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

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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 September 30, 1999

[ ] 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 September 30, 1999, there were 15,077,433 shares of the our 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 - September 30, 1999 and December 31, 1998.................................3

Condensed Statements of Operations - Three months and nine months ended
September 30, 1999 and September 30, 1998..........................................................4

Condensed Statements of Cash Flows - Three months and nine months ended
September 30, 1999 and September 30, 1998...........................................................5

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

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

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS...............................................................................32

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS.......................................................32

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES.................................................................32

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............................................32

ITEM 5 - OTHER INFORMATION...............................................................................32

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K................................................................33

SIGNATURES...............................................................................................34

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

September 30, December 31,
1999 1998
---------------- ---------------
(Unaudited) (1)

ASSETS
Current assets:
Cash and cash equivalents $ 4,251 $ 1,415
Marketable securities 51,612 15,329
Prepaid expenses and other current assets 4,882 1,438
---------------- ---------------
Total current assets 60,745 18,182

Property and equipment, net 4,992 5,435
Deposits and other assets 1,046 603
---------------- ---------------
$ 66,783 $ 24,220
---------------- ---------------
---------------- ---------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 712 $ 439
Deferred revenue 125 425
Accrued product development costs 926 1,225
Other accrued liabilities 1,738 1,293
Current portion of long-term debt 1,744 1,699
---------------- ---------------
Total current liabilities 5,245 5,081

Long-term debt 867 2,180
Commitments
Stockholders' equity:
Preferred stock, $.0001 par value; 5,000,000 shares authorized, none
outstanding
Common stock, $.0001 par value; 50,000,000 shares authorized, 15,077,433
and 11,120,293 shares issued and outstanding at
September 30, 1999 and December 31, 1998, respectively, at amount paid in 108,965 55,842
Additional paid-in capital 32,226 31,588
Deferred compensation (795) (1,170)
Accumulated other comprehensive loss (180) -
Accumulated deficit (79,545) (69,301)
---------------- ---------------
Total stockholders' equity 60,671 16,959
---------------- ---------------
$ 66,783 $ 24,220
---------------- ---------------
---------------- ---------------

(1) The balance sheet as of December 31, 1998 has been derived from the
audited balance sheet as of that date included in the Company's Annual
Report on Form 10-K.

See accompanying notes.

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

Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------

Revenues:
Revenue from collaborative agreements from related
parties (net of related contributions to Xenotech of
$210 and $520 for the three and nine months ended
September 30, 1998, respectively) $ - $ 212 $ - $ 710
Contract revenue 3,670 175 5,390 1,298
------------ ------------ ------------ ------------
Total revenues 3,670 387 5,390 2,008

Operating expenses:
Research and development 4,493 3,120 14,371 11,976
General and administrative 1,134 782 3,428 2,562
Equity in income from the Xenotech joint venture (18) -- (558) --
------------ ------------ ------------ ------------
Total operating expenses 5,609 3,902 17,241 14,538
------------ ------------ ------------ ------------
Operating loss (1,939) (3,515) (11,851) (12,530)
Other income and expenses:
Interest income (762) (328) (1,954) (657)
Interest expense 102 118 347 428
------------ ------------ ------------ ------------
Net loss $ (1,279) $ (3,305) $ (10,244) $ (12,301)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net loss per share $ (0.09) $ (0.31) $ (0.73) $ (3.27)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Shares used in computing net loss per share 15,023 10,716 14,049 3,767
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

See accompanying notes.

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

Nine Months Ended
September 30,
---------------------------
1999 1998
------------ ------------

Operating activities:
Net loss $(10,244) $(12,301)
Adjustments to reconcile net loss to net cash used by
operating activities:
Equity in (income) losses of Xenotech (558) 520
Depreciation and amortization 1,257 1,347
Stock options issued to consultants 638 -
Changes in certain assets and liabilities:
Prepaid expenses and other current assets (3,444) 180
Deposits and other assets 100 (100)
Accounts payable 273 (129)
Deferred revenue (300) -
Accrued product development costs (299) -
Accrued stock issuance costs - (1,200)
Other accrued liabilities 445 (866)
------------ ------------
Net cash used by operating activities (12,132) (12,549)
------------ ------------
Investing activities:
Purchases of marketable securities (59,237) (26,148)
Sales of marketable securities 22,774 14,562
Capital expenditures (424) (528)
Contributions to Xenotech - (417)
------------ ------------
Net cash used by investing activities (36,887) (12,531)
------------ ------------
Financing activities:
Net proceeds from issuances of common stock 53,123 20,031
Net proceeds from issuances of redeemable convertible
preferred stock - 3,936
Principal payments on long-term debt and capital lease
obligations (1,268) (1,221)
------------ ------------
Net cash provided by financing activities 51,855 22,746
------------ ------------
Net increase (decrease) in cash and cash equivalents 2,836 (2,334)

Cash and cash equivalents at the beginning of the period 1,415 4,617
------------ ------------
Cash and cash equivalents at the end of the period $ 4,251 $ 2,283
------------ ------------
------------ ------------

See accompanying notes.

ABGENIX, INC.

NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999

1. 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, 1998 and accompanying notes included in the Company's Annual Report as filed
on Form 10-K with the Securities and Exchange Commission on March 18, 1999. The
results of operations for the quarter and nine months ended September 30, 1999
are not necessarily indicative of the results to be expected for the full year
or for any other future period.

2. NET LOSS PER SHARE

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

3. FOLLOW-ON PUBLIC OFFERING

On March 4, 1999, the Company completed a follow-on public offering and issued
3,000,000 shares of its common stock to the public at a price of $15.00 per
share. The Company received net proceeds of $42.3 million, after deducting
underwriting discounts and commissions and before deducting expenses payable by
the Company. On April 7, 1999 the Company's underwriters exercised an option to
purchase an additional 208,000 shares of common stock at a price of $15.00 per
share to cover over-allotments. The Company received net proceeds of
approximately $2.9 million, net of underwriting discounts and commissions.

4. COLLABORATION AND LICENSE AGREEMENTS

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

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

In March 1999, the Company entered into a research collaboration agreement with
BASF Bio-research Corporation ("BASF"). Under the agreement, BASF can utilize
Abgenix's XenoMouse technology to develop fully human antibodies to an
undisclosed antigen target. In return, Abgenix will receive an upfront research
payment, and could receive additional fees and milestone payments plus royalties
on future product sales by BASF, if any. BASF will be responsible for product
development, manufacturing and marketing of any products developed through the
collaboration.

In April 1999, the Company entered into a research, option and license agreement
with Amgen, Inc. ("Amgen"). Under the agreement, the Company will use its
XenoMouse-TM- technology to generate for Amgen fully human monoclonal antibodies
to an undisclosed antigen. In return, Abgenix will receive an upfront research
payment and could receive additional fees and milestone payments plus royalties
on future product sales by Amgen, if any. Amgen will be responsible for product
development, manufacturing, and marketing of any products developed through the
collaboration.

In June 1999, the Company entered into a collaboration agreement with Japan
Tobacco, Inc. on ABX-IL8 clinical development. Under the agreement, Japan
Tobacco will make certain payments to the Company and, subject to additional
payments, could potentially receive the right to use clinical data generated
by the Company in its own regulatory filings in Japan, Taiwan and Korea.

In July 1999, the Company entered into a collaboration agreement with the
United States Army Medical Research Institute of Infectious Diseases
(USAMRIID) to develop antibodies that could potentially protect U.S. troops
during biological warfare. Under the agreement, USAMRIID will use the
Company's Xenomouse technology to make fully human monoclonal antibodies
against filoviruses. In October 1999, the Company expanded this agreement to
include viral infections attributed to poxviruses.

5. SUBSEQUENT EVENTS

In November 1999, Pfizer has exercised its option to expand its research
collaboration with the Company to include a third antigen target in the field
of cancer. After the exercise of an option by Pfizer, the Company could
receive potential license fees and milestone payments of up to approximately
$8.0 million per antigen upon completion of certain milestones, including
preclinical and clinical trials and receipt of regulatory approval.
Additionally, if a product receives marketing approval from the FDA or an
equivalent foreign agency, the Company is entitled to receive royalties on
future product sales by Pfizer. Pfizer will be responsible for manufacturing,
product development and marketing of any products developed through our
collaboration.

COMMON STOCK

On November 10, 1999, the Company announced that it is contemplating a
private placement of newly issued shares of common stock to qualified
institutional and other accredited investors. See Item 5 and Exhibit 99.1 of
this Report.

NONSTATUTORY STOCK OPTION PLAN

In October 1999, the Board of Directors
approved the 1999 Nonstatutory Stock Option Plan, which authorizes the
Company to grant options for the purchase of 1,400,0000 shares of common
stock to employees and consultants. As of October 31, 1999, the Company has
granted options to purchase 200,200 shares under the plan. The Company grants
stock options under the plan at no less than the public market closing price
of the underlying common stock on the date of grant. Options granted under
the plan generally have a term of ten years and vest over four years at the
rate of 25% one year from the date of hire and 1/48 per month thereafter.

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
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934. THESE STATEMENTS INCLUDE THE
STATEMENTS IN PARAGRAPH TWO UNDER "OVERVIEW" REGARDING OUR COMMERCIALIZATION
STRATEGY, THE STATEMENTS IN PARAGRAPH THREE UNDER "OVERVIEW" REGARDING FUTURE
REVENUES FROM CURRENT AND POTENTIAL FUTURE COLLABORATIVE ARRANGEMENTS, THE
STATEMENTS IN PARAGRAPH FIVE UNDER "LIQUIDITY AND CAPITAL RESOURCES"
REGARDING EXPANSION OF RESEARCH AND DEVELOPMENT, USE OF AVAILABLE RESOURCES
DURING FUTURE PERIODS, AND THE STATEMENTS IN PARAGRAPH SIX UNDER "LIQUIDITY
AND CAPITAL RESOURCES" REGARDING THE SUFFICIENCY OF OUR AVAILABLE RESOURCES
TO MEET WORKING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS, AND THE
STATEMENTS BELOW UNDER "ADDITIONAL FACTORS AFFECTING FUTURE OPERATING
RESULTS", AMONG OTHERS. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON CURRENT
EXPECTATIONS AND ENTAIL VARIOUS RISKS AND UNCERTAINTIES THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS. SUCH RISKS AND UNCERTAINTIES ARE SET FORTH HEREIN
AND BELOW UNDER "ADDITIONAL FACTORS AFFECTING FUTURE OPERATING RESULTS".

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

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

have granted one multi-antigen research license to Genentech, allowing
Genentech to incorporate XenoMouse technology into early stages of its
antibody product research efforts. We plan to pursue similar multi-antigen
research licenses with new or existing collaborative partners. Our
collaborative partners will need to obtain product licenses for any antibody
product they wish to develop and commercialize.

The financial terms of our existing collaborations often include upfront
payments, potential license fees and potential milestone payments paid to us
by the collaborative partner. Based on our collaborative agreements entered
into, these payments and fees may average $8.0 to $10.0 million per antigen
target assuming our collaborative partner takes the antibody product
candidate into development and ultimately to commercialization. In certain
instances, the collaborative partner could make reimbursement payments to us
for research that we conduct on its behalf. Additionally, if a product
receives marketing approval from the FDA or an equivalent foreign agency, we
are entitled to receive royalties on any future product sales by the
collaborative partner. Furthermore, the collaborative partner will be
responsible for worldwide manufacturing, product development and marketing of
any product developed through the collaboration.

Our dependence on collaborative and licensing arrangements with third parties
subjects us to a number of risks. Agreements with collaborative partners
typically allow them significant discretion in electing whether to pursue any
of the planned activities. We cannot control the amount and timing of
resources our collaborative partners may devote to the product candidates.
Even if we fulfill our obligations under a collaborative agreement, the
collaborative partner can terminate the agreement at any time following
proper written notice. If any collaborative partner were to terminate or
breach its agreement with us, or otherwise fail to complete its obligations
in a timely manner, our business, financial condition and results of
operations may be materially 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 have completed a multi-center confirmatory Phase II clinical
trial for ABX-CBL for the treatment of a transplant-related disease known as
graft versus host disease. Our other three product candidates were generated
using XenoMouse technology. We have completed a Phase I clinical trial for
our fully human antibody product candidate in psoriasis, ABX-IL8, and
recently completed a Phase I/II clinical trial in psoriasis. In addition, we
entered a Phase I clinical trial for ABX-IL8 in rheumatoid arthritis in
January 1999. We received FDA approval to enter a Phase I clinical trial for
our fully human antibody product candidate in cancer, ABX-EGF, in July 1999.
We are in preclinical development with our fully human antibody product
candidate for use in the treatment of chronic immunological disorders,
ABX-RB2.

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 collaborative arrangements. 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 collaborative partners if we have
completed significant development of these products.

In 1991, Cell Genesys and JT America, Inc. formed Xenotech, an equally owned
joint venture, to develop XenoMouse technology and to commercialize products
generated from XenoMouse technology. Upon the organization of Abgenix, Cell
Genesys assigned its rights in Xenotech to us. Xenotech funds its research
and development activities through capital contributions from Abgenix and JT
America, Inc. and we are obligated to fund 50% of all Xenotech expenses.
During 1995, 1996 and 1997, we derived revenues principally from performing
research for Xenotech for the continued development of XenoMouse technology.
We are currently in preliminary discussions with Japan Tobacco concerning a
possible acquisition by Abgenix of some or all of Japan Tobacco's interest in
Xenotech in exchange for cash or Abgenix common stock or a combination
thereof. However, we may not consummate any transaction with Japan Tobacco.
See "Item 5--Discussions with Japan Tobacco regarding Xenotech" for a
description of our discussions 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 December 31, 1998, representing the difference between
the deemed fair value of the common stock for accounting purposes and the
option exercise price at the date of grant. These amounts are presented as a
reduction of stockholders' equity and are amortized ratably over the vesting
period of the applicable options, generally four years. These valuations
resulted in charges to operations of $125,000 and $149,000 in the three
months ended September 30, 1999 and 1998, respectively and $376,000 and
$448,000 in the nine months ended September 30, 1999 and 1998, respectively.

RESULTS OF OPERATIONS

THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998

Revenue under collaborative agreements from related parties for the three
months and the nine months ended September 30, 1998 was $0.2 and $0.7,
respectively. Revenue was derived principally from performing research for
Xenotech. The development of XenoMouse technology was substantially completed
in 1996 with modest ongoing research activities in 1997 and 1998. Therefore,
we do not expect to recognize significant revenues from research performed on
behalf of Xenotech in the future.

Contract revenue of $3.7 million in the three months ended September 30,
1999, included non-refundable fees totaling $1.6 million under the
collaboration agreement with Japan Tobacco on ABX-IL8 clinical development.
These fees were for the reimbursement of clinical trial costs and certain
joint interest rights in data from the clinical trials. Additionally, in this
period, contract revenue included fees for the achievement of research
milestones, an execution fee for electing another antigen target and
licensing fees for an antigen target, under existing collaborative
agreements. Contract revenue of $0.2 million in the three months ended
September 30, 1998, consisted of fees paid for the achievement of research
milestones under collaborative agreements.

Contract revenue of $5.4 million in the nine months ended September 30, 1999,
included non-refundable fees totaling $2.3 million under the collaboration
agreement with Japan Tobacco on ABX-IL8 clinical development. These fees
included, in addition to those recorded in the third quarter, an initial
non-refundable fee of $0.6 million for the reimbursement of clinical trial
costs. Additionally, in the nine month period ended September 30, 1999, contract
revenue included non-refundable signing and option fees in connection with the
execution of collaborative agreements, fees for the achievement of research
milestones, an execution fee for

electing another antigen target and licensing fees for an antigen target.
Contract revenues of $1.3 million in the nine months ended September 30, 1998,
consisted primarily of non-refundable signing fees in connection with the
execution of collaborative agreements and fees for the achievement of research
milestones under existing collaborative agreements.

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 from $3.1
million in the three months ended September 30, 1998, to $4.5 million in the
three months ended September 30, 1999, and from $12.0 million in the nine
months ended September 30, 1998, to $14.4 million in the nine months ended
September 30, 1999. The increases reflect primarily costs associated with
increased personnel, the clinical trials of ABX-CBL and ABX-IL8, the
valuation of stock options awarded to certain consultants and lab supplies.
Additionally, the costs of Xenotech product licenses and increased legal
costs related to patents impacted the increase in the nine months ended
September 30, 1999.

General and administrative expenses include compensation and other expenses
related to finance and administrative personnel, professional services and
facilities. General and administrative expenses increased from $0.8 million
in the three months ended September 30, 1998, to $1.1 million in the three
months ended September 30, 1999, and from $2.6 million in the nine months
ended September 30, 1998, to $3.4 million in the nine months ended September
30, 1999. The increases reflect primarily costs associated with increased
personnel, including recruiting costs and an accrual for incentive
compensation (which is based on our meeting certain annual objectives),
additional investor relations costs due to being a publicly traded company,
and increased financing activity, primarily related to our follow-on public
offering.

Equity in income from the Xenotech joint venture in 1999 reflects our
percentage ownership in the net income from the joint venture. In the nine
months ended September 30, 1999, the joint venture recorded net income
primarily from the sale of licenses to Abgenix and our partner, JT America,
Inc. In the three months and nine months ended September 30, 1998, the joint
venture incurred losses. For the three months and nine months ended September
30, 1998, our equity in those losses was netted against our revenues from the
joint venture.

Other income and expenses consist of interest income from cash, cash equivalents
and short-term investments and interest expense incurred in connection with
equipment lease line financing and loan facilities. Interest income increased
due to higher average balances of short-term investments as a result of our
initial and follow-on public offerings. Interest expense decreased due to the
pay down of related debt.

LIQUIDITY AND CAPITAL RESOURCES

Since formation, we have 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;

- - a follow-on public offering of common stock in March and April 1999;

- - revenue from collaborative arrangements;

- - equipment leaseline financings; and

- - loan facilities.

During the nine months ended September 30, 1999, we received cash proceeds of
$53.2 million principally from the following financing activities:

- - $42.3 million from the sale of 3,000,000 shares of common stock in a
follow-on public offering in March 1999;

- - $2.9 million from the sale of 208,000 shares of common stock in April 1999
pursuant to the exercise of the underwriters' over-allotment option granted
in connection with the follow-on public offering; and

- - $8.0 million from the sale of 495,356 shares of common stock to
Genentech in January 1999.

We have incurred operating losses in each of the last three years of
operation, including net losses of approximately $7.1 million in 1996, $35.9
million in 1997 and $16.8 million in 1998 and $10.2 million in the nine
months ended September 30, 1999. As of September 30, 1999, we had an
accumulated deficit of approximately $79.6 million. Our losses have resulted
principally from costs incurred in performing research and development for
our XenoMouse technology and antibody product candidates, from the
non-recurring cross-license and settlement charge and from general and
administrative costs associated with our operations. See our Annual Report
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Overview" for a description of the cross-license and settlement.
We expect to incur additional 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 collaborative
arrangements. This will increase our need for capital and 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 collaborative arrangements, or the initiation, success or
failure of clinical trials.

Our net cash used in operating activities was $12.1 million and $12.5 million
for the nine months ended September 30, 1999, and 1998, respectively. The
cash used for operations was primarily to fund research and development
expenses and manufacturing costs related to the development of new products.

As of September 30, 1999, we had cash, cash equivalents and marketable
securities of $55.9 million. We have invested the net proceeds of our initial
and follow on public offerings in highly liquid, interest bearing, investment
grade securities. We have an agreement with a financing company under which
we have financed purchases of about $2.0 million of our laboratory and office
equipment. The lease term is 48 months and bears interest at rates ranging
from 12.5% to 13.0%, which are based on the 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 (9.25 % at September 30, 1999, and 8.75 % at
December 31, 1998). As of September 30, 1999, no further borrowings were
available under the construction financing line.

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

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

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

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

- - size and complexity of these programs;

- - 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;

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

- - 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 collaborative arrangements will be
sufficient to meet our operating and capital requirements for at least the
next two years. However, we may need additional financing within this
timeframe. We may need to raise additional funds through public or private
financing, collaborative relationships or other arrangements. 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. Collaborative arrangements 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 and
adverse effect on our business, financial condition and results of operations.

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

YEAR 2000

Our plan to resolve the Year 2000 issue is based on a recently completed
assessment of our exposure. All of our time-sensitive software is widely used
and purchased from major vendors, all of whom have announced that their software
is either currently Year 2000-compliant or will be made so with upgrades before
the end of 1999. We have already purchased the Year 2000-compliant upgrade of
our accounting system. We have determined that each of our personal computers,
telephone voice mail and network equipment is compliant. In addition, we will be
gathering information about the Year 2000 compliance status of third parties
with whom we have significant relationships to determine the extent to which our
operations are vulnerable to

these third parties' failure to solve their own Year 2000 issue. None of our
systems interface with those of third parties.

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

We believe we have an effective program in place to resolve the Year 2000 issue
in a timely manner. However, should our software vendors be unable to address
the Year 2000 compliance of their products, or should our suppliers' operations
be disrupted by the Year 2000 issue, then our ability to serve our collaborative
partners and develop products may be materially and adversely impacted. Our
contingency plans for minimizing the impact include increasing supplies of
materials used in clinical trials, establishing accounts with alternate
vendors, and temporarily employing manual accounting systems until alternate
systems can be installed.

ADDITIONAL FACTORS AFFECTING FUTURE OPERATING RESULTS

Abgenix became a public company in July 1998. Included here are risk factors
as updated from the Company's Annual Report. 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 and 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 collaborative partners or be safe and efficacious
for patients. If XenoMouse technology fails to generate antibody product
candidates that lead to the successful development and commercialization of
products, our business, financial condition and results of operations will be
materially 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 October 31, 1999, 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, and
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 collaborative partners, 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 confirmatory Phase II trial in graft versus
host disease, or GVHD, with our mouse antibody, ABX-CBL.

As of October 31, 1999, 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.

In our clinical trials, data from 27 patients was used for our preliminary
Phase II report submitted to the FDA. As an extension to the original Phase
II trial protocol, we filed for and received permission from the FDA to
enroll additional patients. Our application to the FDA for approval to
advance to a registration clinical trial contained the original Phase II data
plus all additional data then available from the extension protocol. The
results of the extension protocol may not be favorable or may not extend the
findings of the original Phase II study. In addition, the FDA may view our
application as insufficient and require additional clinical trials before
allowing us to commence a registration clinical trial. Even if we conduct a
randomized, controlled registration study, there are several issues that
could adversely affect the 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. 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 product candidates on a commercial scale;

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

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

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

- failure to achieve market acceptance.

Because of these risks, our research and development efforts or those of our
collaborative partners may not result in any commercially viable products. To
date, only one of our collaborative partners has exercised its right to obtain a
product license. If a significant portion of these development efforts is not
successfully completed, required regulatory approvals are not obtained, or any
approved products are not commercially successful, our business, financial
condition and results of operations will be materially and adversely affected.

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 four years of operation,
including net losses of approximately $8.3 million in 1995, $7.1 million in
1996, $35.9 million in 1997, and $16.8 million in 1998. We have also incurred
net losses of approximately $10.2 million in the nine months ended September 30,
1999. As of September 30, 1999, our accumulated deficit was approximately $79.5
million. Our losses have resulted principally from:

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

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

- general and administrative costs relating to our operations.

We expect to incur additional 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 collaborative
arrangements. This will increase our need for capital and 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 collaborative arrangements, 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:

- 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;

- revenues generated from our collaborative arrangements;

- equipment leaseline financings; and

- loan facilities.

We expect that substantially all of our revenues for the foreseeable future will
result from payments under collaborative arrangements. To date, 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 collaborative arrangements will be subject to
significant fluctuation in both timing and amount. Our revenues may not be
indicative of our future performance or of our ability to continue to achieve
such milestones. Our revenues and results of operations for any period may also
not be comparable to the revenues or results of operations for any other period.
We may not be able to:

- enter into further collaborative arrangements;

- successfully complete preclinical or clinical trials;

- obtain required regulatory approvals;

- successfully develop, manufacture and market product candidates;
or

- generate additional revenues or profitability.

If we fail to achieve any of the above goals, our business, financial condition
and results of operations will be materially and adversely affected.

WE WILL NEED TO FIND COLLABORATIVE PARTNERS TO DEVELOP MANY OF OUR PRODUCT
CANDIDATES.

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

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

- fund our research and development activities;

- fund preclinical testing, clinical trials and manufacturing;

- seek and obtain regulatory approvals; and

- successfully commercialize existing and future product candidates.

Only a limited number of fully human antibody product candidates have been
generated pursuant to our collaborations. None of these collaborative product
candidates has entered clinical testing and may not result in commercially
successful products. Current or future collaborative arrangements may not be
successful. If

we fail to maintain our existing collaborative arrangements or to enter into
additional collaborative arrangements, our business, financial condition and
results of operations will be materially and adversely affected.

Our dependence on collaborative arrangements with third parties subjects us to a
number of risks. These collaborative arrangements may not be on terms favorable
to us. Agreements with collaborative partners typically allow partners
significant discretion in electing whether to pursue any of the planned
activities. We cannot control the amount and timing of resources our
collaborative partners may devote to the product candidates. Our partners may
not perform their obligations as expected. Business combinations or significant
changes in a collaborative partner's business strategy may adversely affect a
partner's willingness or ability to complete its obligations under the
arrangement. Even if we fulfill our obligations under a collaborative agreement,
our partner can terminate the agreement at any time following proper written
notice. If any collaborative partner were to terminate or breach our agreement
with it, or otherwise fail to complete its obligations in a timely manner, our
business, financial condition and results of operations may be materially and
adversely affected. If we are not able to establish further collaborative
arrangements or any or all of our existing collaborative arrangements are
terminated, we may be required to seek new collaborative arrangements or to
undertake product development and commercialization at our own expense. Such an
undertaking may:

- limit the number of product candidates that we will be able to
develop and commercialize;

- reduce the likelihood of successful product introduction;

- significantly increase our capital requirements; and

- place additional strain on management's time.

Existing or future collaborative partners may pursue alternative
technologies, including those of our competitors. Disputes may arise with
respect to the ownership of rights to any technology or products developed
with any current or future collaborative partner. Lengthy negotiations with
potential new collaborative partners or disagreements between us and our
collaborative partners may lead to delays or termination in the research,
development or commercialization of product candidates or result in time
consuming and expensive litigation or arbitration. If our collaborative
partners pursue alternative technologies or fail to develop or commercialize
successfully any product candidate to which they have obtained rights from
us, our business, financial condition and results of operations may be
materially and adversely affected.

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

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

We must obtain licenses from Xenotech to commercialize antibody products
generated by XenoMouse technology. We have the right to license the use of
XenoMouse technology from Xenotech to develop a certain number of antigen
targets each year in exchange for royalty payments. If we have used our
yearly allotment of licenses to develop antigen targets and desire to acquire
a license to develop additional antigen targets, we may have to negotiate
with JT America Inc. or others to acquire such rights. Disputes with JT
America Inc., or its parent company Japan Tobacco, Inc., may result in the
loss of the right to commercialize a product candidate by either party.
Limits on our ability to acquire additional licenses to develop antigen
targets, or disputes with JT America

Inc. or Japan Tobacco, will limit our ability to establish collaborations and
fully realize the commercial potential of XenoMouse technology.

WE FACE INTENSE COMPETITION AND RAPID TECHNOLOGICAL CHANGE.

The biotechnology and pharmaceutical industries are highly competitive and
subject to significant and rapid technological change. We are aware of several
pharmaceutical and biotechnology companies that are actively engaged in research
and development in areas related to antibody therapy. These companies have
commenced clinical trials of antibody products or have successfully
commercialized antibody products. Many of these companies are addressing the
same diseases and disease indications as Abgenix or our collaborative partners.
Also, we compete with companies that offer antibody generation services to
companies that have antigens. These competitors have specific expertise or
technology related to antibody development. These companies include GenPharm
International, Inc., a wholly-owned subsidiary of Medarex, Inc., Cambridge
Antibody Technology Group plc, Protein Design Labs, Inc. and MorphoSys AG.

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. markets an organ transplant
rejection product 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 and OSI Pharmaceuticals, Inc. have potential antibody and small
molecule product candidates in clinical development that may compete with
ABX-EGF, which is also in clinical trials. We may also compete with Japan
Tobacco in supplying XenoMouse technology or antibody product candidates to
potential collaborative partners.

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

- developing products;

- undertaking preclinical testing and human clinical trials;

- obtaining FDA and other regulatory approvals of products; and

- manufacturing and marketing products.

Accordingly, our competitors may succeed in obtaining patent protection,
receiving FDA approval or commercializing products before us. If we commence
commercial product sales, we will be competing against companies with greater
marketing and manufacturing capabilities, areas in which we have limited or no
experience.

We also face, and will continue to face, competition from academic institutions,
government agencies and research institutions. There are numerous competitors
working on products to treat each of the diseases for which we are seeking to
develop therapeutic products. In addition, any product candidate that we
successfully develop may compete with existing therapies that have long
histories of safe and effective use. Competition may also arise from:

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

- new small molecules; or

- other classes of therapeutic agents.

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

MARKET ACCEPTANCE OF OUR PRODUCTS IS UNCERTAIN.

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

- establishment and demonstration of clinical efficacy and safety;

- cost-effectiveness of our product candidates;

- their potential advantage over alternative treatment methods;

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

- marketing and distribution support for our product candidates.

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 collaborative partners 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 have one
issued patent in the United States, one issued patent in Europe and several
pending patent applications in the United States relating to XenoMouse
technology. We try to protect our proprietary position by filing United States
and foreign patent applications related to our proprietary technology,
inventions and improvements that are important to the development of our
business. The patent position of biopharmaceutical companies involves complex
legal and factual questions and, therefore, enforceability cannot be predicted
with certainty. Patents, if issued, may be challenged, invalidated or
circumvented. Thus, any patents that we own or license from third parties may
not provide any protection against competitors. Our pending patent applications,
those we may file in the future, or those we may license from third parties, may
not result in patents being issued. Also, patent rights may not provide us with
proprietary protection or competitive advantages against competitors with
similar technology. Furthermore, others may independently develop similar
technologies or duplicate any technology that we have developed. The laws of
certain foreign countries do not protect our intellectual property rights to the
same extent as do the laws of the United States.

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

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 patent applications. Patent applications in the United States are, in most
cases, maintained in secrecy until patents issue. The publication of
discoveries in the scientific or patent literature frequently occurs
substantially later than the date on which the underlying discoveries were
made. Our commercial success depends significantly on our ability to operate
without infringing the patents and other proprietary rights of third parties.
Our technologies may infringe the patents or violate other proprietary rights
of third parties. In the event of infringement or violation, we and our
collaborative partners 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 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 issued European patent
relating to XenoMouse technology that is currently undergoing opposition
proceedings within the European Patent Office and the outcome of this
opposition is uncertain.

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 without use in combination with chemotherapy and is
not covered by such claims. 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 these claims from a third
party in order to commercialize ABX-EGF. The license 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 our issued and licensed patents;

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

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

If we become involved in any litigation, interference or other administrative
proceedings, we will incur substantial expense and the efforts of our
technical and management personnel will be significantly diverted. An adverse
determination may subject us to significant liabilities or require us to seek
licenses that may not be available from third parties. We may be restricted
or prevented from manufacturing and selling our products, if any, in the
event of an adverse determination in a judicial or administrative proceeding
or if we fail to obtain necessary licenses. Costs associated with these
arrangements may be substantial and may include ongoing royalties.
Furthermore, we may not be able to obtain the necessary licenses on
satisfactory terms, if at all. These outcomes will materially 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. For
example, we have not received FDA approval to

commence registration clinical trials for ABX-CBL. The approval process takes
many years, requires the expenditure of substantial resources, involves
post-marketing surveillance, and may involve ongoing requirements for
post-marketing studies. Delays in obtaining regulatory approvals may:

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

- impose costly procedures on us or our collaborative partners;

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

- adversely affect our receipt of revenues or royalties.

Certain material changes to an approved product such as manufacturing changes
or additional labeling claims are subject to further FDA review and approval.
Any required approvals, once obtained, may be withdrawn. Compliance with
other regulatory requirements may not be maintained. Further, if we fail to
comply with applicable FDA and other regulatory requirements at any stage
during the regulatory process, 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 collaborative partners to file investigational new
drug applications and generally direct the regulatory approval process for
many of our products. Our collaborative partners may not be able to conduct
clinical testing or obtain necessary approvals from the FDA or other
regulatory authorities for any product candidates. If we fail to obtain
required governmental approvals, our collaborative partners will experience
delays in or be precluded from marketing products developed through our
research. In addition, the commercial use of our products will be limited.
Delays and limitations may materially 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 RELY ON A SOLE SOURCE THIRD-PARTY MANUFACTURER AND DO NOT HAVE COMMERCIAL
SCALE MANUFACTURING EXPERIENCE.

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

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

Contract manufacturers often encounter difficulties in scaling up production,
including problems involving production yields, quality control and quality
assurance and shortage of qualified personnel. Our contract manufacturer may
not perform as agreed or may not remain in the contract manufacturing
business for the time required by us to successfully produce and market our
product candidates. If our contract manufacturer fails to deliver the
required quantities of our product candidates for clinical use on a timely
basis and at commercially reasonable prices, and we fail to find a
replacement manufacturer or develop our own manufacturing capabilities, our
business, financial condition and results of operations will be materially and
adversely affected. We may decide to manufacture our product candidates in
quantities sufficient for conducting clinical trials or for
commercialization. If we make this decision, we will face the same risks and
encounter the same difficulties as contract manufacturers.

In addition, Abgenix and our third-party manufacturer are required to register
manufacturing facilities with the FDA and foreign regulatory authorities. The
facilities will then be subject to inspections confirming compliance with good
manufacturing practice requirements established by the FDA or corresponding
foreign regulations. If Abgenix or our third-party manufacturer fails to
maintain compliance with the good manufacturing practice requirements, our
business, financial condition and results of operations will be materially 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 DEPEND ON KEY PERSONNEL AND MUST CONTINUE TO ATTRACT AND RETAIN KEY EMPLOYEES
AND CONSULTANTS.

We are highly dependent on the principal members of our scientific and
management staff. If we lose any of these persons, our business, financial
condition and results of operations may be materially and adversely affected.
For us to pursue product development, marketing and commercialization plans,
we will need to hire additional qualified scientific personnel to perform
research and development. We will also need to hire personnel with expertise
in clinical testing, government regulation, manufacturing, marketing and
finance. Attracting and retaining qualified personnel will be critical to our
success. We may not be able to attract and retain personnel on acceptable
terms given the competition for such personnel among biotechnology,
pharmaceutical and healthcare companies, universities and non-profit research
institutions.

In addition, we rely on members of our Scientific 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 personnel, the
achievement of our development objectives may be impeded. Such impediments
may materially and adversely affect our business, financial condition and
results of operations.

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

As of September 30, 1999, our directors, executive officers, principal
stockholders and affiliated entities beneficially own, in the aggregate,
approximately 28.9% of our outstanding common stock. These stockholders, if
acting together, will be able to significantly influence all matters
requiring approval by our stockholders. These matters include the election of
directors and the approval of mergers or other business combination
transactions. We may be adversely impacted by the control that such
stockholders will have with respect to matters affecting us.

WE MAY REQUIRE ADDITIONAL FINANCING.

We will continue to expend substantial resources for the expansion of research
and development, including costs associated with conducting preclinical testing
and clinical trials. We will be required to expend substantial funds in the
course of completing required additional development, preclinical testing and
clinical trials of and regulatory approval for product candidates. Our future
liquidity and capital requirements will depend on many factors, including:

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

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

- continued scientific progress in our research and development
programs;

- the size and complexity of these programs;

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

- competing technological and market developments;

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

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

- investment in, or acquisition of, other companies;

- product in-licensing; and

- other factors not within our control.

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

CELL GENESYS EXERCISES SIGNIFICANT INFLUENCE OVER US.

As of September 30, 1999, Cell Genesys beneficially owned approximately 22.5%
of our outstanding common stock. As a result, Cell Genesys will have
significant influence over all matters requiring the approval of our
stockholders. These matters include the election of our board of directors
and changes in control of Abgenix. We have entered into a governance
agreement with Cell Genesys which provides that so long as Cell Genesys or a
group to which it belongs owns a specific percentage of our outstanding
voting stock, Cell Genesys or the group shall have the right to nominate a
fixed number of directors to serve on our board. So long as Cell Genesys or
the group owns less then 25% but greater than 15% of our common stock, Cell
Genesys has the right to nominate one out of seven directors to serve on our
board. The governance agreement also provides that Cell Genesys and each of
our officers and directors who owns voting stock shall agree to vote for the
persons nominated as set forth above. We may be adversely impacted by the
significant influence that Cell Genesys will have with respect to matters
affecting us.

On October 18,1999, Genzyme Corporation announced that it had entered into a
definitive agreement with Cell Genesys under which Genzyme will acquire Cell
Genesys. Following the completion of that acquisition, Genzyme will acquire
Cell Genesys' rights, including the rights under the governance agreement,
the right to direct us to make antibodies to two antigens per year and other
rights under our current gene therapy rights agreement with Cell Genesys.

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. 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 previous 52 weeks ending
November 9, 1999, our common stock traded at a high of $52.00 per share and
a low of $8.50 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 collaborative partners;

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

- sales of a significant number of shares by our collaborative partners;
and

- general market conditions.

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

In June 1999, our board of directors adopted a stockholder rights plan. The
stockholder rights plan provides for a dividend distribution of one preferred
shares 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
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 22.5% of our outstanding common stock as of September 30, 1999,
each right will become exercisable following the tenth day after it announces
the acquisition of 25% or more 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 25% or more of our
common stock. We will be entitled to redeem the rights at $0.01 per right at
any time on or before 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, 25% or more) 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
Abgenix. 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 Abgenix, 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.

WE FACE UNCERTAINTY WITH YEAR 2000 COMPLIANCE.

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

PART II

ITEM 1 - LEGAL PROCEEDINGS

Not applicable.

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

USE OF PROCEEDS

In July 1998, we closed an initial public offering of 2,875,000 shares
of our common stock at a per share price of $8.00 pursuant to a
Registration Statement on Form S-1 (Registration No. 333-49415), which
was declared effective on July 2, 1998. The managing underwriters for
our offering were BancAmerica Robertson Stephens (now BancBoston
Robertson Stephens Inc.) and Lehman Brothers Inc. Of the $23,000,000 in
gross proceeds raised in connection with the offering, (i) $1,610,000
was paid to the managing underwriters in connection with underwriting
discounts and (ii) approximately $1,359,000 was paid by us in
connection with expenses, including legal, printing and filing fees, in
connection with the offering. Of the remaining net proceeds, we paid
$3,750,000 pursuant to the cross-license and settlement with GenPharm
and spent the remainder on research and development activities through
June 30, 1999. There were no direct or indirect payments to any of our
directors or officers or to any other person or entity. No material
amount of the proceeds from the offering were used for the construction
of plant, building or facility or installation of machinery or
equipment, or the purchases of real estate or the acquisition of other
businesses.

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

DISCUSSIONS WITH JAPAN TOBACCO REGARDING XENOTECH

We are currently in preliminary discussions with Japan Tobacco
concerning our possible acquisition of some or all of Japan
Tobacco's interest in Xenotech in exchange for cash or shares of our
common stock or a combination thereof. The structure and price of
any such transaction has not been agreed to. In connection with the
possible acquisition, we may enter into an agreement with Japan
Tobacco, granting Japan Tobacco certain rights to use XenoMouse
technology and to commercialize products generated therefrom. The
discussions regarding these transactions are very preliminary and a
transaction may not ultimately be consummated.

CLINICAL TRIALS FOR ABX-IL8

In October 1999, we completed a Phase I/II multi-center, multi-dose,
dose escalating, placebo-controlled clinical trial with ABX-IL8
including 45 moderate to severe psoriasis patients. Preliminary
findings of this study indicate that ABX-IL8 was safe and well
tolerated at all dose levels tested. In addition, a preliminary
review of multiple activity measures all indicated improvement with
ABX-IL8 treated patients in a dose dependent manner. Further details
of study results are expected to be presented at the PSORIASIS: FROM
GENE TO CLINIC meeting in London on December 2, 1999. Extensive
additional clinical trials will be required to establish efficacy.
We plan to conduct additional Phase II trials in 2000.

COMMON STOCK

On November 10, 1999, we announced that we are contemplating a private
placement of newly issued shares of common stock to institutional and
other accredited investors. A copy of the press release is attached to
this Report as Exhibit 99.1.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

EXHIBIT NO. CAPTION
----------- -------

27.1 Financial Data Schedule
99.1 November 10, 1999 Press Release

(b) Reports on Form 8-K

No reports on Form 8-K were filed with the Securities and
Exchange Commission during the third quarter of fiscal 1999.

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: November 12, 1999.

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

27.1 Financial Data Schedule
99.1 Press Release dated 11/10/99