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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

---------
FORM 10-Q
---------

(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the period ended March 31, 2000

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

Commission file number: 000-24207

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

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

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

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

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

Yes X No
--- ---

As of April 30, 2000 there were 40,183,198 shares of the Registrant's Common
Stock outstanding.

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ABGENIX, INC.

FORM 10-Q

INDEX

Page No.
--------

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

Condensed Balance Sheets - March 31, 2000 and December 31, 1999.....................................3

Condensed Statements of Operations - Three months ended
March 31, 2000 and March 31, 1999...................................................................4

Condensed Statements of Cash Flows - Three months ended
March 31, 2000 and March 31, 1999...................................................................5

Notes to Condensed Financial Statements.............................................................6

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.........................................................................9

ITEM 3 - QUALITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.......................................29

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS...............................................................................30

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS.......................................................30

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES.................................................................30

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............................................30

ITEM 5 - OTHER INFORMATION...............................................................................30

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K................................................................30

SIGNATURES...............................................................................................32

ABGENIX, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

MARCH 31, DECEMBER 31,
2000 1999
---------------- ---------------
(Unaudited)

ASSETS
Current assets:
Cash and cash equivalents $ 316,388 $ 13,366
Marketable securities 251,614 44,646
Accounts receivable 250 4,150
Prepaid expenses and other current assets 4,183 4,861
---------------- ---------------
Total current assets 572,435 67,023

Property and equipment, net 5,253 5,300
Long-term investment 39,176 29,225
Intangible assets, net 45,814 46,591
Deposits and other assets 393 402
---------------- ---------------
$ 663,071 $ 148,541
================ ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,542 $ 1,705
Deferred revenue 13,367 3,767
Accrued product development costs 445 1,667
Accrued employee benefits 700 1,287
Other accrued liabilities 965 725
Current portion of long-term debt 1,634 1,759
---------------- ---------------
Total current liabilities 19,653 10,910

Deferred rent 184 150
Long-term debt 112 421
Commitments
Stockholders' equity:
Preferred stock, $.0001 par value; 5,000,000 shares authorized, none
issued and outstanding
Common stock, $0.0001 par value; 100,000,000 shares authorized,
40,080,030 and 34,334,546 shares issued and outstanding at
March 31, 2000 and December 31, 1999, respectively, at amount paid in 679,950 181,263
Additional paid-in capital 32,829 32,254
Deferred compensation (544) (670)
Accumulated other comprehensive income 24,070 14,013
Accumulated deficit (93,183) (89,800)
---------------- ---------------
Total stockholders' equity 643,122 137,060
---------------- ---------------
$ 663,071 $ 148,541
================ ===============

See accompanying notes.

ABGENIX, INC.
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

THREE MONTHS ENDED
MARCH 31,
-----------------------------------
2000 1999
------------- --------------

Revenues:
Contract revenue $ 1,965 $ -
Interest income 4,341 395
------------- --------------
Total revenues 6,306 395

Costs and expenses:
Research and development 7,214 4,575
General and administrative 1,584 1,084
Amortization of intangible assets 777 -
Interest expense 114 133
------------- --------------
Total costs and expenses 9,689 5,792

------------- --------------
Net loss $ (3,383) $ (5,397)
============= ==============
Basic and diluted net loss per share $ (0.09) $ (0.22)
============= ==============
Shares used in computing basic and diluted net loss per share 37,250 24,274
============= ==============

See accompanying notes.

ABGENIX, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

THREE MONTHS ENDED
MARCH 31,
---------------------------
2000 1999
------------ -------------

Operating activities
Net loss $ (3,383) $ (5,397)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,257 416
Stock based compensation related to stock options
issued to consultants 576 171
Changes for certain assets and liabilities:
Accounts receivable 3,900 -
Prepaid expenses and other current assets 678 733
Deposits and other assets 5 -
Accounts payable 837 753
Deferred revenue 600 -
Accrued product development costs (1,222) (450)
Other accrued liabilities (348) 188
Deferred rent 34 -
------------ -------------
Net cash provided by (used in) operating activities 2,934 (3,586)
------------ -------------
Investing activities
Purchases of marketable securities (212,061) (26,730)
Sales of marketable securities 14,199 2,721
Capital expenditures (303) (148)
------------ -------------
Net cash used in investing activities (198,165) (24,157)
------------ -------------
Financing activities
Net proceeds from issuances of common stock 498,687 49,724
Payments on long-term debt (434) (419)
------------ -------------
Net cash provided by financing activities 498,253 49,305
------------ -------------
Net increase in cash and cash equivalents 303,022 21,562
Cash and cash equivalents at the beginning of the period . 13,366 1,415
------------ -------------
Cash and cash equivalents at the end of the period $316,388 $22,977
============ =============

See accompanying notes.

ABGENIX, INC.

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION - The unaudited condensed financial statements of
Abgenix, Inc. (the "Company" or "Abgenix") included herein have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information or footnote disclosure normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations. In the opinion of the Company, the accompanying
unaudited condensed financial statements contain all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the
financial information included therein. While the Company believes that the
disclosures are adequate to make the information not misleading, it is
suggested that these financial statements be read in conjunction with the
audited financial statements for the year ended December 31, 1999 and
accompanying notes included in the Company's Annual Report as filed on Form
10-K with the Securities and Exchange Commission on March 28, 2000. The
results of operations for the quarter ended March 31, 2000 are not
necessarily indicative of the results to be expected for the full year or for
any other future period.

REVENUE RECOGNITION - In December 1999, the Securities and Exchange
Commission issued Staff Accounting Bulletin No. 101--Revenue Recognition in
Financial Statements ("SAB 101"), which provides guidance on the accounting
for revenue recognition. The Company is currently evaluating the
applicability of SAB 101 to its existing agreements. Should the Company
conclude that its approach is different from the approach described in SAB
101, it will change its method of accounting. As amended, SAB 101 is required
to be implemented no later than the second fiscal quarter of 2000, for
companies with fiscal years beginning between December 16, 1999 and March 15,
2000.

The Company receives payments from customers for licenses, options and
services. These payments are generally non-refundable but are reported as
deferred revenue until they are recognizable as revenue. The Company has
followed the following principles in recognizing revenue:

- Research license fees: Fees to license the use of XenoMouse in
research performed by the customer are generally recognized
when both the inception of the license period and delivery of
the technology has occurred. If Abgenix is obligated to provide
significant assistance to enable the customer to practice the
license, then the revenue is recognized over the period of such
obligation.

- Product license fees: Fees to license the production, use and
sale of an antibody generated by XenoMouse are generally
recognized when both the inception of the license period and
delivery of the technology has occurred. If Abgenix is
obligated to provide significant assistance to enable the
customer to practice the license, then the revenue is
recognized over the period of such obligation.

- Option fees: Fees for granting options to obtain product
licenses are recognized as revenue when the option is exercised
or when the option period expires, whichever occurs first.

- Payments for research services performed by Abgenix are
recognized ratably over the period during which these services
are performed.

- Milestone payments are recognized as revenue when the milestone
is achieved.

TWO-FOR-ONE STOCK SPLIT - The accompanying financial statements have been
restated to reflect a two-for-one common stock split which was effective on
April 6, 2000.

BASIC AND DILUTED NET LOSS PER SHARE

Net loss per share is based on the weighted average number of shares of
common stock outstanding. Potentially dilutive securities consisting of stock
options and warrants have been excluded from the computation, as their effect
is antidilutive.

2. MARKETABLE SECURITIES

The following is a summary of available-for-sale securities at March 31, 2000
and December 31, 1999:

AS OF MARCH 31, 2000 AS OF DECEMBER 31, 1999
---------------------------------- ----------------------------------
AMORTIZED UNREALIZED ESTIMATED AMORTIZED UNREALIZED ESTIMATED
COST GAIN/(LOSS) FAIR VALUE COST GAIN/(LOSS) FAIR VALUE
-------- ----------- ---------- --------- ----------- ----------

Commercial obligations.............. $ 39,205 $ (60) $ 39,145 $22,829 $ (73) $22,756
Commercial paper.................... 493,558 82 493,640 15,358 10 15,368
Obligations of the U.S. government
and its agencies.................. 19,388 (128) 19,260 17,822 (149) 17,673
-------- ------- -------- ------- ------ -------
Total $552,151 $ (106) $552,045 $56,009 $ (212) $55,797
======== ======= ======== ======= ====== =======
Classified as:
Cash equivalents.................. $310,431 $ 11,151
Marketable securities............. 241,614 44,646
-------- --------
$552,045 $ 55,797
======== ========

The Company's available for sale investments have the following maturities at
March 31, 2000:

Due in one year or less............. $550,068
Due after one year but less than
five years........................ 1,977
--------
$552,045
========

At March 31, 2000 the Company also held common stock of Millennium which is
classified as trading securities and included in marketable securities.

3. COMPREHENSIVE INCOME

Other comprehensive gains/(losses) consists of unrealized gains or losses on
available-for-sale securities. For the three-month period ended March 31,
2000 the Company recorded unrealized gains of $9.95 million of gains relating
to its investment in CuraGen Corporation and approximately $106,000 of gains
in other available for sale investments. There were no comprehensive gains or
losses for the three-months ended March 31, 1999.

4. FOLLOW-ON PUBLIC OFFERING

On February 10, 2000 the Company completed a follow-on public offering in
which the Company sold 4,320,000 shares and Cell Genesys sold 1,680,000
shares of the Company's common stock to the public at a price of $105.00 per
share. On February 29, 2000 the Company's underwriters exercised their
overallotment option to purchase 900,000 additional shares, of which 648,000
shares were sold by the Company and 252,000 shares were sold by Cell Genesys
at a price of $105.00 per share. The Company received net proceeds from the
offerings of approximately $496.5 million after the underwriters' discount
and estimated costs of offering. All shares and per share amounts have been
restated to reflect the two-for-one common stock split which was effective
April 6, 2000.

5. CUSTOMER AND LICENSE AGREEMENTS

Elan: In January 2000, the Company entered into a research license and option
agreement with Elan to generate fully human antibodies to an undisclosed
antigen in the field of neurological diseases.

Gliatech: In January 2000, the Company entered into a research agreement,
option and license agreement with Gliatech to generate fully human antibodies
for use in the fields of cardiovascular and inflammatory diseases. Under this
agreement, Gliatech is paying the Company to perform the immunizations and
certain research activities.

Millennium: In March 2000, the Company granted Millennium a license to use
Xenomouse in research performed by Millennium and several licenses to make,
use and sell antibodies generated with Xenomouse. Payments totaling $10
million were made in the first quarter of 2000 representing a research
license fee, product license fees and service fees to establish the
technology at Millennium. The Company is recognizing these fees over the
period ended December 31, 2000 during which Abgenix is obligated to assist in
establishing the technology at Millennium, which will enable Millennium to
practice the research license and product licenses. Accordingly, $1.0 million
was recognized as revenue in the quarter ended March 31, 2000 and $9.0
million as deferred revenue. The $10 million payment was made in common stock
of Millennium, for which Millennium was obligated to make up the difference
between the fair value of such stock and $10 million upon the registration of
such common stock. The stock was registered and sold in April 2000, from
which the Company received $10 million of the proceeds and the remainder will
be refunded to Millennium.

Corixa: In March 2000, the Company entered into an agreement to discover and
develop fully human antibodies against selected targets from Corixas's
library of proprietary autoimmune disease, cancer and infectious disease
antigens.

6. FACILITY LEASE AND LETTER OF CREDIT

In February 2000, the Company signed an operating lease for an additional
100,100 square foot facility, in Fremont, California, to be used primarily
for offices. This lease expires in the year 2015, with options to extend the
lease term. In March 2000, the Company issued a stand-by letter of credit for
$2.0 million to the lessor for the lease term, as a condition to the lease.
Future minimum payments under this non-cancelable operating lease as of
signing are as follows (in thousands): 2000--$1,121; 2001--$1,961;
2002--$2,030; 2003--$2,101; 2004--$2,174; and thereafter $27,698.

7. SUBSEQUENT EVENTS

In May 2000, the Company entered into an agreement to produce commercial
quantities of its fully human antibody, ABX-IL8, using Genzyme Transgenics
Corporation's manufacturing system. Under the terms of the agreement, in
exchange for fees and milestone payments, Genzyme Transgenics will develop
transgenic goats that express ABX-IL8 in their milk.

On May 3, 2000 the Company's stockholders approved an increase to the
aggregate number of shares of common stock authorized for issuance under the
Company's 1996 Incentive Stock Plan by 600,000 shares.

On May 3, 2000 the Company's stockholders approved an amendment to the
Company's Certificate of Incorporation to increase the authorized number of
shares of common stock from 50,000,000 to 100,000,000.

ABGENIX, INC.

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

THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS BASED UPON CURRENT
EXPECTATIONS THAT INVOLVE RISKS AND UNCERTAINTIES. WHEN USED IN THIS
QUARTERLY REPORT ON FORM 10-Q, THE WORDS "INTEND," "ANTICIPATE," "BELIEVE,"
"ESTIMATE," "PLAN" AND "EXPECT" AND SIMILAR EXPRESSIONS AS THEY RELATE TO
ABGENIX ARE INCLUDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. OUR ACTUAL
RESULTS AND THE TIMING OF CERTAIN EVENTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH BELOW AND UNDER "ADDITIONAL FACTORS THAT
MIGHT AFFECT FUTURE RESULTS" SET FORTH BELOW IN THIS QUARTERLY REPORT ON FORM
10-Q AND ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-Q.

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, cardiovascular disease, infectious diseases and cancer.
We have developed XenoMouse technology, a proprietary technology, which we
believe enables rapid generation of highly specific, fully human antibody
product candidates that bind 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 develop and commercialize
either through licensing to pharmaceutical companies or internal product
development programs.

We have established contractual arrangements to use XenoMouse technology to
produce fully human antibodies with eighteen customers covering numerous
antigen targets. Pursuant to these arrangements, we and our customers intend
to generate antibody product candidates for the treatment of cancer,
inflammation, auto immune diseases, transplant rejection, cardiovascular
disease, growth factor modulation, neurological diseases and infectious
disease. Our customers as of May 9, 2000 include Cell Genesys, Pfizer,
Schering-Plough Research Institute, Genentech, Millennium, Research
Corporation Technologies, AVI BioPharma, BASF Bioresearch Corporation, Amgen,
Japan Tobacco, Elan, Chiron, Human Genome Sciences, CuraGen, Centocor/Johnson
and Johnson, Gliatech, Corixa, and the U.S. Army. Of these customers, Pfizer,
Genentech, Millennium, Cell Genesys, Japan Tobacco and the U. S. Army have
each entered into new or expanded agreements 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
contractual arrangements. The terms of the arrangements vary, reflecting the
value we add to the development of any particular product candidate. These
agreements typically provide our customers 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 customer.
In most cases, we provide our mice to the customer who then carry out
immunizations with their specific antigen target. In other cases, we immunize
the mice with the customers' antigen target for additional compensation. Our
customers will need to obtain product licenses for any antibody product they
wish to develop and commercialize.

The financial terms of our existing agreements may include license fees,
option fees, and milestone payments paid to us by our customers. Based on our
agreements, these payments and fees would average $8.0 to $10.0 million per
antigen target if our customer takes the antibody product candidate into
development and ultimately to commercialization. If not, such payments and
fees will be less. In certain instances, the customer 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 customer. Furthermore, the
customer will be responsible for worldwide manufacturing, product development
and marketing of any product developed through the agreement.

Our dependence on licensing and contractual agreements with third parties
subjects us to a number of risks. Agreements with customers 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
customers may devote to the product candidates. Even if we fulfill our
obligations under an agreement, the customer can terminate the agreement at
any time following proper written notice. If any customer 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 and adversely affected.

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 completed a multi-center Phase II clinical trial for ABX-CBL for
the treatment of a transplant-related disease known as graft versus host
disease, or GVHD. Following completion of the Phase II trial, we initiated a
Phase III clinical trial in December 1999. Our other three antibody product
candidates were generated using XenoMouse technology. We completed Phase I
and Phase I/II clinical trials for our fully human antibody product candidate
in psoriasis, ABX-IL8 and began Phase II clinical trials in April 2000. We
initiated a Phase I clinical trial for ABX-EGF in cancer in 1999 and patient
enrollment is ongoing. We are in preclinical development with one other fully
human antibody product candidate, ABX-RB2, for use in the treatment of
chronic immunological disorders.

We will expend significant capital to conduct clinical trials for these
products. We believe that more extensive clinical data will enable us to
enter into additional licensing agreements. We expect that this will
substantially increase our capital needs over the next few years and increase
operating losses. However, we believe that we will be able to receive more
favorable fees and payments from our potential customers if we have completed
significant development of these products.

In December 1999, we paid $47.0 million to purchase Japan Tobacco's interest
in the Xenotech joint venture, and a non-recurring payment of $10.0 million
to terminate rights to the current XenoMouse technology. Additionally, Japan
Tobacco paid us $6.0 million to acquire a license to new technology, and $4.0
million to acquire a research license and commercialization rights under
existing and future XenoMouse technology on a more limited basis than it did
under our prior collaboration with Japan Tobacco.

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 March 31, 2000 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 $125,000 and $125,000 in three months
ended March 31, 2000 and 1999, respectively.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2000 AND 1999

Contract revenue of $ 2.0 million in the three months ended March 31, 2000
included $1.0 million of the $10 million payment received under the agreement
with Millennium Pharmaceuticals. Although the payment from

Millennium is non-refundable and was received at the inception of a research
license and product licenses granted to Millennium upon signing of the
agreement, Abgenix is obligated up to December 31, 2000 to provide assistance
to enable Millennium to practice these licenses, so the payment from
Millennium is being recognized over this period. Additionally, in this
period, contract revenue included fees for research funding, two product
licenses and fees for the performance of certain research work. In the three
months ended March 31, 1999, no contract revenues were recognized.

Interest income consists primarily of interest from cash, cash equivalents
and short-term investments. Interest income increased to $4.3 million in the
three months ended March 31, 2000 from $0.4 million in the three months ended
March 31, 1999. This is a result of the secondary offering in February of
2000 in which we received net proceeds of approximately $496.5 million, after
the costs of offering.

Research and development expenses consist primarily of compensation and other
expenses related to research and development personnel, costs associated with
preclinical testing and clinical trials of our product candidates and
facilities expenses. Research and development expenses increased to $7.2
million in the three months ended March 31, 2000 from $4.6 million in the
three months ended March 31, 1999. The increase reflects primarily costs
associated with increased personnel, costs associated with the clinical
trials of ABX-EGF and ABX-IL8, and the valuation of stock options awarded to
certain consultants.

General and administrative expenses include compensation and other expenses
related to finance and administrative personnel, professional services and
facilities. General and administrative expenses increased to $1.6 million in
the three months ended March 31, 2000 from $1.1 million in the three months
ended March 31, 1999. The increase reflects primarily costs associated with
increased personnel including recruiting costs and an accrual for incentive
compensation, and additional investor relation costs.

Amortization of intangible assets is a result of amortization of certain
assets, primarily patents and certain royalty rights, which were acquired
through the acquisition of the Xenotech joint venture in December of 1999.

Interest expense consists of interest incurred in connection with equipment
lease line financing and loan facilities. Interest expense decreased due to
the pay down of related debt.

LIQUIDITY AND CAPITAL RESOURCES

In February 2000, we completed a follow-on public offering in which we sold
4,968,000 shares of our common stock and raised net proceeds of $496.5
million. Prior to the February 2000 offering, we had financed our operations
primarily through capital contributions by, and borrowings from Cell Genesys,
private placements of our capital stock, an initial public offering of common
stock in 1998 and a follow-on public offering of common stock in March, 1999,
revenue from customer licensing and contractual agreements, 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 $35.9 million in 1997, $16.8
million in 1998 $20.5 million in 1999 and $3.4 million in the three months
ended March 31, 2000. As of March 31, 2000, we had an accumulated deficit of
approximately $93.2 million. Our losses have resulted principally from costs
incurred in performing research and development for our XenoMouse technology
and antibody product candidates, costs associated with certain agreements
with Japan Tobacco, costs related to the non-recurring cross-license and
settlement charge in 1997 and from general and administrative costs
associated with our operations. We expect to incur additional operating
losses for the foreseeable future as a result of our expenditures for
research and product

development, including costs associated with conducting preclinical testing
and clinical trials, and charges related to purchases of technology or other
assets. We intend to invest significantly in our products prior to entering
into licensing arrangements. This will increase our need for capital and may
result in substantial losses for several years. 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 licensing arrangements, or the initiation, success or
failure of clinical trials.

Net cash provided by operating activities was $2.9 million for the three
months ended March 31, 2000 and net cash used in operating activities was
$3.6 million for the three months ended March 31, 1999. In the three months
ended March 31, 2000 cash was provided by payments from customers, including
amounts recorded as deferred revenue. Cash was used for operations in both
periods primarily to fund research and development expenses and manufacturing
costs related to the development of new products.

As of March 31, 2000, we had cash, cash equivalents and marketable securities
of $568.0 million. We have invested the net proceeds of our initial and
follow on public offerings in highly liquid, interest bearing, investment
grade securities. In March 2000, we issued a stand by letter of credit for
$2.0 million from a commercial bank as a deposit on our new leased facility.
The stand-by letter of credit is secured by an investment account which must
maintain a $2.0 million balance. Additionally, 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 (10.0 % at March 31, 2000 and 9.5 % at December 31, 1999). As of
March 31, 2000, no further borrowings were available under the construction
financing line.

We plan to expend significant resources to establish our own manufacturing
facility and also 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:

- - scope and results of preclinical testing and clinical trials;

- - the retention of existing and establishment of further licensing and
contractual agreements, if any;

- - continued scientific progress in our research and development programs;

- - size and complexity of these programs;

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

- - time and expense involved in obtaining regulatory approvals;

- - competing technological and market developments;

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

- - investment in, or acquisition of, other companies;

- - product in-licensing; and

- - other factors not within our control.

We believe that our current cash balances, cash equivalents, marketable
securities and the cash generated from our licensing and contractual
agreements will be sufficient to meet our operating and capital requirements
for at least two years. However, we may need additional financing within this
timeframe. We may need to raise additional funds through public or private
financing, licensing and contractual agreements or other arrangements. We
cannot assure you 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. Licensing and other contractual agreements may require
us to relinquish our rights to certain of our technologies, products or
marketing territories. Our failure to raise capital when needed may have a
material adverse effect on our business, financial condition and results of
operations.

As of December 31, 1999, we had federal net operating loss carryforwards of
approximately $61.0 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 2019, if not utilized. Utilization of the net operating
losses and credits may be subject to a substantial annual limitation due to
the "change in ownership" provisions of the Internal Revenue Code of 1986 and
similar state provisions. The annual limitation may result in the expiration
of net operating losses and credits before utilization.

ADDITIONAL FACTORS THAT MIGHT AFFECT FUTURE RESULTS

The following factors represent current challenges that we face which create
risk and uncertainty. Failure to adequately overcome any of the following
challenges, either singly or in combination, could materially adversely
effect our results of operations, business, or financial position.

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 two
fully human antibody product candidates, ABX-IL8 and ABX-EGF. 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 customers or be safe and efficacious for
patients. If XenoMouse technology fails to generate antibody product
candidates that lead to the successful development

and commercialization of products, our business, financial condition and
results of operations will be materially and adversely affected.

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.

As of March 31, 2000, three of our product candidates, ABX-CBL, ABX-IL8 and
ABX-EGF, were in clinical trials. Patient follow-up for these clinical trials
has been limited. To date, data obtained from these clinical trials has been
insufficient to demonstrate safety and efficacy under applicable FDA
guidelines. As a result, this data will not support an application for
regulatory approval without further clinical trials. Clinical trials
conducted by us or by third parties on our behalf may not demonstrate
sufficient safety and efficacy to obtain the requisite regulatory approvals
for ABX-CBL, ABX-IL8, ABX-EGF and or any other potential product candidates.
Regulatory authorities may not permit us to undertake any additional clinical
trials for our product candidates.

In addition, our other product candidate is in preclinical development, but
we have not submitted investigational new drug applications nor begun
clinical trials for this product candidate. 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.

Completion of clinical trials may take several years or more. The length of
time generally varies substantially according to the type, complexity,
novelty and intended use of the product candidate. Our commencement and rate
of completion of clinical trials may be delayed by many factors, including:

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

- slower than expected rate of patient recruitment;

- inability to adequately follow patients after treatment;

- unforeseen safety issues;

- lack of efficacy during the clinical trials; or

- government or regulatory delays.

We have limited experience in conducting and managing clinical trials. We
rely on third parties, including our customers, to assist us in managing and
monitoring clinical trials. Our reliance on these third parties may result in
delays in completing, or failing to complete, these trials if they fail to
perform under our agreements with them.

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

THE CLINICAL SUCCESS OF ABX-CBL IS UNCERTAIN.

We recently completed a multi-center Phase II trial for the treatment graft
versus host disease, or GVHD, with our mouse antibody, ABX-CBL.

As of March 31, 2000, ABX-CBL had been administered to a total of only 162
patients for GVHD and organ transplant rejection indications. ABX-CBL was
administered to a total of 85 of these 162 patients by third parties prior to
Abgenix obtaining an exclusive license to ABX-CBL. 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.

Data from 27 patients included in the Phase II study was submitted to the
FDA. As an extension to the original Phase II trial protocol, we have
enrolled an additional 32 patients. In December 1999, we initiated a Phase
III clinical trial with ABX-CBL. The results of the Phase III trial may not
be favorable or may not extend the findings of the original Phase II study.
The FDA may view the result of our Phase III trial as insufficient and may
require additional clinical trials. There are several issues that could
adversely affect the clinical trial results, including the lack of a standard
therapy for GVHD patients in the control group, unforeseen side effects,
variability in the number and types of patients in the study, and response
rates required to achieve statistical significance in the study. 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. These adverse
effects may affect the interpretation of clinical trial results. There can be
no assurance that the FDA will accept the results of the Phase III study or
other elements of the product license application as being sufficient for
approval to market. 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 and
adversely affected.

SUCCESSFUL DEVELOPMENT OF OUR PRODUCTS IS UNCERTAIN.

Our development of current and future product candidates is subject to the
risks of failure inherent in the development of new pharmaceutical products
and products based on new technologies. These risks include:

- delays in product development, clinical testing or
manufacturing;

- unplanned expenditures in product development, clinical testing
or manufacturing;

- failure in clinical trials or failure to receive regulatory
approvals;

- emergence of superior or equivalent products;

- inability to manufacture on our own, or through others, product
candidates on a commercial scale;

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

- election by our customers not to pursue product development;

- failure by our customers to successfully develop products; and

- failure to achieve market acceptance.

Because of these risks, our research and development efforts or those of our
customers may not result in any commercially viable products. To date, only
four of our customers have exercised their 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 and adversely affected.

OUR OWN ABILITY TO MANUFACTURE IS UNCERTAIN.

We are in the planning stages of establishing our own pilot scale
manufacturing facility for the manufacture of products for Phase I and Phase
II clinical trials, in compliance with FDA good manufacturing practices. In
February 2000 we signed a long-term lease for a facility which may be used
for this pilot scale facility. Once we have identified our pilot scale
manufacturing facility, the construction schedules may take longer than
expected, and the planned and actual construction costs of building and
qualifying the facility for regulatory compliance may be higher than
expected. The process of manufacturing antibody products is complex. We have
no experience in clinical or commercial scale manufacture of ABX-CBL, ABX-IL8
and ABX-EGF, or any other antibody products. Such antibody products will also
need to be manufactured in a facility and by a process which complies with
FDA and other regulations. It may take a substantial period of time to begin
producing antibodies in compliance with such regulations. If we are unable to
establish and maintain a manufacturing facility within our planned time and
costs parameters, the development and sales of our products and our financial
performance may be adversely affected.

We also may encounter problems with the following:

- production yields;

- quality control and assurance;

- shortages of qualified personnel;

- compliance with FDA regulations;

- production costs; and

- development of advanced manufacturing techniques and process
controls.

For Phase III clinical trials and commercial production of our antibody
products we are currently evaluating our options, which include use of third
party contract manufacturers, establishing or expanding our own commercial
scale manufacturing facility, as applicable, or entering into a manufacturing
joint venture relationship with a third party. We are aware of only a limited
number of companies on a worldwide basis who operate manufacturing facilities
in which our product candidates can be manufactured under good manufacturing
practice regulations, a requirement for all pharmaceutical products. It would
take a substantial period of time for a contract facility which has not been
producing antibodies to begin producing antibodies under good manufacturing
practice regulations. We cannot assure you that we will be able to contract
with any of these companies on acceptable terms, if at all.

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

WE CURRENTLY RELY ON A SOLE SOURCE THIRD-PARTY MANUFACTURER.

We currently rely, and will continue to rely for at least the next two years,
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. We currently rely on our contract manufacturer to 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
assurance, shortage of qualified personnel, compliance with FDA regulations,
production costs, and development of advanced manufacturing techniques and
process controls. 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 and 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. For us to pursue product development, marketing and
commercialization plans, we will need to hire additional qualified scientific
personnel to perform research and development. We will also need to hire
personnel with expertise in clinical testing, government regulation,
manufacturing, marketing and finance. Attracting and retaining qualified
personnel will be critical to our success. We may not be able to attract and
retain personnel on acceptable terms given the competition for such personnel
among biotechnology, pharmaceutical and healthcare companies, universities
and non-profit research institutions. If we lose any of these persons, or are
unable to attract and retain qualified personnel, our business, financial
condition and results of operations may be materially and adversely affected.

In addition, we rely on members of our Scientific Advisory Board and other
consultants to assist us in formulating our research and development
strategy. All of our consultants and the members of our Scientific Advisory
Board are employed by other entities. They may have commitments to, or
advisory or consulting agreements with, other entities that may limit their
availability to us. If we lose the services of these advisors, the
achievement of our development objectives may be impeded. Such impediments
may materially and adversely affect our business, financial condition and
results of operations.

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. Our product candidates, if
successfully developed, may not generate sufficient or sustainable revenues
to enable us to be profitable.

WE HAVE A HISTORY OF LOSSES.

We have incurred net losses in each of the last five years of operation,
including net losses of approximately $8.3 million in 1995, $7.1 million in
1996, $35.9 million in 1997, $16.8 million in 1998, $20.5 million in 1999 and
$3.4 million in the three months ended March 31, 2000. As of March 31, 2000,
our accumulated deficit was $93.2 million. Our losses to date have resulted
principally from:

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

- costs associated with certain agreements with Japan Tobacco.

- costs related to a cross-license and settlement agreement
relating to our intellectual property portfolio; and

- general and administrative costs relating to our operations.

We expect to incur additional losses for the foreseeable future as a result
of increases in our research and development costs, including costs
associated with conducting preclinical testing and clinical trials, and
charges related to purchases of technology or other assets. We intend to
invest significantly in our products prior to entering into licensing
agreements. This will increase our need for capital and may result in
substantial losses for several years. We expect that the amount of operating
losses will fluctuate significantly from quarter to quarter as a result of
increases or decreases in our research and development efforts, the execution
or termination of licensing and contractual agreements, or the initiation,
success or failure of clinical trials.

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:

- the follow-on public offering of our common stock in February
2000

- initial contributions from Cell Genesys;

- private placements of our capital stock;

- the initial public offering of our common stock;

- the follow-on public offering of our common stock in 1999;

- revenues generated from our licensing and contractual
agreements;

- equipment leaseline financings; and

- loan facilities.

We expect that substantially all of our revenues for the foreseeable future
will result from payments under licensing and contractual agreements. To
date, these payments have been in the form of upfront payments, reimbursement
for research and development expenses, license fees and milestone payments.
Payments under our existing and any future customer agreements will be
subject to significant fluctuation in both timing and amount. Our revenues
may not be indicative of our future performance or of our ability to continue
to achieve such milestones. Our revenues and results of operations for any
period may also not be comparable to the revenues or results of operations
for any other period. We may not be able to:

- enter into further licensing and contractual agreements;

- 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 and adversely affected.

WE WILL NEED TO FIND THIRD PARTIES TO LICENSE AND DEVELOP MANY OF OUR PRODUCT
CANDIDATES.

Our strategy for the development and commercialization of antibody
therapeutic products depends, in large part, upon the formation of licensing
agreements with third parties. Potential third parties include pharmaceutical
and biotechnology companies, academic institutions and other entities. We
must enter into these agreements to successfully develop and commercialize
product candidates. These agreements are necessary in order for us to:

- access proprietary antigens for which we can generate fully
human antibody products;

- fund our research and development activities;

- fund 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 customer agreements. None of these product
candidates has entered clinical testing. We cannot assure you that any of
them will result in commercially successful products. Current or future
customer agreements may not be successful. If we fail to maintain our
existing customer agreements or to enter into additional agreements our
business, financial condition and results of operations will be materially
and adversely affected.

Our dependence on licensing and contractual agreements with third parties
subjects us to a number of risks. These agreements may not be on terms
favorable to us. Agreements with customers 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 customers may devote to
the product candidates. Our customers may not perform their obligations as
expected. Business combinations or significant changes in a customer's
business strategy may adversely affect a customer's willingness or ability to
complete its obligations under the arrangement. Even if we fulfill our
obligations under an agreement, our customer can terminate the agreement at
any time following proper written notice. If any customer 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 and adversely affected. If we are not able to
establish further customer agreements or any or all of our existing
agreements are terminated, we may be required to seek new customers 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 customers 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
customer. Lengthy negotiations with potential new customers or disagreements
between us and our customers 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 customers
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 and adversely affected.

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 customers. Also, we compete with companies that offer antibody
generation services to companies that have antigens. These competitors have
specific expertise or technology related to antibody development. These
companies include GenPharm International, Inc., a wholly-owned subsidiary of
Medarex, Inc., Medarex's joint venture partner, Kirin Brewing Co., Ltd.,
Cambridge Antibody Technology Group plc, Protein Design Labs, Inc. and
MorphoSys AG.

Some of our competitors have received regulatory approval or are developing
or testing product candidates that may compete directly with our product
candidates. For example, SangStat Medical Corp. and Protein Design Labs
market organ transplant rejection products that may compete with ABX-CBL,
which is in clinical trials. In addition, MedImmune, Inc. has a potential
antibody product candidate in clinical trials for graft versus host disease
that may compete with ABX-CBL. We are also aware that several companies,
including Genentech, Inc., have potential product candidates that may compete
with ABX-IL8, which is in clinical trials. Furthermore, we are aware that
ImClone Systems, Inc., Medarex, AstraZeneca and Pfizer, in collaboration with
OSI Pharmaceuticals, Inc., have potential antibody and small molecule product
candidates in clinical development that may compete with ABX-EGF, which is
also in clinical trials.

Many of these companies and institutions, either alone or together with their
customers, have substantially greater financial resources and larger research
and development staffs than we do. In addition, many of these competitors,
either alone or together with their customers, have significantly greater
experience than we do in:

- developing products;

- undertaking 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 agreements with

pharmaceutical and biotechnology companies for establishing relationships
with academic and research institutions, and for licenses to proprietary
technology. These competitors, either alone or with their customers, may
succeed in developing technologies or products that are more effective than
ours.

MARKET ACCEPTANCE OF OUR PRODUCTS IS UNCERTAIN.

Our product candidates may not gain market acceptance among physicians,
patients, healthcare payors and the medical community. We may not achieve
market acceptance even if clinical trials demonstrate safety and efficacy,
and the necessary regulatory and reimbursement approvals are obtained. The
degree of market acceptance of any product candidates that we develop will
depend on a number of factors, including:

- establishment and demonstration of clinical efficacy and safety;

- cost-effectiveness of our product candidates;

- their potential advantage over alternative treatment methods;

- reimbursement policies of government and third-party payors; and

- marketing and distribution support for our product candidates.

Physicians will not recommend therapies using our products until such time as
clinical data or other factors demonstrate the safety and efficacy of such
procedures as compared to conventional drug and other treatments. Even if the
clinical safety and efficacy of therapies using our antibody products is
established, physicians may elect not to recommend the therapies for any
number of other reasons, including whether the mode of administration of our
antibody products is effective for certain indications. For example, antibody
products are typically administered by infusion or injection, which requires
substantial cost and inconvenience to patients. Our product candidates, if
successfully developed, will compete with a number of drugs and therapies
manufactured and marketed by major pharmaceutical and other biotechnology
companies. Our products may also compete with new products currently under
development by others. Physicians, patients, third-party payors and the
medical community may not accept and utilize any product candidates that we
or our customers develop. If our products do not achieve significant market
acceptance, our business, financial condition and results of operations will
be materially and adversely affected.

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.
We solely own one issued patent in the U.S., one granted patent in Europe and
have several pending

patent applications in the U.S. and abroad relating to XenoMouse technology.
Our wholly owned subsidiary Xenotech owns two issued U.S. patents, one
Australian patent and several pending U.S. and foreign pending patent
applications related to methods of treatment of bone disease in cancer
patients. In addition, we have four issued U.S. patents and several pending
patent applications in the U.S. and abroad that are jointly owned with Japan
Tobacco relating to antibody technology or genetic manipulation. 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 adequate proprietary protection or competitive
advantages against competitors with similar technologies. The laws of certain
foreign countries do not protect our intellectual property rights to the same
extent as do the laws of the United States.

In addition to patents, we rely on trade secrets and proprietary know-how. We
seek protection, in part, through confidentiality and proprietary information
agreements. These agreements may not provide meaningful protection or
adequate remedies for our technology in the event of unauthorized use or
disclosure of confidential and proprietary information. The parties may
breach such agreements. Also, our trade secrets may otherwise become known
to, or be independently developed by, our competitors. Furthermore, others
may independently develop similar technologies or duplicate any technology
that we have developed.

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

Research has been conducted for many years in the antibody field. This has
resulted in a substantial number of issued patents and an even larger number
of still-pending 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 unintentionally infringe the patents or violate
other proprietary rights of third parties. In the event of such infringement
or violation, we and our customers may be prevented from pursuing product
development or commercialization. Such a result will materially and adversely
affect our business, financial condition and results of operations. In March
1997, we entered into a cross-license and settlement agreement with GenPharm
International Inc. to avoid protracted litigation. Under the cross-license,
we licensed on a non-exclusive basis certain patents, patent applications,
third-party licenses, and inventions pertaining to the development and use of
certain transgenic rodents, including mice, that produce fully human
antibodies that are integral to our products and business. Our business,
financial condition and results of operations will be materially and
adversely affected if any of the parties breaches the cross-license
agreement. We have one granted European patent relating to XenoMouse
technology that is currently undergoing opposition proceedings within the
European Patent Office and the outcome of this opposition is uncertain.

We are aware of at least two companies that each have a patent claiming the
use of antibodies to the EGF receptor in combination with chemotherapy. We
believe that our antibody product candidate targeting the EGF receptor,
ABX-EGF, may be effective alone, and may be used without chemotherapy. We
believe use of ABX-EGF alone is not covered by claims in these other
companies' patents. If clinical trials demonstrate that combination therapy
is preferable or necessary in the treatment of patients, we may desire to, or
be required to, obtain a license under the other companies' patents in order
to commercialize ABX-EGF. Any license under these other patents may not be
available on commercially reasonable terms, if at all.

The biotechnology and pharmaceutical industries have been characterized by
extensive litigation regarding patents and other intellectual property
rights. The defense and prosecution of intellectual property suits, United
States Patent and Trademark Office interference proceedings and related legal
and administrative proceedings in the United States and internationally
involve complex legal and factual questions. As a result, such proceedings
are costly and time-consuming to pursue and their outcome is uncertain.
Litigation may be necessary to:

- enforce patents that we own or license;

- protect trade secrets or know-how that we own or license; or

- determine the enforceability, scope and validity of the
proprietary rights of others.

If we become involved in any litigation, interference or other administrative
proceedings, we will incur substantial expense and the efforts of our
technical and management personnel will be significantly diverted. An adverse
determination may subject us to loss of our proprietary position or to
significant liabilities, or require us to seek licenses that may not be
available from third parties. We may be restricted or prevented from
manufacturing and selling our products, if any, in the event of an adverse
determination in a judicial or administrative proceeding or if we fail to
obtain necessary licenses. Costs associated with these arrangements may be
substantial and may include ongoing royalties. Furthermore, we may not be
able to obtain the necessary licenses on satisfactory terms, if at all. These
outcomes will materially and 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. The approval process takes many
years, requires the expenditure of substantial resources, involves
post-marketing surveillance, and may involve ongoing requirements for
post-marketing studies. Delays in obtaining regulatory approvals may:

- adversely affect the successful commercialization of any drugs
that we or our customer develop;

- impose costly procedures on us or our customers;

- diminish any competitive advantages that we or our customers
may attain; and

- adversely affect our receipt of revenues or royalties.

Certain material changes to an approved product such as manufacturing changes
or additional labeling claims are subject to further FDA review and approval.
Any required approvals, once obtained, may be withdrawn. Compliance with
other regulatory requirements may not be maintained. Further, if we fail to
comply with applicable FDA and other regulatory requirements at any stage
during the regulatory process, we or our 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 customers to file investigational new drug
applications and generally direct the regulatory approval process for many of
our products. Our customers may not be able to conduct clinical testing or
obtain necessary approvals from the FDA or other regulatory authorities for
any product candidates. If we fail to obtain required governmental approvals,
our customers will experience delays in or be precluded from marketing
products developed through our research. In addition, the commercial use of
our products will be limited. Delays and limitations may materially and
adversely affect our business, financial condition and results of operations.

We 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. These facilities must be approved before we can use them in
commercial manufacturing of our products. We or our contract manufacturers
may not be able to comply with the applicable good manufacturing practice
requirements and other FDA regulatory requirements. If we or our contract
manufacturers fail to comply, our business, financial condition and results
of operations will be materially and adversely affected.

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 and adversely affected.

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
licensing and contractual agreements, if any;

- continued scientific progress in our research and development
programs;

- the size and complexity of these programs;

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

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

- competing technological and market developments;

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

- investment in, or acquisition of, other companies;

- product in-licensing; and

- other factors not within our control.

We believe that the net proceeds from our February 2000 offering, our cash
balances, cash equivalents, short-term investments and cash generated from
our customer agreements will be sufficient to meet our operating and capital
requirements for at least two years. However, we may need additional
financing within this timeframe. We may need to raise additional funds
through public or private financings, licensing and contractual agreements or
other arrangements. Additional funding may not be available to us on
favorable terms, if at all. Furthermore, any additional equity financing
would be dilutive to stockholders, and debt

financing, if available, may involve restrictive covenants. Contractual
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 and adversely affected.

CELL GENESYS EXERCISES SIGNIFICANT INFLUENCE OVER US.

As of March 31, 2000 Cell Genesys beneficially owned approximately 12.1% of
our outstanding common stock. We may be adversely impacted by the significant
influence that Cell Genesys will have with respect to matters affecting us.

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 and 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. 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 and adversely affected.

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 and 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. This may impact your decision to buy or sell your
common stock. The market price and trading volume of shares of our common
stock are volatile, and we expect them to continue to be volatile for the
foreseeable future. For example, during the period between March 31, 1999 and
March 31, 2000, our common stock closed as high as $199.50 per share and as
low as $6.625 per share. 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;

- government regulation;

- changes in reimbursement policies;

- developments in patent or other proprietary rights;

- developments in our relationship with customers;

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

- general market conditions.

WE HAVE IMPLEMENTED A STOCKHOLDER RIGHTS PLAN AND ARE SUBJECT TO OTHER
ANTI-TAKEOVER PROVISIONS.

In June 1999, our board of directors adopted a stockholder rights plan, which
was amended in November 1999. The stockholder rights plan provides for a
dividend distribution of one preferred share purchase right on each
outstanding share of our common stock. Each right entitles stockholders to
buy 1/1000th of a share of our Series A participating preferred stock at an
exercise price of $120.00. Each right will become exercisable following the
tenth day after a person or group, other than Cell Genesys or its affiliates,
successors or assigns, announces an acquisition of 15% or more of our common
stock, or announces commencement of a tender offer, the consummation of which
would result in ownership by the person or group of 15% or more of our common
stock. In the case of Cell Genesys, or its affiliates, successors or assigns,
which beneficially owned approximately 12.1% of our outstanding common stock
as of March 31, 2000, each right will become exercisable following the tenth
day after it announces the acquisition of more than 25% of our common stock,
or announces commencement of a tender offer, the consummation of which would
result in ownership by Cell Genesys, or its affiliates, successors or
assigns, of more than 25% of our common stock. We will be entitled to redeem
the rights at $0.01 per right at any time on or before the close of business
on the tenth day following acquisition by a person or group of 15% or more,
or in the case of Cell Genesys, or its affiliates, successors or assigns,
more than 25%, of our common stock.

The stockholder rights plan and certain provisions of our amended and
restated certificate of incorporation and amended and restated bylaws may
have the effect of making it more difficult for a third party to acquire, or
of discouraging a third party from attempting to acquire control of Abgenix.
This could limit the price that certain investors might be willing to pay in
the future for our shares of common stock. Certain provisions of our amended
and restated certificate of incorporation and amended and restated bylaws
allow us to:

- issue preferred stock without any vote or further action by the
stockholders;

- eliminate the right of stockholders to act by written consent
without a meeting;

- specify procedures for director nominations by stockholders and
submission of other proposals for consideration at stockholder
meetings; and

- eliminate cumulative voting in the election of directors.

We are subject to certain provisions of Delaware law which could also delay
or make more difficult a merger, tender offer or proxy contest involving us.
In particular, Section 203 of the Delaware General Corporation Law prohibits
a Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years unless certain conditions
are met. The stockholder rights plan, the possible issuance of preferred
stock, the procedures required for director nominations and stockholder
proposals and Delaware law could have the effect of delaying, deferring or
preventing a change in control of us, including without limitation,
discouraging a proxy contest or making more difficult the acquisition of a
substantial block of our common stock. The provisions could also limit the
price that investors might be willing to pay in the future for shares of our
common stock.

WE DO NOT INTEND TO PAY CASH DIVIDENDS ON OUR COMMON STOCK.

We intend to retain any future earnings to finance the growth and development
of our business and we do not plan to pay cash dividends on our common stock
in the foreseeable future.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The objective of our investment activities is to preserve principal, while at
the same time maximizing yields without significantly increasing risk. To
achieve this objective, we invest in highly liquid and high quality debt
securities. Our investments in debt securities are subject to interest rate
risk. To minimize the exposure due to an adverse shift in interest rates, we
invest in short term securities and maintain an average maturity of one year
or less. A hypothetical 50 basis point increase in interest rates would
result in an approximate $450,000 decrease (0.08%) in the fair value of our
debt securities, classified as available-for-sale securities, at March 31,
2000. As part of a strategic alliance effort, we invested in common stock of
CuraGen Corporation. This investment is subject to fluctuations from market
value changes in stock prices.

PART II

ITEM 1 - LEGAL PROCEEDINGS

Not applicable.

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

USE OF PROCEEDS

Not applicable.

RECENT SALES OF UNREGISTERED SECURITIES

Not applicable.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

Not applicable.

ITEM 5 - OTHER INFORMATION

Not applicable.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit No. Caption
----------- -------

10.54 Lease agreement dated February 24, 2000 between
Ardenwood Corporate Park Associates, a California
Limited Partnership and Abgenix, Inc.

27.1 Financial Data Schedule
-----------

(b) Reports on Form 8-K

- On January 7, 2000 a Form 8-K was filed relating to the
announcement that we had acquired JT America Inc.'s interest in
the Xenotech joint venture.

- On January 28, 2000 a Form 8-K was filed relating to our
signing several agreements with JT America Inc., including the
acquisition of JT America Inc.'s interest in the Xenotech joint
venture that became effective on December 31, 1999.

- On January 28, 2000 a Form 8-K was filed relating to our
Registration Statement on Form S-1 with the Securities and
Exchange Commission, covering the underwritten public offering
of our common stock.

- On March 2, 2000 a Form 8-K was filed relating to the
announcement that we had declared a two-for-one stock split to
be effected in the form of a stock dividend.

SIGNATURES

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

Dated: May 15, 2000

ABGENIX, INC.
(Registrant)

/s/ R. Scott Greer
--------------------------------------------
R. Scott Greer
President and Chief Executive Officer
(Principal Executive Officer)

/s/ Kurt Leutzinger
--------------------------------------------
Kurt Leutzinger
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

INDEX TO EXHIBITS

EXHIBITS
- --------

10.54 Lease agreement dated February 24, 2000 between Ardenwood Corporate Park Associates, a California Limited
Partnership and Abgenix, Inc.
27.1 Financial Data Schedule