
Balance at December 31, 1995............... $ -- $ -- $ --
Contributions from parent................ -- -- --
Issuance of 3,750,000 shares of series A
redeemable convertible preferred stock
to parent for $10,000 cash and
assignment of employee notes totaling
$150................................... 10,150 -- --
Issuance of 1,192 shares of common stock
upon exercise of stock options......... -- -- --
Net loss................................. -- -- --
-------- ------- -------
Balance at December 31, 1996............... 10,150 -- --
Contributions from parent.................. -- -- --
Issuance of 2,846,542 shares of series B
redeemable convertible preferred stock
at $6.50 per share, net of issuance
costs of $1,463........................ 17,039 -- --
Conversion of note payable to parent into
666,667 shares of series A redeemable
convertible preferred stock............ 4,000 -- --
Stock subscription to purchase 421,143
shares of series B redeemable
convertible preferred stock at $6.50
per share.............................. -- (2,737) 2,737
Issuance of 232,350 shares of common
stock upon exercise of stock options
and stock purchase rights.............. -- -- --
Deferred compensation for stock options
issued below deemed fair value......... -- -- --
Amortization of deferred compensation.... -- -- --
Net loss................................. -- -- --
-------- ------- -------
Balance at December 31, 1997............... 31,189 (2,737) 2,737
Issuance of 160,000 shares of series C
redeemable convertible preferred stock
at $8.00 per share..................... 1,280 -- --
Issuance of 421,143 shares of series B
redeemable convertible preferred stock
at $6.50 per share (net of issuance
costs of $81).......................... 2,656 2,737 (2,737)
Conversion of 7,844,352 shares of series
A, series B and series C redeemable
convertible preferred stock to common
stock.................................. (35,125) -- --
Issuance of 2,875,000 shares of common
stock at $8.00 per share upon initial
public offering (net of issuance costs
of $2,860)............................. -- -- --
Issuance of 153,268 shares of common
stock upon exercise of stock options... -- -- --
Issuance of 14,130 shares of common stock
at $6.80 per share pursuant to the
employee stock purchase plan........... -- -- --
Deferred compensation related to grant of
certain stock options below deemed fair
value.................................. -- -- --
Amortization of deferred compensation.... -- -- --
Compensation related to grant of stock
options to consultants................. -- -- --
Net loss................................. -- -- --
-------- ------- -------
Balance at December 31, 1998............... $ -- $ -- $ --
======== ======= =======

<CAPTION>
STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
---------------------------------------------------------------------------------
TOTAL
STOCKHOLDERS'
CONTRIBUTIONS ADDITIONAL EQUITY (NET
COMMON FROM PAID-IN DEFERRED ACCUMULATED CAPITAL
STOCK PARENT CAPITAL COMPENSATION DEFICIT DEFICIENCY)
------- ------------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995............... $ -- $ 9,494 $ -- $ -- $ (9,494) $ --
Contributions from parent................ -- 4,783 -- -- -- 4,783
Issuance of 3,750,000 shares of series A
redeemable convertible preferred stock
to parent for $10,000 cash and
assignment of employee notes totaling
$150................................... -- -- -- -- -- --
Issuance of 1,192 shares of common stock
upon exercise of stock options......... 1 -- -- -- -- 1
Net loss................................. -- -- -- -- (7,100) (7,100)
------- ------- ------ ------- -------- --------
Balance at December 31, 1996............... 1 14,277 -- -- (16,594) (2,316)
Contributions from parent.................. -- 15,000 -- -- -- 15,000
Issuance of 2,846,542 shares of series B
redeemable convertible preferred stock
at $6.50 per share, net of issuance
costs of $1,463........................ -- -- -- -- -- --
Conversion of note payable to parent into
666,667 shares of series A redeemable
convertible preferred stock............ -- -- -- -- -- --
Stock subscription to purchase 421,143
shares of series B redeemable
convertible preferred stock at $6.50
per share.............................. -- -- -- -- -- --
Issuance of 232,350 shares of common
stock upon exercise of stock options
and stock purchase rights.............. 350 -- -- -- -- 350
Deferred compensation for stock options
issued below deemed fair value......... -- -- 1,776 (1,776) -- --
Amortization of deferred compensation.... -- -- -- 528 -- 528
Net loss................................. -- -- -- -- (35,880) (35,880)
------- ------- ------ ------- -------- --------
Balance at December 31, 1997............... 351 29,277 1,776 (1,248) (52,474) (22,318)
Issuance of 160,000 shares of series C
redeemable convertible preferred stock
at $8.00 per share..................... -- -- -- -- -- --
Issuance of 421,143 shares of series B
redeemable convertible preferred stock
at $6.50 per share (net of issuance
costs of $81).......................... -- -- -- -- -- --
Conversion of 7,844,352 shares of series
A, series B and series C redeemable
convertible preferred stock to common
stock.................................. 35,125 -- -- -- -- 35,125
Issuance of 2,875,000 shares of common
stock at $8.00 per share upon initial
public offering (net of issuance costs
of $2,860)............................. 20,140 -- -- -- -- 20,140
Issuance of 153,268 shares of common
stock upon exercise of stock options... 130 -- -- -- -- 130
Issuance of 14,130 shares of common stock
at $6.80 per share pursuant to the
employee stock purchase plan........... 96 -- -- -- -- 96
Deferred compensation related to grant of
certain stock options below deemed fair
value.................................. -- -- 520 (520) -- --
Amortization of deferred compensation.... -- -- -- 598 -- 598
Compensation related to grant of stock
options to consultants................. -- -- 15 -- -- 15
Net loss................................. -- -- -- -- (16,827) (16,827)
------- ------- ------ ------- -------- --------
Balance at December 31, 1998............... $55,842 $29,277 $2,311 $(1,170) $(69,301) $ 16,959
======= ======= ====== ======= ======== ========
</TABLE>

See accompanying notes.

F-5
<PAGE> 83

ABGENIX, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................... $(7,100) $(35,880) $(16,827)
Adjustments to reconcile net loss to net cash used by
operating activities:
Equity in losses of Xenotech (including the charge for
cross-license and settlement in 1997)................... 3,866 12,147 411
Depreciation and amortization............................. 8 1,489 1,715
Charge for cross-license and settlement................... -- 11,250 --
Changes for certain assets and liabilities:
Prepaid expenses and other current assets............... (58) (392) (888)
Deposits and other assets............................... (337) (78) (166)
Short-term payable to related party..................... 730 -- (167)
Payable to Xenotech for cross-license and settlement
obligation............................................ -- -- (3,750)
Accounts payable........................................ -- 426 (32)
Deferred revenue........................................ 376 (376) 425
Accrued stock issuance costs............................ -- 1,200 (1,200)
Accrued product development costs....................... -- 743 482
Other accrued liabilities............................... 345 (704) 36
------- -------- --------
Net cash used in operating activities....................... (2,170) (10,175) (19,961)
------- -------- --------
INVESTING ACTIVITIES
Purchases of short-term investments......................... (2,982) (15,505) (24,868)
Sales of short-term investments............................. -- 7,783 20,243
Capital expenditures........................................ (334) (1,075) (697)
Contributions to Xenotech................................... (3,864) (4,647) (475)
------- -------- --------
Net cash used in investing activities....................... (7,180) (13,444) (5,797)
------- -------- --------
FINANCING ACTIVITIES
Net proceeds from issuances of redeemable convertible
preferred stock........................................... 10,000 17,039 3,936
Proceeds from issuance of note payable to parent............ 1,757 -- --
Proceeds from long-term debt................................ -- 4,300 --
Contributions from parent................................... 4,783 -- --
Payments under long-term debt............................... -- (643) (1,746)
Net proceeds from issuances of common stock................. -- 350 20,366
------- -------- --------
Net cash provided in financing activities................... 16,540 21,046 22,556
------- -------- --------
Net increase (decrease) in cash and cash equivalents........ 7,190 (2,573) (3,202)
Cash and cash equivalents at the beginning of the period.... -- 7,190 4,617
------- -------- --------
Cash and cash equivalents at the end of the period.......... $ 7,190 $ 4,617 $ 1,415
======= ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest...................... $ 10 $ 632 $ 549
======= ======== ========
NON-CASH INVESTING AND FINANCING ACTIVITIES
Allocation of charges related to the cross-license and
settlement from parent and Xenotech....................... $ -- $ 15,000 $ --
======= ======== ========
Conversion of note payable to parent........................ $ -- $ 4,000 $ --
======= ======== ========
Financed property and equipment acquisitions................ $ 3,314 $ -- $ --
======= ======== ========
Assignment of note receivable from Xenotech................. $ 30 $ -- $ --
======= ======== ========
Assignment of note receivable from parent................... $ 150 $ -- $ --
======= ======== ========
Furniture and equipment acquired under capital lease
financing................................................. $ -- $ 1,968 $ --
======= ======== ========
Deferred compensation related to grant of certain stock
options................................................... $ -- $ 1,776 $ 520
======= ======== ========
</TABLE>

See accompanying notes.
F-6
<PAGE> 84

ABGENIX, INC.

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF PRESENTATION

Abgenix, Inc., a Delaware corporation ("Abgenix" or the "Company"),
develops and intends to commercialize antibody therapeutic products for the
prevention and treatment of a variety of disease conditions, including
transplant-related diseases, inflammatory and autoimmune disorders and cancer.
The Company has developed a proprietary technology which it believes enables it
to quickly generate high affinity, fully human antibody product candidates to
essentially any disease target appropriate for antibody therapy. The operations
of Abgenix commenced in 1989 and were initially conducted as a research project
within Cell Genesys, Inc., ("Cell Genesys"). On June 24, 1996, Abgenix was
incorporated and subsequently on July 15, 1996 it was organized pursuant to a
Stock Purchase and Transfer Agreement between the Company and Cell Genesys. The
agreement sets forth the terms and conditions for the transfer of the antibody
business and operations within Cell Genesys to Abgenix.

The accompanying financial statements include the operations of Abgenix
since July 15, 1996, and the revenues and expenses of Abgenix as a research
project within Cell Genesys prior to July 15, 1996. The Company was not a
separate business unit or division within Cell Genesys and, therefore, no
separate accounting records existed for the Company during the period it was
operated as a research project within Cell Genesys. All administrative functions
were handled by Cell Genesys and the costs of operations, while part of Cell
Genesys, were estimated from project cost records and were recorded as
contributions. All assets and liabilities for 1994 and 1995 were combined with
Cell Genesys and it was impractical and not meaningful to carve out the balance
sheets for such periods

Prior to July 15, 1996, specifically identified revenues and costs such as
research and development were allocated to Abgenix from Cell Genesys. General
and administrative expenses were allocated based on Abgenix research and
development expense as a percentage of Cell Genesys' total research and
development expenses. From July 16, 1996 to July 31, 1997, Cell Genesys
performed certain general and administrative functions on behalf of Abgenix. The
Company estimates that the general and administrative costs would have been
$500,000 to $1,000,000 higher (unaudited) for each year of operation on a stand-
alone basis. The Company believes the allocation methodology used was
reasonable.

In 1997, the Company incurred an aggregate non-recurring charge for
cross-license and settlement of $22,500,000 which represents an allocation of
$11,250,000 from Cell Genesys and an entry to record the equity in the losses of
an equally owned joint venture with JT America, Inc., a medical subsidiary of
Japan Tobacco, Inc. and the Company ("Xenotech") of $11,250,000 (see Note 6).

INITIAL PUBLIC OFFERING

In July 1998, the Company completed an initial public offering of 2,500,000
shares of its common stock to the public, at a per share price of $8.00. On July
27, 1998, the Company's underwriters exercised an option to purchase an
additional 375,000 shares of common stock at a price of $8.00 per share to cover
over-allotments. The Company received net proceeds from the offerings of
approximately $20,140,000. Upon the closing of the initial public offering, each
of the outstanding 7,844,352 shares of redeemable convertible preferred stock
was automatically converted into one share of common stock.

REVENUE RECOGNITION

Revenues related to collaborative research agreements with corporate
partners are generally recognized ratably over the related funding periods for
each contract. For research funding, the Company is required to perform research
activities as specified in each respective agreement on a best efforts basis,
and the Company is reimbursed based on the fees stipulated in the respective
agreements which approximates cost. Deferred revenue may result when the Company
does not incur the required level of effort or has not

F-7
<PAGE> 85
ABGENIX, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

fulfilled its obligation under the agreement during a specific period in
comparison to funds received under the respective contracts. Milestone payments
are recognized pursuant to collaborative agreements upon the achievement of the
specified milestone, where no future obligation to perform exists for that
milestone. Nonrefundable signing fees, under which no future obligation to
perform exists, are recognized when invoiced. Revenues related to the Xenotech
research agreement are recognized net of the Company's contributions to
Xenotech.

RESEARCH AND DEVELOPMENT

Research and development expenses, including direct and allocated expenses,
consist of independent research and development costs and costs associated with
sponsored research and development.

NET LOSS PER SHARE

In 1997, the Company adopted Financial Accounting Standards Board Statement
of Financial Accounting Standard No. 128, "Earnings Per Share" ("SFAS 128").
Potentially dilutive securities have been excluded from the computation, as
their effect is antidilutive.

Pro forma net loss per share has been computed to give effect to the
automatic conversion of redeemable convertible preferred stock into common stock
which occurred at the completion of the Company's initial public offering in
July 1998, using the as-if-converted method, from the original date of issuance.

A reconciliation of shares used in calculation of basic and diluted and pro
forma net loss per share follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
Net loss.......................................... $(7,100,000) $(35,880,000) $(16,827,000)
=========== ============ ============
Basic and diluted:
Weighted-average shares of common stock
outstanding used in computing basic and
diluted net loss per share................... 152 34,744 5,602,963
=========== ============ ============
Basic and diluted net loss per share.............. $(46,710.53) $ (1,032.70) $ (3.00)
=========== ============ ============
Pro forma:
Shares used in computing basic and diluted net
loss per share (from above).................. 34,744 5,602,963
Adjusted to reflect the effect of the assumed
conversion of preferred stock from the date
of issuance.................................. 3,858,843 4,300,757
------------ ------------
Weighted-average shares used in computing pro
forma net loss per share..................... 3,893,587 9,903,720
============ ============
Pro forma net loss per share...................... $ (9.22) $ (1.70)
============ ============
</TABLE>

Had the Company been in a net income position, diluted earnings per share
would have included the shares used in the computation of pro forma net loss per
share as well as an additional 1,168,906, 1,630,093, and 1,736,854 shares
related to outstanding options and warrants not included above, determined using
the treasury stock method at the estimated average fair value, for the years
ended December 31, 1996, 1997 and 1998 respectively.

F-8
<PAGE> 86
ABGENIX, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

The Company considers all highly-liquid investments purchased with a
maturity from the date of purchase of three months or less to be cash
equivalents; investments with maturities in excess of three months are
considered to be short-term investments.

The Company's investment securities are classified as available-for-sale
and carried at fair value. The Company determines the appropriate classification
of securities at the time of purchase and reevaluates such designation as of
each balance sheet date.

DEPRECIATION AND AMORTIZATION

The Company records property and equipment at cost and provides
depreciation using the straight-line method over the estimated useful lives of
the assets. Leasehold improvements are depreciated over the remaining life of
the facility lease, and all other assets are generally depreciated over two to
five years. Furniture and equipment leased under capital leases is amortized
over the shorter of the useful lives or the lease term. Amortization of leased
assets is included in depreciation and amortization expense and is combined with
accumulated depreciation and amortization of the Company's owned assets.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

OTHER RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"), and Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information" ("SFAS 131"), which
required additional disclosures to be adopted beginning in the first quarter of
1998 and on December 31, 1998, respectively. The Company has determined that the
impact of adopting SFAS 130 and SFAS 131 on its financial statement disclosures
was not material.

2. COLLABORATION AGREEMENT WITH XENOTECH

XENOTECH

In 1991, Cell Genesys and JT America, Inc. formed Xenotech to develop
genetically modified strains of mice, which can produce fully human monoclonal
antibodies, and to commercialize products generated from these mice. Upon the
creation of Abgenix, Cell Genesys' rights in the joint venture were assigned to
the Company. Xenotech funds its research, which is generally conducted by
Abgenix, through capital contributions from the partners. The Company expensed
as research and development $350,000, $172,500 and $453,000 paid to Xenotech
related to licensing the rights to the XenoMouse technology from Xenotech for
the years ended December 31, 1996, 1997 and 1998, respectively.

F-9
<PAGE> 87
ABGENIX, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The Company is obligated to pay 50% of all Xenotech's cash requirements.
The Company accounts for its investment in Xenotech under the equity method; 50%
of Xenotech's net losses up to the Company's investment amount. Details are as
follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1997 1998
------ -------- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Abgenix's share of Xenotech losses....................... $3,306 $ 12,347 $411
Losses associated with cross-license and settlement...... -- (11,250) --
Difference due to timing and change in deferred
revenue................................................ 560 (200) --
------ -------- ----
Equity in losses of Xenotech............................. $3,866 $ 897 $411
====== ======== ====
</TABLE>

The Company recognized revenue of $4,719,000, $1,343,000, $1,344,000 for
the years ended December 31, 1996, 1997 and 1998, respectively, net of its cash
contributions to Xenotech related to this revenue.

Summary financial information for Xenotech is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1998
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
Total assets................................................ $ 7,569 $ 219
Total liabilities........................................... 7,556 67
Total revenues.............................................. 272 985
Total operating expenses.................................... (24,964) (1,807)
Net loss.................................................... (24,680) (822)
</TABLE>

3. COLLABORATION AND LICENSE AGREEMENTS

CBL LICENSE AGREEMENT

On February 1, 1997, the Company entered into a license agreement for
exclusive worldwide rights to commercialize ABX-CBL. The Company paid an initial
license fee and is further obligated to pay an annual maintenance fee of
$50,000, to commit at least $1,000,000 annually to the development of ABX-CBL
until ABX-CBL receives regulatory approval in any country and to pay royalties
on potential product sales. The Company is also obligated to issue 25,000 shares
of its common stock upon the submission of a Product License Application for the
first indication of the product.

RESEARCH COLLABORATION AND LICENSE OPTION AGREEMENT WITH PFIZER

In December 1997, Abgenix established a research collaboration with Pfizer
Inc. ("Pfizer"). In connection with the execution of the agreement, Pfizer paid
the Company a fee upon signing and may make additional payments to Abgenix upon
completion of certain research milestones. Additionally, Pfizer has an option to
expand the research collaboration to include two additional antigens, one of
which was exercised in October 1998 (see below). The agreement expires in
December 1999.

Concurrent with the execution of the research collaboration agreement,
Pfizer and Abgenix entered into a license and royalty agreement that grants
Pfizer the option to acquire an exclusive, worldwide license to develop, make,
use and sell antibody products derived from the research collaboration. If
Pfizer chooses to exercise its option to expand the research collaboration,
Abgenix could receive potential license fees and milestone payments of up to
approximately $8,000,000 per antigen upon the completion of certain milestones,
including preclinical and clinical trials and receipt of regulatory approval.
Additionally, if a

F-10
<PAGE> 88
ABGENIX, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

product receives marketing approval from the FDA or an equivalent foreign
agency, the Company is entitled to receive royalties on future product sales by
Pfizer. Pfizer will be responsible for manufacturing, product development and
marketing of any products developed through this collaboration.

In January 1998, the Company also entered into a stock purchase agreement
with Pfizer to purchase 160,000 shares of the Company's series C redeemable
convertible preferred stock at $8.00 per share. The shares were automatically
converted to 160,000 shares of the Company's common stock upon the completion of
the Company's initial public offering in July 1998.

In October 1998, Pfizer exercised its option under the December 1997
agreement to expand its research collaboration with the Company to include a
second undisclosed antigen target in the field of cancer and has an option for a
third antigen target. After the exercise of an option by Pfizer, the Company
could receive potential license fees and milestone payments of up to
approximately $8,000,000 per antigen upon the completion of certain milestones,
including preclinical and clinical trials and receipt of regulatory approval.
Additionally, if a product receives marketing approval from the FDA or an
equivalent foreign agency, the Company is entitled to receive royalties on
future product sales by Pfizer. Pfizer will be responsible for manufacturing,
product development and marketing of any products developed through this
collaboration.

RESEARCH COLLABORATION WITH SCHERING-PLOUGH

In January 1998, Abgenix established a research collaboration with
Schering-Plough Research Institute ("Schering-Plough"). In connection with the
execution of the agreement, Schering-Plough paid the Company a fee upon signing
and will be obligated to make additional payments to Abgenix upon completion of
the research.

In addition, the agreement provides Schering-Plough with an option, for a
limited time, to enter into a research, option and license agreement that
provides Schering-Plough an option to obtain an exclusive worldwide license to
develop, make, use and sell antibody products derived from the research
collaboration. If the option is exercised, the research, option and license
agreement may provide Abgenix with up to approximately $8,000,000 in additional
research fees and milestone payments upon the completion of certain milestones,
including preclinical and clinical trials and receipt of regulatory approval.
Additionally, if a product receives marketing approval from the FDA or an
equivalent foreign agency, the Company is entitled to receive royalties on
future product sales by Schering-Plough.

RESEARCH LICENSE AND OPTION AGREEMENT WITH GENENTECH

In April 1998, Abgenix established a research collaboration with Genentech
to develop antibody products for an undisclosed antigen designated by Genentech
in the field of growth factor modulation. In June 1998, the Company and
Genentech expanded their collaboration to include a second undisclosed antigen
in the field of cardiovascular research. Under the research license and option
agreement, as amended, Abgenix will allow Genentech to use XenoMouse technology
to generate fully human antibodies to the antigen targets. Genentech is
obligated to make payments to Abgenix for performance of research activities.

In addition, the agreement provides Genentech with options, for a limited
time, to enter into product license agreements that provide Genentech with an
exclusive worldwide license, with respect to the antigen in the field of growth
factor modulation, and with respect to the antigen in the field of
cardiovascular research, to develop, make, use and sell antibody products
derived from the research collaboration. If an option is exercised, a product
license agreement may provide Abgenix with up to approximately $5,500,000
million per antigen target in license fees and milestone payments to be made
upon completion of certain milestones, including clinical trials and receipt of
regulatory approvals. Additionally, if a product receives

F-11
<PAGE> 89
ABGENIX, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

marketing approval from the FDA or an equivalent foreign agency, the Company is
entitled to receive royalties on future product sales by Genentech. Genentech
will be responsible for manufacturing, product development and marketing of any
product developed through the collaboration.

The research collaboration with Genentech was superceded by the agreement
signed with Genentech in January 1999. See Note 10.

RESEARCH COLLABORATION AND LICENSE OPTION AGREEMENT WITH MILLENNIUM
BIOTHERAPEUTICS

In July 1998, the Company entered into a research collaboration agreement
with Millennium BioTherapeutics to generate fully human antibodies to an antigen
target in the field of inflammation. In October 1998, the Company entered into a
research, license and option agreement with Millennium BioTherapeutics covering
the same antigen target. The October 1998 agreement provides Millennium
BioTherapeutics with an option, for a limited time, to obtain a license to
develop, make, use and sell antibody products derived from the research
collaboration. If the product license agreement is signed, it may provide
Abgenix with up to approximately $7,500,000 million in license fees and
milestone payments to be made in the future upon completion of certain
milestones, including completion of research, clinical trials and the receipt of
regulatory approvals. Additionally, if a product receives marketing approval
from the FDA or equivalent foreign agency, the Company is entitled to receive
royalties on future product sales by Millennium BioTherapeutics.

In September 1998, the Company entered into a second research collaboration
agreement with Millennium BioTherapeutics covering a second antigen target in
the field of inflammation.

TECHNOLOGY AGREEMENT WITH CENTOCOR

In December 1998, the Company entered into a research collaboration with
Centocor to generate fully human antibodies to antigens in the cardiovascular
field. This agreement allows the partner to conduct limited research using the
XenoMouse technology for a limited time after which the partner may exercise its
option to enter a Research License and Option Agreement.

MEMORANDUM OF UNDERSTANDING WITH RCT

In December 1998, the Company entered into a binding memorandum of
understanding with Research Corporation Technologies ("RCT") to generate fully
human antibodies to a specified antigen, under which the Company has agreed to
perform certain research for RCT and may receive either a percentage of
sublicense income received by RCT or milestone and royalty payments on sales of
products.

4. AVAILABLE-FOR-SALE SECURITIES

All of the Company's available-for-sale securities consist of commercial
paper and U.S. government obligations and are classified as short-term
investments. All investments mature within two years. These investments are
carried at market, which approximates cost. There were no significant unrealized
gains or losses related to these investments.

F-12
<PAGE> 90
ABGENIX, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The following is a summary of available-for-sale securities at fair value,
which approximates amortized cost:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
Commercial paper......................................... $12,038 $ 5,106
U.S. government obligations.............................. 2,881 11,575
------- -------
Total.......................................... $14,919 $16,681
======= =======
</TABLE>

Included in cash and cash equivalents at December 31, 1997, and 1998 are
available-for-sale securities of $4,215,000 and $1,352,000, respectively.
Included in short-term investments at December 31, 1997 and 1998 are
available-for-sale securities of $10,704,000 and $15,329,000, respectively. At
December 31, 1998, the average remaining maturity of the portfolio is less than
12 months.

5. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1998
------ -------
(IN THOUSANDS)
<S> <C> <C>
Furniture, machinery and equipment........................ $2,188 $ 3,118
Leasehold improvements.................................... 4,503 4,270
------ -------
6,691 7,388
Less accumulated depreciation and amortization............ (915) (1,953)
------ -------
$5,776 $ 5,435
====== =======
</TABLE>

Property and equipment financed under capital leases was $1,956,000 at
December 31, 1997 and 1998.

6. COMMITMENTS

LONG-TERM NOTE PAYABLE TO CELL GENESYS

In July 1996, the Company issued a $4,000,000 Convertible Promissory Note
(the "Note") to Cell Genesys which the Company could draw against in order to
pay for services provided by Cell Genesys. As of December 31, 1996, the Company
had drawn $1,757,000 against the Note. Interest accrued at the rate of 6.82% per
annum on the outstanding principal until July 15, 1997, whereupon the accrued
interest was added to the outstanding principal of the Note. The entire
principal and accrued interest amount was due on or before July 14, 2000. In
December 1997, the Company had drawn $4,000,000 against the Note and Cell
Genesys exercised its option to convert the Note into 666,667 shares of Series A
convertible preferred stock at a conversion price of $6.00 per share. Upon the
completion of the Company's initial public offering, in July 1998, these shares
were automatically converted to 666,667 shares of the Company's common stock.

SHORT-TERM PAYABLE TO CELL GENESYS

Until June 30, 1997, the Company reimbursed Cell Genesys for payments made
to third parties on behalf of the Company. At December 31, 1997, the Company
owed $212,000 to Cell Genesys for this reimbursement. The entire amount was paid
to Cell Genesys in 1998.

F-13
<PAGE> 91
ABGENIX, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

LOAN

On January 24, 1997, the Company secured a loan with a bank in the amount
of $4,300,000 in order to finance tenant improvements on its facility in
Fremont, California. The loan matures in January 2001 and bears an annual
interest rate of prime plus 1.0%. The interest rate at December 31, 1998 was
8.75%. The loan is secured by substantially all tangible and intangible assets
of the Company.

CAPITAL LEASE

On March 28, 1997, the Company entered into a lease agreement with a
financing company under which the Company may finance up to $3,000,000 of its
laboratory and office equipment. The lease term is 48 months.

Future principal payments under the loan and minimum payments under the
capital lease are as follows:

<TABLE>
<CAPTION>
CAPITAL TOTAL
LOAN LEASE PAYMENTS
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Year ending December 31,
1999......................................... $ 1,259 $ 594 $ 1,853
2000......................................... 1,258 594 1,852
2001......................................... 105 332 437
------- ------ -------
Total................................ 2,622 1,520 4,142
Less amount representing interest and tax...... -- (263) (263)
------- ------ -------
Present value of future payments............... 2,622 1,257 3,879
Less current portion........................... (1,259) (440) (1,699)
------- ------ -------
Noncurrent portion............................. $ 1,363 $ 817 $ 2,180
======= ====== =======
</TABLE>

The carrying value of the loan approximates fair value at December 31,
1998. The fair value of the loan was estimated using discounted cash flow
analysis, based on the incremental borrowing rates currently available to the
Company for borrowings with similar terms and maturity.

FACILITY LEASE

In October 1996, the Company signed an operating lease commencing February
1, 1997, for its facilities in Fremont, California. The lease expires in January
2007; however, the Company has the option to extend the term through 2016.
Future minimum payments under the noncancelable operating lease at December 31,
1998 are:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Year ending December 31, 1999.......................... $ 891
2000................................................. 923
2001................................................. 955
2002................................................. 987
2003................................................. 1,019
Thereafter........................................... 3,341
------
Total lease payments................................... $8,116
======
</TABLE>

Rent expense was approximately $862,000 for the year ended December 31,
1998.

F-14
<PAGE> 92
ABGENIX, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

COMMITMENT FOR PRODUCT DEVELOPMENT

The Company has contracted with a third party, located in the United
Kingdom, for the manufacture of certain products it uses in its clinical trials.
As of December 31, 1998, the Company has committed approximately $600,000
related to future deliveries of these products. The Company has not recorded
these obligations in its accrued liabilities as no legal liability exits until
the products are delivered to and accepted by the Company.

CHARGE FOR CROSS-LICENSE AND SETTLEMENT

On March 27, 1997, Cell Genesys announced, along with Abgenix, Xenotech and
Japan Tobacco Inc., that it had signed a comprehensive patent cross-license and
settlement agreement with GenPharm that resolved all related litigation and
claims between the parties. As initial consideration for the cross-license and
settlement agreement, Cell Genesys issued a note to GenPharm due September 30,
1998 for $15,000,000 payable by Cell Genesys and convertible into shares of Cell
Genesys common stock. Of this note, $3,750,000 satisfied certain of Xenotech's
obligations under the agreement. Japan Tobacco also made an initial payment.
During 1997, two patent milestones were achieved and Xenotech was obligated to
pay $7,500,000 for each milestone. Xenotech paid $7,500,000 to satisfy the first
milestone and has recorded a payable to GenPharm for the remaining $7,500,000.
The Company recorded a liability of $3,750,000 in its balance sheet at December
31, 1997, representing its share of the Xenotech obligation, since the joint
venture partners are equally obligated to fund the cash requirements of
Xenotech. The Company made the payment of $3,750,000 in November 1998. No
additional payments will accrue under this agreement.

The Company has recognized as a non-recurring charge for cross-license and
settlement, a total of $22,500,000. The full amount of the cross-license and
settlement costs has been recognized in the Company's statement of operations
for the year ended December 31, 1997 because the Company has determined that the
cross-license received by the Company from GenPharm is non-exclusive and has no
alternative future uses for the Company.

Pursuant to Staff Accounting Bulletin 55, Cell Genesys allocated its
portion of the settlement obligation, $11,250,000, to Abgenix since the related
technology was contributed upon formation of Abgenix. The $15,000,000 note
issued by Cell Genesys was recorded as a capital contribution by Abgenix. In
accordance with the joint venture agreement and the equity method of accounting,
Abgenix has also recorded an expense of $11,250,000 representing 50% of the
Xenotech expense.

7. STOCKHOLDERS' EQUITY

COMMON STOCK

Each holder of common stock is entitled to one vote for each share held on
all matters to be voted upon by the stockholders and there are no cumulative
voting rights. Subject to preferences that may be applicable to any outstanding
preferred stock, holders of common stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. In the event of a liquidation, dissolution or winding up of
the Company, holders of common stock would be entitled to share in the Company's
assets remaining after the payment of liabilities and the satisfaction of any
liquidation preference granted to the holders of any outstanding shares of
preferred stock. Holders of common stock have no preemptive or conversion rights
or other subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are, and
the shares of common stock offered by the Company in this offering, when issued
and paid for, will be, fully paid and nonassessable. The rights, preferences and
privileges of the holders of common stock are subject to, and may be adversely
affected by the rights of the holders of shares of any series of preferred
stock, which the Company may designate in the future.

F-15
<PAGE> 93
ABGENIX, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

PREFERRED STOCK

The Board of Directors is authorized, without any further action by the
stockholders, subject to any limitations prescribed by law, without stockholder
approval, from time to time to issue up to an aggregate of 5,000,000 shares of
preferred stock, $0.0001 par value per share, in one or more series, each of
such series to have such rights and preferences, including voting rights,
dividend rights, conversion rights, redemption privileges and liquidation
preferences, as shall be determined by the Board of Directors. The rights of the
holders of common stock will be subject to, and may be adversely affected by,
the rights of holders of any preferred stock that may be issued in the future.
Issuance of preferred stock, while providing desirable flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, a majority of the outstanding voting
stock of the Company. The Company has no present plans to issue any shares of
preferred stock.

1996 INCENTIVE STOCK PLAN

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under
Financial Accounting Standards Board Statement No. 123, "Accounting for
Stock-Based Compensation," ("SFAS 123") requires use of option valuation models
that were not developed for use in valuing employee stock options. Under APB 25,
because the exercise price of the Company's employee stock option equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.

The 1996 Incentive Stock Plan (the "Plan") provides for the granting of
options to purchase common stock to employees, outside directors and consultants
of the Company. Stock purchase rights are granted only to employees or
consultants. The Company grants shares of common stock for issuance under the
Plan at no less than the fair value of the stock (at a price determined by the
Board of Directors for nonqualified options and stock purchase rights). Options
granted under the Plan generally have a term of ten years and vest over four
years at the rate of 25% one year from the grant date and 1/48 monthly
thereafter.

F-16
<PAGE> 94
ABGENIX, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Information with respect to the Plan activity is as follows:

<TABLE>
<CAPTION>
WEIGHTED
SHARES NUMBER OF AVERAGE
AVAILABLE SHARES EXERCISE PRICE
---------- --------- --------------
<S> <C> <C> <C>
Authorized at inception.................. 1,600,000 -- --
Options granted below fair value....... (1,185,100) 1,185,100 $0.60
Options exercised...................... -- (1,192) 0.60
Options canceled....................... 15,002 (15,002) 0.60
---------- --------- -----
Balances at December 31, 1996............ 429,902 1,168,906 0.60
Authorized............................... 791,250 -- --
Options granted below fair value....... (676,644) 676,644 2.42
Options exercised...................... -- (232,350) 1.51
Options canceled....................... 104,774 (104,774) 1.11
---------- --------- -----
Balances at December 31, 1997............ 649,282 1,508,426 1.24
Authorized............................... 500,000 -- --
Options granted........................ (353,551) 353,551 6.82
Options exercised...................... -- (153,268) 0.86
Options canceled....................... 66,522 (66,522) 2.11
---------- --------- -----
Balances at December 31, 1998............ 862,253 1,642,187 $2.44
========== ========= =====
</TABLE>

Exercise prices for options outstanding as of December 31, 1998 ranged from
$0.60 to $12.38. The following table summarizes information about options
outstanding at December 31, 1998:

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
-----------------------------------------
REMAINING NUMBER
EXERCISE NUMBER CONTRACTUAL OF OPTIONS
PRICES OF OPTIONS LIFE, IN YEARS EXERCISABLE
-------- ---------- -------------- -----------
<S> <C> <C> <C>
$ 0.60...................................... 907,781 7.66 431,359
$ 1.00...................................... 3,800 8.31 1,634
$ 2.50...................................... 299,739 8.44 102,989
$ 4.00...................................... 67,491 8.62 33,131
$ 5.00...................................... 24,800 8.95 6,283
$ 6.00...................................... 246,176 9.13 59,116
$ 8.50...................................... 57,000 9.82 1,666
$ 9.00...................................... 2,200 9.56 --
$10.00...................................... 31,200 9.44 1,153
$12.38...................................... 2,000 9.94 83
--------- ---- -------
1,642,187 8.20 637,414
========= ==== =======
</TABLE>

From inception to December 31, 1997, options to purchase a total of
1,861,744 shares of common stock were granted at prices ranging from $0.60 to
$5.00 per share. Deferred compensation of $1,776,000 was recorded for these
option grants based on the deemed fair value of common stock (ranging from $1.20
to $6.50 per share). In the first quarter of 1998, the Company granted options
to purchase 260,175 shares of common stock at $6.00 per share for which deferred
compensation of approximately $520,000 was recorded based on the deemed fair
value of common stock at $8.00 per share. During the second, third and fourth
quarters of 1998, the Company granted an additional 51,376 options to employees
to purchase shares of common stock at prices ranging from $5.00 to $10.00 per
share. No deferred compensation expense was recorded as the options were granted
at the then current market price of the

F-17
<PAGE> 95
ABGENIX, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

stock on the date of the grant. The Company amortized $528,000 and $598,000 of
the deferred compensation balance during the years ended December 31, 1997 and
1998, respectively.

Additionally, in the fourth quarter of 1998, the Company granted 42,000
options to purchase shares of common stock at prices ranging from $8.50 to
$12.38 per share to two independent consultants with vesting periods ranging
from one to two years. Compensation expense of $15,000 was recorded for the
services performed through December 31, 1998, and the Company expects to record
additional compensation expense as the services are provided.

PRO FORMA INFORMATION

Pro forma information regarding net loss and net loss per share is required
by SFAS 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following assumptions for 1996, 1997 and 1998,
respectively: risk-free interest rate of 6.65%, 6.46% and 4.67%; no dividend
yield in 1996, 1997 or 1998; volatility factor of 0.68, 0.67 and 0.78; and an
expected life of the option of five years in 1996, 1997 and 1998. These same
assumptions were applied in the determination of the option values related to
stock options granted to non-employees, except for the option life for which 10
years, the term of the option, was used. The value has been recorded in the
financial statements.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

The weighted-average fair values of options granted during the years ended
December 31, 1996, 1997 and 1998 were $0.87, $3.00 and $6.82 per share. All
options granted in 1996 and 1997 were granted at exercise prices below the
deemed fair value of the underlying common stock. All options granted in 1998
were granted at exercise prices at the then current market value of the stock.
The following table illustrates what net loss would have been had the Company
accounted for its stock-based awards under the provisions of SFAS 123. Pro forma
amounts may not be representative of future years.

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1998
------------ ----------
(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net loss:
As reported................................ $ (35,880) $(16,827)
---------- --------
Pro forma.................................. $ (36,103) $(17,160)
---------- --------
Net loss per share:
As reported................................ $(1,032.70) $ (3.00)
---------- --------
Pro forma.................................. $(1,039.11) $ (3.06)
---------- --------
</TABLE>

STOCK PLANS

In March 1998, the board of directors adopted the 1998 Employee Stock
Purchase Plan, the 1998 Director Option Plan and approved the amended and
restated 1996 Incentive Stock Plan.

F-18
<PAGE> 96
ABGENIX, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

250,000 shares of common stock have been reserved under both the 1998 Employee
Stock Purchase Plan and the 1998 Director Option Plan.

The Employee Stock Purchase Plan also provides for an annual increase,
commencing in 1999, in the number of shares reserved for issuance under the
Employee Stock Purchase Plan equal to the lesser of 250,000, 1% of the Company's
outstanding capitalization or a lesser amount determined by the Board, such that
the maximum number of shares which could be reserved under the Employee Stock
Purchase Plan over its term would be 2,500,000 shares.

WARRANTS

In connection with the loan guaranteed by Cell Genesys in January 1997, the
Company issued a warrant to purchase 71,667 shares of common stock at an
exercise price of $6.00 per share to Cell Genesys. The warrants are exercisable
immediately and expire three years from issuance.

In connection with the loan guaranteed by Cell Genesys in March 1997, the
Company issued a second warrant to purchase 50,000 shares of common stock at an
exercise price of $6.00 per share to Cell Genesys. The terms for exercise and
expiration are the same as the January 1997 warrants.

The fair value of the above warrants was insignificant for accounting
purposes.

8. OTHER RELATED PARTY TRANSACTIONS

Through July 31, 1997, pursuant to the terms of the Service Agreement with
Cell Genesys, Cell Genesys provided Abgenix certain administrative services. In
addition, beginning July 15, 1996, the Company leased equipment from Cell
Genesys on a month-to-month basis pursuant to the Stock Purchase and Transfer
Agreement. Total fees incurred under the Services Agreement and the Stock
Purchase and Transfer Agreement were approximately $1,816,000, $825,000 and
$383,000 in 1996, 1997 and 1998, respectively. The Company chose to draw down on
its Promissory Note with Cell Genesys in order to pay for the fees incurred
through December 1997. In December 1997, the entire principal amount of the
Promissory Note was converted into preferred stock, which subsequently was
automatically converted to common stock upon the completion of the Company's
initial public offering of its common stock.

In addition, the Company had an agreement with Cell Genesys under which the
Company provided immunization services as requested by Cell Genesys. Under this
agreement, the Company recognized revenue of $111,000 in 1997.

On December 31, 1996, the Company purchased Xenotech's remaining laboratory
equipment. The Company paid $154,000, which approximated net book value at the
time of purchase.

In July 1996, the Company assumed from Cell Genesys a $100,000 loan issued
to a Director and officer. The loan did not bear interest and was evidenced by a
promissory note secured by the common stock of Cell Genesys owned by the
Director and officer. The note was repaid in September 1997.

In May 1997, the Company granted a 10-year loan for $100,000 to an officer
of the Company. Interest is accrued per annum at 6.6% beginning May 2002. The
loan is payable in five equal installments beginning June 2003.

On February 27, 1998, the Chief Financial Officer and the Company entered
into a Relocation Loan Agreement pursuant to which Abgenix loaned $100,000 to
the Chief Financial Officer in exchange for a promissory note secured by a deed
of trust. No interest accrues on the loan until June 30, 2003.

F-19
<PAGE> 97
ABGENIX, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

9. INCOME TAXES

As of December 31, 1998, the Company had federal net operating loss
carryforwards of approximately $36,500,000. The Company also had federal
research and development tax credit carryforwards of approximately $1,100,000 as
of December 31, 1998. The net operating loss and credit carryforwards will
expire in the years 2011 through 2018, 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.

Significant components of the Company's deferred tax assets for federal and
state income taxes as of December 31, 1998 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............. $ 5,400 $ 12,900
Research credit carryforwards................ 400 1,500
Capitalized research and development......... 200 1,600
Capitalized license agreements............... 8,000 6,000
Deferred partnership losses.................. -- 1,600
Other, net................................... 400 100
-------- --------
Total deferred tax assets............ 14,400 23,700
Valuation allowance............................ (14,400) (23,700)
-------- --------
Net deferred tax assets.............. $ -- $ --
======== ========
</TABLE>

The net valuation allowance increased by $13,500,000 during the year ended
December 31, 1997. Deferred tax assets relate primarily to net operating loss
carryforwards and to the capitalization of the GenPharm cross-license and
settlement obligation of $22,500,000, which was expensed for accounting
purposes.

10. SUBSEQUENT EVENTS (UNAUDITED)

In January 1999, the Company entered into a research license and option
agreement with AVI BioPharma ("AVI") to generate fully human antibodies to a
specified antigen. This agreement allows the partner to conduct research and
provides the partner with an option, for a limited time, to enter into a product
license agreement at a future date. If the product license agreement is signed,
it may provide the Company with additional license fees, milestone payments and
royalties.

In January 1999, the Company entered into a multi-antigen research license
and option agreement with Genentech. Under the agreement, the Company granted
Genentech a license to utilize XenoMouse technology in its antibody product
research efforts and an option to obtain product licenses for up to ten antigen
targets, but not more than two in any one year, over the agreement's six year
term. Included in the ten are the two previously identified antigen targets
under the now superceded research license and option agreement at the new
option, license fee and milestone payment levels. The agreement can be renewed
by Genentech for up to an additional four targets over a subsequent three year
period. Genentech acquired 495,356 shares of the Company's common stock for an
aggregate purchase price of $8,000,000. To renew the agreement at the end of the
sixth year, Genentech must purchase an additional $2,500,000 of the Company's
common stock at a 50% premium to the then current market price.

F-20
<PAGE> 98

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors
Xenotech, LP

We have audited the accompanying balance sheets of Xenotech, LP (a
development stage enterprise) as of December 31, 1997 and 1998, and the related
statements of operations, partners' capital and cash flows for each of the three
years in the period ended December 31, 1998 and for the period from inception
(June 12, 1991) to December 31, 1998. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Xenotech, LP (a development
stage enterprise) at December 31, 1997 and 1998 and the results of its
operations and its cash flows for each of the three years ended December 31,
1998 and for the period from inception (June 12, 1991) to December 31, 1998, in
conformity with generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

Palo Alto, California
January 22, 1999

F-21
<PAGE> 99

XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)

BALANCE SHEETS
(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
-------- --------
<S> <C> <C>
Cash........................................................ $ 58 $ 94
Short-term investments...................................... 3,750 --
Prepaid expenses and other current assets................... 11 11
Receivable from partners.................................... 3,750 114
-------- --------
Total current assets.............................. $ 7,569 $ 219
======== ========

LIABILITIES AND PARTNERS' CAPITAL
Accrued liabilities......................................... $ 56 $ 67
Payable related to cross-license and settlement agreement... 7,500 --
-------- --------
Total current liabilities......................... 7,556 67
Partners' capital:
Paid-in capital........................................... 60,746 61,707
Deficit accumulated during the development stage.......... (60,733) (61,555)
-------- --------
Total partners' capital........................... 13 152
-------- --------
Total liabilities and partners' capital........... $ 7,569 $ 219
======== ========
</TABLE>

See accompanying notes.
F-22
<PAGE> 100

XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
YEAR ENDED DECEMBER 31, (JUNE 12, 1991) TO
----------------------------- DECEMBER 31,
1996 1997 1998 1998
------- -------- ------ ------------------
<S> <C> <C> <C> <C>
Research and license revenues from
partners................................... $ 1,912 $ 272 $ 985 $ 11,289
Expenses:
Research and development................... 8,240 2,396 1,695 48,805
General and administrative................. 307 98 82 1,721
Cross-license and settlement expense....... -- 22,470 30 22,500
------- -------- ------ --------
Total expenses..................... 8,547 24,964 1,807 73,026
Interest income.............................. 21 12 -- 182
------- -------- ------ --------
Net loss..................................... $(6,614) $(24,680) $ (822) $(61,555)
======= ======== ====== ========
</TABLE>

See accompanying notes.
F-23
<PAGE> 101

XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENT OF PARTNERS' CAPITAL
(IN THOUSANDS)

<TABLE>
<CAPTION>
LIMITED PARTNERS
------------------------ TOTAL
GENERAL JAPAN PARTNERS'
PARTNER TOBACCO INC. ABGENIX CAPITAL
------- ------------ -------- ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1995..................... $ 19 $ 368 $ 368 $ 755
Capital contributed............................ 63 3,114 3,115 6,292
Net loss....................................... (66) (3,274) (3,274) (6,614)
----- -------- -------- --------
Balance at December 31, 1996..................... 16 208 209 433
Capital contributed............................ 230 12,015 12,015 24,260
Net loss....................................... (246) (12,217) (12,217) (24,680)
----- -------- -------- --------
Balance at December 31, 1997..................... -- 6 7 13
Capital contributed............................ 9 476 476 961
Net loss....................................... (9) (406) (407) (822)
----- -------- -------- --------
Balance at December 31, 1998..................... $ -- $ 76 $ 76 $ 152
===== ======== ======== ========
</TABLE>

See accompanying notes.
F-24
<PAGE> 102

XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
YEAR ENDED DECEMBER 31, (JUNE 12, 1991) TO
------------------------------ DECEMBER 31,
1996 1997 1998 1998
------- -------- ------- ------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................... $(6,614) $(24,680) $ (822) $(61,555)
Adjustments to reconcile net loss to net
cash used in operating activities:
Charge for cross-license and settlement... -- 7,485 -- 7,485
Depreciation and amortization expense..... 74 8 -- 325
Changes in certain assets and liabilities:
Decrease (increase) in prepaid and other
current assets......................... 108 181 -- (11)
Decrease (increase) in receivable from
partner................................ 30 (3,750) 3,636 (114)
Increase (decrease) in accrued
liabilities............................ (298) (3) 11 67
Decrease in deferred revenue.............. (250) -- -- --
Increase (decrease) in payable for
cross-license settlement............... -- 7,500 (7,500) --
------- -------- ------- --------
Net cash used in operating activities....... (6,950) (13,259) (4,675) (53,803)
------- -------- ------- --------
CASH USED IN INVESTING ACTIVITIES
Capital expenditures........................ -- -- -- (325)
Purchases (sales) of short-term
investments............................... -- (3,750) 3,750 --
------- -------- ------- --------
Net cash provided by (used in) investing
activities................................ -- (3,750) 3,750 (325)
------- -------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions....................... 6,292 16,775 961 54,222
------- -------- ------- --------
Net increase (decrease) in cash and cash
equivalents............................... (658) (234) 36 94
Cash and cash equivalents at beginning of
period.................................... 950 292 58 --
------- -------- ------- --------
Cash and cash equivalents at end of
period.................................... $ 292 $ 58 $ 94 $ 94
======= ======== ======= ========
</TABLE>

See accompanying notes.
F-25
<PAGE> 103

XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS

Xenotech, LP, a California limited partnership and a development stage
enterprise (the "Partnership"), was organized on June 12, 1991 pursuant to a
Limited Partnership Agreement between Xenotech, Inc. (the "General Partner"),
Cell Genesys, Inc. ("Cell Genesys") and JT Immunotech USA, Inc., the predecessor
company of JT America, Inc. and a medical subsidiary of Japan Tobacco, Inc. ("JT
America"), (the "Limited Partners"), to develop genetically modified strains of
mice which can produce fully human monoclonal antibodies, and to commercialize
products generated therefrom. On July 15, 1996, Cell Genesys transferred its
partnership interest to its subsidiary, Abgenix Inc. ("Abgenix").

The General Partner must make cash contributions as necessary to maintain a
minimum capital balance of 1% of the total positive capital account balances for
the Partnership. Since July 1995, net losses are allocated 49.5% to Abgenix,
49.5% to JT America and 1% to the General Partner. Prior to July 1995, operating
expenses were allocated 99% to JT America and 1% to the General Partner until JT
America had been allocated, on a cumulative basis, partnership losses and
deductions in an amount equal to the sum of JT America's total research support
capital contributions and 50% of JT America's initial capital contribution.
Since 1992, interest income has been allocated 49.5% to Abgenix, 49.5% to JT
America and 1% to the General Partner. No allocation of expenses and losses
shall create a deficit in the Limited Partners' capital accounts. Such item, to
the extent it would increase or create such a deficit, shall be allocated 100%
to the General Partner. Cash distributions are generally to be made in
accordance with the percentage interests.

See related discussion in Note 3 -- Related Party Transactions.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REVENUE RECOGNITION

Research revenues from partners or their affiliates are recorded when
earned as defined under the terms of the respective collaboration agreements.
Payments received in advance under these agreements are recorded as deferred
revenue until earned (see Notes 3 and 4).

DEPRECIATION

The Partnership depreciates equipment using the straight-line method over
the estimated useful lives of the assets, generally four years.

INCOME TAXES

The financial statements include no provision for income taxes as
Partnership income or loss is reported in the Partners' separate income tax
returns.

USE OF ESTIMATES

3. RELATED PARTY TRANSACTIONS

Abgenix provides contract research and development services to the
Partnership to develop genetically modified strains of mice, which can produce
fully human monoclonal antibodies pursuant to a

F-26
<PAGE> 104
XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

collaboration agreement under which Abgenix receives certain minimum payments.
During the years ended 1996, 1997 and 1998, the Partnership paid Abgenix
$1,200,000, $2,300,000, $1,656,000, respectively ($42,856,000 for the period
from inception to December 31, 1998) to perform research.

In January 1994, the Partnership, Abgenix and JT America executed an
agreement creating the Xenotech Division within Abgenix to conduct ongoing
preclinical research of fully human monoclonal antibodies derived from the
genetically modified strains of mice. Abgenix and Japan Tobacco Inc. ("Japan
Tobacco"), the indirect parent company of JT America, are providing significant
funding to the Partnership for research funding and in consideration of the
Partnership granting marketing rights for specified products in certain
territories to Abgenix and Japan Tobacco (see Note 4). The Partnership
reimbursed Abgenix for the costs of the operation of the Xenotech Division.
During 1995 and 1996, the Partnership recognized expenses of $5,500,000 and
$5,500,000, respectively ($13,300,000 for the period from inception to December
31, 1997) which were paid to Abgenix for the costs of operating the Xenotech
Division.

Pursuant to an agreement dated June 28, 1996, the Xenotech Division was
terminated as of December 31, 1996. In conjunction with this agreement, Xenotech
paid Abgenix $1,200,000 to satisfy Xenotech's obligations under the Xenotech
Division Research Agreement. In addition, Abgenix purchased Xenotech's capital
equipment at net book value, and was assigned Xenotech's note receivable, which
was reflected as a reduction of capital contributions.

4. RESEARCH REVENUES

The Partnership recorded research and license revenues of $4,747,000,
$1,912,000 and $272,000 and $985,000 for the years ended December 31, 1995,
1996, 1997 and 1998, respectively. The research revenues were derived from
research payments made by Japan Tobacco and Abgenix. Of research payments made
by Japan Tobacco and Abgenix, $250,000 was deferred revenue at December 31,
1995.

5. CROSS-LICENSE AND SETTLEMENT AGREEMENT

On March 27, 1997, Cell Genesys announced, along with Abgenix, Xenotech and
Japan Tobacco, that it had signed a comprehensive patent cross-license and
settlement agreement with GenPharm, International, Inc. ("GenPharm"), a
subsidiary of Medarex, Inc., that resolved all related litigation and claims
between the parties. As initial consideration for the cross-license and
settlement agreement, Cell Genesys issued a note to GenPharm due September 30,
1998 for $15,000,000 payable by Cell Genesys and convertible into shares of Cell
Genesys common stock. Of this note, $3,750,000 satisfied certain of Xenotech's
obligations under the agreement. Japan Tobacco also made an initial payment.
During 1997, two patent milestones were achieved and Xenotech was obligated to
pay $7,500,000 for each milestone. Xenotech paid $7,500,000 to satisfy the first
milestone and recorded a payable to GenPharm for the remaining $7,500,000, which
was paid in November 1998. No additional payments will accrue under this
agreement. Xenotech has recognized as a non-recurring charge for cross-license
and settlement, a total of $22,500,000.

F-27
<PAGE> 105

[ARTWORK]

ALL OF OUR PRODUCT CANDIDATES ARE AT EARLY STAGES OF RESEARCH AND DEVELOPMENT
AND HAVE NOT BEEN APPROVED FOR SALE IN THE UNITED STATES BY THE UNITED STATES
FOOD AND DRUG ADMINISTRATION, AND THEREFORE, NO SALES HAVE BEEN GENERATED.
APPROVAL OF OUR PRODUCT CANDIDATES BY THE FDA OR CORRESPONDING INTERNATIONAL
REGULATORY AUTHORITIES COULD TAKE SEVERAL YEARS. REGULATORY APPROVAL MAY NEVER
BE OBTAINED.
<PAGE> 106
DESCRIPTION OF GRAPHICS

INSIDE FRONT COVER:

HEADER "XenoMouse Technology"

SUBHEADER 1: "XenoMouse has reached the goal of eliminating mouse protein from
antibody therapeutics"

This diagram depicts four Y-shaped figures, extending horizontally across
the page, which represent antibodies produced by four alternate methods. From
left to right, the figures are labeled "Ordinary Mouse," "Chimeric,"
"Humanized" and "Fully Human," with arrows connecting the diagrams. A legend
indicates that the color green represents mouse protein, while the color yellow
represents human protein. The left-most Y-shaped figure is entirely green and
is labeled "100% Mouse Protein." The next figure from the left is yellow with a
thick green stripe on each upper arm of the "Y" and is labeled "34% mouse
protein." The following figure from the left is yellow with three small green
stripes on each upper arm of the "Y" and is labeled "10% mouse protein." The
right-most figure is completely yellow and is labeled "100% Human Protein."

SUBHEADER 2: "XenoMouse Technology Collaborations (As of January 31, 1999)"

This is a depiction of the Table found on page 44 of the Prospectus.

PAGE 34

HEADER: "ANTIBODY STRUCTURE"

This illustration shows a Y-shaped antibody structure composed of two
"Heavy Chains" and two "Light Chains." The heavy chains form the base and
branches of the "Y," while the shorter light chains only run parallel to the
arms of the "Y." A legend indicates that shaded areas represent "Constant
Domain," and unshaded areas represent "Variable Domain." The top halves of the
light chains are unshaded, while the remainder is shaded. The upper tips of the
heavy chains are unshaded, while the remainder is shaded.

PAGE 35

Four gene segments, represented by numerically labeled squares within
rectangles, are labeled "DNA Before Recombination (Heavy Chain)." One arrow
from a particular section of each of the four segments points toward a combined
segment and demonstrates how recombination produces an antibody gene. The
"Antibody Gene Assembled By Recombination" is represented by a rectangle
containing four numerically labeled squares. An arrow leads from this antibody
gene to a Y-shaped antibody, labeled "Antibody Heavy Chain Produced By Gene."

PAGE 37

HEADER: "EVOLUTION OF ANTIBODY TECHNOLOGIES"

This diagram depicts four Y-shaped figures, extending horizontally across
the page, which represent antibodies produced by four alternate methods. From
left to right, the figures are labeled "Ordinary Mouse," "Chimeric,"
"Humanized" and "XenoMouse," with arrows connecting the labels. A legend
indicates that shaded areas represent mouse protein while unshaded areas
represent human protein. The left-most Y-shaped figure is entirely shaded and
below is labeled "100% Mouse Protein." The next figure from the left is
unshaded with a thick shaded stripe on each upper arm of the "Y" and below is
labeled "34% mouse protein." The following figure from the left is unshaded
with three small shaded stripes on each upper arm of the "Y" and below is
labeled "10% mouse protein." The right-most figure is completely unshaded and
below is labeled "100% Human Protein."

INSIDE BACK COVER:

HEADER "Abgenix Proprietary Product Pipeline (As of January 31, 1999)"

This chart is a horizontal bar graph where each of six bars represents
the stage of development of each of four products with respect to each of the
medical conditions that they treat.

The top line of the chart lays out the various stages, from left to
right, as follows: "Research"; "Preclinical"; "Phase I"; "Phase I/II"; "Phase
II"; "Phase III."

From top to bottom, the six bars are as follows:

1. The "ABX-CBL : GVHD" bar extends through the "Phase II" region.
2. The "ABX-IL8 : Psoriasis" bar extends into the "Phase I/II"
region.
3. The "ABX-IL8 : Rheumatoid Arthritis" bar extends into the "Phase
I" region.
4. The "ABX-EGF : Various Cancers" bar extends through the
"Preclinical" region.
5. The "ABX-RB2 : Transplant Rejection" bar extends into the
"Preclinical" region.
6. The "ABX-RB2 : Autoimmune Disease" bar extends into the
"Preclinical" region.

<PAGE> 107

LOGO
<PAGE> 108

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth all fees and expenses payable by Abgenix in
connection with the registration of the common stock hereunder. All of the
amounts shown are estimates except for the SEC registration fee, NASD filing fee
and the Nasdaq National Market listing fees.

<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
-----------
<S> <C>
SEC Registration Fee........................................ $ 14,986.00
NASD Filing Fee............................................. 5,891.00
Nasdaq National Market Listing Fee.......................... 17,500.00
Blue Sky Qualification Fees and Expenses.................... 5,000.00
Printing and Engraving Expenses............................. 150,000.00
Legal Fees and Expenses..................................... 150,000.00
Accounting Fees and Expenses................................ 75,000.00
Transfer Agent and Registrar Fees and Expenses.............. 10,000.00
Miscellaneous Expenses...................................... 71,623.00
-----------
Total............................................. $500,000.00
===========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law allows for the
indemnification of officers, directors and any corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act. Our Amended and Restated Certificate of Incorporation and our
Amended and Restated Bylaws provide for indemnification of our directors,
officers, employees and other agents to the extent and under the circumstances
permitted by the Delaware General Corporation Law. We have also entered into
agreements with our directors and executive officers that require Abgenix among
other things to indemnify them against certain liabilities that may arise by
reason of their status or service as directors and executive officers to the
fullest extent permitted by Delaware law. We have also purchased directors and
officers liability insurance, which provides coverage against certain
liabilities including liabilities under the Securities Act.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

(a) Since our incorporation (June 24, 1996), we have issued and sold the
following unregistered securities:

(1) On July 15, 1996, we issued 1,691,667 shares of series A senior
convertible preferred stock to Cell Genesys in exchange for $10.0 million.

(2) On July 15, 1996, we issued 2,058,333 shares of series 1
subordinated convertible preferred stock to Cell Genesys, and in exchange,
Cell Genesys contributed research, development and manufacturing
technology, as well as patents and other intellectual property specific to
the antibody therapy programs to be pursued by Abgenix, including Cell
Genesys' interest in its joint venture with Japan Tobacco.

(3) On July 15, 1996, Abgenix, in exchange for a loan in the principal
amount of up to $4,000,000, issued a convertible promissory note to Cell
Genesys convertible at an exercise price per share of $6.00 into up to
666,667 shares of series A convertible preferred stock.

II-1
<PAGE> 109

(4) From July 15, 1996 to October 22, 1998, we granted options to
purchase 2,156,295 shares of common stock to employees, directors and
consultants under the 1996 Plan at exercise prices ranging from $0.60 to
$10.00 per share. Of the 2,156,295 shares granted, 1,622,008 remain
outstanding, 349,023 shares of common stock have been purchased pursuant to
exercises of stock options or stock purchase rights under the 1996 Plan and
185,264 shares have been canceled and returned to the 1996 Plan.

(5) On January 23, 1997 and March 27, 1997, we issued two warrants to
purchase an aggregate of 121,667 shares of series A senior convertible
preferred stock (convertible into 121,667 shares of common stock) to Cell
Genesys with a weighted average exercise price per share of $6.00.

(6) On December 23, 1997, we issued 3,267,685 shares of series B
preferred stock to 29 accredited or institutional purchasers at a purchase
price per share of $6.50. In connection with and contemporaneous to this
transaction the 1,691,667 shares of series A senior convertible preferred
stock, the 2,058,333 shares of series 1 subordinated convertible preferred
stock and the $4,000,000 convertible promissory note issued to Cell
Genesys, described above, were all converted into an aggregate 4,416,667
shares of series A convertible preferred stock.

(7) On January 12, 1998, we issued 160,000 shares of series C
preferred stock to Pfizer at a per share purchase price of $8.00. This
issuance was in connection with a collaborative arrangement entered into
between Abgenix and Pfizer.

(8) On January 27, 1999, we issued 495,356 of common stock to
Genentech at a per share purchase price of $16.15. This issuance was in
connection with a multi-antigen research license and option agreement
entered into between Abgenix and Genentech.

The sales and issuances of securities in the transactions described above
were deemed to be exempt from registration under the Securities Act in reliance
upon Section 4(2) of the Securities Act, Regulation D promulgated thereunder, or
Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions
by an issuer not involving any public offering or transactions pursuant to
compensatory benefit plans and contracts relating to compensation as provided
under Rule 701. The recipients of securities in each transaction represented
their intentions to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the securities issued in such transactions. All
recipients had adequate access, through their relationship with Abgenix, to
information about Abgenix.

(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<C> <S>
*1.1 Form of Underwriting Agreement.
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.
*5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1(1) Form of Indemnification Agreement between Abgenix and each
of its directors and officers.
10.2(1) 1996 Incentive Stock Plan and form of agreement thereunder.
10.3(1) 1998 Employee Stock Purchase Plan and form of agreement
thereunder.
10.4(1) 1998 Director Option Plan and form of agreement thereunder.
10.5(1) Warrant dated January 23, 1997 exercisable for shares of
Series A Preferred Stock.
10.6(1) Warrant dated March 27, 1997 exercisable for shares of
Series A Preferred Stock.
</TABLE>

II-2
<PAGE> 110
<TABLE>
<C> <S>
10.7(3) Joint Venture Agreement dated June 12, 1991 between Cell
Genesys and JT Immunotech USA Inc.
10.7A(6) Amendment No. 1 dated January 1, 1994 to Joint Venture
Agreement.
10.7B(9) Amendment No. 2 dated June 28, 1996 to Joint Venture
Agreement.
10.8(3) Collaboration Agreement dated June 12, 1991 among Cell
Genesys, Xenotech, Inc. and JT Immunotech USA Inc.
10.8A(5) Amendment No. 1 dated June 30, 1993 to Collaboration
Agreement.
10.8B(13) Amendment No. 2 dated January 1, 1994 to Collaboration
Agreement.
10.8C(7) Amendment No. 3 dated July 1, 1995 to Collaboration
Agreement.
10.8D(9) Amendment No. 4 dated June 28, 1996 to Collaboration
Agreement.
10.8E(2) Amendment No. 5 dated November 1997 to Collaboration
Agreement.
10.9(3) Limited Partnership Agreement dated June 12, 1991 among Cell
Genesys, Xenotech, Inc. and JT Immunotech USA Inc.
10.9A(6) Amendment No. 2 dated January 1, 1994 to Limited Partnership
Agreement.
10.9B(8) Amendment No. 3 dated July 1, 1995 to Limited Partnership
Agreement.
10.9C(10) Amendment No. 4 dated June 28, 1996 to Limited Partnership
Agreement.
10.10(4) Field License dated June 12, 1991 among Cell Genesys, JT
Immunotech USA Inc. and Xenotech, L.P.
10.10A(10) Amendment No. 1 dated March 22, 1996 to Field License.
10.10B(10) Amendment No. 2 dated June 28, 1996 to Field License.
10.11(3) Expanded Field License dated June 12, 1991 among Cell
Genesys, JT Immunotech USA Inc. and Xenotech, L.P.
10.11A(10) Amendment No. 1 dated June 28, 1996 to Expanded Field
License.
10.12(2) Amended and Restated Anti-IL-8 License Agreement dated March
19, 1996 among Xenotech, L.P., Cell Genesys and Japan
Tobacco Inc.
10.13(9) Master Research License and Option Agreement dated June 28,
1996 among Cell Genesys, Japan Tobacco Inc. and Xenotech,
L.P.
10.13A(2) Amendment No. 1 dated November 1997 to the Master Research
License and Option Agreement.
10.14(2) Stock Purchase and Transfer Agreement dated July 15, 1996 by
and between Cell Genesys and Abgenix.
10.15(1) Governance Agreement dated July 15, 1996 between Cell
Genesys and Abgenix.
10.15A(1) Amendment No. 1 dated October 13, 1997 to the Governance
Agreement.
10.15B(1) Amendment No. 2 dated December 22, 1997 to the Governance
Agreement.
10.16(1) Tax Sharing Agreement dated July 15, 1996 between Cell
Genesys and Abgenix.
10.17(2) Gene Therapy Rights Agreement effective as of November 1,
1997 between Abgenix and Cell Genesys.
10.18(2) Patent Assignment Agreement dated July 15, 1996 by Cell
Genesys in favor of Abgenix.
10.19(11) Lease Agreement dated July 31, 1996 between John Arrillaga,
Trustee, or his Successor Trustee, UTA dated 7/20/77
(Arrillaga Family Trust) as amended, and Richard T. Peery,
Trustee, or his Successor Trustee, UTA dated 7/20/77
(Richard T. Peery Separate Property Trust) as amended, and
Abgenix.
10.20(1) Loan and Security Agreement dated January 23, 1997 between
Silicon Valley Bank and Abgenix.
10.21(1) Master Lease Agreement dated March 27, 1997 between
Transamerica Business Credit Corporation and Abgenix.
</TABLE>

II-3
<PAGE> 111

<TABLE>
<C> <S>
10.22(2) License Agreement dated February 1, 1997 between Ronald J.
Billing, Ph.D. and Abgenix.
10.23(12) Release and Settlement Agreement dated March 26, 1997 among
Cell Genesys, Abgenix, Xenotech, L.P., Japan Tobacco Inc.
and GenPharm International, Inc.
10.24(12) Cross License Agreement effective as of March 26, 1997,
among Cell Genesys, Abgenix, Xenotech, L.P., Japan Tobacco
Inc. and GenPharm International, Inc.
10.25(12) Interference Settlement Procedure Agreement, effective as of
March 26, 1997, among Cell Genesys, Abgenix, Xenotech, L.P.,
Japan Tobacco Inc. and GenPharm International, Inc.
10.26(2) Agreement dated March 26, 1997 among Xenotech, L.P.,
Xenotech, Inc., Cell Genesys, Abgenix, Japan Tobacco Inc.
and JT Immunotech USA Inc.
10.27(2) Collaborative Research Agreement dated December 22, 1997
between Pfizer, Inc. and Abgenix.
10.27A(16) Amendment No. 1 dated May 26, 1998 to Collaborative Research
Agreement between Abgenix and Pfizer, Inc.
10.27B(16) Amendment No. 2 dated October 22, 1998 to Collaborative
Research Agreement between Abgenix and Pfizer, Inc.
10.28(1) Amended and Restated Stockholder Rights Agreement dated
January 12, 1998 among Abgenix and certain holders of
Abgenix's capital stock.
10.29(2) Collaborative Research Agreement effective as of January 28,
1998 between Schering-Plough Research Institute and Abgenix.
+10.29A Amendment No. 2 effective as of January 28, 1999 to
Collaborative Research Agreement between Schering-Plough
Research Institute and Abgenix.
10.30(1) Excerpts from the Minutes of a Meeting of the Board of
Directors of Abgenix, dated October 23, 1996.
10.31(1) Excerpts from the Minutes of a Meeting of the Board of
Directors of Abgenix, dated October 22, 1997.
10.32(2) Exclusive Worldwide Product License dated November 1997
between Xenotech, L.P. and Abgenix.
10.33(2) Research License and Option Agreement effective as of April
6, 1998 between Abgenix and Genentech, Inc.
10.33A(2) Amendment No. 1 effective as of June 18, 1998 to Research
License and Option Agreement between Abgenix and Genentech,
Inc.
10.34(14) Research Collaboration Agreement dated July 15, 1998 between
Millennium BioTherapeutics, Inc. and Abgenix.
10.35(16) Research Collaboration Agreement dated September 29, 1998
between Millennium BioTherapeutics, Inc. and Abgenix.
10.35A(17) Amendment No. 1 effective as of November 29, 1998 to the
Research Collaboration Agreement between Millennium
BioTherapeutics, Inc. and Abgenix.
10.36(16) Research License and Option Agreement dated October 30, 1998
between Millennium BioTherapeutics, Inc. and Abgenix.
*+10.37 Research Collaboration Agreement dated December 22, 1998
between Centocor, Inc. and Abgenix.
10.38(16) Memorandum of Understanding between Research Corporation
Technologies, Inc. and Abgenix.
10.39(15) Registration Rights Agreement dated November 18, 1998
between certain holders of Abgenix capital stock and
Abgenix.
10.40(16) Research License and Option Agreement dated January 4, 1999
between AVI BioPharma, Inc. and Abgenix.
</TABLE>

II-4
<PAGE> 112

<TABLE>
<C> <S>
*10.41 Registration Rights Agreement dated January 27, 1999 between
Genentech and Abgenix.
+10.42 Multi-Antigen Research License and Option Agreement dated
January 27, 1999 between Genentech and Abgenix.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
*23.2 Consent of Counsel (included in Exhibit 5.1).
*24.1 Power of Attorney.
*27.1 Financial Data Schedule.
</TABLE>

- ---------------

* Previously filed.

+ Confidential treatment requested for portions of these exhibits. Omitted
portions have been filed separately with the Commission.

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

(2) Incorporated by reference to the same exhibit filed with Abgenix's
Registration Statement on Form S-1 (File No. 333-49415), portions of which
have been granted confidential treatment.

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

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

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

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

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

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

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

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

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

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

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

(14) Incorporated by reference to the same exhibit filed with Abgenix's Current
Report on Form 8-K filed with the Commission on July 17, 1998, portions of
which have been granted confidential treatment.

(15) Incorporated by reference to the same exhibit filed with Abgenix's Current
Report on Form 8-K filed with the Commission on November 24, 1998.

(16) Incorporated by reference to the same exhibit filed with Abgenix's
Registration Statement on Form S-1 (File No. 333-70631), portions for which
Abgenix has requested confidential treatment.

(17) Incorporated by reference to the same exhibit filed with Abgenix's
Registration Statement on Form S-1 (File No. 333-70631).

II-5
<PAGE> 113

(b) Financial Statement Schedules:

All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.

ITEM 17. UNDERTAKINGS

Insofar as indemnification by Abgenix for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of Abgenix, we have been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Abgenix of expenses incurred or paid by a director, officer or controlling
person of Abgenix in the successful defense of any action, suit or proceeding)
is asserted by a director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of our counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by Abgenix is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

We hereby undertake that:

(a) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by Abgenix pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.

(b) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-6
<PAGE> 114

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
Abgenix has duly caused this Amendment No. 1 to the Registration Statement on
Form S-1 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fremont, State of California, on the 3rd day of
February, 1999.

ABGENIX, INC.

By: /s/ R. SCOTT GREER
------------------------------------
R. Scott Greer
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ R. SCOTT GREER President, Chief Executive February 3, 1999
- -------------------------------------------------------- Officer and Director
R. Scott Greer (Principal Executive
Officer)

/s/ KURT W. LEUTZINGER Vice President, Finance and February 3, 1999
- -------------------------------------------------------- Chief Financial Officer
Kurt W. Leutzinger (Principal Financial and
Accounting Officer)

* STEPHEN A. SHERWIN, M.D. Chairman of the Board February 3, 1999
- --------------------------------------------------------
Stephen A. Sherwin, M.D.

* M. KATHLEEN BEHRENS, PH.D. Director February 3, 1999
- --------------------------------------------------------
M. Kathleen Behrens, Ph.D.

* RAJU S. KUCHERLAPATI, PH.D. Director February 3, 1999
- --------------------------------------------------------
Raju S. Kucherlapati, Ph.D.

* MARK B. LOGAN Director February 3, 1999
- --------------------------------------------------------
Mark B. Logan

* JOSEPH E. MAROUN Director February 3, 1999
- --------------------------------------------------------
Joseph E. Maroun

*By: /s/ R. SCOTT GREER February 3, 1999
----------------------------------------------------
R. Scott Greer
(Attorney-in-Fact)
</TABLE>

II-7
<PAGE> 115

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- -----------------------
<S> <C>
*1.1 Form of Underwriting Agreement.
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.
*5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1(1) Form of Indemnification Agreement between Abgenix and each
of its directors and officers.
10.2(1) 1996 Incentive Stock Plan and form of agreement thereunder.
10.3(1) 1998 Employee Stock Purchase Plan and form of agreement
thereunder.
10.4(1) 1998 Director Option Plan and form of agreement thereunder.
10.5(1) Warrant dated January 23, 1997 exercisable for shares of
Series A Preferred Stock.
10.6(1) Warrant dated March 27, 1997 exercisable for shares of
Series A Preferred Stock.
10.7(3) Joint Venture Agreement dated June 12, 1991 between Cell
Genesys and JT Immunotech USA Inc.
10.7A(6) Amendment No. 1 dated January 1, 1994 to Joint Venture
Agreement.
10.7B(9) Amendment No. 2 dated June 28, 1996 to Joint Venture
Agreement.
10.8(3) Collaboration Agreement dated June 12, 1991 among Cell
Genesys, Xenotech, Inc. and JT Immunotech USA Inc.
10.8A(5) Amendment No. 1 dated June 30, 1993 to Collaboration
Agreement.
10.8B(13) Amendment No. 2 dated January 1, 1994 to Collaboration
Agreement.
10.8C(7) Amendment No. 3 dated July 1, 1995 to Collaboration
Agreement.
10.8D(9) Amendment No. 4 dated June 28, 1996 to Collaboration
Agreement.
10.8E(2) Amendment No. 5 dated November 1997 to Collaboration
Agreement.
10.9(3) Limited Partnership Agreement dated June 12, 1991 among Cell
Genesys, Xenotech, Inc. and JT Immunotech USA Inc.
10.9A(6) Amendment No. 2 dated January 1, 1994 to Limited Partnership
Agreement.
10.9B(8) Amendment No. 3 dated July 1, 1995 to Limited Partnership
Agreement.
10.9C(10) Amendment No. 4 dated June 28, 1996 to Limited Partnership
Agreement.
10.10(4) Field License dated June 12, 1991 among Cell Genesys, JT
Immunotech USA Inc. and Xenotech, L.P.
10.10A(10) Amendment No. 1 dated March 22, 1996 to Field License.
10.10B(10) Amendment No. 2 dated June 28, 1996 to Field License.
10.11(3) Expanded Field License dated June 12, 1991 among Cell
Genesys, JT Immunotech USA Inc. and Xenotech, L.P.
10.11A(10) Amendment No. 1 dated June 28, 1996 to Expanded Field
License.
10.12(2) Amended and Restated Anti-IL-8 License Agreement dated March
19, 1996 among Xenotech, L.P., Cell Genesys and Japan
Tobacco Inc.
10.13(9) Master Research License and Option Agreement dated June 28,
1996 among Cell Genesys, Japan Tobacco Inc. and Xenotech,
L.P.
10.13A(2) Amendment No. 1 dated November 1997 to the Master Research
License and Option Agreement.
</TABLE>

<PAGE> 116

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- -----------------------
<S> <C>
10.14(2) Stock Purchase and Transfer Agreement dated July 15, 1996 by
and between Cell Genesys and Abgenix.
10.15(1) Governance Agreement dated July 15, 1996 between Cell
Genesys and Abgenix.
10.15A(1) Amendment No. 1 dated October 13, 1997 to the Governance
Agreement.
10.15B(1) Amendment No. 2 dated December 22, 1997 to the Governance
Agreement.
10.16(1) Tax Sharing Agreement dated July 15, 1996 between Cell
Genesys and Abgenix.
10.17(2) Gene Therapy Rights Agreement effective as of November 1,
1997 between Abgenix and Cell Genesys.
10.18(2) Patent Assignment Agreement dated July 15, 1996 by Cell
Genesys in favor of Abgenix.
10.19(11) Lease Agreement dated July 31, 1996 between John Arrillaga,
Trustee, or his Successor Trustee, UTA dated 7/20/77
(Arrillaga Family Trust) as amended, and Richard T. Peery,
Trustee, or his Successor Trustee, UTA dated 7/20/77
(Richard T. Peery Separate Property Trust) as amended, and
Abgenix.
10.20(1) Loan and Security Agreement dated January 23, 1997 between
Silicon Valley Bank and Abgenix.
10.21(1) Master Lease Agreement dated March 27, 1997 between
Transamerica Business Credit Corporation and Abgenix.
10.22(2) License Agreement dated February 1, 1997 between Ronald J.
Billing, Ph.D. and Abgenix.
10.23(12) Release and Settlement Agreement dated March 26, 1997 among
Cell Genesys, Abgenix, Xenotech, L.P., Japan Tobacco Inc.
and GenPharm International, Inc.
10.24(12) Cross License Agreement effective as of March 26, 1997,
among Cell Genesys, Abgenix, Xenotech, L.P., Japan Tobacco
Inc. and GenPharm International, Inc.
10.25(12) Interference Settlement Procedure Agreement, effective as of
March 26, 1997, among Cell Genesys, Abgenix, Xenotech, L.P.,
Japan Tobacco Inc. and GenPharm International, Inc.
10.26(2) Agreement dated March 26, 1997 among Xenotech, L.P.,
Xenotech, Inc., Cell Genesys, Abgenix, Japan Tobacco Inc.
and JT Immunotech USA Inc.
10.27(2) Collaborative Research Agreement dated December 22, 1997
between Pfizer, Inc. and Abgenix.
10.27A(16) Amendment No. 1 dated May 26, 1998 to Collaborative Research
Agreement between Abgenix and Pfizer, Inc.
10.27B(16) Amendment No. 2 dated October 22, 1998 to Collaborative
Research Agreement between Abgenix and Pfizer, Inc.
10.28(1) Amended and Restated Stockholder Rights Agreement dated
January 12, 1998 among Abgenix and certain holders of
Abgenix's capital stock.
10.29(2) Collaborative Research Agreement effective as of January 28,
1998 between Schering-Plough Research Institute and Abgenix.
+10.29A Amendment No. 2 effective as of January 28, 1999 to
Collaborative Research Agreement between Schering-Plough
Research Institute and Abgenix.
10.30(1) Excerpts from the Minutes of a Meeting of the Board of
Directors of Abgenix, dated October 23, 1996.
10.31(1) Excerpts from the Minutes of a Meeting of the Board of
Directors of Abgenix, dated October 22, 1997.
10.32(2) Exclusive Worldwide Product License dated November 1997
between Xenotech, L.P. and Abgenix.
</TABLE>

<PAGE> 117

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- -----------------------
<S> <C>
10.33(2) Research License and Option Agreement effective as of April
6, 1998 between Abgenix and Genentech, Inc.
10.33A(2) Amendment No. 1 effective as of June 18, 1998 to Research
License and Option Agreement between Abgenix and Genentech,
Inc.
10.34(14) Research Collaboration Agreement dated July 15, 1998 between
Millennium BioTherapeutics, Inc. and Abgenix.
10.35(16) Research Collaboration Agreement dated September 29, 1998
between Millennium BioTherapeutics, Inc. and Abgenix.
10.35A(17) Amendment No. 1 effective as of November 29, 1998 to the
Research Collaboration Agreement between Millennium
BioTherapeutics, Inc. and Abgenix.
10.36(16) Research License and Option Agreement dated October 30, 1998
between Millennium BioTherapeutics, Inc. and Abgenix.

*+10.37 Research Collaboration Agreement dated December 22, 1998
between Centocor, Inc. and Abgenix.
10.38(16) Memorandum of Understanding between Research Corporation
Technologies, Inc. and Abgenix.
10.39(15) Registration Rights Agreement dated November 18, 1998
between certain holders of Abgenix capital stock and
Abgenix.
10.40(16) Research License and Option Agreement dated January 4, 1999
between AVI BioPharma, Inc. and Abgenix
*10.41 Registration Rights Agreement dated January 27, 1999 between
Genentech and Abgenix.
+10.42 Multi-Antigen Research License and Option Agreement dated
January 27, 1999 between Genentech and Abgenix.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
*23.2 Consent of Counsel (included in Exhibit 5.1).
*24.1 Power of Attorney.
*27.1 Financial Data Schedule.
</TABLE>

- ---------------

* Previously filed.

+ Confidential treatment requested for portions of these exhibits. Omitted
portions have been filed separately with the Commission.

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

(2) Incorporated by reference to the same exhibit filed with Abgenix's
Registration Statement on Form S-1 (File No. 333-49415), portions of which
have been granted confidential treatment.

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

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

(6) Incorporated by reference to the same exhibit filed with Cell Genesys'
Annual Report on Form 10-K for the year ended December 31, 1993, portions
of which have been granted confidential treatment.
<PAGE> 118

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

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

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

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

(15) Incorporated by reference to the same exhibit filed with Abgenix's Current
Report on Form 8-K filed with the Commission on November 24, 1998.

(16) Incorporated by reference to the same exhibit filed with Abgenix's
Registration Statement on Form S-1 (File No. 333-70631), portions for which
Abgenix has requested confidential treatment.

(17) Incorporated by reference to the same exhibit filed with Abgenix's
Registration Statement on Form S-1 (File No. 333-70631).

<PAGE> 1
EXHIBIT 10.29A

AMENDMENT NO. 2
TO COLLABORATIVE RESEARCH AGREEMENT

This Amendment No. 2 to the Collaborative Research Agreement (the
"Amendment No. 2"), effective as of January 28, 1999 (the "Amendment No. 2
Effective Date"), is made by and between Abgenix, Inc., a Delaware corporation
having its principal place of business at 7601 Dumbarton Circle, Fremont, CA
94555 ("ABX") and Schering-Plough Research Institute, a Delaware corporation
having its principal place of business at 2015 Galloping Hill Road, Kenilworth,
New Jersey 07033 ("SPRI") and amends that certain Collaborative Research
Agreement, effective as of January 28, 1998, and made by and between ABX and
SPRI (the "Agreement"), as amended by Amendment No. 1 to the Agreement,
effective as of August 25, 1998.

WHEREAS, SPRI and ABX are interested in continuing to conduct the
Research under the Agreement and, accordingly, wish to amend the Agreement to
extend the Research period and the Option Period;

NOW, THEREFORE, in consideration of the mutual promises contained in
this Amendment, the parties agree as follows:

1. All terms with initial capitals that are used herein and that are not
specifically defined herein shall have the defined meanings set forth in the
Agreement.

2. The Effective Date of this Amendment No. 2 is January 28, 1999.

3. The first sentence of Section 3 of the Agreement is amended to read
in its entirety as follows:

During the period commencing on the Effective Date and ending on the
earlier of (i) February 12, 1999 or (ii) termination of this Agreement
(the "Option Period"), SPRI, through a corporate affiliate, shall have
the exclusive option to enter into a written definitive agreement
("Research, Option and License Agreement") that will provide for the
additional research described in Exhibit B and an option to acquire a
worldwide, exclusive (even as to ABX) license, including the right to
sublicense, to develop, make, have made, use, export and import
hybridoma cells or other cells derived from XenoMouse animals under this
Agreement in order to develop, make, have made, use, sell, offer for
sale, export and import Antibodies to [*] generated under this
Agreement upon mutually agreeable terms and conditions to be set forth
in the Research, Option and License Agreement.

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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 2

4. The first sentence of Section 6.1 of the Agreement is amended to read
in its entirety as follows:

Subject to the next sentence, this Agreement shall commence on the
Effective Date and, unless earlier terminated by mutual agreement of the
parties, shall continue in effect until February 12, 1999.

5. Except as specifically modified or amended hereby, the Agreement
shall remain in full force and effect and, as modified or amended, is hereby
ratified, confirmed, and approved.

IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their respective duly authorized officers as of the day and year
first above written.

ABGENIX, INC. SCHERING-PLOUGH RESEARCH INSTITUTE

By: /s/ Kurt Leutzinger By: /s/ Cecil B. Pickett
------------------------------- -------------------------------

Printed Printed
Name: Kurt Leutzinger Name: Cecil B. Pickett
----------------------------- -----------------------------

VP, Finance and Executive Vice President,
Title: Chief Financial Officer Title: Discovery Research
---------------------------- ----------------------------

<PAGE> 1
EXHIBIT 10.42

MULTI-ANTIGEN RESEARCH LICENSE AND OPTION AGREEMENT

This MULTI-ANTIGEN RESEARCH LICENSE AND OPTION AGREEMENT (this
"Agreement"), effective as of January 26, 1999 (the "Effective Date") is made by
and between Abgenix, Inc., a Delaware corporation ("ABX") and Genentech, Inc., a
Delaware corporation ("GNE") with reference to the following facts and
circumstances.

RECITALS

A. WHEREAS, ABX has rights in certain technology relating to certain
strains of XenoMouse(TM) Animals (as defined below);

B. WHEREAS, GNE desires to use such XenoMouse Animals to generate
antibodies to certain Specified Antigens and GNE Program Antigens (each as
defined below);

C. WHEREAS, ABX is willing to grant to GNE, and GNE desires to acquire a
license to use XenoMouse Animals solely for immunization with Specified Antigens
and GNE Program Antigens for research purposes, as described below and on the
terms and conditions set forth herein; and

D. WHEREAS, ABX is willing to grant to GNE, and GNE desires to acquire
an option to obtain a GNE Product License Agreement with respect to Products
derived from immunization of XenoMouse Animals with a particular GNE Program
Antigen, all as described fully below and on the terms and conditions set forth
herein.

NOW THEREFORE, for and in consideration of the covenants, conditions,
and undertakings hereinafter set forth, it is agreed by and between the parties
as follows:

1. DEFINITIONS

For purposes of this Agreement, capitalized terms set forth in this
Agreement and not otherwise defined herein shall have the meaning set forth in
the Common Definitions Exhibit attached hereto as Exhibit A.

<PAGE> 2

2. RESEARCH LICENSE; SUPPLY OF MICE; MATERIALS OWNERSHIP

2.1 Research License.

2.1.1 License Grant. Subject to the terms and conditions of this
Agreement (including without limitation compliance with the provisions of
Section 9.4.6), ABX agrees to grant, and hereby grants, to GNE a paid up (except
as otherwise provided in Section 2.1.5 below), non-exclusive license and/or
sublicense of its rights, as the case may be, under the Licensed Technology and
any issued U.S. patents owned or controlled by ABX that claim the Specified
Antigen or Antibodies thereto, without right to grant further sublicenses to (a)
immunize the XenoMouse Animals provided by ABX with up to [*] Specified Antigens
per year and (b) to use the Antibodies and materials derived from such immunized
XenoMouse Animals in the Research Field for conducting research and development
work within the scope of the Research Field. The license contemplated in the
preceding sentence shall include the right for GNE to transfer Antibodies to
third parties solely for the purposes of testing and evaluation in the Research
Field, provided, however, that any such transfer is under a material transfer
agreement that is consistent with the terms of this Agreement and that grants no
right, title or interest in or to such Antibody (or any derivative thereof) to
such third party. The parties acknowledge that notwithstanding any license from
ABX to GNE under this Agreement of ABX's rights within the Research Field
(including, without limitation, under Section 3.1.4(c)), ABX's rights may not be
exclusive from ABX's licensors. The license and/or sublicense rights granted
under this Section 2.1.1 shall terminate with regard to a particular Specified
Antigen on the Effective Date (if any) of a GNE Product License Agreement
between ABX and GNE relating to such Specified Antigen. At such time as any
Specified Antigen becomes a GNE Program Antigen under the terms and conditions
of this Agreement (i.e. GNE has taken an Evaluation Position with regard to such
Specified Antigen), the research licenses and/or sublicenses described above
shall become exclusive licenses and/or sublicenses as set forth herein.
Notwithstanding anything contained in this Agreement, immunization of XenoMouse
Animals with any Antigen other than a Specified Antigen (a "Non-Specified
Antigen") in good faith (e.g., as a mistake) shall be considered a breach of
this Agreement; provided, however, that the sole remedy for such breach will be
as provided in Section 6.6 hereof. Immunization of XenoMouse Animals with
Non-Specified Antigens other than in good faith shall be a material breach of
this Agreement.

2.1.2 License Term. The rights and/or (sub)licenses granted under
Section 2.1.1 above shall terminate upon expiration or termination of this
Agreement; provided, however, that such rights and/or (sub)licenses shall also
expire and terminate with respect to each particular GNE Program Antigen on the
date on which ABX duly executes and delivers the GNE Product License Agreement
for such GNE Program Antigen in accordance with the provisions of Section 4.1.5
below.

2.1.3 No Other Rights. No implied licenses or rights are conveyed
to GNE hereunder. GNE shall only be authorized to use the XenoMouse Animals, the
ABX Materials and the materials derived in whole or part from the XenoMouse
Animals (including without limitation Antibodies) solely as expressly provided
in this Article 2 and Section 9.4.6.

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the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 3

2.1.4 XenoMouse Animals. On the terms and conditions of this
Agreement, ABX will provide free of charge to GNE such types, strains and
quantities, as GNE reasonably requests, of sterilized male XenoMouse Animals of
the highest quality reasonably available for immunization with Specified
Antigens; provided however, that ABX's obligation to provide such XenoMouse
Animals free of charge shall be limited to providing GNE with up to [*]
XenoMouse Animals per month and up to a total of [*] XenoMouse Animals per
calendar year. GNE shall use such XenoMouse Animals solely for the purposes set
forth in this Agreement. Notwithstanding anything to the contrary in this
Agreement, unless ABX otherwise agrees in writing, ABX shall not be required to
provide GNE with more than (a) [*] XenoMouse Animals in any given calendar
month, or (b) [*] XenoMouse Animals in any given calendar year, in the
aggregate. Subject to availability, ABX will provide to GNE reasonable
quantities of XenoMouse Animals requested by GNE hereunder in excess of the
number of XenoMouse Animals set forth in clauses (a) and (b) above at a cost to
GNE of [*] per XenoMouse Animal.

2.1.5 New Strains. If, prior to ABX's delivery to GNE of the
maximum number of XenoMouse Animals which GNE is entitled to receive in any
given calendar year in Section 2.1.4 above, ABX develops and has reasonably
available for licensing and shipment to GNE a strain of transgenic mice that
produce human antibodies that was not available on the Effective Date (a "New
Strain"), ABX shall inform GNE of the availability of such New Strain and any
net Incremental Royalty associated with such New Strain and discuss with GNE
whether GNE would prefer to receive some or all the remaining deliverable
transgenic animals for such calendar year from the New Strain. Notwithstanding
the foregoing, GNE shall have the right to continue to receive XenoMouse Animals
from the strain of XenoMouse Animals available as of the Effective Date (the
"Original Strain"), and ABX shall be required to continue to deliver mice from
the Original Strain. If GNE chooses to receive mice from the New Strain, ABX
shall provide GNE with a reasonable number of transgenic animals from the New
Strain (up to a maximum of the remaining number of XenoMouse Animals deliverable
to GNE under Section 2.1.4), provided that any such animals shall be deemed to
be XenoMouse Animals. In the event that GNE elects to receive mice from the New
Strain, (a) GNE shall agree to be bound by any other obligations, terms or
conditions imposed upon the New Strain, including without limitation any
reporting, indemnification, use restrictions or diligence requirements; (b) any
New Strain Intellectual Property shall become part of the Licensed Technology;
and (c) ABX shall modify Attachment B to reflect New Strain Intellectual
Property with respect to such New Strain. Notwithstanding anything to the
contrary in this Agreement, ABX shall not be obligated to develop any New
Strains. Nothing herein shall prevent GNE from receiving and using XenoMouse
Animals from both the Original Strain and the New Strain simultaneously provided
that the maximum number of XenoMouse Animals provided in Section 2.1.4 is not
exceeded.

2.1.6 Updates Concerning GNE Research. During the term of this
Agreement, GNE shall update ABX, as reasonably requested by ABX, as to the
general status of the activities of GNE in the Research Field under this
Agreement and the results thereof. It is understood that except as the parties
may otherwise agree in writing, ABX shall not be responsible for

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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 4

conducting any research and development activities involved in the creation,
research and development of Products, including without limitation immunizations
of XenoMouse Animals with Specified Antigens or GNE Program Antigens, screening
of Antibodies generated from such immunizations, creation of Hybridomas,
production of Antibodies to the Specified Antigens or GNE Program Antigens, or
preclinical evaluation of Antibodies to the Specified Antigens or GNE Program
Antigens.

2.1.7 Supply of XenoMouse Animals and Materials; Material
Transfer Terms. It is understood and agreed that all XenoMouse Animals, and all
materials derived in whole or part from XenoMouse Animals shall be used solely
in accordance with, and subject to the covenants set forth in Section 9.4.6.

2.1.8 Ownership of Materials and Data. It is understood and
agreed that:

(a) ABX shall [*].

(b) Except as expressly set forth in Section 2.1.8(a), GNE shall
[*]

(c) The transfer of physical possession of any materials or data
owned by, and the physical possession and use of such materials and/or data by,
GNE or ABX, as the case may be, shall not be (nor be construed as) a sale,
lease, offer to sell or lease, or other transfer of title of such materials
and/or data to GNE or ABX, as the case may be.

(d) Notwithstanding anything contained in this Agreement to the
contrary (including, without limitation, in Section 6.6), GNE shall [*]

2.1.9 Notice of Specified Antigens. During the term of this
Agreement, if and when GNE desires to immunize a XenoMouse Animal with an
Antigen, GNE shall, prior to GNE's immunization of a XenoMouse Animal with such
Antigen, provide written notice [*] [*] informing ABX [*] that GNE desires to
have such Antigen designated a Specified Antigen. ABX [*] [*] will determine in
accordance with this Section 2.1.9 if the Antigen can be designated a Specified
Antigen of GNE.

(a) Notice. When GNE desires to have an Antigen designated a
Specified Antigen, GNE shall provide written notice [*] [*] of its desire that
such Antigen be designated a Specified Antigen. In such notice, GNE

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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 5

shall provide reasonable identification and description of such Antigen (the
"GNE Antigen Information"). The GNE Antigen Information shall be considered
Confidential Information of GNE. Where GNE provides notice pursuant this Section
2.1.9(a) to [*]

(b) [*]

(c) Confidentiality and Non-Use. Where GNE provides notice
pursuant to Section 2.1.9(a) to [*]. Where GNE provides notice pursuant to
Section 2.1.9(a) to ABX, ABX shall not use or disclose the GNE Antigen
Information except as expressly provided under this Agreement. Further, ABX
shall not disclose the GNE Antigen Information to any third party.

(d) Determination. Upon receipt of notice pursuant to Section
2.1.9(a), ABX [*] shall objectively evaluate such request in the context of the
ABX Antigen Information and determine whether the Antigen requested by GNE is
available as a Specified Antigen. Where GNE provides notice pursuant to Section
2.1.9(a) to [*]; provided, however, no Confidential Information of ABX or GNE
shall be provided to the other party. If ABX notifies GNE [*], that such Antigen
is not available as a Specified Antigen, such Antigen shall not be designated as
a Specified Antigen. In the event that GNE is notified that an Antigen requested
by GNE is not available as a Specified Antigen, ABX and GNE agree to discuss the
reasons for such determination.

(e) Default. Where GNE provides notice pursuant to Section
2.1.9(a) to ABX, and ABX fails to notify GNE that such Antigen is not available
as a Specified Antigen within [*] of request by GNE, such Antigen shall be
designated a "Specified Antigen",

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the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 6

GNE shall have the right to immunize the XenoMouse Animals with such Specified
Antigen, and such Specified Antigen shall be counted as one of the [*]
permitted Specified Antigens under Section 2.1.1 above. Notwithstanding the
foregoing in this Section 2.1.9(e), where GNE provides notice pursuant to
Section 2.1.9(a) to [*] informs GNE that such Antigen is available as a
Specified Antigen.

2.1.10 Third Party Rights. It is understood and agreed that the
grant of rights under this Article 2 shall be subject to and limited in all
respects by the terms of the applicable ABX In-License(s) pursuant to which ABX
acquired or does acquire any Licensed Technology, including, without limitation,
any rights granted to or retained by GenPharm International, Inc. under the
GenPharm Cross License, and that all rights or sublicenses granted under this
Agreement shall be to the extent and only to the extent that ABX shall have the
right to grant such rights and sublicenses under such ABX In-Licenses.

3. EVALUATION POSITIONS

3.1 Evaluation Positions. During the term of this Agreement and subject
to the terms and conditions set forth herein, GNE shall have the right to obtain
evaluation positions ("Evaluation Positions", as further described in Section
3.1.4) from ABX with respect to certain Specified Antigens as set forth in this
Section 3.1. It is understood and agreed by the Parties that, unless and until a
Specified Antigen becomes a GNE Program Antigen as set forth in this Article 3,
[*]

3.1.1 Notice. For each Specified Antigen for which GNE desires to
obtain an Evaluation Position, GNE shall provide ABX with written notice (each
such notice an "Evaluation Notice") stating that GNE desires to obtain an
Evaluation Position on such Specified Antigen and identifying in reasonable
detail such Specified Antigen.

3.1.2 ABX Review. Within [*] days of receiving an
Evaluation Notice from GNE, ABX shall notify GNE as to whether any of the
conditions set forth under Section 3.1.2 (i)-(iii) below (each such condition,
an "Impediment") exist with respect to each Specified Antigen which is the
subject of such Evaluation Notice, and if so, ABX shall provide to GNE a
reasonable description of such Impediment, subject to any confidentiality
restrictions to which ABX may be a party. If ABX notifies GNE that an Impediment
exists with respect to the Specified Antigen that is the subject of the
Evaluation Notice, GNE shall not have the right to obtain an Evaluation Position
for such Specified Antigen, provided, however, that if ABX has Selected a
Specified Antigen for its own account under Section 3.1.2(i) below, ABX agrees
to discuss with GNE the possibility of entering into a collaboration with
respect to such Specified Antigen. Impediments are as follows:

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the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 7

(i) the Specified Antigen identified by GNE is not
available to GNE for an Evaluation Position and cannot be Selected by ABX
because under the terms of the Xenotech Agreement [*];

(ii) the Antigen so identified by GNE is at the
time that ABX receives the Evaluation Notice for such Specified Antigen, an
Excluded Antigen; or

(iii) as evidenced by written records prior to the
date of the Evaluation Notice relating to such Specified Antigen, ABX or its
Affiliates [*].

3.1.3 Acceptance by ABX; Payment. If ABX gives notice (an
"Acceptance Notice") to GNE that no Impediment exists with respect to the
Specified Antigen identified in the Evaluation Notice, or if ABX does not notify
GNE of an Impediment within [*] of GNE's Evaluation Notice as set forth in
Section 3.1.2, GNE shall have the right to obtain an Evaluation Position with
respect to such Specified Antigen by paying to ABX a payment (the "Evaluation
Position Payment") of [*]. Such payment shall be nonrefundable, except as
provided in Section 4.1.5; provided, however, that such Evaluation Position
Payment may be partially creditable against the License Fee with respect to an
Option for such GNE Program Antigen, as provided in Section 4.1.6 below. Upon
ABX's receipt of the Evaluation Position Payment set forth above, such Specified
Antigen which is subject of such Evaluation Position, shall be designated a "GNE
Program Antigen". Notwithstanding anything to the contrary in this Agreement, no
Antigen shall be a GNE Program Antigen unless such antigen was first a Specified
Antigen.

3.1.4 Effect of Evaluation Position. An Evaluation Position, with
respect to a GNE Program Antigen, shall entitle GNE to the rights set forth
below with respect to such GNE Program Antigen:

(a) Option. To exercise an Option with regard to such
GNE Program Antigen as set forth in Article 4 below.

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<PAGE> 8

(b) Term of Evaluation Positions. With respect to each
Evaluation Position for a GNE Program Antigen, the term of such Evaluation
Position shall begin on the date which ABX receives the Evaluation Position
Payment for such Specified Antigen and shall, unless earlier terminated as
provided under Section 3.1.4(e) below, continue thereafter for a period of [*],
at which time the Evaluation Position on such GNE Program Antigen shall expire
unless extended as provided in Section 3.1.4(d) below.

(c) Exclusivity. During the term of an Evaluation Position
with respect to a GNE Program Antigen, ABX shall not (i) Select such GNE Program
Antigen (except for the sole benefit of GNE); (ii) cause or allow (with regard
to "allow", to the extent that it is within the reasonable control of ABX and
would not cause ABX to take any commercially unreasonable action or incur any
commercially unreasonable expense) any Impediment described in Section 3.1.2
above to arise with respect to such GNE Program Antigen, or (iii) take any other
action that would prevent GNE from obtaining an Exclusive Worldwide Product
License as defined in the Xenotech Agreement.

(d) Extension. With respect to each Evaluation Position
for a GNE Program Antigen, GNE shall have the right to extend the term of such
Evaluation Position for such GNE Program Antigen [*] by (i) notifying ABX
in writing, no later than [*] prior to the then current expiration date of such
Evaluation Position, that GNE desires to extend such Evaluation Position and for
how long and (ii) paying to ABX concurrently with such notice a payment of [*]
extension of such Evaluation Position. GNE may extend the term of such
Evaluation Position all at once or on a [*] basis, up to the maximum aggregate
of [*]. All payments made by GNE to ABX to extend the period of time for an
Evaluation Position shall be nonrefundable, except as provided under Section
4.1.5; provided, however, that GNE shall have the right to partially credit such
payments against the License Fee for such GNE Program Antigen as set forth in
Section 4.1.6 below.

(e) Termination of Evaluation Position by GNE. GNE shall
have the right to terminate an Evaluation Position with respect to a GNE Program
Antigen at GNE's sole discretion at any time by delivering written notice of
such termination to ABX. Such termination of such Evaluation Position shall
become effective upon ABX's receipt of written notice from GNE; provided
however, that any amounts paid by GNE to ABX for such terminated Evaluation
Position (and any extensions thereof) shall not be refundable or creditable
against any other payments due under this Agreement.

(f) Effect of Termination or Expiration of Evaluation
Position. If an Evaluation Position with respect to a GNE Program Antigen
expires or terminates prior to GNE's exercise of an Option with respect to such
GNE Program Antigen (as set forth below) (i) such GNE Program Antigen shall
cease to be a GNE Program Antigen for purposes of this Agreement, (ii) GNE shall
have no right to exercise an Option for such GNE Program Antigen (unless
renominated as provided below under this Section 3.1.4(f)) and (iii) ABX shall
have no

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<PAGE> 9

further obligations with respect to such GNE Program Antigen. After the term of
an Evaluation Position has expired (during the term of this Agreement), GNE
shall have the right to nominate a prior GNE Program Antigen again (if no
Impediment exists) for an Evaluation Position (and designation as a GNE Program
Antigen) on the terms and conditions of this Agreement by following the
Evaluation Position procedures and paying an Evaluation Position Payment with
respect to such Evaluation Position, provided that, such Evaluation Position
shall count as one of the [*] Evaluation Positions which is in effect under
Section 3.1.5.

3.1.5 Number of Evaluation Positions. During the term of this
Agreement, GNE shall have the right to obtain and have in effect a maximum
aggregate of [*] Evaluation Positions (i.e., representing a maximum of [*] GNE
Program Antigens) at any given time. For purposes of this Section 3.1.5, an
Evaluation Position for [*] shall not be counted toward the number of Evaluation
Positions in effect at any given time, nor shall Evaluation Positions that have
terminated or expired pursuant to the terms of this Agreement (except as set
forth in Section 3.1.4(f)). Notwithstanding anything in this Agreement to the
contrary, GNE shall be required to obtain from ABX and make Evaluation Position
Payments for a minimum cumulative number of [*] Evaluation Positions during each
consecutive [*] period (beginning on the Effective Date) during the term of this
Agreement, unless the Agreement is terminated earlier than [*] from the
Effective Date, respectively.

4. OPTION TO OBTAIN GNE PRODUCT LICENSE AGREEMENT

4.1 Option to Nominate GNE Program Antigens.

4.1.1 Option. Subject to the terms and conditions set forth in
this Agreement, ABX hereby grants to GNE exclusive options (an "Option" or
"Options") to obtain the right to enter into GNE Product License Agreements with
respect to particular GNE Program Antigens. Each calendar year during the term
of this Agreement, up to two (2) Options may be exercised by GNE with respect to
a total of two (2) GNE Program Antigens, provided that, such Options for such
GNE Program Antigens must be exercised by GNE prior to the termination or
expiration of the Evaluation Position for such GNE Program Antigen (the "Option
Period"), pursuant to the procedures set forth in this Article 4, and provided,
further, that GNE may not exercise more than [*] Options in any [*] year period
or more than [*] Options in any [*] year period, in each case excluding [*].

4.1.2 Exercise. Pursuant to and subject to Section 4.1.1, GNE may
exercise Options with respect to GNE Program Antigens in accordance with the
following provisions:

(a) Exercise Notice; Timing of Notice. GNE may exercise
its Option with respect to a GNE Program Antigen at any time during the term of
an Evaluation Position for such GNE Program Antigen by giving ABX express
written notice (the "Exercise Notice") stating that GNE is exercising its Option
with respect to such GNE Program Antigen and indicating whether GNE has
intellectual property covering such GNE Program Antigen.

(b) Selection by ABX. Upon GNE's delivery to ABX of an
Exercise Notice pursuant to Section 4.1.2(a), ABX shall be obligated to Select
the GNE Program Antigen on behalf of GNE on a date (a "Selection Date") within
the particular calendar quarter and in the particular calendar year as
determined in accordance with the following table:

<TABLE>
<S> <C> <C> <C>
Calendar Quarter If Exercise Notice is "Trigger Date" by "Selection Date"
in which Antigen delivered by GNE: which GNE may by which ABX must
counts towards retract Exercise select the GNE
GNE's limits Notice with no Program Antigen
penalty

1st Calendar [*] [*] [*]
Quarter:
January 1- March
31

2nd Calendar [*] [*] [*]
Quarter:
April 1 - June 30

3rd Calendar [*] [*] [*]
Quarter:
July 1 -
September 30

4th Calendar [*] [*] [*]
Quarter:
October 1 -
December 31
</TABLE>

Notwithstanding the foregoing in this Section 4.1.2(b):

(i) in any calendar quarter that GNE has the right
to exercise [*];

(ii) should the event described in Section
4.1.2(b)(i) occur [*]

[*]; and

(iii) based upon the information contained in the
Exercise Notice, ABX shall take the following actions with respect to Selection
of a GNE Program Antigen:

(1) in the event that GNE notifies ABX that [*]; and

(2) in the event that GNE does not notify ABX that [*].

(c) Retraction of Exercise Notice. Following GNE's
delivery to ABX of an Exercise Notice, GNE shall have the right to retract such
Exercise Notice at any time from the date of such Exercise Notice to the
applicable "Trigger Date" shown in the above table by providing written notice
of such retraction on or before such "Trigger Date." Upon retraction of an
Exercise Notice in compliance with the preceding sentence, GNE shall have no
financial responsibility to ABX under Section 4.1.6. If GNE retracts an Exercise
Notice prior to the "Trigger Date" (as shown in the above table) in a given
calendar quarter in which an Exercise Notice would obligate ABX to Select a GNE
Program Antigen in the same calendar quarter, GNE may substitute a GNE Program
Antigen for the one retracted; provided that an Exercise Notice with respect to
such substitute GNE Program Antigen is delivered to ABX by the "Trigger Date"
and within the same applicable "Exercise Notice Period".

(d) Notification of Selection by ABX. Within [*] of a
Selection Date with regard to a GNE Program Antigen in accordance with Section
4.1.2(b), ABX shall provide written notice (the "Selection Notice") to GNE that
such GNE Program Antigen has been Selected on GNE's behalf by ABX. Such notice
shall include the date such Selection was made and the territory that will be
available to GNE with respect to the particular GNE Program Antigen in the
applicable GNE Product License.

(e) Cancellation of Entry into Product Licenses. After the
date of a Selection Notice, GNE shall have the right to cancel its obligations
to execute a GNE Product License, and ABX's obligations to enter into an XT
Product License on GNE's behalf, only in accordance with the following
provisions:

(i) from the date of such Selection Notice and
until a date [*] after the Selection Date for such GNE Program Antigen, GNE has
the right to inform ABX by written notice that it will not enter into the GNE
Product License with respect to such GNE Program Antigen; provided, however,
regardless of territory of the XT Product License to

which ABX may be entitled, GNE shall remain obligated to pay the License Fee
pursuant to Section 4.1.6;

(ii) notwithstanding the foregoing in Section
4.1.2(e)(i), GNE [*]; and

(iii) notwithstanding the foregoing Section
4.1.2(e)(i), for a period of thirty (30) days following the date ABX delivers a
Selection Notice, if:

(1) ABX has Selected a particular GNE Program Antigen
[*] and the territory that will be available to GNE with
respect to the particular GNE Program Antigen in the
applicable GNE Product License [*] (as defined in the
Xenotech Agreement); or

(2) ABX has Selected a particular GNE Program Antigen
[*] and the territory that will be available to GNE with
respect to the particular GNE Program Antigen in the
applicable GNE Product License [*] (as defined in the
Xenotech Agreement),

then GNE [*]. If GNE fails to cancel its obligation as set forth in this Section
4.1.2(e)(iii), then GNE is deemed to have accepted the territory obtained by ABX
pursuant to the XT Product License. It is understood and agreed that,
notwithstanding any other provision of this Agreement, in the event that the XT
Product License entered into by ABX with XT is [*] then (a) GNE shall not be
obligated to enter into the GNE Product License Agreement with ABX or pay the
License amount set forth in Section 4.1.6 and (b) ABX shall not, if ABX used
commercially reasonable efforts to obtain [*] be in breach of this Agreement.
[*]

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(f) Entry into Product License. Except as provided in
Section 4.1.2(e), at the end of [*] from the Selection Date of each particular
GNE Program Antigen, ABX shall, in accordance with Section 4.1.4, enter into an
XT Product License with respect to such GNE Program Antigen and provide a copy
to GNE.

(g) It is understood and agreed that nothing in this
Section 4.1.2 shall in any way (i) modify or extend the term of any Evaluation
Position with respect to GNE Program Antigens, (ii) increase the number of
Options with respect to GNE Program Antigens exercisable by GNE, or (iii) modify
the numbers or timing of exercise of Options with respect to GNE Program
Antigens exercisable by GNE under this Agreement.

4.1.3 [Intentionally Left Blank]

4.1.4 Territory and Exclusivity. The territory and exclusivity
provided in a given GNE Product License Agreement shall be the same as the
territory and exclusivity granted to ABX under the XT Product License with
respect to the same Antigen. Accordingly, for example, (i) if ABX obtains a
Co-Exclusive Worldwide Product License related to the GNE Program Antigen, the
terms of the GNE Product License Agreement shall provide for a territory which
is the ABX Home Territory and the Rest of the World and will provide that the
rights granted therein are exclusive in the ABX Home Territory and co-exclusive
with JTI or its assignee or sublicensee in the Rest of the World, (ii) if ABX
obtains an Exclusive Home Territory Product License related to the GNE Program
Antigen, the terms of the GNE Product License Agreement shall provide for a
territory which is the ABX Home Territory and will provide that the rights
granted are exclusive in the ABX Home Territory, (iii) if ABX obtains an
Exclusive Qualified Worldwide Product License related to the GNE Program
Antigen, the terms of the GNE Product License Agreement will provide for a
territory which is the ABX Home Territory and the Rest of the World, and will
provide that the rights granted are exclusive in that territory, and (iv) if ABX
obtains an Exclusive Worldwide Product License related to the GNE Program
Antigen, the terms of the GNE Product License Agreement will provide for a
territory which is worldwide and will provide that the rights granted are
exclusive in that territory. Capitalized terms used in this Section 4.1.4 and
not otherwise defined in this Agreement are used in this Section as defined in
the Xenotech Agreement.

4.1.5 GNE Product License Agreement. Within [*] of GNE's receipt
of the XT Product License with respect to a particular GNE Program Antigen, ABX
and GNE shall enter into the GNE Product License Agreement with regard to such
GNE Program Antigen. If GNE fails to timely pay to ABX the License Fee set forth
in Section 4.1.6 (subject to any applicable cure provision), then (a) the
applicable GNE Product License Agreement shall terminate and ABX shall have no
further obligation to GNE regarding such GNE Product License Agreement and (b)
ABX shall be entitled, in its sole discretion, to exercise ABX's rights under
the Xenotech Agreement and enter into the XT Product License for the GNE Program
Antigen on its own behalf or on behalf of a third party without further
obligation to GNE. Notwithstanding the foregoing, nothing in this Section 4.1.5
shall be implied to grant ABX a license or entitle ABX to license or make any
other use of any technology, know-how, intellectual property, materials
(including, without limitation, any Antibodies, Antibody

Secreting Cells, Hybridomas, or Genetic Material) or data owned by GNE, ABX,
owned jointly by GNE and ABX, and, in each case generated in whole or in part
from ABX's or GNE's activities under this Agreement in any case without first
obtaining GNE's prior written consent, except as expressly provided in this
Agreement (provided that this sentence is not intended to affect ABX's rights
under Section 6.6 of this Agreement). If GNE timely exercises its Option with
respect to a GNE Program Antigen and ABX fails or is unable to enter into (i) an
XT Product License with XT as provided in Section 4.1.2(f) within the time frame
set therein or (ii) the GNE Product License Agreement with GNE (in each case,
other than due to a breach of this Agreement by GNE), GNE shall be entitled to a
full refund of the Evaluation Position Payment paid by GNE to ABX and all
available remedies conferred on it under this Agreement and by law or in equity.
In connection with the foregoing sentence, (i) it is understood that money
damages would not be a sufficient remedy for GNE and GNE is entitled to specific
performance and injunctive relief in addition to other available remedies [*].

4.1.6 License Fee; Evaluation Position Credit. Subject to Section
4.1.2, within [*] of complete execution of a GNE Product License Agreement by
GNE and ABX with regard to a GNE Program Antigen for which an Option has been
exercised, GNE shall pay ABX a fee (a "License Fee") of [*] for each of the
first [*] GNE Program Antigens for which GNE has exercised its Option and [*]
for each subsequent GNE Program Antigen for which GNE exercises an Option.
Notwithstanding the foregoing, GNE shall have the right to credit the amount of
the Evaluation Position Payments made to ABX for such GNE Program Antigen
against the License Fee for such GNE Program Antigen as set forth in this
Section 4.1.6 as follows: GNE shall have the right to credit the prorated amount
of any Evaluation Position Payment over the remaining term of such Evaluation
Position or extension thereof [*] against such License Fee payable to ABX for
such GNE Program Antigen which was the subject of such Evaluation Position;
provided however, that in no event shall GNE be entitled to credit more than [*]
of such prorated amount against any License Fee. For purposes of example and
illustration only, if GNE were to exercise an Option with respect to a certain
GNE Program Antigen [*] during the term of an Evaluation Position, GNE would
have the right to credit [*] against the License Fee payable to ABX, which
credit amount would be capped at [*]. Subject to applicable cure provisions,
failure to timely pay amounts set forth in this Section shall be a material
breach of this Agreement.

4.1.7 [*]. To the extent and only to the extent that ABX has been
directly informed by GNE of a Specified Antigen pursuant to Section 2.1.9, if
[*] Selects such a Specified Antigen under the Xenotech Agreement during the
term of this Agreement, ABX shall promptly notify GNE in writing (a "[*]
Notice") with respect to [*] Selection of such Specified Antigen and, if a [*]
is available to ABX under the XT Agreement, ABX shall offer to exercise the [*]
regarding such Specified Antigen on behalf of GNE on the terms and conditions
set forth in the Xenotech Agreement; provided however, that ABX shall

not be obligated to have in effect more than [*] for GNE's benefit at any time.
ABX shall inform GNE of ABX's deadlines for taking action with respect to any
such [*] in the [*] Notice. GNE may exercise its rights pursuant to this
Section 4.1.7 as follows:

(a) Request by GNE; Exercise by ABX. In response to a
notification that [*] has Selected a Specified Antigen as described in this
Section, and an offer by ABX to exercise such [*] on GNE's behalf, GNE may, by
written notice to ABX (each such notice a "[*] Exercise Notice"), request that
ABX exercise its [*] with respect to such GNE Antigen. Concurrently with each
such [*] Exercise Notice, GNE shall make a payment to ABX of [*]. If ABX
receives both a [*] Exercise Notice with respect to a particular GNE Antigen and
the appropriate payment before the deadline set forth in the [*] Notice, ABX
shall, to the extent that it has the right to do so, promptly exercise its [*]
with respect to such GNE Antigen. ABX shall promptly notify GNE of its exercise
of a [*] under this Section 4.1.7(a). A [*] exercised by ABX on GNE's behalf,
pursuant to this Section 4.1.7, shall be referred to as a "GNE [*]" from the
date of exercise by ABX.

(b) [*]. Promptly upon GNE's request, but no more than [*]
after ABX exercises the [*] on GNE's behalf, ABX shall enter into an [*] (as
defined in the Xenotech Agreement) with respect to such GNE Program Antigen.
Within [*] of entering into any such [*], ABX will execute and deliver to GNE
for Product License with respect to such GNE Program Antigen and execute and
deliver to GNE the corresponding GNE Product License with respect to such GNE
Program Antigen for execution by GNE. Further, following entry into each such XT
Product License, ABX shall provide written notice to GNE that ABX has entered
into the appropriate XT Product License and provide GNE with a complete copy
(excepting only financial terms) of the fully signed XT Product License.

(c) GNE Product License Agreement. Within [*] of GNE's
receipt of the XT Product License with regard to a particular [*] pursuant to
Section 4.1.7(b), ABX and GNE shall enter into the applicable GNE Product
License Agreement. If GNE fails to timely pay to ABX the [*] License Fee set
forth below, then (a) any applicable GNE Product License Agreement shall
terminate and ABX shall have no further obligation to GNE regarding such GNE
Product License Agreement and (b) ABX shall be entitled, in its sole discretion,
to exercise ABX's rights under the Xenotech Agreement and enter into the XT
Product License for the GNE Program Antigen on its own behalf or on behalf of a
third party without further obligation to GNE. Notwithstanding the foregoing,
nothing in this Section 4.1.7 shall be implied to grant ABX a license or entitle
ABX (a) to license or make any other use of any technology, know-how,
intellectual property, materials (including, without limitation, any Antibodies,
Antibody Secreting Cells, Hybridomas, or Genetic Material) or data owned by GNE,
owned jointly by GNE and ABX, and, in each case generated in whole or in part
from GNE's activities under this Agreement in any case without first obtaining
GNE's prior written consent, except as expressly provided in this Agreement
(provided that this sentence is

not intended to affect ABX's rights under Section 6.6 of this Agreement).

(d) License Fee. Within [*] of execution of a GNE Product
License Agreement with ABX with regard to a GNE Program Antigen for which an
Option has been exercised, GNE shall pay ABX a fee (a "[*] License Fee") of [*]
for each GNE Program Antigen for which ABX exercises a [*] on GNE's behalf. An
exercise by GNE of a [*] shall not affect the number of Options or Licenses
available to GNE under this Agreement. Subject to applicable cure provisions,
failure to timely pay the amounts set fort in this Section shall be a material
breach of this Agreement.

4.1.8 Definition of GNE Program Antigen. ABX shall use
commercially reasonable efforts to establish as the definition of the GNE
Program Antigen under the XT Master Research License and Option Agreement the
same definition of the GNE Program Antigen as is established under this
Agreement, it being understood and agreed, however, that the precise definition
of the GNE Program Antigen defining the rights licensed to ABX under the XT
Product License (and the definition in the corresponding GNE Product License
Agreement) shall be as established in accordance with the XT Master Research
License and Option Agreement.

4.1.9 Previous Agreement Superceded. The Previous Agreement is
hereby superceded in its entirety by this Agreement. [*], as each term is
defined in the Previous Agreement, are deemed to be GNE Program Antigens under
the terms of this Agreement, for which GNE has obtained [*] initial [*]
Evaluation Positions. The initial Evaluation Position with regard to [*] shall
expire on December 10, 1999, unless extended pursuant to the terms of this
Agreement, and the Evaluation Position with regard to [*] shall expire on June
10, 1999, unless extended pursuant to the terms of this Agreement.

5. FINANCING DOCUMENTS

5.1 Financing Documents. Simultaneously with the execution of this
Agreement, ABX and GNE shall execute and deliver a Common Stock Purchase
Agreement and a Registration Rights Agreement, in the forms attached hereto as
Attachment C (collectively, the "Financing Documents"). The execution and
delivery of the Financing Documents by ABX and GNE and the Closing (as defined
in the Common Stock Purchase Agreement) shall be conditions precedent to the
effectiveness of this Agreement.

6. INTELLECTUAL PROPERTY

6.1 GNE Intellectual Property. GNE shall own all right, title and
interest in and to [*] and all intellectual property related to the foregoing.

6.2 ABX Intellectual Property. ABX shall own all right, title and
interest in and to [*] and all intellectual property related to the foregoing.

6.3 Intellectual Property Concerning Other Inventions. Except as
otherwise provided in Sections 6.1 through 6.2 and Section 2.1.8 above, title to
any inventions (and to any patent applications, patents and other intellectual
property rights thereon) by a party or parties under this Agreement, [*].
Designation of inventors on any patent application hereunder is a matter of law
and shall be solely within the discretion of qualified patent counsel of the
party(ies) hereto making such invention.

6.4 Joint Ownership. For purposes of clarification, to the extent that
something is jointly owned under this Agreement, including the exclusive nature
of certain licenses which may be granted by ABX or GNE (but except as otherwise
provided in this Agreement with respect to GNE's obligations with respect to the
[*] thereof as set forth in this Agreement), both
parties shall have the right to use, commercialize, grant and authorize
sublicenses, and otherwise exploit all such jointly-owned patents and inventions
without obligation to account to, or obtain the consent of, the other joint
owner. Both parties hereto agree to promptly disclose to the other all
jointly-owned inventions under this Agreement and, on request of the other
party, will provide such information and assistance as may be reasonably
necessary to assist in the filing and prosecution of patent applications
claiming such inventions. The parties hereto agree to ensure that each employee,
agent, or independent contractor that conducts research using the XenoMouse
Animals, or materials derived in whole or part from the XenoMouse Animals, will
promptly disclose and assign to the parties hereto any and all rights to
jointly-owned inventions. The parties hereto agree to maintain records in
sufficient detail and in good scientific manner appropriate for patent purposes
and so as to properly reflect all work done and results achieved in performing
research under this Agreement.

6.5 Patent Prosecution.

6.5.1 Solely Owned. The party solely owning any invention under
this Article 6 shall have the sole right and responsibility (but not the
obligation), at its expense, to file, prosecute and maintain all patent
applications and patents thereon, and to conduct any interferences, oppositions,
or reexaminations thereon, and to request any reissues or patent term extensions
thereof.

6.5.2 Jointly Owned. In the event of any invention jointly owned
by the parties under this Article 6, ABX shall have the sole right and
responsibility (but not the obligation), at its expense, to file, prosecute and
maintain all patent applications (and to conduct any interferences, oppositions,
or reexaminations thereon, and to request any reissues or patent term extensions
thereof) claiming any XenoMouse Animals or any uses thereof, and GNE shall have
the sole right and responsibility (but not the obligation), at its expense, to
file, prosecute and

maintain all patent applications and patents (and to conduct any interferences,
oppositions, or reexaminations thereon, and to request any reissues or patent
term extensions thereof) claiming a GNE Program Antigen, an Antibody that binds
to a GNE Program Antigen or a Product and/or its development, manufacture, use
or sale. The party having such rights and responsibilities hereunder is referred
to as the "Controlling Party". The Controlling Party shall: (i) provide the
non-Controlling Party with any patent application filed hereunder by the
Controlling Party promptly after such filing; (ii) provide the non-Controlling
Party promptly with copies of all substantive communications received from or
filed in patent office(s) with respect to such filings; (iii) notify the
non-Controlling Party of any interference, opposition, reexamination request,
nullity proceeding, appeal or other interparty action and review it with the
non-Controlling Party as reasonably requested; and (iv) provide the
non-Controlling Party a reasonable time prior to taking or failing to take any
action that would substantially affect the scope of validity of rights under
such patent applications or patents thereon (including substantially narrowing
or canceling any claim without reserving the right to file a continuing or
divisional application, abandoning any patent or not filing or perfecting the
filing of any patent application) with notice of such proposed action so that
the non-Controlling Party has a reasonable opportunity to review and make
comments. If the Controlling Party fails to undertake the filing of a patent
application (or continuing or divisional application) within ninety (90) days
after a written request from the non-Controlling Party to do so, or if the
Controlling Party discontinues the prosecution or maintenance of a patent
application or patent, the non-Controlling Party at its expense may, in its
discretion, undertake such filing, prosecution or maintenance thereof, in which
case such patent application and patent thereon shall be solely owned by the
non-Controlling Party. The parties hereto shall assist each other to the extent
commercially reasonable in securing intellectual property rights resulting from
jointly owned inventions hereunder. As to enforcement of jointly-owned patents,
including actions against an alleged infringer, the parties hereto shall consult
with each other in good faith as to the best manner in which to proceed. In the
case of such actions against alleged infringers, any recovery awarded shall be
first used to reimburse the costs and expenses (including reasonable attorneys'
fees) of the party or parties in the action, second used to reimburse ABX for
any amounts ABX is obligated to pay to third parties (if any) in respect of such
amount pursuant to applicable ABX In-Licenses, with the remainder for the
account of the party or parties that undertake such actions to the extent of
their financial participation therein. To the extent that damages are awarded
for lost sales or lost profits from the sale of Products, such damages shall be
allocated among the parties taking into account royalties that would have been
payable to ABX on the sale of such Products. Either party may withdraw from or
abandon any jointly-owned patent application or patent hereunder, on reasonable
prior written notice to the other party providing a free-of-charge option to
assume the prosecution and/or maintenance thereof.

6.6 Grant Back. (a) In the event that GNE provides proper notice and
immunizes XenoMouse Animals with a Specified Antigen but ultimately does not
exercise an Option to enter into a GNE Product License Agreement with respect to
such Specified Antigen, then GNE agrees to grant to ABX a non-exclusive,
royalty-free, sublicensable, worldwide license to intellectual property directly
created by GNE arising out of GNE's activities under this Agreement using the
XenoMouse Animals with respect to such particular Specified Antigen, including,
but not limited to, Antibodies to such Specified Antigen, cells that express
such

<PAGE> 19

Antibodies and Genetic Material encoding such Antibodies; provided, however,
that such license shall be limited to intellectual property which could have
only been created using XenoMouse Animals or with another mouse strain that
contains human antibody genes and is able to produce human antibodies but not
with any other mouse strains (such as wild-type mice); and provided, further,
that if GNE properly exercises an Evaluation Position on the terms and
conditions of this Agreement and then exercises an Option with respect to the
Specified Antigen and ABX for any reason (other than a breach of this Agreement
by GNE or retraction or cancellation by GNE pursuant to Sections 4.1.2(c) or
4.1.2(e), respectively) does not enter into the applicable GNE Product License
Agreement with GNE, no license shall be granted to ABX for intellectual property
covering such Specified Antigen.

(b) In the event that GNE violates the last sentence of Section
2.1.1 by immunizing XenoMouse Animals with a Non-Specified Antigen, then GNE
agrees to grant to ABX a license to intellectual property created by GNE using
XenoMouse Animals and covering only such Non-Specified Antigen, including, but
not limited to, Antibodies to such Non-Specified Antigen, cells that express
such Antibodies and genetic material encoding such Antibodies, as follows:

(i) In the event that GNE would not have been allowed to immunize
the XenoMouse Animals with the Non-Specified Antigen at the time of
immunization because such Antigen had been [*], GNE agrees to grant ABX
an exclusive, royalty-free, sublicensable, worldwide license to all
intellectual property created by GNE using the XenoMouse with such
Non-Specified Antigen; provided, however, that such license shall be
limited to intellectual property which could have only been created
using the XenoMouse Animals or with another mouse strain that contains
human antibody genes and is able to produce human antibodies but not
with any other mouse strains (such as wild-type mice);

(ii) In the event that GNE would have been allowed to immunize
the XenoMouse Animals with such Non-Specified Antigen because such
Antigen had not been [*] but GNE failed to give ABX proper notice prior
to immunization, then, if GNE converts such Non-Specified Antigen into a
Specified Antigen by following the procedures set forth in this
Agreement but does not ultimately exercise an Option with regard to such
Antigen, GNE shall then grant ABX a non-exclusive, royalty-free,
sublicensable, worldwide license to intellectual property created by GNE
using the XenoMouse covering that Non-Specified Antigen; provided,
however, that such license shall be limited to intellectual property
which could have only been created using the XenoMouse Animals or with
another mouse strain that contains human antibody genes and is able to
produce human antibodies but not with any other mouse strains (such as
wild-type mice); and provided, further, that if GNE exercises an
Evaluation Position and then exercises an Option with respect to such
properly converted Specified Antigen and ABX for any reason does not
enter into the applicable GNE Product License Agreement, no license
shall be granted to ABX for intellectual property

covering such Specified Antigen.

(c) If, during GNE's immunization of the XenoMouse Animals with a
Specified Antigen under the terms and conditions of this Agreement, an invention
covering a Non-Specified Antigen arises, and GNE does not convert such
Non-Specified Antigen into a Specified Antigen under Section 6.6(b)(ii) within a
reasonable amount of time, GNE shall grant ABX a non-exclusive, royalty-free,
worldwide, sublicensable license to intellectual property created by GNE using
the XenoMouse covering such Non-Specified Antigen; provided, however, that such
license shall be limited to intellectual property which could have only been
created using XenoMouse Animals or with another mouse strain that contains human
antibody genes and is able to produce human antibodies but not with any other
mouse strains (such as wild-type mice).

(d) None of the licenses contemplated in Section 6.6 shall
require GNE to transfer any know-how or provide any training to ABX.
Notwithstanding the foregoing, GNE agrees to execute such documents and take
such further actions as are reasonably necessary to effectuate any grant of
licenses contemplated by this Section 6.6.

7. CONFIDENTIALITY

7.1 Confidentiality. Except as expressly provided herein, GNE and ABX
each shall keep completely confidential and shall not publish or otherwise
disclose and shall not use for any purpose any Confidential Information during
the term of this Agreement and for five (5) years following the expiration or
termination of this Agreement. ABX may disclose in its promotional material,
information contained in GNE's publicly available documents and attribute
appropriate credit to XenoMouse Technology.

7.2 Permitted Disclosure. Notwithstanding Section 7.1 above, each party
may nevertheless disclose the other party's Confidential Information to the
extent such disclosure is required by applicable law, regulation or court order,
provided that if a party is so required to make any such disclosure of the other
party's Confidential Information, other than pursuant to a confidentiality
agreement, it will give reasonable advance notice to the other party of such
disclosure requirement and will use efforts consistent with prudent business
judgment to secure confidential treatment of such information prior to its
disclosure (whether through protective orders or confidentiality agreements or
otherwise). The expiration of GNE's obligations under Section 7.1 above shall
not limit GNE's obligations under Section 9.4.6 above.

7.3 Terms of Agreement. Except as expressly provided in this Article 7,
each party hereto agrees not to make any public disclosure of the terms of this
Agreement or the identity of the Specified Antigen (unless such Specified
Antigen is an Excluded Antigen)(including, without limitation, any press release
and/or Q&A to be issued on the date of GNE's exercise of any Option), without
first obtaining the written approval of the other party and agreement upon the
nature and text of such public announcement or disclosure. After execution of
this Agreement, either party hereto may issue a press release, the content of
which will be agreed upon by the parties. The party desiring to make any such
public announcement shall provide the other party

<PAGE> 21

with a copy of the proposed announcement for review and comment in reasonably
sufficient time prior to public release. Each party agrees that it shall
cooperate fully with the other with respect to all disclosures regarding this
Agreement required under applicable laws and regulations to the United States
Securities Exchange Commission and any other governmental or regulatory
agencies, including requests for confidential treatment of proprietary
information of either party included in any such governmental disclosure. The
parties may publicly disclose information contained in any prior public
disclosure that was in compliance with this Section 7.3 without further
approvals hereunder. In addition, each party agrees not to disclose the identity
of any Specified Antigen to any third party under any circumstances except if
required by law, nor the terms of this Agreement or the GNE Product License
Agreement to any third party, other than to professional advisors and financing
sources, and in that case, only under confidentiality terms at least as
stringent in material respects as this Article. GNE shall have the right to
review and comment on applications for confidential treatment insofar as they
pertain to this Agreement, prior to being filed with the SEC and ABX shall not
unreasonably refuse to consider such comments. GNE shall provide its comments,
if any, on such application as soon as practicable, and in no event later than
four (4) days after such application is provided to GNE.

7.4 Scientific Publications. The parties agree, as a general principle,
that it is desirable to publish the results of the research conducted by the
parties hereto under this Agreement, and agree that both parties will have the
right to publish such results. The following restrictions shall apply with
respect to the disclosure in scientific journals or publications by the parties
hereto regarding any scientific work under this Agreement (but not any
Independent Discovery or other research performed by the parties): (a) the party
publishing, or proposing to publish, such results (the "Publishing Party") shall
provide the other party (the "Non-Publishing Party") with an advance copy of any
proposed submission of a publication arising from such scientific work, not less
than thirty (30) days prior to submission or disclosure of such publication, and
the Non-Publishing Party shall have a reasonable opportunity to recommend any
changes it reasonably believes are necessary to preserve its Patent Rights or
Know-How or to protect its Confidential Information hereunder, and the
incorporation of such recommended changes shall not be unreasonably refused; and
(b) if the Non-Publishing Party informs the Publishing Party, within thirty (30)
days of receipt of an advance copy of a proposed publication hereunder, that
such publication includes Confidential Information of the Non-Publishing Party
the publication of which, in the Non-Publishing Party's sole judgment, could be
expected to have a material adverse effect on any of its Patent Rights or
Know-How, or on the Non-Publishing Party's business affairs which are the
subject of this Agreement, the Publishing Party shall delete such Confidential
Information of the Non-Publishing Party from such publication and, in the case
of inventions made solely by the Publishing Party or jointly by the Publishing
Party and the Non-Publishing Party, delay publication thereof for a reasonable
time period (not to exceed ninety (90) days) sufficient for the preparation and
filing of a patent application or application for a certificate of invention
thereon. The parties agree to confer regarding authorship of such publications,
which shall be determined in accordance with the standards for authorship
customary for peer-reviewed journals. For purposes of this Section 7, the
parties agree that publication of Confidential Information incorporated within a
filed patent application shall not be required to be deleted solely due to such
patent application having reached its 18 month international publication date.

<PAGE> 22

8. INDEMNIFICATION

8.1 GNE. GNE agrees to save, defend and hold ABX and its directors,
officers, employees, agents and Affiliates harmless from and against any suits,
claims, actions, demands, damages, liabilities, expenses or losses (including
court costs and reasonable attorneys' and experts' fees) (collectively, the
"Liabilities") resulting directly from any third party claims arising from any
negligence or willful misconduct of GNE (or its directors, officers, employees
or agents) or the breach of any representations, warranties or covenants of GNE
under this Agreement; provided, however, that nothing in this Section 8.1 shall
obligate GNE to save, defend or hold harmless ABX for any Liabilities to the
extent arising from the gross negligence or willful misconduct of ABX or its
directors, officers, employees, or agents.

8.3 Indemnification Procedures. If any person or party entitled to
indemnification under this Article 8 (an "Indemnitee") intends to claim
indemnification under this Article 8, it shall promptly notify the indemnifying
party hereunder (the "Indemnitor") in writing of any Liability in respect of
which the Indemnitee intends to claim such indemnification, as soon as
reasonably practicable after the Indemnitee receives notice of such Liability.
Indemnitor's obligations under this Article 8 are conditioned upon the
Indemnitee permitting the Indemnitor to assume direction and control of the
defense of the Liability (including the right to settle it); provided, however,
that an Indemnitee shall have the right to retain its own legal counsel, with
the reasonable fees and expenses thereof to be paid by the Indemnitor, if
representation of such Indemnitee by the legal counsel retained by the
Indemnitor would be inappropriate due to actual or potential conflicts of
interest between such Indemnitee and such Indemnitor. Indemnitor's obligations
under this Article 8 shall not apply to amounts paid in settlement of any loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Indemnitor, which consent shall not be withheld or delayed
unreasonably. The failure to deliver written notice to the Indemnitor within a
reasonable time after the commencement of any third party suit, claim, action or
demand, if prejudicial to Indemnitor's ability to defend such suit, claim,
action or demand, shall relieve the Indemnitor of its obligations under this
Section 8 solely with respect to Liabilities that could have been defended in
such action. The Indemnitee (and its directors, officers, employees and agents)
shall cooperate fully with the Indemnitor and its legal counsel in the
investigation of any such Liability for which indemnification is sought by such
Indemnitee hereunder.

<PAGE> 23

9. REPRESENTATIONS, WARRANTIES AND COVENANTS

9.1 Representations and Warranties of ABX. ABX represents and warrants
to GNE as of the Effective Date that:

9.1.1 (i) it has the power and authority to enter into this
Agreement; (ii) to the knowledge of ABX, there are no existing or threatened
actions, suits or claims pending with respect to the subject matter hereof or
the right of ABX to enter into and perform its obligations under this Agreement;
(iii) it has taken all necessary action on its part to authorize the execution
and delivery of this Agreement and the performance of its obligations hereunder;
(iv) this Agreement has been duly executed and delivered on behalf of it, and
constitutes a legal, valid, binding obligation, enforceable against it in
accordance with the terms hereof; and (v) the execution and delivery of this
Agreement and the performance of its obligations hereunder do not conflict with
or violate any requirement of applicable laws or regulations and do not conflict
with, or constitute a default under, any contractual obligation of it;

9.1.2 it has the full right and authority to grant the rights
and licenses granted herein;

9.1.3 it has not previously granted any rights materially
inconsistent or in material conflict with the rights and licenses granted to GNE
herein, including without limitation, any right or license in and to the
Licensed Technology or any portion thereof;

9.1.4 to its knowledge (without the obligation to perform
external due diligence) there are no existing or threatened actions, suits or
claims pending against ABX with respect to the Licensed Technology or the right
of ABX to enter into and perform its obligations under this Agreement;

9.1.5 ABX has no knowledge (without the obligation to perform due
diligence) of any rights of third parties that would materially interfere with
GNE's use of the ABX Know-How or the ABX Patent Rights under this Agreement,
and, as of the Effective Date, ABX has no knowledge (without the obligation to
perform due diligence) that any patents or patent applications within the ABX
Patent Rights are invalid or unenforceable or that their practice as licensed
hereunder would infringe patent rights of third parties; provided, however, that
this representation does not apply to any Liabilities or infringement arising
out of, relating to or with respect to the Specified Antigens or the GNE Program
Antigens;

9.1.6 Cell Genesys, Inc. ("CGI") has assigned to ABX all of CGI's
rights and obligations under the XT Master Research License and Option
Agreement, and ABX is a party to the XT Master Research License and Option
Agreement; and

9.1.7 it has provided to GNE complete copies of all material
applicable ABX In-Licenses setting forth all material applicable limitations or
restrictions on the Licensed Technology and the XenoMouse Animals (it being
understood that the financial terms have been

<PAGE> 24

redacted from some or all such copies).

9.2 Covenants of ABX. ABX covenants to GNE that:

9.2.1 ABX will not take any action or fail to take any action
under this Agreement that will cause a material breach of the GenPharm
Cross-License, the XT Master Research License and Option Agreement or any ABX
In-License; provided, however, that it shall not be a breach of this covenant if
ABX cures any breach of such third party agreement pursuant to the cure
provisions contained therein;

9.2.2 ABX shall, at the reasonable request of GNE, discuss with
GNE ABX's interpretation of material terms and conditions of ABX In-Licenses,
including, without limitation, any limitations on ABX's right to further
transfer or grant licenses or sublicenses to GNE to any and all rights to
technology within the scope of the ABX Patent Rights and/or ABX Know-How under
any ABX In-License;

9.2.3 ABX shall not agree to any termination, modifications or
amendments to any ABX In-Licenses that would negatively affect GNE's rights
under this Agreement without first obtaining GNE's reasonable prior written
consent, and ABX shall notify GNE as soon as practicable (if possible) of any
material modification or amendment of any ABX In-License that materially affects
(positively or negatively) GNE's rights or obligations under this Agreement or
the GNE Product License Agreement, and provide a copy of such modification or
amendment, redacted only with regard to financial terms;

9.2.4 ABX shall promptly provide GNE with a copy of any notice of
default by ABX and/or its sublicensee under any ABX In-License, and of any
notice of termination by any other party to any ABX In-License;

9.2.5 ABX shall not use or permit others to use cells created by
ABX from immunization of XenoMouse Animals pursuant to the Previous Agreement in
any way without GNE's prior written consent nor shall ABX directly or indirectly
create, incur, assume or suffer to exist, any lien, security interest or other
similar encumbrance of any kind, or any other type of preference, as such term
is used in bankruptcy law, upon or with respect to such cells or with respect to
cells generated pursuant to this Agreement.

9.2.6 ABX will provide GNE with a complete (excepting only for
financial terms) copy of each Product License entered into by ABX with regard to
a GNE Program Antigen as signed by all parties thereto;

9.2.7 ABX shall notify GNE promptly in writing of assertion by
JTI (if any) that it has any rights anywhere that would prevent ABX from
acquiring an XT Product License with a territory other than that indicated in
the notice provided for in Section 4.1.2(d) with regard to a GNE Program Antigen
or any other right or license under the Licensed Technology to develop, make and
have made, use, sell, lease, offer to sell or lease, import, export, otherwise
transfer physical possession of or otherwise transfer title to Product with
respect to such GNE Program

<PAGE> 25

Antigen in the Field, except with respect to rights granted under the research
license set forth in Article 3 of the Xenotech Agreement; and

9.2.8 On the first date on which a Product License for any GNE
Program Antigen between ABX and XT and the corresponding GNE Product License
Agreement between ABX and GNE are both in full force and effect, and thereafter
so long as both are in effect, ABX shall be and remain XT's exclusive licensee
and sublicensee (except with respect to any rights of JT under the Xenotech
Agreement and the licenses granted in the GenPharm Cross License) for all the
uses of the Licensed Technology relating to applicable Products in the Field
throughout the Territory, and GNE shall be ABX's exclusive sublicensee
thereunder for all uses of the Licensed Technology relating to the applicable
Products in the Field throughout the Territory, as more fully set forth in the
applicable GNE Product License Agreement and on the terms and condition set
forth therein.

9.2.9 If ABX becomes aware of any third party intellectual
property that would constitute a Core Third Party Patent under a GNE Product
License Agreement if such a GNE Product License Agreement were in effect, ABX
agrees to inform GNE of such third party intellectual property and discuss with
GNE ways to resolve issues related thereto.

9.3 Representations and Warranties of GNE. GNE represents and warrants
to ABX as of the Effective Date that:

9.3.1 (i) it has the power and authority to enter into this
Agreement; (ii) it has taken all necessary action on its part to authorize the
execution and delivery of this Agreement and the performance of its obligations
hereunder; (iii) this Agreement has been duly executed and delivered on behalf
of it, and constitutes a legal, valid, binding obligation, enforceable against
it in accordance with the terms hereof; (iv) the execution and delivery of this
Agreement and the performance of its obligations hereunder do not conflict with
or violate any requirement of applicable laws or regulations and do not conflict
with, or constitute a default under, any contractual obligation of it; and (v)
it will not knowingly take any action, or fail to take any action, under this
Agreement that will cause a breach of the GenPharm Cross License Agreement or
the XT Master Research and License Agreement;

9.3.2 it has the full right and authority to enter into this
Agreement and grant the rights and licenses granted herein;

9.3.3 to its knowledge, without the obligation to perform due
diligence, there are no existing or threatened actions, suits or claims pending
with respect to the subject matter hereof (including, without limitation, rights
in and to the GNE Program Antigens and/or antibodies to the GNE Program
Antigens) or the right of GNE to enter into and perform its obligations under
this Agreement;

9.3.4 it has no knowledge (without the obligation to perform due
diligence) of any rights of third parties that would interfere with the use of
the GNE Know-How or practice of the GNE Patent Rights as contemplated under this
Agreement; and

<PAGE> 26

9.3.5 it has not previously granted any rights inconsistent or in
conflict with the rights and licenses granted under this Agreement.

9.4 Covenants of GNE. GNE covenants to ABX that:

9.4.1 during the term of this Agreement GNE will not grant any
rights inconsistent or in conflict with the rights and licenses granted under
this Agreement;

9.4.2 it will not, to its knowledge, take any action or fail to
take any action that will cause a breach by ABX of the GenPharm Cross License,
the XT Master Research License and Option Agreement, the XT Product License, or
any ABX In-License; and

9.4.3 it will not, in bad faith, immunize the XenoMouse Animals
with any Antigens other than Specified Antigens or GNE Program Antigens; and

9.4.4 it will provide ABX [*] with proper notice with respect to
the Specified Antigens that will be used by GNE to immunize the XenoMouse
Animals.

9.4.5 If any member of GNE's project team involved in use of
XenoMouse Technology becomes aware of any third party intellectual property that
would constitute a Core Third Party Patent under a GNE Product License Agreement
if such a GNE Product License Agreement were in effect, GNE agrees to inform ABX
of such third party intellectual property and discuss with ABX ways to resolve
issues related thereto.

9.4.6 (a) all XenoMouse Animals transferred to GNE and the ABX
Materials shall be the sole property of ABX and are transferred to GNE solely
for the purposes set forth in Section 2.1.1 above, and the transfer of physical
possession to GNE, and/or possession or use by GNE of the XenoMouse Animals or
the ABX Materials shall not be, nor be construed as, a sale, lease, offer to
sell or lease, or other transfer of title to any XenoMouse Animals or the ABX
Materials;

(b) all XenoMouse Animals and all materials derived in whole
or part from the XenoMouse Animals (including the ABX Materials and Antibodies
derived therefrom) shall remain in the control of GNE and shall not be
transferred to GNE's Affiliates, sublicensees or any other party (other than
ABX), except as expressly set forth under Section 2.1.1 or as expressly
permitted under a GNE Product License Agreement (if entered into by the parties
hereto);

(c) GNE shall not directly or indirectly use or attempt to
use the XenoMouse Animals, or any information or biological or chemical
materials derived from the XenoMouse Animals (including without limitation
Products), to reproduce, generate, create or produce, through breeding,
reverse-engineering, genetic manipulation or otherwise, the XenoMouse Animals or
other transgenic mice or other transgenic animals;

(d) GNE shall not sell, have sold, (sub)license, assign,
lease, or offer to sell, lease, (sub)license, or assign, or otherwise transfer
title to any XenoMouse Animals;

(e) Except as expressly set forth under Section 2.1.1, GNE
shall not sell, have sold, (sub)license, assign, lease, or offer to sell,
(sub)license, assign or lease, otherwise transfer title to, or distribute,
commercialize or clinically develop any Antibody, ABX Materials, Product or
materials derived from XenoMouse Animals (or Genetic Materials encoding the
foregoing) without first entering into a GNE Product License Agreement with ABX
with respect to such materials;

(f) Upon expiration or termination of this Agreement for any
reason, GNE shall destroy (or return to ABX as directed by ABX) each XenoMouse
Animal and shall destroy, at ABX's request, all materials derived therefrom
(regardless of title), including without limitation all ABX Materials and any
tissues or Genetic Materials therefrom, and certify such destruction or transfer
within thirty (30) days after written notice by ABX instructing GNE to destroy
or return XenoMouse Animals and/or materials, in each case except as otherwise
expressly provided in an applicable GNE Product License Agreement (if entered
into by the parties);

(g) GNE shall not use the XenoMouse Animals to make or use
antibodies to any antigens other than the Specified Antigens and the GNE Program
Antigens (including without limitation to [*]);

(h) GNE shall grant to ABX an exclusive (even as to GNE),
worldwide, irrevocable, perpetual, sublicensable, royalty free license to GNE's
entire right, title and interest in and to all inventions (whether patentable or
nonpatentable), made or created by GNE (and any of its agents or employees)
using the Licensed Technology and which covers any modification, improvement,
use or adaptation of the XenoMouse Animals, which use is not in accordance with
the terms and conditions set forth in Article 2;

(i) GNE shall use the XenoMouse Animals and all materials
derived from the XenoMouse Animals (including without limitation Products) in
compliance with all applicable national, state, and local laws and regulations,
including all applicable National Institutes of Health guidelines. GNE
acknowledges that the XenoMouse Animals, and all materials derived from the
XenoMouse Animals (including without limitation Products), are experimental in
nature and may have unknown characteristics. GNE shall use reasonable prudence
and care in the use, handling, storage, transportation, disposition and
containment of the XenoMouse Animals and all materials derived from the
XenoMouse Animals (including without limitation Products), and shall not use any
such materials in humans without a Product License;

(j) Unless otherwise agreed by ABX in advance in writing, all
XenoMouse Animals delivered to GNE shall be delivered to GNE's primary research
facility, which is

currently located in South San Francisco, CA, and such XenoMouse Animals shall
not leave such facility (except for return of XenoMouse Animals to ABX or upon
destruction of the XenoMouse Animals by GNE); and

(k) XT shall be a third-party beneficiary of the commitments
by GNE set forth in items (a) through (g) above.

9.5 Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF
ANY KIND TO THE OTHER PARTY, EITHER EXPRESS OR IMPLIED, REGARDING THE MATERIALS,
PRODUCTS OR THE LICENSED TECHNOLOGY, INCLUDING, BUT NOT LIMITED TO, WARRANTIES
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OR
VALIDITY OF INTELLECTUAL PROPERTY RIGHTS. ALL XENOMOUSE ANIMALS AND MATERIALS
DERIVED IN WHOLE OR PART FROM THE XENOMOUSE ANIMALS PROVIDED TO GNE BY ABX ARE
PROVIDED "AS IS," AND ABX SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT WITH
RESPECT TO XENOMOUSE ANIMALS AND MATERIALS DERIVED IN WHOLE OR PART FROM
XENOMOUSE ANIMALS.

10. TERM; TERMINATION

10.1 Term. This Agreement shall commence on the Effective Date and,
unless earlier terminated as provided in this Article 10, shall continue in
effect for a period of six (6) years from the Effective Date; provided that, GNE
shall have the right, at any time during the final year of the initial term of
this Agreement, to extend the term of this Agreement as set forth below in this
Section 10.1. GNE shall have the right to extend the term of this Agreement for
one additional period of three (3) years by (a) notifying ABX in writing that
GNE desires to extend the term of this Agreement prior to the expiration of this
Agreement, and (b) purchasing from ABX (within sixty (60) days of the date of
such notice), on terms (other than price) substantially similar to those of the
Financing Documents, such number of shares of the common stock of ABX (the
"Common Stock") equal to an aggregate purchase price of two million five hundred
thousand dollars ($2,500,000), at a purchase price per share of such Common
Stock of one hundred and fifty percent (150%) of the average closing price per
share of such Common Stock during the twenty (20) day trading period prior to
the date of notice.

10.2 Termination by GNE. GNE may terminate this Agreement at any time
upon thirty (30) days written notice to ABX.

10.3 Termination for Breach. Either party to this Agreement may
terminate this Agreement in the event that the other party shall have materially
breached or defaulted in the performance of any of its material obligations
hereunder, and such breach or default shall have continued for sixty (60) days
after written notice of such breach and intent to terminate this

<PAGE> 29

Agreement therefor was provided to the breaching party by the nonbreaching
party. Any such termination shall become effective at the end of such sixty (60)
day period unless the breaching party has cured any such breach or default prior
to the expiration of the sixty (60) day period. Any such termination shall be
without prejudice to any other remedies available to, the nonbreaching party by
law or at equity (including, without limitation under Section 10.4 below). The
right of a nonbreaching party to terminate this Agreement shall not be affected
in any way by its waiver or failure to take action with respect to any previous
default.

10.4 Effect of Expiration or Termination.

10.4.1 Accrued Obligations and Rights. Expiration or any
termination of this Agreement shall not relieve the parties of any obligation
accruing prior to such expiration or termination or release either party hereto
from any liability which at the time of such expiration or termination has
already accrued to such party, nor preclude either party from pursuing any
rights and remedies it may have hereunder or at law or in equity which accrued
to it prior to such expiration or termination, subject to the terms of this
Agreement.

10.4.2 XT. GNE and ABX agree that this Agreement, including,
without limitation, any licenses and/or sublicenses granted to GNE pursuant to
this Agreement or any GNE Product License Agreement entered into between ABX and
GNE, shall survive any dissolution, liquidation or acquisition of XT, and that
such licenses shall remain in full force and effect even after any distribution,
following dissolution, of the intellectual property owned or licensed to XT, to
any entity. GNE and ABX agree that any transfer of such intellectual property to
or following such dissolution shall be subject to the licenses and/or
sublicenses granted herein (and to be granted pursuant to applicable GNE Product
License Agreements, if entered into at all by the parties).

10.4.3 XT Master Research License and Option Agreement. This
Agreement, including without limitation, any license and/or sublicense granted
to GNE hereunder, and any GNE Product License Agreement (if entered into by the
parties) (including without limitation, any licenses and/or sublicenses granted
to GNE thereunder), are, except as otherwise provided in this Agreement,
independent of, and, as between GNE and ABX, shall not be affected by, any
breach or termination of the XT Master Research License and Option Agreement.

10.4.4 Survival. Articles 6, 7, 8, 9, 11 and Sections 2.1.8 and
10.4 shall survive the expiration or termination of this Agreement.

11. MISCELLANEOUS PROVISIONS

11.1 Governing Laws. This Agreement shall be interpreted and construed
in accordance with the laws of the State of California, without regard to
conflicts of law principles.

11.2 Waiver. It is agreed that no waiver by a party hereto of any breach
or default of any of the covenants or agreements herein set forth shall be
deemed a waiver as to any

<PAGE> 30

subsequent and/or similar breach or default.

11.3 Assignments. Neither this Agreement nor any right or obligation
hereunder may be assigned or delegated, in whole or part, by either party
without the prior written consent of the other; provided, however, that either
party may, without the written consent of the other, assign this Agreement to
(a) any entity to which it has acquired all or substantially all of the business
or assets of the assigning party, (b) any successor corporation resulting from
any merger or consolidation with another corporation (including, in the case of
GNE, F. Hoffmann-La Roche Ltd or any Affiliate thereof) or (c) in the case of
ABX, to XT. Notwithstanding the foregoing, ABX shall not be obligated without
its written consent to send XenoMouse Animals to any party other than GNE. The
terms and conditions of this Agreement shall be binding on and inure to the
benefit of the permitted successors and assigns of the parties.

11.4 Independent Contractors. The relationship of the parties hereto is
that of independent contractors. The parties hereto are not deemed to be agents,
partners or joint venturers of the others for any purpose as a result of this
Agreement or the transactions contemplated thereby.

11.5 Compliance with Laws. In exercising their rights under this
Agreement, the parties shall fully comply with the requirements of any and all
applicable laws, regulations, rules and orders of any governmental body having
jurisdiction over the exercise of rights under this Agreement.

11.6 Further Actions. Each party agrees to execute, acknowledge and
deliver such further instruments and to do all such other acts as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.

11.7 No implied obligations. Except as expressly provided herein,
nothing in this Agreement shall be deemed to require GNE to exploit the Licensed
Technology or to prevent GNE from commercializing products similar to or in
competition with any Product, in addition to or in lieu of such Products.

<PAGE> 31

11.8 Notices. Any notice, request, approval or consent required or
permitted to be given between the parties hereto shall be given in writing, and
shall be deemed to have been properly given if delivered in person, transmitted
by telecopy with machine confirmation of transmission and confirmation by
personal delivery, first class certified mail or courier), or mailed by first
class certified mail to the other party at the appropriate address set forth
below, or to such other address as may be designated in writing by a party from
time to time in accordance with this Agreement. Such notice, request, approval
or consent shall be deemed given (i) on the date delivered or transmitted if
delivered in person or transmitted by telecopy prior to 5 p.m. on any business
day, (ii) on the next business day following delivery or transmission if
delivered in person or transmitted by telecopy after 5 p.m. on any business day
or on any non-business day, or (iii) on the fourth business day following the
date deposited in the United States mail if sent mailed by first class certified
mail.

Genentech, Inc.: Genentech, Inc.
One DNA Way
South San Francisco, CA 94080
Attn: Corporate Secretary
Telecopy: (650) 952-9881

Abgenix, Inc.: Abgenix, Inc.
7601 Dumbarton Circle
Fremont, California 94555
Attn: President
Telecopy: (510) 608-6511

11.9 Export Laws. Notwithstanding anything to the contrary contained
herein, all obligations of ABX and GNE are subject to prior compliance with
United States export regulations and such other United States laws and
regulations as may be applicable, and to obtaining all necessary approvals
required by the applicable agencies of the government of the United States. GNE
shall be responsible for obtaining such approvals, and shall use efforts
consistent with prudent business judgment to obtain such approvals. ABX agrees
to cooperate reasonably and provide reasonable assistance to GNE as may be
reasonably necessary to obtain any required approvals.

11.10 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision and the parties shall discuss in good faith appropriate
revised arrangements.

11.11 Force Majeure. Nonperformance of any party (except for payment
obligations) shall be excused to the extent that performance is rendered
impossible by strike, fire, earthquake, flood, governmental acts or orders or
restrictions, failure of suppliers, or any other reason where failure to perform
is beyond the reasonable control and not caused by the negligence, intentional
conduct or misconduct of the nonperforming party.

<PAGE> 32

11.7 No Consequential Damages. IN NO EVENT SHALL ANY PARTY HERETO BE
LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS
AGREEMENT OR THE EXERCISE OF ITS RIGHTS HEREUNDER, INCLUDING WITHOUT LIMITATION
LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT,
REGARDLESS OF ANY NOTICE OF SUCH DAMAGES.

11.13 Disputes. The parties recognize that disputes as to certain
matters may from time to time arise during the term of this Agreement which
relate to either party's rights and/or obligations hereunder. It is the
objective of the parties to establish procedures to facilitate the resolution of
disputes arising under this Agreement in an expedient manner by mutual
cooperation and without resort to litigation. To accomplish this objective, it
is agreed that each party will inform the other as soon as possible when it
becomes aware of an area or issue of dispute. Prior to filing or initiating any
legal proceeding, the parties agree in good faith to discuss the dispute at the
organizational level at which such dispute arises. If either party believes
there has been sufficient discussion of the matter at such level, then such
party, by written notice to the other party, may have such dispute referred to
their respective chief executive officers (or, if unavailable, a designee who is
an officer of the party empowered to resolve such disputes) for attempted
resolution by good faith negotiations between such chief executive officers
within fourteen (14) days of such referral. In the event that the chief
executive officers are not able to resolve such dispute within such fourteen
(14) day period, either party may pursue whatever remedies are available to them
under this Agreement or by law.

11.14 Complete Agreement. It is understood and agreed between ABX and
GNE that this Agreement and the GNE Product License Agreement(s) arising under
this Agreement constitute the entire agreement, both written and oral, between
the parties with respect to the subject matter hereof, and supersede and cancel
all prior agreements, understandings and representations respecting the subject
matter hereof, either written or oral, expressed or implied. No amendment or
change hereof or addition hereto shall be effective or binding on either of the
parties hereto unless reduced to writing and executed by the respective duly
authorized representatives of ABX and GNE.

11.15 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original and both together shall be deemed to
be one and the same agreement.

11.16 Headings. The captions to the several Articles and Sections hereof
are not a part of this Agreement, but are included merely for convenience of
reference only and shall not affect its meaning or interpretation.

<PAGE> 33

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers as of the day and year
first above written.

ABGENIX, INC.

By: /s/ Raymond M. Withy
-------------------------------------
(Signature)

Raymond M. Withy
-------------------------------------
(Printed Name)

Vice-President, Corporate Development
-------------------------------------
(Title)

GENENTECH, INC.

By: /s/ William D. Young
-------------------------------------
(Signature)

William D. Young
-------------------------------------
(Printed Name)

Chief Operating Officer
-------------------------------------
(Title)

<PAGE> 34

EXHIBIT A TO
GNE OPTION AGREEMENT AND
GNE PRODUCT LICENSE AGREEMENT

COMMON DEFINITIONS EXHIBIT

1.1. "ABX Home Territory" shall mean the United States and its
territories, Canada and Mexico.

1.2. "ABX In-Licenses" shall mean any and all licenses, sublicenses or
other agreements, as in effect as of the Effective Date or hereafter during the
term of this Agreement (as the same may be amended from time to time), under
which ABX has rights to technology (whether or not patentable) that is related
to XenoMouse Animals and/or is within the scope of the ABX Patent Rights and/or
the ABX Know-How. The parties agree that any and all such rights pursuant to any
ABX In-License are included in the XenoMouse Animals, ABX Patent Rights or the
ABX Know-How, as the case may be, but only to the extent that ABX is permitted
under the terms of the applicable ABX In-License to further transfer or grant
licenses or sublicenses of such rights. "ABX In-Licenses" shall include, without
limitation, the XT Master Research License and Option Agreement, any XT Product
License for a GNE Program Antigen and the GenPharm Cross License Agreement and
other agreements listed in Attachment A attached to the GNE Option Agreement.

1.3. "ABX Know-How" shall mean any and all processes, techniques, ideas,
technical information and any other information or materials, whether or not any
of the foregoing is patentable, that are owned or controlled by ABX (solely or
jointly, including under any ABX In-License) as of the Effective Date or
hereafter during the term of this Agreement, and as to which ABX has the right
to transfer or grant licenses or sublicenses (including as permitted under any
ABX In-License), to the extent that any of the foregoing relates to the
immunization of XenoMouse Animals with a Specified Antigen to generate any
Antibody hereunder. "ABX Know-How" shall not include any of the foregoing which
is generally ascertainable from publicly available information, or that was
known to GNE prior to disclosure to GNE by ABX, or which GNE obtained
independently (on its own or with partners) and not in violation of any
obligation of confidentiality owed to ABX or any third party, in any case as
demonstrated by competent written records of GNE (and/or its partners) which may
be supported or explained by additional testimonial evidence. All "ABX Know-How"
shall be treated as "Confidential Information" of ABX as provided in Article 7
of the GNE Option Agreement. As of the Effective Date, the parties have agreed
that ABX shall transfer to or provide GNE with the ABX Know-How identified in
Attachment B attached to and incorporated in the GNE Option Agreement.

1.4. "ABX Materials" shall mean [*].

1.5. "ABX Patent Rights" shall mean (a) any and all patent applications
and patents (including inventor's certificates and utility models) throughout
the Territory and (b) all

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extensions, reissues, reexaminations, renewals, divisions, continuations and
continuations-in-part of any of the foregoing, that are owned or controlled by
ABX (solely or jointly, including under any ABX In-License) as of the Effective
Date or hereafter during the term of this Agreement, and as to which ABX has the
right to transfer or grant licenses or sublicenses (including as permitted under
any ABX In-License), to the extent that any of the foregoing claims (i) any
XenoMouse Animals and/or any uses thereof to generate Antibodies, or (ii) any
Antibody. "ABX Patent Rights" shall include, without limitation, the patents and
patent applications listed on Attachment B attached to the GNE Option Agreement
and made a part thereof, and ABX shall notify GNE promptly in writing of any
changes to Attachment B (e.g., issuance of new patents, filing of new patent
applications, abandonment of existing filings, etc.), so that the parties may
update Attachment B by amendment of the GNE Option Agreement.

1.6. "Affiliate" shall mean, with respect to any person or entity, any
other person or entity which controls, is controlled by or is under common
control with such person or entity. A person or entity shall be regarded as in
control of another entity if it owns or controls at least fifty percent (50%) of
the equity securities of the subject entity entitled to vote in the election of
directors (or, in the case of an entity that is not a corporation, for the
election of the corresponding managing authority).

1.7. "Antibody" shall mean (i) a composition comprising a whole antibody
or fragment thereof, said antibody or fragment having been generated in whole or
part from the XenoMouse Animals through immunization with a Specified Antigen,
and (ii) any composition comprising a whole antibody or fragment thereof made by
or on behalf of GNE which is derived (directly or indirectly through single or
multiple steps) from an antibody or fragment thereof made under (i) above. ABX
acknowledges that as of the Effective Date, GNE has already undertaken and
thereafter may continue its own research efforts (on its own or with partners)
separate from (and without using any Licensed Technology, Confidential
Information of ABX or ABX Materials) this Agreement, and such efforts may result
in one or more antibodies to the Specified Antigen. ABX agrees that no
composition (or any fragment, variant or derivative thereof or any or nucleotide
sequences encoding, or amino acid sequences of, any of the foregoing) that is an
Independent Discovery shall be considered an "Antibody" for purposes of this
Agreement, even if a homologous sequence might also be generated in whole or in
part from XenoMouse Animals.

1.8. "Antigen" shall mean a single molecular species to be identified by
an appropriate scientific reference sufficient to distinguish it from other
molecular species.

1.9. "BLA" shall mean a Biologics License Application, Product License
Application, New Drug Application, or other equivalent application filed with
the FDA seeking regulatory approval to market and sell a Product in the United
States for a particular indication, including, without limitation, any pricing
and/or reimbursement approvals (if any).

1.10. "[*] Notice" shall have the meaning set forth in Section 4.1.7
of the GNE Option Agreement.

1.11. "[*]" shall mean the right of ABX or JTI under the terms of the
XT Master Research License and Option Agreement to obtain an option for [*].

1.12. "Confidential Information" shall mean, with respect to a party,
all information of any kind whatsoever (including without limitation,
compilations, data, formulae, models, patent disclosures, procedures, processes,
projections, protocols, results of experimentation and testing,

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<PAGE> 36

specifications, strategies and techniques), and all tangible and intangible
embodiments thereof of any kind whatsoever (including without limitation,
apparatus, biological or chemical materials, animals, cells, compositions,
documents, drawings, machinery, patent applications, records, reports), which is
owned or controlled by such party, is disclosed by such party to the other party
pursuant to this Agreement, and (if disclosed in writing or other tangible
medium) is marked or identified as confidential at the time of disclosure to the
receiving party or (if otherwise disclosed) is identified as confidential at the
time of disclosure to the receiving party and described as such in writing
within thirty (30) days after such disclosure. Notwithstanding the foregoing,
Confidential Information of a party shall not include information which the
receiving party can establish by written documentation (a) to have been publicly
known prior to disclosure of such information by the disclosing party to the
receiving party, (b) to have become publicly known, without fault on the part of
the receiving party, subsequent to disclosure of such information by the
disclosing party to the receiving party, (c) to have been received by the
receiving party at any time from a source, other than the disclosing party,
rightfully having possession of and the right to disclose such information free
of confidentiality obligations, (d) to have been otherwise known by the
receiving party free of confidentiality obligations prior to disclosure of such
information by the disclosing party to the receiving party, or (e) to have been
independently developed by employees or agents of the receiving party without
access to or use of such information disclosed by the disclosing party to the
receiving party. The parties acknowledge that the foregoing exceptions shall be
narrowly construed and that the obligations imposed upon each party under
Section 7 below shall be relieved solely with respect to such Confidential
Information of the disclosing party which falls within the above exceptions and
not with respect to related portions, other combinations, or characteristics of
the Confidential Information of the disclosing party including, without
limitation, advantages, operability, specific purposes, uses and the like.

1.13. "Core Third Party Patent" means an issued, unexpired patent not
within the ABX Patent Rights or the patent rights solely owned (but not
licensed) by GNE or its Affiliates (except Roche) that is infringed, or except
for a license would be infringed, by the research, development, manufacture,
use, importation, offering for sale or sale of Products in each case
specifically because such Products were generated from XenoMouse Animals but not
wherein such infringement (i) would nevertheless be found had such Products been
produced from some other source or through some other process (e.g., a patent
that is, or except for a license would be, infringed by the research,
development, manufacture, use, importation, offering for sale or sale of
Products and which would still be infringed by the research, development,
manufacture, use, importation, offering for sale or sale of products derived
from immunization of a mouse that does not contain human antibody genes nor is
able to produce human antibodies with a Product Antigen), or (ii) is founded
solely on the basis of the Products being expressly covered through a
product-by-process claim in such patent; provided, however, that "Core Third
Party Patents" shall not include (a) any patent that has been held invalid,
unpatentable, unenforceable or revoked in a decision of a court or other
governmental body of competent jurisdiction that is unappealable or unappealed
within the time frame allowed for appeal, or (b) any patent that has been
rendered unenforceable or invalid through disclaimer, reissue or otherwise.

1.14. "Derived" or "derived", for purposes of determining when an
antibody or fragment thereof has been "derived" from an Antibody, shall mean:
(a) resulting from a program of synthesis or modification or selection based on
an Antibody; (b) resulting from a program of synthesis or modification or
selection based on nucleotide or amino acid sequence information obtained from
an Antibody (or Genetic Material encoding an Antibody); or (c) incorporating a
functional domain determined by, or selected using, information or data from (i)
structure-activity

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<PAGE> 37

studies of an Antibody or (ii) structure-activity studies of the epitope to
which any Antibody binds that are performed using an Antibody.

1.15. "Europe" shall mean Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Ireland, Italy, Luxembourg, Monaco, Netherlands, Portugal,
Spain, Sweden, Switzerland, and the United Kingdom.

1.16. "Evaluation Position" shall have the meaning set forth in Section
3.1 of the GNE Option Agreement.

1.17. "Excluded Antigen" shall mean an Antigen [*].

1.18. "Excluded Technology" shall mean any intellectual property or
technology or other proprietary rights of ABX in or to [*]

1.19. "Exercise Notice" shall have the meaning set forth in Section
4.1.2(a) of the GNE Option Agreement.

1.20. "FDA" shall mean the United States Food and Drug Administration,
and any successor agencies thereto.

1.21. "Field" shall mean the use of Products for human therapeutic,
prophylactic and diagnostic medical purposes.

1.22. "Financing Documents" shall mean the Common Stock Purchase
Agreement and the Registration Rights Agreement attached to the GNE Option
Agreement as Attachment C.

1.23. "Foreign Marketing Application" shall mean all applications for
regulatory approval filed with any Foreign Regulatory Authority necessary for
the marketing and sale of any Product for a particular indication in the
applicable country or regulatory jurisdiction (other than the FDA in the United
States), including, without limitation, any pricing and/or reimbursement
approvals (if any).

1.24. "Foreign Regulatory Authority" shall mean any applicable agency,
department, bureau or other governmental entity or authority (and any successors
thereto) of any country or regulatory jurisdiction in the Territory (other than
the FDA in the United States) having responsibility in such country or
regulatory jurisdiction over any Foreign Marketing Application in such country
or regulatory jurisdiction.

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1.25. "Genetic Material" shall mean a nucleotide sequence, including
DNA, RNA and complementary and reverse complementary nucleotide sequences
thereto, whether coding or noncoding and whether intact or a fragment.

1.26. "GenPharm Cross License Agreement" shall mean that certain Cross
License Agreement entered into by and between ABX, JTI, XT, Cell Genesys, Inc.,
and GenPharm International, Inc., effective as of March 26, 1997, as the same
may be amended from time to time.

1.27. "GNE [*]" shall have the meaning set forth in Section 4.1.7(a) )
of the GNE Option Agreement.

1.28. "GNE Option Agreement" shall mean that certain Multi-Antigen
Research License and Option Agreement entered into by and between ABX and GNE
effective as of the Effective Date (as defined therein), as the same may be
amended from time to time.

1.29. "GNE Product License Agreement" shall mean a license agreement
with respect to a particular GNE Program Antigen, in the form materially and
substantially set forth in Exhibit B to the GNE Option Agreement.

1.30. "GNE Program Antigen" shall mean a Specified Antigen with respect
to which ABX has provided GNE an Acceptance Notice (defined below) for an
Evaluation Position on such Specified Antigen, pursuant to Section 3.1 of the
GNE Option Agreement.

1.31. "Hybridoma" shall mean all hybridomas that contain, express or
secrete Antibodies or Genetic Materials encoding such Antibodies.

1.32. "Impediment" shall have the meaning defined in Section 3.1.2 of
the GNE Option Agreement.

1.33. "IND" shall mean an Investigational New Drug application filed
with the Food and Drug Administration in the United States, or any similar
filing with any foreign regulatory authority, to commence human clinical testing
of any product in any country.

1.34. "Independent Discovery" shall mean any composition (or any
fragment, variant or derivative thereof or any nucleotide sequences encoding, or
amino acid sequences of, any of the foregoing) or other material, information
and/or development that is discovered, obtained or derived (directly or
indirectly through single or multiple steps) by GNE (on its own or with
partners) through no use of any ABX Materials, Licensed Technology or
Confidential Information of ABX, as demonstrated by competent written records of
GNE (and/or its partners) which may be supported or explained by additional
testimonial evidence.

1.35. "JTI Home Territory" shall mean Japan, Taiwan, and South Korea
(including the territory now comprising North Korea, if reunited with South
Korea after the Effective Date of the GNE Option Agreement).

1.36. "JTI" shall mean Japan Tobacco Inc., a Japanese corporation.

1.37. "Licensed Technology" shall mean ABX's rights in the ABX Patent
Rights and ABX Know-How; provided, however, that the foregoing (a) are all to
the extent and only to the extent that ABX has the right to grant (sub)licenses
thereunder (including without limitation to

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the extent permitted under the applicable ABX In-Licenses); (b) are expressly
subject to the ABX In-Licenses; and (c) shall exclude the Excluded Technology,
unless ABX has agreed to grant a license to GNE for a Specified Antigen which
also meets the definition of an Excluded Antigen, in which case, for the GNE
Product License Agreement with regard to such Specified Antigen, Licensed
Technology shall include ABX Patent Rights and ABX Know-How covering such
Specified Antigen.

1.38. "Major Country" shall mean the United States, Japan, the United
Kingdom, France, Germany, Spain, or Italy.

1.39. "Net Incremental Royalty" shall mean, with regard to a New Strain,
an amount equal to the total royalties owed by ABX with regard to the Original
Strain subtracted from the total royalties owed by ABX with regard to such New
Strain, if a positive number.

1.40. "Net Sales" shall mean the gross sales price charged by GNE and
its Sublicensees for sales of Product to non-Affiliate customers, less: [*]

1.40.1. Sales Among GNE and its Sublicensees. Net Sales shall not
include sales among and between GNE and its Sublicensees for resale, provided
that Net Sales shall include the amounts invoiced by GNE, its Affiliates and its
Sublicensees to third parties on the resale of such Products.

1.40.2. Combination Products. In the event that a Product is sold
in combination as a single product with another product or component, Net Sales
from such combination sales for purposes of calculating the amounts due under
this Agreement shall be calculated by multiplying the Net Sales of that
combination by the fraction A/(A + B), where A is the gross selling price of the
Product sold separately and B is the gross selling price of the other product
sold separately. In the event that no such separate sales are made in the same
quarter by GNE or its Sublicensee, Net Sales for royalty determination shall be
as reasonably allocated in good faith by GNE and ABX, between such Product and
such other product, based upon their relative independent values.

1.41. "New Strain" shall have the meaning set forth in Section 2.1.5 of
the GNE Option Agreement.

1.42. "New Strain Intellectual Property" shall mean any intellectual
property owned or licensed by ABX covering a New Strain that is not also
intellectual property covering the Original Strain.

1.43. "Non-Specified Antigen" shall have the meaning set forth in
Section 2.1.1 of the GNE Option Agreement.

1.44. "Option" and "Option Period" shall have the meanings described in
Section 4.1 of the GNE Option Agreement.

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1.45. "Original Strain" shall have the meaning set forth in Section
2.1.5 of the GNE Option Agreement.

1.46. "Parties" shall mean, collectively, ABX and GNE.

1.47. "Phase II Trial" shall mean a human clinical trial prospectively
designed to generate data evidencing the safety, dose ranging and preliminary
efficacy of a Product for a particular indication sufficient (if successful) to
commence a Phase III trial for the Product for the indication, and that would
otherwise satisfy the requirements of 21 CFR 312.21(b). "Initiation" of a Phase
II Trial shall be deemed to occur upon the administration of such drug or
placebo to the first patient in such trial.

1.48. "Phase III Trial" shall mean a human clinical trial prospectively
designed to demonstrate with statistical significance whether a Product is safe
and effective for use in a particular indication in a manner sufficient (if
successful) to file a BLA with the FDA for the marketing and sale of the Product
for the indication, and would otherwise satisfy the requirements of 21 CFR
312.21(c). "Initiation" of a Phase III Trial shall be deemed to occur upon the
administration of study drug or placebo to the first patient in such trial.

1.49. "Previous Agreement" shall mean that certain Research License and
Option Agreement effective as of April 6, 1998, and amended as of June 18, 1998
by and between the Parties.

1.50. "Product Antigen" shall mean [insert particular molecular entity]

1.51. "Product" shall mean (i) with regard to the GNE Option Agreement,
any composition which incorporates or is derived from (a) an Antibody that binds
a GNE Program Antigen or (b) Genetic Material encoding such an Antibody, wherein
in respect of each Product, said Genetic Material does not encode multiple
Antibodies; and (ii) with regard to a GNE Product License Agreement, any
composition which incorporates or is derived from (a) an Antibody that binds to
the Product Antigen or (b) Genetic Material encoding such an Antibody wherein,
in respect of each Product, said Genetic Material does not encode multiple
Antibodies.

1.52. "Research Field" shall mean the immunization of XenoMouse Animals
with Specified Antigens and the use of materials derived or generated in whole
or in part from such XenoMouse Animals that are so immunized, solely for the
creation, identification, analysis, manufacture, research, and preclinical
development of Products in the Field. For purposes of clarification, the
Research Field shall not include, among other things: (i) the creation,
breeding, reverse-engineering, design or development of mice or any transgenic
animals, (ii) use in humans of materials derived or generated in whole or part
from the XenoMouse Animals (including without limitation, Products), (iii) use
of XenoMouse Animals or materials derived in whole or part from XenoMouse
Animals (including without limitation Products) for any purpose other than the
creation, identification, analysis, manufacture, testing, research and
preclinical development of Products in the Field, (iv) the transfer of XenoMouse
Animals or any Products or materials derived in whole or part from the XenoMouse
Animals, except pursuant to an MTA as set forth in Section 2.1.1 of the GNE
Option Agreement or (v) the use of a plurality of Antibodies or Genetic Material
encoding such Antibodies for the screening of Antigens that are not Specified
Antigens (whether or not in combination with antibodies or Genetic Material
encoding such Antibodies that bind to Specified Antigens) for binding to
Non-Specified Antigens. For purposes of further clarification, it is understood
that "immunization" of XenoMouse Animals with a Specified Antigen includes the
immunization of XenoMouse Animals with any formulation or construction

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<PAGE> 41

of a Specified Antigen, regardless of the three dimensional configuration of
such Specified Antigen, including, but not limited to, cell lines expressing
such Specified Antigen on their cell surface and chimeric molecules containing
such Specified Antigen; provided, however, that any research, development or use
of Antibodies that do not bind to a Specified Antigen (other than to determine
whether they bind to a Specified Antigen) shall be outside of the scope of the
licenses granted hereunder.

1.53. "Rest of the World" shall mean all countries of the world other
than the countries in the ABX Home Territory and JTI Home Territory.

1.54. "Selecting" and "Select" shall mean with respect to an Antigen,
the process whereby JTI or ABX obtains an option to acquire from XT an XT
Product License related to a particular Antigen.

1.55. "Selection Date" shall have the meaning set forth in Section
4.1.2(b) of the GNE Option Agreement.

1.56. "Selection Notice" shall have the meaning set forth in Section
4.1.2(d) of the GNE Option Agreement.

1.57. "Specified Antigen" shall mean an Antigen with regard to which GNE
has notified ABX [*] that it intends to immunize XenoMouse Animals, and with
regard to which ABX has not notified GNE (subject, however, to the last sentence
of Section 2.1.9(e) of the GNE Option Agreement) within thirty (30) days of
GNE's notification, that such Antigen is at such time exclusively optioned or
licensed by ABX, XT or JTI (including, without limitation, those optioned or
licensed by XT to ABX or JTI).

1.58. [*]

1.59. "Sublicensee" shall mean an Affiliate of GNE or a third party that
GNE grants rights to under the Licensed Technology to develop, make, use and/or
sell Products, including, without limitation, a third party to whom GNE grants
the right to distribute Products, provided that such third party also has
responsibility for marketing and promotion of Products within the applicable
territory. As used herein, a "Sublicense" shall mean an agreement or arrangement
between GNE and any Sublicensee pursuant to which such rights of such
Sublicensee have been granted.

1.60. "Territory" shall mean [insert appropriate territory]

1.61. "Therapeutically Active" shall mean that a compound or agent has
activity as a therapeutic agent, or directly or indirectly acts to increase,
enhance, catalyze, enable, protect, target or deliver a Product or the activity
of a Product, but shall not include any diluent, vehicle, adjuvant or other
ingredient (other than a Product) that does not have any therapeutic properties.

1.62. "[*]" shall have the meanings set forth in the Previous Agreement.

1.63. "United States" shall mean the United States of America and its
territories and possessions.

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<PAGE> 42

1.64. "Valid Patent Claim" shall mean a claim [*]

1.65. "XenoMouse Animals" shall mean transgenic mice containing human
immunoglobulin variable heavy and light chain genes provided by ABX to GNE for
immunization with Specified Antigens and GNE Program Antigens under the GNE
Option Agreement.

1.66. "XT Master Research License and Option Agreement" or "Xenotech
Agreement" shall mean that certain Master Research License and Option Agreement
entered into by and among XT, JTI and Cell Genesys, Inc. effective as of June
28, 1996, and subsequently assigned to ABX by Cell Genesys, Inc., as the same
may be amended from time to time.

1.67. "XT Product License" shall mean a license granted from XT to ABX
as set forth in Section 4.1.5 herein pursuant to the terms of the XT Master
Research and License Agreement permitting ABX, among other things, to
commercialize certain products in one or more territories for all human medical
uses.

1.68. "XT" shall mean Xenotech, L.P., a California limited partnership.

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EXHIBIT B

FORM OF GNE PRODUCT LICENSE AGREEMENT

THIS GNE PRODUCT LICENSE AGREEMENT (this "Agreement") effective as of the ____
day of _______________, (the "Effective Date") is made by and between ABGENIX,
INC., a Delaware corporation ("ABX"), and GENENTECH, INC., a Delaware
corporation (hereinafter "GNE") with reference to the following facts and
circumstances.

RECITALS

GNE and ABX have entered into that certain Multi-Antigen Research
License and Option Agreement effective as of January 26, 1999 (as defined below,
the "GNE Option Agreement"), pursuant to which GNE has certain rights to acquire
a license under the Licensed Technology; and

GNE has exercised an option right under the GNE Option Agreement to
acquire from ABX a license or sublicense, as the case may be, under the Licensed
Technology with respect to a particular GNE Program Antigen (defined below) to
commercialize Products in the Field, all as set forth below on the terms and
conditions herein.

NOW, THEREFORE, for and in consideration of the covenants, conditions,
and undertakings hereinafter set forth, it is agreed by and between the parties
hereto as follows:

1. DEFINITIONS.

For purposes of this Agreement, capitalized terms set forth in this
Agreement and not otherwise defined herein shall have the meanings set forth in
the Common Definitions Exhibit set forth as Exhibit A attached hereto and made a
part hereof.

2. LICENSE GRANT.

2.1 Grant of Rights. Subject to the terms and conditions of this
Agreement and with respect to the Product Antigen, ABX hereby grants to GNE an
exclusive (even as to ABX) license or sublicense, as the case may be, under the
Licensed Technology, to research and develop, make and have made Products in the
Field in the Territory and to use, sell, lease, offer to sell or lease, import,
export, otherwise transfer physical possession of or otherwise transfer title to
Products in the Field in the Territory. For purposes of clarification, it is
understood and agreed that the licenses and/or sublicenses granted herein shall
not include any right to make or sell (or lease, or offer to sell or lease, or
otherwise transfer title to) any XenoMouse Animal or transgenic animal or the
right to sell (or lease, or offer to sell or lease, or otherwise transfer title
to) Hybridomas.

2.2 Sublicenses. GNE may grant a Sublicense of any or all of its rights
under Section 2.1 to (a) Affiliates of GNE or (b) to any other third party on
written notice to ABX. It is understood that any such Sublicense shall be
subject and subordinate to the terms and conditions of this Agreement, and that
GNE shall remain responsible for all payments due to ABX hereunder with respect
to Net Sales of Products by any such Sublicensee. It is understood that GNE
shall not have the right to grant any Sublicense except as provided above, and
notwithstanding the foregoing, shall in no event have the right to Sublicense
any right under this Agreement in or to (i) a XenoMouse Animal, or (ii) any
other transgenic animal covered by the Licensed Technology.

2.3 Third Party Rights. It is understood and agreed that the grant of
rights under Sections 2.1 and 2.2 above shall be subject to and limited in all
respects by the terms of the applicable ABX In-License(s) pursuant to which ABX
acquired or does acquire any Licensed Technology, including, without limitation,
any rights

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<PAGE> 44

granted to or retained by GenPharm International, Inc. under the GenPharm Cross
License, and that all rights or sublicenses granted under this Agreement shall
be limited to the extent that ABX may grant such rights and sublicenses under
such ABX In-Licenses. Further, the parties acknowledge that while ABX is
granting GNE an exclusive license to certain of its rights, ABX's rights may not
be exclusive from ABX's licensors.

2.4 Ownership of Materials and Data. It is understood and agreed that:

(a) ABX shall [*].

(b) Except as expressly set forth in Section 2.4(a), GNE shall
[*}.

(d) Notwithstanding anything contained in this Agreement to the
contrary, GNE shall [*].

2.5 No Other Rights; No License to Other Therapeutically Active
Components. No rights other than those expressly set forth in this Agreement are
granted to either party hereunder, and no additional rights shall be deemed
granted to either party by implication, estoppel or otherwise. It is understood
and agreed that, although a Product licensed hereunder may contain other
components (including without limitation, other Therapeutically Active
components) in conjunction with or in addition to an Antibody that binds to a
GNE Program Antigen or Genetic Material encoding such an Antibody, the licenses
and rights granted under this Agreement shall not be construed to convey, and
shall not convey, any licenses or rights under the ABX Patent Rights with
respect to the manufacture, use, or sale of any such component other than an
Antibody that binds to the Product Antigen or Genetic Material encoding such an
Antibody.

3. CONSIDERATION.

3.1 License Fee. In consideration of the license rights granted herein
to GNE with respect to the Product Antigen which is the subject of this
Agreement, GNE shall pay to ABX the license fee (the "License Fee") set forth in
Section 4.1.6 of the GNE Option Agreement under the terms and conditions
therein.

3.2 Milestone Payments.

3.2.1 Amounts. In further consideration of the license rights
granted herein to GNE, within [*] following the first achievement by GNE (or any
of its Sublicensees) of each of the following milestones with respect to any
Product under this Agreement, GNE shall pay to ABX the corresponding milestone
payment set forth herein in accordance with the payment provisions of Section
4.3 below:

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<TABLE>
<CAPTION>
Milestone Payment
--------- -------
<S> <C>

A [*] [*]

B [*] [*]

C [*] [*]

D [*] [*]

E [*] [*]

</TABLE>

In the event that any of milestones C, D or E are met, and at such time either
milestone A or milestone B has not been met, the payment for such unmet
milestone(s) shall be due. It is understood and agreed that GNE shall not be
obligated to pay to ABX the milestone payments set forth in this Section 3.2.1
more than once for each of milestones A, B, C, D, and E under this Agreement,
irrespective of how many times each such milestone is achieved.

3.2.2 [*]. Capitalized terms used in this Section and not
otherwise defined in this Agreement are used as defined in the Xenotech
Agreement. If, before or during the term of this Agreement, the XT Product
License between ABX and XT is modified for any reason such that the [*] for
purposes of the license granted to GNE under this Agreement [*]

3.2.3 Potential Readjustments. Upon request of either party, the
parties shall discuss in good faith and may agree to amend this Agreement to
provide an option for GNE to make milestone payments for the events set forth in
milestones C, D and/or E above in amounts greater than those set forth in
milestones C, D and/or E above, in exchange for royalties on Net Sales of
Products in the countries and territories covered by such milestones lower than
those set forth in Section 3.3 below.

3.2.4 [*]. The milestone payments set forth in Section 3.2.1
shall be [*] except as

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<PAGE> 46
otherwise provided in Section 3.2.2 above, but may be [*] as set forth in
Section 3.3.5 below.

3.3 Royalties. GNE or its Sublicensee shall notify ABX of the date of
commercial introduction of the first Product into any country in the Territory,
which shall mean on a country-by-country basis in the Territory, the date of
first commercial sale (other than for purposes of obtaining Regulatory Approval)
of the first Product by GNE or its Sublicensees in such Territory. In
consideration of the license rights granted herein, GNE and its Sublicensees
shall pay to ABX a royalty on Net Sales of Products as set forth herein:

3.3.1 [*].

(a) Commencing as to each country in the Territory on the
date of first commercial sale of the first Product in such country (hereinafter,
a "Royalty Commencement Date" for such country), GNE shall pay ABX a running
royalty equal to [*]

(b) In the event that a royalty would be owed under
3.3.1(a) [*]

3.3.2 [*]. Commencing as to each country in the
Territory on the Royalty Commencement Date for the first Product in such
country, GNE shall pay ABX a running royalty equal to three percent (3%) of Net
Sales of any Product by GNE and its Sublicensees [*].

3.3.3 [Section intentionally left blank]

3.3.4 Third Party Royalty Offset.

(a) In the event that GNE or any of its Sublicensees is
required to pay to a third party during the term of this Agreement royalties
with respect to a Product under agreements for patent rights or other
technologies that GNE [*], then GNE may deduct [*] of such royalty amounts
actually paid by GNE or its Sublicensee to such third party on sales of such
Product in a particular country from the royalties owed to ABX for Net Sales of
such Product in such country pursuant to this Section 3.3; provided, however,
that the royalty amount payable to ABX under this Section 3.3 with respect to
such Net Sales for such Product in such country shall not be reduced pursuant to
this Section 3.3.4(a) to an amount below that determined pursuant to Section
3.3.4(b) in accordance with the procedures and table of "Floor Royalty Rates"
set forth therein, which Floor Royalty Rates will be established on a
Region-by-Region basis (as such Regions are defined in Section 3.3.4(c) below);
and provided, further, the third party royalty offset under this Section
3.3.4(a) if any, shall be applied first to determine the applicable royalty
amount on Net Sales of a Product for each quarter and thereafter the applicable
milestone credits described in Section 3.3.5, if any, shall then be applied for
such quarter.

(b) The applicable minimum royalties payable by GNE to ABX
pursuant to Section 3.3.4(a) shall be calculated as follows:

(i) at the end of each calendar quarter, the
countries within a particular Region [*]. The Net Sales in such quarter of all
Products in each subgroup will then be cumulated to determine [*]

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The royalty payable for a particular Region will be the total of the amounts
payable for each subgroup in such Region for such quarter.

(ii) the royalties payable by GNE to ABX in each
subgroup within such Region is calculated by [*]
<TABLE>
<CAPTION>
<S> <C>
[*]
</TABLE>

3.3.5 [*]. Certain [*] payments set forth in Section [*] that
have been paid to ABX [*]

(a) [*]. Subject to the limits set forth in Subsection
(b) below, [*]

(b) [*]. Notwithstanding the foregoing, the milestone
credits described in this Section 3.3.5 shall not [*]

<TABLE>
<S> <C>
A. [*]

B. [*]

C. [*]

</TABLE>

However, the foregoing limitation on [*]

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<PAGE> 48

[*]

3.3.6 Length of Term of Royalty Obligations. GNE's obligation to
pay royalties on Net Sales of Products under this Agreement shall commence on a
country-by-country basis on the Royalty Commencement Date for such country as
defined in Section 3.3 above, and continue thereafter on a country-by-country
basis until the later of (a) ten (10) years after the Royalty Commencement Date
in such country or (b) expiration, [*] (as defined in [*], of (i) the
last-to-expire of the Valid Patent Claims [*] in such country or (ii) the
last-to-expire of the Valid Patent Claims [*].

3.3.7 Single Royalty. Only one royalty shall be payable with
respect to any Product hereunder [*].

3.4 Royalties To Be Paid By ABX. Subject to the terms and conditions of
this Agreement, including without limitation GNE's payment of royalties as set
forth herein, ABX shall be responsible for paying all amounts owed to third
parties in respect of Net Sales of Products by GNE and its Sublicensees in
accordance with this Agreement under the agreements set forth in Attachment A to
the GNE Option Agreement. GNE may not offset such payments under Section 3.3.4.

3.5 Core Third Party Patents. If anything is set forth on Schedule A
hereto or if either party becomes aware of any Core Third Party Patent during
the term of this Agreement, such party shall promptly notify the other party
and, except to the extent that such party is prohibited under a duty of
confidentiality from disclosing such information, provide a reasonably detailed
summary of its knowledge regarding such patent (including, by way of example and
without limitation, the identity of the person that owns or controls such
patent, the subject matter of the patent, and any available information about
terms offered or asked with respect to licenses under such patents).

3.5.1 ABX. GNE agrees to [*] under any Core Third Party Patent;
provided, however, that neither ABX nor GNE (nor its Sublicensees) shall be
obligated [*], and provided, further, that if ABX elects not [*] it shall
promptly notify GNE of such election, and GNE [*] on its own behalf. In the
absence of such an election, on and after the date falling [*] after either
party first notifies the other of the Core Third Party Patent, GNE [*] directly

[*]. If ABX [*] such patent, [*], ABX will be responsible [*], as set forth in
this Section 3.5.1, [*]; and provided, further, that if both ABX and GNE [*],
GNE shall [*] as provided in Section 3.5.2 below. ABX shall invoice GNE for any
such amounts [*] on such Net Sales within [*] after receiving the report from
GNE under Section 4.1 setting forth the quarterly Net Sales of Products in each
country and/or any annual reconciliation regarding such royalties, and GNE shall
pay such amounts to ABX within [*] after delivery of such invoice. It is
understood that such invoice will not [*]

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[*] for which the invoice is sent, or the [*]. Such invoice shall be
accompanied by such documentation as GNE reasonably requests to [*].

3.5.2 GNE. If GNE or its Sublicensee [*] under a Core Third Party
Patent, GNE [*]; provided, however, that (a) the [*]. It is understood that the
[*]; provided, however, that in the event that the [*]. ABX shall invoice GNE
for any such amounts [*] on such Net Sales within [*] after receiving the report
from GNE under Section 4.1 setting forth the quarterly Net Sales of Products in
each country and/or any annual reconciliation regarding such royalties, and GNE
shall pay such amounts to ABX within [*] after delivery of such invoice. It is
understood that, to the extent that ABX is contractually prohibited from doing
so, such invoice will not specify [*] for which the invoice is sent or the [*].
Such invoice, in each case, shall be accompanied by such documentation as GNE
reasonably requests to [*].

3.6 New Strain Intellectual Property. GNE [has] [has not] used a
New Strain of XenoMouse Animals in development of the Product Antigen. If GNE
has used such New Strain, GNE shall pay, in addition to the other royalties
contained herein, a Net Incremental Royalty with respect to such New Strain
equal to ___%.

4. ACCOUNTING AND RECORDS.

4.1 Royalty Reports; Payments, Invoices. After the Royalty Commencement
Date in any country in the Territory, GNE agrees to make quarterly written
reports to ABX within [*] after the end of each calendar quarter, stating in
each such report the aggregate Net Sales of Product sold during the calendar
quarter upon which a royalty is payable under Article 3. Concurrently with the
making of such reports, GNE shall pay to ABX all amounts payable pursuant to
Article 3 above, in accordance with the payment provisions of Section 4.3. For
purposes of determining when a sale of any Product occurs under this Agreement,
the sale shall be deemed to occur on the date that GNE books the sale (so long
as GNE books the sale in accordance with GNE's customary practices).

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4.2 Records; Inspection.

4.2.1 GNE. GNE shall keep (and require its Sublicensees to keep)
complete, true and accurate books of account and records for the purpose of
determining the royalty amounts payable to ABX under this Agreement. Such books
and records shall be kept at the principal place of business of GNE or its
Sublicensees, as the case may be, for at least [*] following the end of the
calendar quarter to which they pertain. Such records will be open for inspection
during such [*] by an independent certified public accountant representing ABX
(which representative may also represent XT) and reasonably acceptable to GNE
for the purpose of verifying the royalty statements. GNE shall require each of
its Sublicensees to maintain similar books and records and to open such records
for inspection during the same [*] period by such representative of ABX for the
purpose of verifying the royalty statements. All such inspections may be made no
more than once each calendar year at reasonable times mutually agreed by GNE and
ABX. The representative of ABX will be obliged to execute a reasonable
confidentiality agreement prior to commencing any such inspection. The results
of any inspection hereunder, but not the basis for such results, which ABX's
accountant will not disclose to ABX, shall be provided to both parties, and GNE
shall pay any underpayment to ABX within [*]. Any overpayment may be credited
against future royalty amounts due to ABX hereunder; provided however, that if
there is no further obligation to pay royalties hereunder anywhere in the
Territory, ABX shall refund any such overpayment within [*]. Inspections
conducted under this Section 4.2.1 shall be at the expense of ABX, unless a
variation or error producing an increase exceeding [*] of the amount stated for
any period (after taking into account any applicable annual reconciliation) is
established in the course of any such inspection, whereupon all costs of such
audit of such period will be paid by GNE. Upon the expiration of [*] following
the end of any calendar year, the calculation of royalties payable with respect
to such year shall be binding and conclusive, and GNE shall be released from any
liability or accountability with respect to royalties for such year; provided,
however, that if ABX has demanded payment of additional royalties it claims have
not been properly paid under this Agreement, or if there is a dispute between
the parties regarding the amount of royalties due, prior to the expiration of
the third calendar year following the calendar year in question, then the
calculation of royalties shall not become binding and conclusive (and GNE shall
not be released from liability or accountability with respect to such royalties)
before [*] following the date, if any, that such dispute is finally resolved
between the parties by mutual written agreement. It is understood that nothing
in the preceding sentence shall limit or prohibit the [*].

4.2.2 ABX. ABX shall keep complete, true and accurate books of
account and records for the purpose of determining the royalty amounts payable
to ABX under Section 3.5, including, without limitation, records pertaining to
ABX In-Licenses and Third Party Royalties. Such books and records shall be kept
at the principal place of business of ABX for at least [*] following the end of
the calendar quarter to which they pertain. For any period for which the offsets
under Section 3.5 apply, such records will be open for inspection during such
three-year period by an independent certified public accountant representing GNE
and reasonably acceptable to ABX for the purpose of verifying the invoiced
amounts paid by GNE. All such inspections may be made no more than once each
calendar year at reasonable times mutually agreed by GNE and ABX. The
representative of GNE will be obliged to execute a reasonable confidentiality
agreement prior to commencing any such inspection. The results of any inspection
hereunder shall be provided to both parties as follows: it is understood and
agreed that GNE shall not be informed of the financial terms of any [*] and
shall only be informed whether or not the amounts invoiced by ABX and paid by
GNE accurately represent the amounts to be paid by [*]. ABX shall refund any
overpayment found by the accountant in such an inspection within [*] after
receiving the results, and GNE shall pay to ABX any underpayment found by the
accountant in such an inspection within [*] after receiving notice of such
underpayment. Inspections conducted for payments under Section 3.5 shall be at
the expense of GNE unless a variation or error producing a decrease exceeding
[*] of the amount paid by GNE for any period (after taking into account any
applicable annual reconciliation) is established in the course of any such
inspection, whereupon all costs of such audit of such period will be paid by
ABX. Upon the expiration of [*] following the end of any calendar year, the
calculation of royalties payable with respect to such year shall be binding and
conclusive, and GNE shall be released from any liability or accountability with
respect to

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royalties for such year; provided, however, that if ABX has demanded payment of
additional royalties it claims have not been properly paid under this Agreement,
or if there is a dispute between the parties regarding the amount of royalties
due, prior to the expiration of the [*] calendar year following the calendar
year in question, then the calculation of royalties shall not become binding and
conclusive (and GNE shall not be released from liability or accountability with
respect to such royalties) before [*] following the date, if any, that such
dispute is finally resolved between the parties by mutual written agreement. It
is understood that nothing in the preceding sentence shall limit or prohibit the
[*].

4.3 Payment Method. All payments due hereunder shall be made in U.S.
dollars, and shall be made by bank wire transfer in immediately available funds
to an account designated by ABX in a written notice to GNE. Any payments from
ABX to GNE (if any) shall also be made in U.S. dollars, by bank wire transfer in
immediately available funds to an account designated by GNE in a written notice
to ABX.

4.4 Currency Conversion. If any currency conversion shall be required in
connection with the calculation of royalties hereunder, such conversion shall be
made using the selling exchange rate for conversion of the foreign currency into
U.S. Dollars, quoted for current transactions reported in The Wall Street
Journal for the last business day of the calendar quarter to which such payment
pertains.

4.5 Late Payments. Any payments due from GNE (or from ABX, if any) that
are not paid on the date such payments are due under this Agreement shall bear
interest at the lesser of (i) the prime rate as reported by the Bank of America
in San Francisco, California on the date such payment is due, plus an additional
[*], or (ii) the maximum rate permitted by applicable law, in each case
calculated on the number of days such payment is delinquent. This Section 4.5
shall in no way limit any other remedies available to either party.

4.6 Withholding Taxes. All payments required to be made pursuant to
Article 3 hereof shall be without deduction or withholding for or on account of
any taxes or similar governmental charge imposed by a jurisdiction except for
withholding taxes to the extent applicable ("Withholding Taxes"). GNE shall pay
any applicable Withholding Taxes due on behalf of ABX and shall promptly provide
ABX with written documentation of any such payment sufficient to satisfy the
requirements of the United States Internal Revenue Service related to an
application by ABX for a foreign tax credit for such payment.

4.7 Restrictions on Payment. If by law, regulation or fiscal policy of a
particular country or jurisdiction in the Territory, remittance of funds in U.S.
Dollars is restricted or forbidden such that GNE cannot expatriate funds and
that both ABX and GNE are affected, written notice thereof will promptly be
given to ABX, and payment of such funds that constitute amounts that would be
owing to ABX under this Agreement that cannot be expatriated shall be made by
the deposit thereof in local currency to the credit of ABX in a recognized
banking institution designated by ABX in writing. When in any country or
jurisdiction in the Territory the law, regulation or fiscal policy prohibit both
the transmittal and the deposit of royalties on sales of Products in such
country or jurisdiction, royalty payments shall be suspended for as long as such
prohibition is in effect, and as soon as such prohibition ceases to be in
effect, all royalties that GNE would have been under an obligation to transmit
or deposit but for such prohibition shall forthwith be deposited or transmitted.

5. DUE DILIGENCE.

5.1 Reasonable Commercial Efforts; IND Milestone.

5.1.1 GNE agrees to use commercially reasonable efforts
consistent with prudent business judgment to commercialize Products, by the
filing of an IND by GNE or its Sublicensee in the United States, within such
time period as may be mutually agreed upon by the parties after taking into
account factors relating to the Product Antigen and ABX's obligations under the
XT Product License with XT or, if no such period is agreed upon, [*] from the
Effective Date. [Note: For the GNE Product License with regard to [*], if any,
the [*] period set forth in this sentence shall be replaced with a [*] period.]
ABX agrees that it will, on request of GNE, use reasonable efforts to try to
establish a longer period of time for filing of an IND in the United States
under the terms of the XT Product License.

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5.1.2 Notwithstanding the foregoing, GNE shall be required
actively and continuously to pursue the filing of an IND by GNE or its
Sublicensees, as soon as practicable after the Effective Date using reasonable
commercial efforts consistent with prudent business judgment. After filing of an
IND, GNE or its Sublicensees shall be required to have an active IND and to use
commercially reasonable efforts, consistent with prudent business judgment, to
conduct clinical trials in pursuit of regulatory approval for a Product in the
United States.

5.2 Failure to Meet Due Diligence Obligation. If the diligence
requirements set forth in Section 5.1 are not met by GNE (or its Sublicensees),
ABX shall have the right, at ABX's election (subject to the notice and cure
provisions under Section 10.2, except to the extent that the XT Product License
between ABX and XT is terminated by XT because the diligence requirements set
forth in the XT Product License have not been met), either (a) to convert GNE's
exclusive license to a non-exclusive royalty-bearing license to use the ABX
Know-How and practice the ABX Patent Rights for the purposes set forth in this
Agreement, or (b) to terminate the license rights granted to GNE hereunder.

5.3 GNE Reports. GNE agrees, upon request by ABX, to keep ABX informed
as to the research, development and commercialization of Products hereunder.
Without limiting the foregoing, if ABX makes a written request, then within [*]
of such written request during the term of this Agreement, GNE shall provide to
ABX a report detailing the status and potential timing of any anticipated IND
filings under Section 5.1 above, the status of clinical and preclinical testing
of any Products, and anticipated filings of any BLA and/or Foreign Marketing
Application for any Products in the Territory, provided, however, that ABX may
make only one such written request per twelve (12) month period. All GNE reports
hereunder shall be treated as "Confidential Information" of GNE as provided in
Article 7 of this Agreement.

5.4 Gene Therapy Applications. GNE's intention as of the Effective Date
is to commercialize a Product hereunder for an application other than Gene
Therapy (as defined below) before commercializing a Product hereunder for a Gene
Therapy application. It is understood, however, that GNE may or may not also
intend to develop and sell Products for use in Gene Therapy, and that such Gene
Therapy application may ultimately be commercialized before a Product is
commercialized hereunder for a non-Gene Therapy application. As used herein,
"Gene Therapy" shall mean the treatment or prevention of a disease by means of
[*].

6. INTELLECTUAL PROPERTY.

6.1 GNE Intellectual Property. GNE shall own all right, title and
interest in and to [*] and all intellectual property related thereto.

6.2 ABX Intellectual Property. ABX shall own all right, title and
interest in and to [*] and all intellectual property related thereto.

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6.3 Joint Intellectual Property. GNE and ABX shall jointly own all
right, title and interest in patent or patent applications directed to
inventions jointly made, conceived, reduced to practice or otherwise developed
by GNE and ABX. It is understood and agreed that nothing in this Section 6.3
shall convey, or be construed to convey, title in or to the biological materials
themselves embodying any such jointly owned inventions to GNE or ABX, as the
case may be.

6.4 Intellectual Property Concerning Other Inventions. Except as
otherwise provided in Sections 6.1, 6.2, 6.3 and Section 2.4 above, title to any
inventions (and to any patent applications, patents and other intellectual
property rights thereon) by a party or parties under this Agreement, shall
[*]. Designation of inventors on any patent application hereunder is
a matter of law and shall be solely within the discretion of qualified patent
counsel of the party(ies) hereto making such invention.

6.5 Joint Ownership. For purposes of clarification, to the extent that
something is jointly owned under this Agreement, and except as otherwise
provided in this Agreement (including the exclusive nature of the licenses
granted by ABX hereunder), both parties shall have the right to use,
commercialize, grant and authorize sublicenses, and otherwise exploit all such
jointly-owned patents and inventions without obligation to account to, or obtain
the consent of, the other joint owner. Both parties hereto agree to promptly
disclose to the other all jointly-owned inventions under this Agreement and, on
request of the other party, will provide such information and assistance as may
be reasonably necessary to assist in the filing and prosecution of patent
applications claiming such inventions. The parties hereto agree to ensure that
each employee, agent, or independent contractor that conducts research using the
XenoMouse Animals, or materials derived in whole or part from the XenoMouse
Animals, will promptly disclose and assign to the parties hereto any and all
rights to jointly-owned inventions. The parties hereto agree to maintain records
in sufficient detail and in good scientific manner appropriate for patent
purposes and so as to properly reflect all work done and results achieved in
performing research under this Agreement.

6.6 Patent Prosecution.

6.6.1 Solely Owned. The party solely owning any invention under
this Article 6 shall have the sole right and responsibility (but not the
obligation), at its expense, to file, prosecute and maintain all patent
applications and patents thereon, and to conduct any interferences, oppositions,
or reexaminations thereon, and to request any reissues or patent term extensions
thereof.

6.6.2 Jointly Owned. In the event of any invention jointly owned
by the parties under this Article 6, ABX shall have the sole right and
responsibility (but not the obligation), at its expense, to file, prosecute and
maintain all patent applications (and to conduct any interferences, oppositions,
or reexaminations thereon, and to request any reissues or patent term extensions
thereof) claiming any XenoMouse Animals or any uses thereof, and GNE shall have
the sole right and responsibility (but not the obligation), at its expense, to
file, prosecute and maintain all patent applications and patents (and to conduct
any interferences, oppositions, or reexaminations thereon, and to request any
reissues or patent term extensions thereof) claiming a Product Antigen, an
Antibody that binds to a Product Antigen or a Product and/or its development,
manufacture, use or sale. The party having such rights and responsibilities
hereunder is referred to as the "Controlling Party". The Controlling Party
shall: (i) provide the non-Controlling Party with any patent application filed
hereunder by the Controlling Party promptly after such filing; (ii) provide the
non-Controlling Party promptly with copies of all substantive communications
received from or filed in patent office(s) with respect to such filings; (iii)
notify the non-Controlling Party of any interference, opposition, reexamination
request, nullity proceeding, appeal or other interparty action and review it
with the non-Controlling Party as reasonably requested; and (iv) provide the
non-Controlling Party a reasonable time prior to taking or failing to take any
action that would substantially affect the scope of validity of rights under
such patent applications or patents thereon (including substantially narrowing
or canceling any claim without reserving the right to file a continuing or
divisional application, abandoning any patent or not filing or perfecting the
filing of any patent application) with notice of such proposed action so that
the non-Controlling Party has a reasonable opportunity to review and make
comments. If the Controlling Party fails to undertake the filing of a

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patent application (or continuing or divisional application) within [*] after a
written request from the non-Controlling Party to do so, or if the Controlling
Party discontinues the prosecution or maintenance of a patent application or
patent, the non-Controlling Party at its expense may, in its discretion,
undertake such filing, prosecution or maintenance thereof, in which case such
patent application and patent thereon shall be solely owned by the
non-Controlling Party. The parties hereto shall assist each other to the extent
commercially reasonable in securing intellectual property rights resulting from
jointly owned inventions hereunder. As to enforcement of jointly-owned patents,
including actions against an alleged infringer, the parties hereto shall consult
with each other in good faith as to the best manner in which to proceed,
provided, however, that with regard to any jointly-owned patent covering a
Product, GNE shall have final decision making authority over how to proceed. In
the case of such actions against alleged infringers, any recovery awarded shall
be first used to reimburse the costs and expenses (including reasonable
attorneys' fees) of the party or parties in the action (including any amounts
ABX is obligated to pay to third parties (if any) in respect of such amount
pursuant to applicable ABX In-Licenses (or licenses under any Core Third Party
Patents)), with the remainder for the account of the party or parties that
undertake such actions to the extent of their financial participation therein.
To the extent that damages are awarded for lost sales or lost profits from the
sale of Products, such damages shall be allocated among the parties taking into
account royalties that would have been payable to ABX on the sale of such
Products. Either party may withdraw from or abandon any jointly-owned patent
application or patent hereunder, on reasonable prior written notice to the other
party providing a free-of-charge option to assume the prosecution and/or
maintenance thereof.

6.7 Enforcement of ABX Patent Rights.

6.7.1 If either party learns that a third party is infringing or
allegedly infringing any ABX Patent Rights with regard to any Product, it shall
promptly notify the other party thereof, including available evidence of
infringement. As between GNE, its Sublicensees and ABX, ABX shall have the
exclusive right at its expense, and in its discretion, to bring an enforcement
proceeding, or defend any declaratory judgment action, involving any ABX Patent
Rights. ABX shall keep GNE reasonably informed of the progress of such claim,
suit or proceeding involving enforcement or defense of any ABX Patent Rights. To
the extent such action with respect to the ABX Patent Rights involves claims
directly concerning any Product, GNE shall have the right to join such
proceeding at any time at its own expense, but GNE shall not admit the
invalidity or unenforceability of any ABX Patent Rights without ABX's prior
written consent.

6.7.2 Notwithstanding the foregoing, if ABX notifies GNE that it
does not desire to pursue an enforcement action or defend a declaratory judgment
action hereunder with respect to any infringement of any patent rights described
in Sections 6.1 through 6.4, then to the extent such action involves or affects
any Product, GNE may at its expense bring or defend such action with respect to
such patent rights (and no other patent rights in the ABX Patent Rights) in
consultation with ABX, and in such event ABX agrees to join as party plaintiff
at GNE's expense if necessary to prosecute the action and agrees to give GNE
reasonable assistance and authority to file and prosecute the suit (but neither
party shall be required to transfer title to any property to confer standing on
a party hereunder). In connection with any such action by GNE hereunder. GNE
shall not admit the invalidity or unenforceability of any ABX Patent Rights
without ABX's prior written consent.

6.7.3 Any recovery as a result of any such claim, suit or
proceeding hereunder shall be first used to reimburse the costs and expenses
(including reasonable attorneys' fees) of the party or parties in the action,
second, to reimburse ABX for any amounts ABX is obligated to pay to third
parties in respect of such amount pursuant to applicable ABX In-Licenses, third
to reimburse GNE's and its Sublicensees' lost sales of Products within the Field
because of the infringement, with the remainder for the account of the party or
parties that undertake such actions to the extent of their financial
participation therein. To the extent that damages are awarded for lost sales or
lost profits from the sale of Products, such damages shall be allocated among
the parties taking into account royalties that would have been payable to ABX on
the sale of such Products.

6.8 Infringement Claims Against GNE. If the production, sale or use of
Product pursuant to this Agreement results in any claim, suit or proceeding
alleging patent infringement against GNE (or its Sublicensees) specifically with
respect to GNE's or its Sublicensees' use of the Licensed Technology (but not
otherwise), GNE shall promptly notify ABX thereof in writing setting forth the
facts of such claim in reasonable detail. GNE agrees to keep ABX

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reasonably informed of all material developments in connection with any such
claim, suit or proceeding as it relates to the Licensed Technology.
Notwithstanding the above, GNE shall not admit the infringement,
unenforceability or invalidity of any patent within the Licensed Technology
without prior express written consent from ABX.

6.9 Limitation. Notwithstanding any other provision in this Article 6,
the parties acknowledge and understand that (i) ABX shall not be obligated to
prepare, file, prosecute, and maintain patents and patent applications, or to
bring or pursue enforcement proceedings or defend declaratory judgment actions
regarding the Licensed Technology if, and to the extent that, ABX is not
entitled to do so under one or more ABX In-Licenses, and (ii) any rights
conveyed under this Article 6 permitting GNE to prepare, file, prosecute and
maintain certain patents and patent applications, or to bring and pursue
enforcement proceedings, or defend declaratory judgment actions, regarding the
Licensed Technology, shall be subject to all applicable ABX In-Licenses, and are
conveyed only to the extent permitted under such agreements.

6.10 Patent Marking. GNE agrees to mark and have its Sublicensees mark
all Products sold pursuant to this Agreement in accordance with the applicable
statutes or regulations in the country or countries of manufacture and sale
thereof.

7. CONFIDENTIALITY.

7.1 Confidentiality. Except as expressly provided herein, GNE and ABX
each shall keep completely confidential and shall not publish or otherwise
disclose and shall not use for any purpose any Confidential Information of the
other until the later of (a) ten (10) years from the Effective Date or (b) five
(5) years following the expiration or termination of this Agreement.

7.2 Permitted Disclosures. Notwithstanding Section 7.1 above and Section
7.3 below, each party hereto may nevertheless disclose the other party's
Confidential Information and the terms of this Agreement to the extent such
disclosure is reasonably necessary in filing or prosecuting patent applications,
prosecuting or defending litigation, complying with applicable laws or
regulations or otherwise submitting information to governmental tax or other
governmental authorities, making a permitted Sublicense or publication or other
exercise of its rights hereunder or conducting clinical trials, provided that if
a party is required by law to make any such disclosure of the other party's
Confidential Information, other than pursuant to a confidentiality agreement, it
will give reasonable advance notice to the other party of such disclosure
requirement and, save to the extent inappropriate in the case of patent
applications, will use efforts consistent with prudent business judgment to
secure confidential treatment of such information prior to its disclosure
(whether through protective orders or confidentiality agreements or otherwise).
It is understood that the obligations set forth in this Article 7 are separate
from GNE's obligations under Section 9.4.6 of the GNE Option Agreement, and the
expiration or nonapplicability of GNE's obligations under Section 7.1 above
shall not be deemed to limit GNE's obligations under Section 9.4.6 of the GNE
Option Agreement.

7.3 Terms of Agreement. Except as expressly provided in this Article 7,
each party hereto agrees not to make any public disclosure of the terms of this
Agreement or the identity of the GNE Program Antigen (including, without
limitation, any press release and/or Q&A to be issued on the Effective Date),
without first obtaining the written approval of the other party and agreement
upon the nature and text of such public announcement or disclosure. The party
desiring to make any such public announcement shall provide the other party with
a copy of the proposed announcement for review and comment in reasonably
sufficient time prior to public release. Each party agrees that it shall
cooperate fully with the other with respect to all disclosures regarding this
Agreement required under applicable laws and regulations to the United States
Securities Exchange Commission and any other governmental or regulatory
agencies, including requests for confidential treatment of proprietary
information of either party included in any such governmental disclosure. The
parties may publicly disclose information contained in any prior public
disclosure that was in compliance with this Section without further approvals
hereunder. In addition, each party agrees not to disclose the identity of the
GNE Program Antigen to any third party under any circumstances except if
required by law, nor the terms of this Agreement or the GNE Option Agreement to
any third party, other than professional advisors and financing sources, and in
that case, only under confidentiality terms that are at least as stringent in
material respects as those in this Article. GNE shall have the right to review
and comment on applications for confidential treatment insofar as they pertain
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with the SEC and ABX shall not unreasonably refuse to consider such comments.
GNE shall provide its comments, if any, on such application as soon as
practicable, and in no event later than four (4) days after such application is
provided to GNE.

8. INDEMNIFICATION.

8.1 GNE. GNE agrees to save, defend and hold ABX and its directors,
officers, employees, agents and Affiliates harmless from and against any suits,
claims, actions, demands, damages, liabilities, expenses or losses (including
court costs and reasonable attorneys' and experts' fees) (collectively, the
"Liabilities") resulting directly from (a) third party claims arising from any
negligence or willful misconduct of GNE (or its directors, officers, employees,
agents or Sublicensees) or the breach of any representations, warranties or
covenants of GNE under this Agreement, or (b) any third party claims arising
from GNE's or its Sublicensee's development, making, having made, use, offer for
sale, or sale of any Product developed, manufactured, used, sold or otherwise
distributed by GNE and its Sublicensees under this Agreement; provided, however,
that nothing in this Section 8.1 shall obligate GNE to save, defend or hold
harmless ABX for any Liabilities to the extent arising from the negligence or
willful misconduct of ABX or its directors, officers, employees, or agents.

8.2 ABX. ABX agrees to save, defend and hold GNE and its directors,
officers, employees, agents and Affiliates harmless from and against any
Liabilities resulting directly from (a) third party claims arising from any
negligence or willful misconduct of ABX (or its directors, officers, employees,
or agents) or the breach of any representations, warranties or covenants of ABX
under this Agreement, or (b) any third party claims arising from infringement of
a Core Third Party Patent in the course of using the Licensed Technology in
accordance with this Agreement; provided, however, that indemnification under
Section 8.2(b) shall only be required by ABX in the event that neither ABX nor
GNE enters into a license with the party claiming infringement, under Section
3.5 of this Agreement; provided, further, that indemnification under Section
8.2(b) shall be limited to amounts paid by GNE to ABX under this Agreement; and
provided, further, that nothing in this Section 8.2 shall obligate ABX to save,
defend or hold harmless GNE for any Liabilities to the extent arising from the
negligence or willful misconduct of GNE or its directors, officers, employees,
agents or Sublicensees.

8.3 Indemnification Procedures. If any person or party entitled to
indemnification under this Article 8 (an "Indemnitee") intends to claim
indemnification under this Article 8, it shall promptly notify the indemnifying
party hereunder (the "Indemnitor") in writing of any Liability in respect of
which the Indemnitee intends to claim such indemnification, as soon as
reasonably practicable after the Indemnitee receives notice of such Liability.
Indemnitor's obligations under this Article 8 are conditioned upon the
Indemnitee permitting the Indemnitor to assume direction and control of the
defense of the Liability (including the right to settle it); provided, however,
that an Indemnitee shall have the right to retain its own legal counsel, with
the reasonable fees and expenses thereof to be paid by the Indemnitor, if
representation of such Indemnitee by the legal counsel retained by the
Indemnitor would be inappropriate due to actual or potential conflicts of
interest between such Indemnitee and such Indemnitor. Indemnitor's obligations
under this Article 8 shall not apply to amounts paid in settlement of any loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Indemnitor, which consent shall not be withheld or delayed
unreasonably. The failure to deliver written notice to the Indemnitor within a
reasonable time after the commencement of any third party suit, claim, action or
demand, if prejudicial to Indemnitor's ability to defend such suit, claim,
action or demand, shall relieve the Indemnitor of its obligations under this
Section 8 with respect to Liabilities that could have been defended in such
action. The Indemnitee (and its directors, officers, employees and agents) shall
cooperate fully with the Indemnitor and its legal counsel in the investigation
of any such Liability for which indemnification is sought by such Indemnitee
hereunder.

9. REPRESENTATIONS, WARRANTIES AND COVENANTS.

9.1 Representations and Warranties of ABX. ABX represents and warrants
to GNE as of the Effective Date that:

9.1.1 it has the power and authority to enter into this
Agreement; (ii) to the knowledge of ABX, there

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are no existing or threatened actions, suits or claims pending against ABX with
respect to the subject matter hereof or the right of ABX to enter into and
perform its obligations under this Agreement; (iii) it has taken all necessary
action on its part to authorize the execution and delivery of this Agreement and
the performance of its obligations hereunder; (iv) this Agreement has been duly
executed and delivered on behalf of it, and constitutes a legal, valid, binding
obligation, enforceable against it in accordance with the terms hereof; and (v)
the execution and delivery of this Agreement and the performance of its
obligations hereunder do not conflict with or violate any requirement of
applicable laws or regulations and do not conflict with, or constitute a default
under, any contractual obligation of it;

9.1.2 it has the full right and authority to grant the rights
and licenses granted herein;

9.1.4 to its actual knowledge (without the obligation to perform
due diligence) there are no existing or threatened actions, suits or claims
pending against ABX with respect to the Licensed Technology or the right of ABX
to enter into and perform its obligations under this Agreement;

9.1.5 Except as set forth on Schedule A, ABX has no knowledge
(without the obligation to perform due diligence) of any rights of third parties
that would materially impair the licenses granted by ABX to GNE under the ABX
Know-How or the ABX Patent Rights as contemplated under this Agreement, and, as
of the Effective Date, ABX has no knowledge (without the obligation to perform
due diligence) that any patents or patent applications within the ABX Patent
Rights are invalid or unenforceable or that their practice under this Agreement
would infringe patent rights of third parties, provided, however, that this
representation does not apply to any Liabilities or infringement arising out of,
relating to or with respect to the Product Antigens;

9.2 Covenants of ABX. ABX covenants to GNE that:

9.2.1 ABX will not take any action or fail to take any action
under this Agreement that will cause a material breach of the GenPharm
Cross-License, the Xenotech Agreement or any ABX In-License; provided, however,
that it shall not be a breach of this covenant if ABX cures any breach of such
third party agreement pursuant to the cure provisions contained therein;

9.2.3 ABX shall use its commercially reasonable, good faith
efforts to reject any termination, modifications or amendments to any ABX
In-Licenses that would materially and negatively affect GNE's rights under this
Agreement without first obtaining GNE's reasonable prior written consent, and
ABX shall notify GNE as soon as reasonably practicable of any material
modification or amendment of any ABX In-License that materially affects
(positively or negatively) GNE's rights or obligations under this Agreement; and

9.2.4 ABX shall promptly provide GNE with a copy of any notice of
default by ABX and/or its

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sublicensee under any ABX In-License, and of any notice of termination by any
other party to any ABX In-License.

9.2.5 ABX shall not directly or indirectly create, incur, assume or
suffer to exist, any lien, security interest or other similar encumbrance upon
or with respect to cells generated pursuant to this Agreement; and

9.2.6 During the term of this Agreement: (i) ABX will not agree to any
modifications or amendments to the XT Product License that restrict or limit or
otherwise negatively affect the rights and licenses granted to GNE hereunder,
and shall not terminate any licenses therein, in any case without GNE's prior
written consent in its sole discretion; and (ii) ABX shall provide GNE promptly
with a copy of any notice of default by ABX and/or its Sublicensee under such XT
Product License, and of any notice of termination by any other party thereto.

9.3 Representations and Warranties of GNE. GNE represents and warrants
to ABX as of the Effective Date that:

9.3.1 (i) it has the power and authority to enter into this
Agreement; (ii) to the knowledge of GNE, there are no existing or threatened
actions, suits or claims pending with respect to the subject matter hereof or
the right of GNE to enter into and perform its obligations under this Agreement;
(iii) it has taken all necessary action on its part to authorize the execution
and delivery of this Agreement and the performance of its obligations hereunder;
(iv) this Agreement has been duly executed and delivered on behalf of it, and
constitutes a legal, valid, binding obligation, enforceable against it in
accordance with the terms hereof; and (v) the execution and delivery of this
Agreement and the performance of its obligations hereunder do not conflict with
or violate any requirement of applicable laws or regulations and do not conflict
with, or constitute a default under, any contractual obligation of it;

9.3.2 it has the full right and authority to enter into this
Agreement and to grant the rights and licenses granted herein;

9.3.3 to its knowledge without the obligation to perform due
diligence, there are no existing or threatened actions, suits or claims pending
against GNE or its Affiliates with respect to the subject matter hereof
(including, without limitation, rights in and to the Product Antigen and/or
antibodies to the Product Antigen) or the right of GNE to enter into and perform
its obligations under this Agreement;

9.3.4 as of the Effective Date and except as set forth on
Schedule B hereto, it has no knowledge (without the obligation to perform due
diligence) of any rights of third parties that would interfere with the use of
the ABX Know-How or practice of the ABX Patent Rights as contemplated under this
Agreement; and

9.3.5 it has not previously granted any rights inconsistent or in
conflict with the rights and licenses granted under this Agreement.

9.4 Covenants of GNE. GNE covenants to ABX that:

9.4.1 during the term of this Agreement GNE will not grant any
rights inconsistent or in conflict with the rights and licenses granted under
this Agreement; and

9.4.2 it will not, to its knowledge, take any action or fail to
take any action that will cause a breach of the GenPharm Cross License, the
Xenotech Agreement, the XT Product License, or any ABX In-License.

9.5 Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES TO
THE OTHER PARTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, REGARDING PRODUCTS OR
THE LICENSED TECHNOLOGY, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, AND VALIDITY
OF LICENSED TECHNOLOGY CLAIMS, ISSUED OR PENDING. ALL XENOMOUSE ANIMALS AND
MATERIALS DERIVED IN WHOLE OR PART FROM THE XENOMOUSE ANIMALS PROVIDED TO GNE BY
ABX ARE PROVIDED "AS IS," AND ABX SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES
OF MERCHANTABILITY OR

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FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO XENOMOUSE ANIMALS AND MATERIALS
DERIVED IN WHOLE OR PART FROM XENOMOUSE ANIMALS.

10. TERM AND TERMINATION.

10.1 Term. The term of this Agreement shall commence on the Effective
Date and, unless earlier terminated as provided in this Article 10, shall
continue in full force and effect on a country-by-country basis until the
expiration of all royalty obligations pursuant to this Agreement for such
country, as provided in Section 3.3.6 above. Following the expiration, but not
earlier termination, of this Agreement on a country-by-country basis, GNE shall
have a fully paid-up, royalty-free, perpetual, sublicensable license under the
rights granted in Article 2, which license shall be a license exclusive as to
ABX (whose interest may be non-exclusive) under the ABX Know-How to research,
develop, make, use, sell and commercialize Products in such country.

10.2 Termination for Breach. Either party to this Agreement may
terminate this Agreement in the event that the other party (or any of its
Sublicensees in the case of GNE), shall have materially breached or defaulted in
the performance of any of its material obligations hereunder, and such breach or
default shall have continued for sixty (60) days after written notice of such
breach and intent to terminate this Agreement therefor was provided to the
breaching party by the nonbreaching party. Any such termination shall become
effective at the end of such sixty (60) day period unless the breaching party
has cured any such breach or default prior to the expiration of the sixty (60)
day period. Any such termination shall be without prejudice to any other rights,
conferred, or remedies available to, the nonbreaching party by law or at equity,
including, without limitation, under Section 8.3 above. The right of a
nonbreaching party to terminate this Agreement pursuant to this Section 10.2
shall not be affected in any way by its waiver or failure to take action with
respect to any previous default.

10.3 Termination for Insolvency or Bankruptcy. Either party may, in
addition to any other remedies available to it by law or in equity, terminate
this Agreement effective on written notice to the other party in the event the
other party shall have become insolvent or bankrupt, or shall have made an
assignment for the benefit of its creditors, or there shall have been appointed
a trustee or receiver of the other party or for all or a substantial part of its
property, or any case or proceeding shall have been commenced or other action
taken by or against the other party in bankruptcy or seeking reorganization,
liquidation, dissolution, winding-up, arrangement, composition or readjustment
of its debts or any other relief under any bankruptcy, insolvency,
reorganization or other similar act or law of any jurisdiction now or hereafter
in effect, or there shall have been issued a warrant of attachment, execution,
distraint or similar process against any substantial part of the property of the
other party, and any such event shall have continued for ninety (90) days
undismissed, unbonded and undischarged. Furthermore, all rights and licenses
granted under this Agreement are, and shall be deemed to be, for purposes of
Section 365(n) of the Bankruptcy Code, licenses of rights to "intellectual
property" as defined under Section 101(56) of the United States Bankruptcy Code.
The parties agree that in the event of the commencement of a bankruptcy
proceeding by or against of party hereunder under the United States Bankruptcy
Code, the other party shall be entitled to complete access, in accordance with
this Agreement, to any such intellectual property, and all embodiments of such
intellectual property, pertaining to the rights licensed to it hereunder of the
party by or against whom a bankruptcy proceeding has been commenced.

10.4 Termination by GNE. GNE may terminate this Agreement and the
license granted herein at any time, by providing ABX ninety (90) days prior
written notice.

10.5 Effect of Termination.

10.5.1 Accrued Obligations. Expiration or any termination of this
Agreement shall not relieve the parties of any obligation accruing prior to such
expiration or termination or release either party hereto from any liability
which at the time of such expiration or termination has already accrued to such
party, nor preclude either party from pursuing any rights and remedies it may
have hereunder or at law or in equity which accrued to it prior to such
expiration or termination, subject to the terms of this Agreement.

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10.5.2 Stock in Hand; Sublicenses. In the event this Agreement
is terminated for any reason (other than due to a material breach of this
Agreement by GNE or its Affiliates), GNE and its Sublicensees shall have the
right to sell or otherwise dispose (consistent with all applicable regulations
and law and subject to Articles 3 and 4 of this Agreement) of the stock of any
Product subject to this Agreement then on hand. No termination of this Agreement
(except by ABX under Section 10.2 above with respect to a Sublicensee of GNE
that is in breach of this Agreement) shall be construed as a termination of any
Sublicenses hereunder, and any Sublicense granted by GNE hereunder shall
survive, provided that upon request by ABX, such Sublicensee promptly agrees in
writing to be bound by the applicable terms of this Agreement.

10.5.3 Return of Know-How; Termination of Licenses. After the
effective date of termination by ABX under Section 10.2 or termination by GNE
under Section 10.4 above, GNE shall have no further obligations to ABX with
respect to the development and commercialization of Products in the Field in the
Territory, all underlying rights to the Licensed Technology (including without
limitation such rights pertaining to the Products in the Field in the Territory)
shall be the sole property of ABX, and all of GNE's license rights to the
Licensed Technology with respect to the Product shall terminate and revert to
ABX. In the event that GNE terminates this Agreement under Section 10.2, above,
after the effective date of such termination, GNE shall have no further
obligations to ABX with respect to the development and commercialization of
Products in the Field in the Territory. Such termination by GNE under Section
10.2 above shall not terminate any rights of GNE under this Agreement, and GNE
shall have an exclusive license under the rights licensed to GNE under Article 2
above to research, develop, make, have made Products in the Field in the
Territory and to use, sell, lease, offer to sell or lease, import, export,
otherwise transfer physical possession of or otherwise transfer title to
Products in the Field in the Territory. Except as otherwise provided in this
Section 10.5.3, such license shall be subject to the same royalty obligations as
set forth under Article 3 above. ABX, at ABX's expense, shall execute all
documents and make any filings necessary to perfect such license rights to GNE.

10.5.4 GNE Option Agreement. This Agreement is independent of,
and shall not be affected by, the expiration or termination of the GNE Option
Agreement.

10.5.5 XT. GNE and ABX agree that this Agreement, including,
without limitation, any licenses and sublicenses granted to GNE pursuant to this
Agreement (including any licenses and sublicenses to be granted to GNE therein)
shall survive any dissolution, liquidation or acquisition of XT, and that such
licenses shall remain in full force and effect even after any distribution,
following dissolution, of the intellectual property owned or licensed to XT, to
any entity. GNE and ABX agree that any transfer of such intellectual property to
or following such dissolution shall be subject to the licenses and sublicenses
granted herein.

10.5.6 ABX In-Licenses. In the event that any ABX In-License is
terminated due to breach by ABX and, as a result of such termination, ABX is
unable to convey to GNE the rights necessary to manufacture, use or sell
Products, ABX agrees that GNE's licenses hereunder shall become fully paid and
royalty free as to ABX and GNE shall step into the shoes of ABX with regard to
such ABX In-License as set forth in, and on the terms and conditions provided
in, such ABX In-License. ABX agrees to use best efforts and to take such actions
as are reasonably necessary to effectuate the foregoing.

10.5.7 Survival. Sections 9.5 and 10.5 and Articles 3, 4, 6, 7, 8
and 11 shall survive the expiration and any termination of this Agreement for
any reason.

11 MISCELLANEOUS.

11.1 Governing Laws. This Agreement shall be interpreted and construed
in accordance with the laws of the State of California, without regard to
conflicts of law principles.

11.2 Waiver. It is agreed that no waiver by any party hereto of any
breach or default of any of the covenants or agreements herein set forth shall
be deemed a waiver as to any subsequent and/or similar breach or default.

11.3 Assignment. Neither this Agreement nor any right or obligation
hereunder may be assigned or delegated,

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in whole or part, by either party without the prior written consent of the
other; provided, however, that either party may, without the written consent of
the other, assign this Agreement to (a) any entity to which it has acquired all
or substantially all of the business or assets of the assigning party, or (b)
any successor corporation resulting from any merger or consolidation with
another corporation (including, in the case of GNE, F. Hoffmann-La Roche Ltd or
any Affiliate thereof). Notwithstanding the foregoing, ABX shall not be
obligated without its written consent to send XenoMouse Animals to any party
other than GNE. The terms and conditions of this Agreement shall be binding on
and inure to the benefit of the permitted successors and assigns of each party
hereto.

11.5 Compliance with Laws. In exercising their rights under this
license, the parties shall fully comply with the requirements of any and all
applicable laws, regulations, rules and orders of any governmental body having
jurisdiction over the exercise of rights under this license.

11.6 No Implied Obligations. Except as expressly provided in Article 5
above, nothing in this Agreement shall be deemed to require GNE to exploit the
Licensed Technology nor to prevent GNE from commercializing products similar to
or competitive with any Product, in addition to or in lieu of such Products.

11.7 Notices. Any notice, request, approval or consent required or
permitted to be given between the parties hereto shall be given in writing, and
shall be deemed to have been properly given if delivered in person, transmitted
by telecopy with machine confirmation of transmission, or mailed by first class
certified mail to the other party at the appropriate address set forth below, or
to such other address as may be designated in writing by a party from time to
time in accordance with this Agreement. Such notice, request, approval or
consent shall be deemed given (i) on the date delivered or transmitted if
delivered in person or transmitted by telecopy prior to 5 p.m. on any business
day, (ii) on the next business day following delivery or transmission if
delivered in person or transmitted by telecopy after 5 p.m. on any business day
or on any nonbusiness day, or (iii) on the fourth business day following the
date deposited in the United States mail if sent mailed by first class certified
mail.

Genentech, Inc.: Genentech, Inc.
One DNA Way
South San Francisco, CA 94080
Attn: Corporate Secretary
Telecopy: (650) 952-9881

Abgenix, Inc.: Abgenix, Inc.
7601 Dumbarton Circle
Fremont, California 94555
Attn: President
Telecopy: (510) 608-6511

11.8 Export Laws. Notwithstanding anything to the contrary contained
herein, all obligations of ABX and GNE are subject to prior compliance with
United States export regulations and such other United States laws and
regulations as may be applicable, and to obtaining all necessary approvals
required by the applicable agencies of the government of the United States. GNE
shall be responsible for obtaining such approvals, and shall use efforts
consistent with prudent business judgment to obtain such approvals. ABX agrees
to cooperate reasonably with GNE and provide reasonable assistance to GNE as may
be reasonably necessary to obtain any required approvals.

11.9 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision and the parties shall discuss in good faith appropriate
revised arrangements.

11.10 Force Majeure. Nonperformance of any party (except for payment
obligations) shall be excused to the

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<PAGE> 62

extent that performance is rendered impossible by strike, fire, earthquake,
flood, governmental acts or orders or restrictions, failure of suppliers, or any
other reason where failure to perform, is beyond the reasonable control and not
caused by the negligence, intentional conduct or misconduct of the nonperforming
party.

11.11 No Consequential Damages. IN NO EVENT SHALL ANY PARTY HERETO BE
LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS
AGREEMENT OR THE EXERCISE OF RIGHTS HEREUNDER.

11.12 Disputes. The parties recognize that disputes as to certain
matters may from time to time arise during the term of this Agreement which
relate to either party's rights and/or obligations hereunder. It is the
objective of the parties to establish procedures to facilitate the resolution of
disputes arising under this Agreement in an expedient manner by mutual
cooperation and without resort to litigation. To accomplish this objective, it
is agreed that each party will inform the other as soon as possible when it
becomes aware of an area or issue of dispute. Prior to filing or initiating any
legal proceeding, the parties agree to discuss the dispute at the organizational
level at which such dispute arises. If either party believes there has been
sufficient discussion of the matter at such level, then such party, by written
notice to the other party, may have such dispute referred to their respective
chief executive officers (or, if unavailable, a designee who is an officer of
the party empowered to resolve such disputes) for attempted resolution by good
faith negotiations between such chief executive officers within fourteen (14)
days of such referral. In the event that the chief executive officers are not
able to resolve such dispute within such fourteen (14) day period, either party
may pursue whatever remedies are available to them under this Agreement or by
law.

11.13 Complete Agreement; Amendment. It is understood and agreed between
ABX and GNE that this Agreement and the GNE Option Agreement constitute the
entire agreement, both written and oral, between the parties with respect to the
subject matter hereof, and supersede and cancel all prior agreements respecting
the subject matter hereof, either written or oral, expressed or implied. No
amendment or change hereof or addition hereto shall be effective or binding on
either of the parties hereto unless reduced to writing and executed by the
respective duly authorized representatives of ABX and GNE.

11.14 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original and both together shall be deemed to
be one and the same agreement.

11.15 Headings. The captions to the several Articles and Sections hereof
are not a part of this Agreement, but are included merely for convenience of
reference only and shall not affect its meaning or interpretation.

IN WITNESS WHEREOF, the parties have executed this Agreement, through
their respective officers hereunto duly authorized, as of the day and year first
above written.

ABGENIX, INC. GENENTECH, INC.

By: By:
---------------------------- ---------------------------------

Name: Name:
-------------------------- --------------------------------

Title: Title:
------------------------- -------------------------------

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SCHEDULE A

INFORMATION PURSUANT TO SECTION 9.1.5

<PAGE> 64

SCHEDULE B

INFORMATION PURSUANT TO SECTION 9.3.4

<PAGE> 65

ATTACHMENT A

ABX IN-LICENSES

I. [*]

II. [*]

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the Commission. Confidential treatment has been requested with respect to the
omitted portions.

<PAGE> 66

ATTACHMENT B

ABX KNOW-HOW AND ABX PATENT RIGHTS

ABX KNOW-HOW:

PURSUANT TO PREVIOUS AGREEMENT:

[*]

PURSUANT TO THIS AGREEMENT:

[*]

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omitted portions.

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<PAGE> 67

ATTACHMENT B

ABX KNOW-HOW AND ABX PATENT RIGHTS

ABX PATENT RIGHTS:

I. PURSUANT TO THE MRLOA

A. Any of the patent applications listed in the following Table:

<TABLE>
<CAPTION>
Ref. No. Application No. Filing Date Inventors Title
-------- --------------- ----------- --------- -----
<S> <C> <C> <C> <C>
[*] [*] [*] [*] [*]

[*] [*] [*] [*] [*]

[*] [*] [*] [*] [*]
</TABLE>

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the Commission. Confidential treatment has been requested with respect to the
omitted portions.

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<PAGE> 68

ATTACHMENT B

ABX KNOW-HOW AND ABX PATENT RIGHTS

[*]

B. Pursuant to the License Agreement by and between the [*]

C. Pursuant to the Agreement between the [*]

D. Pursuant to the [*]

E. Pursuant to Agreements [*]

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the Commission. Confidential treatment has been requested with respect to the
omitted portions.

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ATTACHMENT B

ABX KNOW-HOW AND ABX PATENT RIGHTS

II. PURSUANT TO THE GENPHARM CROSS LICENSE

A. [*]

B. [*]

C. [*]

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omitted portions.

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ATTACHMENT C

FINANCING DOCUMENTS

ABGENIX, INC.

COMMON STOCK PURCHASE AGREEMENT

JANUARY 27, 1999

THIS AGREEMENT is made as of the date first written above by and
between ABGENIX, INC., a Delaware corporation having its principal executive
office at 7601 Dumbarton Circle, Fremont, California 94555 (the "Company"), and
GENENTECH, INC., a Delaware corporation having its principal executive office at
1 DNA Way, South San Francisco, California 94080 (the "Purchaser").

RECITALS

A. The parties are entering into a Multi-Antigen Research License and
Option Agreement contemporaneously with this Agreement (the "Multi-Antigen
Agreement"), providing the Purchaser with the right to use the Company's
XenoMouse technology and an option to acquire product licenses to XenoMouse
technology for use in specific fields.

B. In connection with the Multi-Antigen Agreement, the parties desire
that the Purchaser make an $8,000,000 equity investment in the Company pursuant
to the terms and conditions of this Agreement.

C. The shares of Common Stock issued to the Purchaser pursuant to this
Agreement shall have registration rights as evidenced by the Registration Rights
Agreement in the form attached hereto as Exhibit A (the "Rights Agreement").

NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and promises set forth in this Agreement, the parties agree as
follows:

1. Sale of Stock. The Company hereby agrees to sell to the Purchaser,
and the Purchaser hereby agrees to purchase from the Company, 495,356 shares of
the Company's Common Stock (the "Shares") at the per share purchase price equal
to the average of the last sale price of one share of the Company's Common Stock
as reported on the Nasdaq National Market for the twenty (20) trading day period
commencing on and including December 24, 1998 (the "Per Share Purchase Price").

2. Closing Date. The closing of the purchase and sale of the Shares
hereunder (the "Closing") will take place as promptly as practicable hereafter,
upon the satisfaction of the conditions to closing set forth in Section 8
hereof, at the offices of Wilson Sonsini Goodrich & Rosati, P.C., 650 Page Mill
Road, Palo Alto, California, or at such other time and place as the parties
hereto shall agree. The date of the Closing is hereinafter referred to as the
"Closing Date".

<PAGE> 71

3. Delivery. At the Closing, the Company will deliver a certificate
registered in the Purchaser's name representing the Shares to be purchased by
the Purchaser. Such delivery shall be against payment of the purchase price
therefor in an amount equal to the product of the number of Shares and the Per
Share Purchase Price (the "Purchase Price") by wire transfer to the Company's
bank account at:

Bank Name: Wells Fargo Bank
Bank Address: 525 Market Street, 10th Floor
San Francisco, CA 94105
Bank Contact: Rod Ocmond
ABA#: 121000248
Account Name: WFB Acct
Account Number: 4068-000769

4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as follows:

(a) Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is qualified to do business as a foreign corporation in each
jurisdiction where failure to qualify would have a material adverse effect on
the business or properties of the Company. The Company has full corporate power
and authority to own its property, to carry on its business as presently
conducted and to carry out the transactions contemplated hereby.

(b) Authorization. The Company has full corporate power to
execute, deliver and perform this Agreement, the Rights Agreement and the
Multi-Antigen Agreement, and each such agreement has been duly executed and
delivered by the Company and is the legal, valid and, assuming due execution by
the Purchaser, binding obligation of the Company, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting creditors' rights generally, and to
general equitable principles. The execution, delivery and performance by the
Company of this Agreement, the Rights Agreement and the Multi-Antigen Agreement,
including the issuance, sale and delivery, of the Shares contemplated by Section
1 hereof, have been duly authorized by all necessary corporate action of the
Company.

(c) Valid Issuance of Stock. The Shares will be duly
authorized, validly issued, fully paid and non-assessable and, based in part
upon the representations of the Purchaser in this Agreement, will be issued in
compliance with all applicable federal and state securities laws. The Shares
will be free of restrictions on transfer other than the restrictions in this
Agreement, the Rights Agreement and under applicable state and/or federal
securities laws, and will not be subject to any preemptive or other similar
rights or any liens or encumbrances with the exception of any liens or
encumbrances created by the Purchaser.

(d) Governmental Approvals. Based in part on the
representations made by the Purchaser in Sections 5 and 6, no authorization,
consent, approval, license, exemption of or filing or

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registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, under any applicable
laws, rules or regulations presently in effect, is or will be necessary to be
made or obtained by the Company for, or in connection with, the execution and
delivery of this Agreement, the Rights Agreement or the Multi-Antigen Agreement
or the consummation of the transactions contemplated hereby or thereby or
performance by the Purchaser of its obligations hereunder or thereunder,
including the offer, sale and issuance of the Shares, except for (i) such
filings under applicable securities laws that will be made by the Company within
the prescribed periods, (ii) such filings with the Securities and Exchange
Commission (the "Commission"), Nasdaq and others pursuant to the Rights
Agreement that will be made by the Company within the prescribed periods and
(iii) any of the foregoing required or contemplated to be made pursuant to the
terms of the Multi-Antigen Agreement.

(e) Offering. Subject to the accuracy of the representations
of the Purchaser made in Sections 5 and 6, the offer, sale and issuance of the
Shares in conformity with the terms of this Agreement constitutes a transaction
exempt from the registration requirements of Section 5 of the Securities Act and
from the qualification requirements of the California Corporate Securities Law
of 1968, as amended (the "California Securities Law").

(f) Litigation. There is no litigation or governmental
proceeding or investigation pending or, to the knowledge of the Company,
threatened against the Company that could, either individually or in the
aggregate, materially and adversely affect (i) the execution and delivery of
this Agreement, the Rights Agreement or the Multi-Antigen Agreement, or (ii) the
performance by the Company of its obligations hereunder or thereunder, or that
could, either individually or in the aggregate, materially and adversely affect
the condition (financial or otherwise), business, property, assets or
liabilities of the Company or result in any change in the current equity
ownership of the Company. The Company is not a party or subject to, and none of
its assets is bound by, the provisions of any order, writ, injunction, judgment
or decree of any court or government agency or instrumentality.

(g) Subsidiaries. Except for Xenotech, L.P. and its general
partner Xenotech, Inc., the Company has no active subsidiaries and does not
otherwise directly or indirectly control any other business entity, and is not a
participant in any joint venture, partnership or similar entity. The Company has
furnished the Purchaser with true, correct and complete copies of its Amended
and Restated Certificate of Incorporation and Bylaws, together with any
amendments thereto as of the date hereof.

(h) Absence of Certain Developments. Since November 24, 1998,
the date of its most recent report filed with the Commission pursuant to the
Securities and Exchange Act of 1934, as amended from time to time (such act,
together with the rules and regulations promulgated thereunder, the "Exchange
Act," and such report, the "Current SEC Filing"), except as disclosed therein,
there has been no (i) material adverse change in the condition, financial or
otherwise, of the Company or its assets, liabilities, properties, business,
operations, intellectual property rights owned or controlled by it, or prospects
generally, (ii) declaration, setting aside or payment of any dividend or other
distribution with respect to the capital stock of the Company, or (iii) loss,
destruction or damage to any property of the Company, whether or not insured,
which has or may have a material adverse effect on the Company.

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(i) Absence of Undisclosed Liabilities. Except as and to the
extent reflected or stated in the Current SEC Filing, the Company has no
material accrued or contingent liability of a type required to be reflected on a
balance sheet in accordance with generally accepted accounting principles or
described in the footnotes thereto, other than liabilities arising in the
ordinary course of its business since the Current SEC Filing, arising out of any
transaction or state of facts existing prior to the date hereof.

(j) Non-Contravention. The execution, delivery and performance
by the Company of this Agreement, the Rights Agreement and the Multi-Antigen
Agreement do not and will not (i) contravene or conflict with the Amended and
Restated Certificate of Incorporation or Bylaws of the Company, or (ii)
contravene or conflict with or constitute a violation of any provision of any
law, regulation, judgment, injunction, order or decree binding upon or
applicable to the Company or its property, or result in a breach of or
constitute a default under any material agreement of the Company (whether upon
notice or passage of time) binding upon or applicable to it or its property, in
any manner which would materially and adversely affect the Purchaser's rights or
its ability to realize the intended benefits under this Agreement, the Rights
Agreement or the Multi-Antigen Agreement, or to require any consent or waiver
under any such material agreement.

(k) Filings. The Company has filed in a timely manner, and has
delivered to the Purchaser copies of, the following report required to be filed
with the Commission under the Exchange Act: (i) the Company's quarterly report
on Form 10-Q for the quarter ended September 30, 1998 filed with the Commission
on November 13, 1998 (the "SEC Report"). As of its filing date, no such report
or statement filed pursuant to the Exchange Act contained any untrue statement
of a material fact or omitted to state any material fact necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading.

(l) No Brokers. The Company has not directly or indirectly
employed any broker, finder or other person (including any employee) that might
be entitled to a fee, commission or other compensation upon the execution of
this Agreement, the Rights Agreement or the Multi-Antigen Agreement or the
consummation of the transactions contemplated by this Agreement, the Rights
Agreement or the Multi-Antigen Agreement for which the Purchaser or the Company
is or may be liable.

(m) Current Compliance with Other Instruments. The Company is
not in violation or default of any provision of its Amended and Restated
Certificate of Incorporation or Bylaws, each as in effect on and as of the
Closing, or any material agreement of the Company binding upon or applicable to
the Company or any of its properties or assets, or, to the best of its
knowledge, any provision of any law, regulation, judgment, injunction, order or
decree binding upon or applicable to the Company or any of its properties or
assets, which violation or default in any manner could, either individually or
in the aggregate, materially and adversely affect the condition (financial or
otherwise), business, property, assets or liabilities of the Company or result
in any change in the current equity ownership of the Company.

(n) Patents and Trademarks. The Company has sufficient title
to and ownership of or right to use all patents, trademarks, service marks,
trade names, copyrights, trade secrets, information, processes and other
proprietary rights (collectively, "IP Rights") necessary for its business as
presently

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<PAGE> 74

conducted, without any known infringement of the rights of others. The Company
has not received any communications alleging that the Company has violated any
IP Rights of any other person or entity, nor is the Company aware of any third
party that is infringing or violating any such rights of the Company.

(o) Confidential Information and Invention Assignment
Agreements. Each former and current employee, officer and consultant of the
Company has executed a confidential information and invention assignment
agreement in the form attached hereto as Exhibit B.

(p) Employees. The Company's relations with its employees are
satisfactory. The Company has no collective bargaining agreements with any of
its employees. There is no labor union organizing activity pending or, to the
Company's knowledge, threatened with respect to the Company. To the Company's
knowledge, no employee of the Company, nor any consultant with whom the Company
has contracted, is in violation of any term of any employment contract,
proprietary information agreement or any other agreement relating to the right
of any such individual to be employed by, or to contract with, the Company
because of the nature of the business conducted by the Company; and to the
Company's knowledge the continued employment by the Company of its present
employees, and the performance of the Company's contracts with its independent
contractors, will not result in any such violation. The Company has not received
any notice alleging that any such violation has occurred. The Company is not
aware that any officer or key employee intends to terminate his or her
employment with the Company, and the Company does not have a present intention
to terminate the employment of any officer or key employee. The Company has
complied in all material respects with the applicable state, federal and foreign
equal employment opportunity laws and with other laws related to employment.

(q) Permits. The Company has all franchises, permits, licenses
and any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects or financial condition of the Company. The
Company is not in default under any such franchise, permit, license or other
similar authority and neither the execution, delivery nor performance of this
Agreement, the Rights Agreement or the Multi-Antigen Agreement and the
consummation of the transactions contemplated hereby and thereby will result in
any suspension, revocation, impairment, forfeiture or nonrenewal of any of them.

(r) Registration Rights. The Company has not granted or agreed
to grant to any person or entity any registration rights, including piggyback
rights, that can currently or in the future may be exercisable, except for those
pursuant to (i) the Amended and Restated Stockholder Rights Agreement, dated as
of January 12, 1998, among the Company and certain holders of Common Stock and
warrants of the Company, (ii) the Registration Rights Agreement, dated November
18, 1998, between Zesiger Capital Group, LLC and the Company, and (iii) the
Rights Agreement.

(s) Environmental and Safety Laws. The Company, to the best of
its knowledge, is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and, based on the
Company's business as currently conducted and to the best of its knowledge, no
material expenditures are or will be required in order to comply with any such
existing statute, law or regulation.

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<PAGE> 75

(t) Insurance. The Company has in full force and effect fire
and casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its property
that might be damaged or destroyed. The Company has in full force and effect
product liability insurance in an amount customary for companies similarly
situated.

5. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company as follows:

(a) Corporate Power. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is qualified to do business as a foreign corporation in each
jurisdiction where failure to qualify would have a material adverse effect on
the business or properties of the Purchaser. The Purchaser has full corporate
power and authority to own its property, to carry on its business as presently
conducted and to carry out the transactions contemplated hereby.

(b) Authorization. The Purchaser has full corporate power to
execute, deliver and perform this Agreement, the Rights Agreement and the
Multi-Antigen Agreement, and each such agreement has been duly executed and
delivered by the Purchaser and is the legal, valid and, assuming due execution
by the Company, binding obligation of the Purchaser, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting creditors' rights generally, and to
general equitable principles. The execution, delivery and performance by the
Purchaser of this Agreement, the Rights Agreement and the Multi-Antigen
Agreement, including the payment of the Purchase Price, have been duly
authorized by all necessary corporate action of the Purchaser.

(c) Risk Factors. The Purchaser acknowledges that an
investment in the Company involves known and unknown risks, uncertainties and
other factors which may result in the Purchaser's loss of its entire investment.
The Purchaser acknowledges that it has received a copy of the SEC Report and
reviewed the "Risk Factors" contained therein, which "Risk Factors" are deemed
incorporated by reference into this Agreement.

(d) No Brokers. The Purchaser has not directly or indirectly
employed any broker, finder or other person (including any employee) that might
be entitled to a fee, commission or other compensation upon the execution of
this Agreement, the Rights Agreement or the Multi-Antigen Agreement or the
consummation of the transactions contemplated by this Agreement, the Rights
Agreement or the Multi-Antigen Agreement for which the Purchaser or the Company
is or may be liable.

6. Compliance with Securities Laws and Restrictions on Transfer of
Securities.

(a) Additional Representations and Warranties and Agreements
of the Purchaser. The Purchaser hereby represents and warrants to, and agrees
with, the Company as follows:

(i) The Purchaser is purchasing the Shares for its
own account for investment only and not with a view to any resale or
distribution thereof, except pursuant to an effective registration

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statement under the Securities Act of 1933, as amended from time to time (such
act, together with the rules and regulations promulgated thereunder, herein the
"Securities Act"), covering the sale, assignment or transfer or an opinion of
counsel satisfactory to the Company (which may be counsel to the Company;
provided that no conflict of interest exists or that the Purchaser and the
Company have waived any such conflict) that such registration is not required,
which opinion will be at the cost of the Company.

(ii) The Purchaser has received and carefully
reviewed the Current SEC Filing, and has had the opportunity to obtain and
receive such other information as it has deemed necessary to understand the
business and financial condition of the Company and to make the investment
decision to purchase the Shares.

(iii) As an investor in companies in the
biopharmaceutical industry and a participant in such industry, the Purchaser has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the investment represented by the
Shares, and it is able to bear the economic risk of such investment.

(iv) The Purchaser is an "accredited investor" as
such term is defined in Rule 501(a) of Regulation D under the Securities Act.
The Purchaser also represents it has not been organized for the purpose of
acquiring the Shares.

(v) The Purchaser understands that the Shares are
being issued in a transaction that is exempt from the registration requirements
of the Securities Act by reason of the provisions of Section 4(2) of the
Securities Act and that the Shares will be subject to transfer restrictions and
must be held indefinitely unless subsequently registered under the Securities
Act or an exemption from such registration is available. The certificate
representing the Shares will be affixed with the following legends:

"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, ASSIGNED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT COVERING THE TRANSFER OR
AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."

The restrictions on sale, assignment and transfer of the
Shares contained in this Section 6(a)(v) shall terminate at such time as there
shall be delivered to the Company and the Purchaser an opinion of counsel to the
Purchaser, in form and substance satisfactory to the Company, to the effect
that, due to the lapse of time or otherwise, no registration of such securities
is required under the Securities Act in connection with any distribution of such
securities to the public in the United States. In addition, at any time after
(A) the delivery of such opinion; or (B) such securities are sold pursuant to
and in accordance with an effective registration statement under the Securities
Act covering such sale,

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<PAGE> 77

the Purchaser shall be entitled to exchange its certificate representing such
securities (or any portion thereof as to which (A) or (B) above applies) for a
new certificate not bearing the first legend set forth in Section 6(a)(v).

(vi) The Purchaser understands that the Shares
constitute "restricted securities" within the meaning of Rule 144, promulgated
under the Securities Act. Purchaser is aware that Rule 144, in substance, except
as otherwise provided in subsection (k) of such rule, permits limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions, including, among other
things: (A) the availability of certain public information about the Company;
(B) the resale occurring not earlier than the expiration of the applicable
holding period stated therein; (C) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Exchange Act) and (D) the amount of
securities being sold during any three-month period not exceeding the specified
limitations stated therein. The Purchaser also understands that the holding
period under Rule 144 will commence on the Closing Date.

(vii) The Purchaser further understands that in the
event all of the applicable requirements of Rule 144 are not satisfied,
registration under the Securities Act, compliance with Regulation A, or some
other registration exemption will be required; and that, notwithstanding the
fact that Rule 144 is not exclusive, the staff of the Commission has expressed
its opinion that persons proposing to sell private placement securities other
than in a registered offering and otherwise than pursuant to Rule 144 will have
a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own
risk.

(b) Stop Transfer Orders. The Purchaser understands that
notations restricting the transfer of the Shares will be made on the transfer
records of the Company and that a stop transfer order will be entered with the
Company's transfer agent.

(c) Compliance with Section 6. None of the Shares (nor any
interest therein) shall be sold, assigned or offered except in accordance with
the provisions of this Section 6.

7. Additional Covenants of Purchaser Regarding Securities.

(a) Effectiveness and Termination. The provisions of this
Section 7 shall become effective at such time (if any), and from time to time,
as the Purchaser and its Affiliates, taken together, own Voting Securities
representing two percent (2%) or more of the total outstanding Voting Securities
of the Company, and shall continue in effect until the earlier of (i) the fifth
anniversary of the date of this Agreement or (ii) such time as the Purchaser and
its Affiliates, taken together, own less than two percent (2%) of the total
outstanding Voting Securities of the Company, provided that the provision of
this Section 7 shall again become effective if, and at such time, and from time
to time, as the Purchaser and its Affiliates, taken together, own such
percentage of Voting Securities of the Company within the five year period
commencing on the date hereof. For purposes of this Agreement, the term "Voting

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<PAGE> 78

Securities" means any outstanding securities of the Company entitled to vote
generally the election of directors, including the Shares. The provisions of
this Section 7 shall have no effect unless and until they become effective, and
only so long as they are effective, pursuant to this Section 7(a), other than
for purposes of defining certain terms used elsewhere in this Agreement.
Notwithstanding any provision hereof to the contrary, this Section 7 shall not
apply to any Shares assigned, sold or transferred in accordance with Section
6(a)(v).

(b) Additional Stock Purchases by Purchaser. The Purchaser
hereby agrees that neither the Purchaser nor any of its Affiliates nor anyone
acting on its or their behalf will acquire any equity securities (as such term
is used in the Exchange Act) of the Company without the Company's prior written
approval. For purposes of this Agreement, the term "Affiliate" means, when used
with respect to any specified person, any other person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such specified person. For the purposes of this definition, "control," when used
with respect to any person, means the power to direct the management and
policies of such person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise and the terms "affiliated,"
"controlling" and "controlled" have meanings correlative to the foregoing.

8. Closing Conditions.

(a) Conditions to Purchaser's Obligations at the Closing. The
Purchaser's obligation to purchase the Shares at the Closing is subject to the
fulfillment on or prior to the Closing of the following conditions, any one or
more of which may be waived in whole or in part by the Purchaser:

(i) Compliance with Laws. At the Closing, the sale
and issuance of the Shares shall be legally permitted by all laws and
regulations to which the Purchaser or the Company is subject.

(ii) Representations and Warranties. Each of the
representations and warranties of the Company set forth in Section 4 shall be
true and correct as if made on the Closing Date.

(iii) Performance. The Company shall have performed
and complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing Date.

- --------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.

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(iv) Compliance Certificate. The Chief Executive
Officer of the Company shall deliver to the Purchaser on the Closing Date a
certificate certifying that the conditions set forth in clauses (ii), (iii) and
(vi) of this Section 8(a) have been fulfilled.

(v) Other Agreements. The Company shall have
executed and delivered to the Purchaser the Rights Agreement and the
Multi-Antigen Agreement.

(vi) Consents. The Company shall have obtained all
consents (including all governmental and regulatory consents, approvals, or
authorizations required in connection with the valid execution and delivery of
this Agreement, the Rights Agreement and the Multi-Antigen Agreement), permits
and waivers necessary or required to be obtained on or prior to the Closing Date
for consummation of the transactions contemplated hereby.

(vii) Proceedings and Documents. All corporate and
other proceedings in connection with the transactions contemplated in connection
with the Purchaser's purchase of the Shares and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Purchaser and the
Purchaser's counsel, and they shall have received all such counterpart original
and certified or other copies of such documents as they may reasonably request.

(viii) Delivery of Stock Certificate. The Company
shall have caused the delivery to the Purchaser of a stock certificate
representing the Purchaser's ownership of the Shares.

(ix) Blue Sky. On or before the Closing, the Company
shall have obtained all necessary permits and qualifications, if any, or secured
an exemption therefrom, required by any state or country for the offer and sale
of the Shares.

(x) Opinion of Wilson Sonsini Goodrich & Rosati. The
Purchaser shall have received from Wilson Sonsini Goodrich and Rosati, counsel
to the Company, an opinion, dated the Closing Date, in the form attached hereto
as Exhibit C.

(xi) Opinion of Pillsbury Madison & Sutro. The
Purchaser shall have received from Pillsbury Madison & Sutro, counsel to the
Company, an opinion, dated the Closing Date, in the form attached hereto as
Exhibit D.

(b) Conditions to Company's Obligations at the Closing. The
Company's obligation to sell and issue the Shares at the Closing is subject to
the fulfillment on or prior to the Closing of the following conditions, any one
or more of which may be waived in whole or in part by the Company:

(i) Compliance with Laws. At the Closing, sale and
issuance of the Shares shall be legally permitted by all laws and regulations to
which the Purchaser or the Company is subject.

(ii) Representations and Warranties. Each of the
representations and warranties of the Purchaser set forth in Sections 5 and 6
shall be true and correct as if made on the Closing Date.

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<PAGE> 80

(iii) The Purchase Price. The Purchaser shall have
delivered to the Company the Purchase Price in accordance with Section 3 hereof.

(iv) Performance. The Purchaser shall have performed
and complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with on or before the
Closing Date.

(v) Other Agreements. The Purchaser shall have
executed and delivered to the Company the Rights Agreement and the Multi-Antigen
Agreement.

(vi) Consents. The Purchaser shall have obtained all
consents (including all governmental and regulatory consents, approvals, or
authorizations required in connection with the valid execution and delivery of
this Agreement, the Rights Agreement and the Multi-Antigen Agreement), permits
and waivers necessary or required to be obtained on or prior to the Closing Date
for consummation of the transactions contemplated hereby.

(vii) Proceedings and Documents. All corporate and
other proceedings in connection with the transactions contemplated in connection
with the sale and issuance of the Shares and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Company and the
Company's counsel, and they shall have received all such counterpart original
and certified or other copies of such documents as they may reasonably request.

9. General Provisions.

(a) Notices. All notices and other communication required or
appropriate to be given hereunder shall be in writing and shall be delivered by
hand or mailed by certified mail, return receipt requested, or sent by telex or
facsimile (in which case a confirming copy shall also be sent by certified mail
or courier), to the following respective addresses or to such other addresses as
may be specified in any notice delivered or mailed as above provided:

(i) If to the Purchaser, to:

Genentech, Inc.
1 DNA Way
South San Francisco, CA 94080
Telephone: (650) 225-1000
Facsimile: (650) 952-9881

Attention: Corporate Secretary

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<PAGE> 81

(ii) If to the Company to:

Abgenix, Inc.
7601 Dumbarton Circle
Fremont, California 94555
Telephone: (510) 608-6500
Facsimile: (510) 608-6547

Attention: President

with a copy to:

Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Telephone: (650) 493-9300
Facsimile: (650) 493-6811

Attention: Chris F. Fennell

Any notice or other communication delivered by hand or mailed shall be deemed to
have been delivered on the date on which such notice or communication is
delivered by hand, or in the case of certified mail deposited with the
appropriate postal authorities on the date when such notice or communication is
actually received, and in any other case shall be deemed to have been delivered
on the date on which such notice or communication is actually received.

(b) Governing Law. The parties have agreed that this Agreement
will be governed by and construed in accordance with the laws of the State of
California.

(c) Amendments. No provision of this Agreement may be waived,
changed or modified, or the discharge thereof acknowledged orally, but only by
an agreement in writing signed by the party against which the enforcement of any
waiver, change, modification or discharge is sought.

(d) Assignment.

(i) Except as set forth in this Section 9(d), none of
the rights or obligations of either party hereto may be assigned or transferred
without the prior written consent of the other party hereto.

(ii) Either party may assign all of its rights and
obligations under this Agreement in connection with a merger or similar
reorganization or the sale of all or substantially all of its assets. This
Agreement shall survive any such merger or reorganization of either party with
or into, or such sale of assets to, another party and no consent for such
merger, reorganization or sale shall be required hereunder.

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<PAGE> 82

(iii) The Purchaser may assign its rights and
obligations to a wholly-owned subsidiary, provided the assignee is not deemed by
the Board of Directors of the Company, in its reasonable judgment, to be a
competitor of the Company and provided further such assignee agrees, prior to
the transfer, in writing with the Company to comply with all the provisions of
this Agreement applicable to the Purchaser. Notwithstanding anything herein to
the contrary, no such assignment shall relieve the Purchaser of its obligations
hereunder and under the Rights Agreement and the Multi-Antigen Agreement.

(iv) This Agreement shall be binding upon and inure
to the benefit of the successors and permitted assigns of the parties. Any
assignment not in accordance with this Agreement shall be void.

(e) Expenses. All fees and expenses incurred in connection
with this Agreement and the transactions contemplated hereby, including without
limitation brokerage, placement agent, attorneys' and accountants' fees and
expenses, shall be paid by the party incurring such expenses, whether or not the
sale and purchase of the Shares is consummated.

(f) Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.

(g) Entire Agreement. This Agreement, the Rights Agreement and
the Multi-Antigen Agreement, together with the Exhibits and other documents
attached hereto and thereto, constitute the entire contract between the parties
with respect to the subject matter hereof and thereof, and no party will be
liable or bound to the other in any manner by any representations, warranties or
covenants except as specifically set forth herein and therein.

(h) Titles. The titles of the Sections of this Agreement are
inserted for reference only, and are not to be considered as part of this
Agreement in construing this Agreement.

[remainder of page left blank intentionally]

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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first set forth above.

"COMPANY" ABGENIX, INC.

By: /s/ R. Scott Greer
--------------------------------------
R. Scott Greer
President and Chief Executive Officer

"HOLDER" GENENTECH, INC.

By: /s/ William D. Young
--------------------------------------
William D. Young
Vice President, Business and Corporate
Development

<PAGE> 1

EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the references to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our reports on Abgenix, Inc. and
Xenotech, LP dated January 22, 1999 in Amendment No. 1 to the Registration
Statement (Form S-1) and related Prospectus of Abgenix, Inc. for the
registration of 3,450,000 shares of its common stock.

/s/ ERNST & YOUNG LLP

Palo Alto, California

February 3, 1999