Via Facsimile and U.S. Mail
Mail Stop 03-09
April 5, 2005
Mr. H. Ward Wolff
Chief Financial Officer and
Senior Vice President
Abgenix, Inc.
6701 Kaiser Drive
Fremont, CA 94555
Re: Abgenix, Inc.
Form 10-K for the fiscal year ended December 31, 2004
File No. 000-24207
Dear Mr. Wolff:
We have reviewed your filing and have the following
comments.
We have limited our review of the above referenced filing to only
those issues addressed. Where our comments call for disclosure, we
think you should revise your document in response to these
comments
in future filings beginning with your Form 10-Q for the quarter
ended
March 31, 2005. In a supplemental letter, please either confirm
that
you will comply with these comments in future filings or, if you
disagree, we will consider your explanation as to why our comments
are inapplicable or a revision is unnecessary. In our comments,
we
ask you to provide us with supplemental information so we may
better
understand your disclosure. Please provide us this letter, that
keys
your response to our comments, within 10 business days of the date
of
this letter or tell us when you will provide a response prior to
the
expiration of the 10-day period. Detailed letters greatly
facilitate
our review. Please file your letter on EDGAR under the form type
label CORRESP. Please understand that we may have additional
comments after reviewing your responses to our comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the fiscal year ended December 31, 2004
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Critical Accounting Estimates
Revenue Recognition, page 59
1. We note from your disclosure that if management made different
judgments or utilized different estimates that the amount and
timing
of revenue would be materially different. The disclosure should
provide greater insight into the quality and variability of
information regarding financial condition and operating
performance.
As such, we believe your discussion of revenue recognition in MD&A
should also include the following information:
a. Specifically address why your accounting estimates and/or
assumptions bear the risk of change.
b. How you arrived at the estimates and/or assumptions.
c. How much the estimates and/or assumptions have changed in the
past.
d. Whether the estimates and/or assumptions are reasonably likely
to
change in the future.
e. Provide a quantitative analysis of the sensitivity of your
estimates and/or assumptions to change, based on outcomes that are
reasonably likely to occur and would have a material effect.
Please refer to FRR 72 "Interpretation: Commission Guidance
Regarding
Management`s Discussion and Analysis of Financial Condition and
Results of Operations" for additional guidance. Please provide to
us
supplementally the proposed disclosure.
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Note 1. Organization and Summary of Significant Accounting
Policies
Goodwill and Intangible Assets, page 72
2. We refer to the last paragraph in your significant accounting
policy for goodwill and intangible assets on page 72. In that
paragraph you state that as of December 31, 2004 you determined
that
no changes in circumstances have occurred that would indicate that
an
additional impairment of an intangible asset had occurred. This
statement appears to be inconsistent with Note 12 which discloses
the
fact that you recorded an impairment charge in 2004 for your
intangible assets. Please explain to us why your current
accounting
policy in Note 1 is appropriate.
Revenue Recognition, page 73
3. We have the following comments related to your revenue
recognition
policy:
a. Please explain to us in greater detail your accounting policy
for
joint development arrangements. Specifically please provide the
following:
1. A summary of each joint development arrangement and the
calculation used to determine the net profit or loss.
2. Tell us where all revenue that is earned and costs that are
incurred by you related to the joint development arrangements are
recorded in the statement of operations.
3. The authoritative guidance you used to record the profit or
loss
related to the joint development arrangements.
4. Please provide us an analysis of EITF 99-19 for each of your
joint
development arrangements.
5. Please tell us the authoritative guidance used to record cost
of
goods manufactured without any corresponding product sale revenue.
b. We noted that you "generally" recognize research and product
license fees only after both the period has begun and the
technology
has been delivered. Please clarify to us and in the filing what
are
the other cases in which you recognize research and product
license
fees and how the revenue in those other cases are earned.
c. Regarding your revenue recognition policy for option fees,
please
explain to us the exact nature of these option fees and why you
believe it is appropriate under US GAAP to record the fees when
the
option is exercised or the option period lapses. If the amounts
paid
are in cash and are non-refundable and you provide no additional
services related to the option issued please disclose those facts.
* * * *
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require.
Since the company and its management are in possession of all
facts
relating to a company`s disclosure, they are responsible for the
accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments in the filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Joseph Roesler, Staff Accountant, at (202)
942-
1788 or Mary Mast, Senior Accountant, (202) 942-1858 if you have
questions regarding the comments. In this regard, do not hesitate
to
contact me, at (202) 942-1803.
Sincerely,
Jim B. Rosenberg
Senior Assistant Chief
Accountant
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H. Ward Wolff
Abgenix, Inc.
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