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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

For the quarterly period ended June 30, 2002
OR

For the transition period from                              to                             .

Commission file number: 000-24207

ABGENIX, INC.

(Exact name of registrant as specified in its charter)

(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 in 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 ý No o

        As of July 31, 2002 there were 87,370,317 shares of the Registrant's Common Stock outstanding.

TABLE OF CONTENTS

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PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

ABGENIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

See accompanying notes.

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ABGENIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

See accompanying notes.

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ABGENIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

See accompanying notes.

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ABGENIX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2002

1.    Basis of Presentation and Summary of Significant Accounting Policies

        Basis of Presentation—The unaudited condensed consolidated 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 has been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial information included therein. These financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2001, and accompanying notes included in the Company's Annual Report as filed on Form 10-K with the Securities and Exchange Commission. The results of operations for the three and six months ended June 30, 2002, are not necessarily indicative of the results to be expected for the full year or for any other future period.

        Revenue Recognition—The Company receives payments from customers for license, option, service and milestone fees. These payments are generally non-refundable but are reported as deferred revenue until they are recognizable as revenue. The Company follows the following principles in recognizing revenue:

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Research license fees: Fees to license the use of the Company's proprietary technologies in research performed by the customer are generally recognized only after both the license period has commenced and the technology has been delivered. If Abgenix is obligated to provide significant assistance to enable the customer to practice the license, then the revenue is recognized over the period of such obligation.



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Product license fees: Fees to license the production, use and sale of an antibody generated by the Company's proprietary technologies are generally recognized only after both the license period has commenced and the technology has been delivered. If Abgenix is obligated to provide significant assistance to enable the customer to practice the license, then the revenue is recognized over the period of such obligation.



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Option fees: Fees for granting options to obtain product licenses to develop a product are recognized as revenue when the option is exercised or when the option period expires, whichever occurs first. If the option fee is commingled with the license fee in the contract, and if the fees related to the license are recognized as revenue up-front, the Company estimates the fair value of the option component and recognizes the revenue attributed to the option component separately in accordance with its revenue recognition policy.



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Fees for research services performed by Abgenix are recognized ratably over the entire period the services are performed. In the case of co-development arrangements, fees received for research services provided are recorded as contract revenues in the period the services are rendered.



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

        Net Loss Per Share—Basic net loss per share is calculated based on the weighted average number of shares outstanding during the period. The impact of common stock options and warrants was

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excluded from the computation of diluted net loss per share, as their effect is antidilutive for the periods presented.

        Accounting Change—Effective January 1, 2002, the company completed the adoption of Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires all business combinations initiated after June 30, 2001, to be accounted for using the purchase method of accounting. As required by SFAS No. 142, the company discontinued amortizing the remaining balances of goodwill as of January 1, 2002. All remaining and future acquired goodwill will be subject to impairment tests annually, or earlier if indicators of potential impairment exist, using a fair-value-based approach. All other intangible assets will continue to be amortized over their estimated useful lives and assessed for impairment under SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." In conjunction with the implementation of SFAS No. 142, the company has completed a goodwill impairment review as of the beginning of 2002 and found no impairment.

        Upon adoption of the new Business Combination rules, acquired workforce no longer meets the definition of an identified intangible asset. As a result, the net balance of $120,000 has been reclassified to goodwill in 2002. During the three and six months ended June 30, 2002, no goodwill was acquired, impaired or written off.

        A reconciliation of previously reported net income and earnings per share to the amounts adjusted for the exclusion of goodwill amortization is as follows (in thousands, except per share amounts):

        Reclassifications—Certain prior period balances have been reclassified to conform to the current period presentation.

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2.    Comprehensive Income (Loss)

        Other comprehensive income (loss) consists of unrealized gains or losses on available-for-sale securities. The components of comprehensive income (loss) were as follows (in thousands):

3.    Identified Intangible Assets

        During the three and six months ended June 30, 2002, no identified intangible assets were acquired, impaired or written off.

        Identified intangible assets as of June 30, 2002 and December 31, 2001 consisted of the following:

        Amortization of acquisition-related intangibles was $1.8 million and $3.5 million, respectively, for the three and six months ended June 30, 2002, and $1.4 million and $2.8 million, respectively, for the three and six months ended June 30, 2001. Amortization of other intangible assets was $46,000 and $93,000, respectively, for the three and six months ended June 30, 2002. All of the company's acquired identified intangibles other than goodwill are subject to amortization.

        Expected amortization expense related to identified intangible assets for the six-month period from July 1, 2002, to December 31, 2002, and each of the fiscal years thereafter is as follows:

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4.    Convertible Subordinated Notes

        In March 2002, the Company issued $200.0 million principal amount of convertible subordinated notes in a private placement. The notes are convertible into shares of Abgenix common stock at a conversion price of $27.58 per share subject to certain adjustments. The notes accrue interest at an annual rate of 3.5% and the Company is obligated to pay interest on March 15 and September 15 of each year, beginning on September 15, 2002. The notes will mature on March 15, 2007, and are redeemable at the Company's option on or after March 20, 2005, or earlier if the price of the Company's common stock exceeds specified levels. In addition, the holders of the notes may require the Company to repurchase the notes if the Company undergoes a change in control. If a shelf registration statement for the notes and the shares into which they are convertible is not declared effective by the Securities and Exchange Commission by August 30, 2002, additional interest will accrue at a rate of 0.5% per annum. The shelf registration statement filed by the Company in May 2002 has not yet been declared effective.

5.    Impairment of Investments

        The Company purchased an aggregate amount of $80.0 million of common stock of CuraGen Corporation and ImmunoGen, Inc. as strategic investments. Under SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," the CuraGen and ImmunoGen investments are designated as available-for-sale and are reported at fair value on the Company's balance sheet. Unrealized holding gains and losses for available-for-sale securities generally are excluded from earnings and reported as a component of stockholders' equity. However, if a decline in the fair value of available-for-sale securities is judged to be other than temporary, the cost basis of the security is written down to fair value as a new cost basis and the amount of the write-down is included in earnings as an impairment charge. Under the Company's accounting policy, marketable equity securities are presumed to be impaired if their fair value is less than their cost basis for more than six months, absent compelling evidence to the contrary. At March 31, 2002, the Company's investments in CuraGen and ImmunoGen common stock had traded below their original cost basis for more than six months, at which time the Company deemed that an impairment of these investments had occurred. Additionally, at June 30, 2002, these same investments were trading below their March 31, 2002 values, at which time the Company determined that a further impairment had occurred. Accordingly, the Company recorded impairment charges of $34.7 million and $30.4 million, in the first and second quarters of 2002, respectively, which are recorded in the Company's results of operations. The amount of the charge in the first quarter was based on the difference between the market price of the securities as of March 31, 2002, and the Company's original cost basis. The amount of the charge in the second quarter was based on the difference between the market price of these securities as of June 30, 2002, and the Company's cost basis as of March 31, 2002. As of June 30, 2002, the cost basis of these investments reflected the public trading prices on June 30, 2002, which is recorded in long-term investments on the balance sheet. If the Company deems these investments further impaired at the end of any future period, the Company may incur an additional impairment charge on these investments.

        In addition, the Company invested $15.0 million in MDS Proteomics Inc., a privately held company, in connection with the Company's collaboration with that company. Because MDS Proteomics is a private company and its securities are not publicly traded, the value of this investment is inherently more difficult to estimate than an investment in a publicly traded company. As of June 30, 2002, the Company estimated that the value of its investment had declined to $7.9 million and that an impairment of this investment had occurred. Accordingly, the Company recorded an impairment charge of $7.1 million in the second quarter of 2002. The amount of the charge in the second quarter was based on the difference between the estimated value as determined by Abgenix management and the Company's original cost basis. As of June 30, 2002, the cost basis of this investment reflected the new estimated value, which is recorded in long-term investments on the balance sheet. If the Company

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deems its investment in MDS Proteomics further impaired at the end of any future period, the Company may incur an additional impairment charge on this investment. The Company understands that MDS Proteomics is in the process of undergoing a reorganization, which may result in a further decrease in the estimated valuation of the Company's investment in MDS Proteomics. Depending on this ongoing reorganization and other relevant factors, the Company may deem its investment further impaired at the end of a subsequent period.

6.    Segment Information

        The operations of the Company and its wholly owned subsidiaries constitute one business segment.

        Revenues from three customers represented 38%, 32%, and 15%, respectively, of contract revenues for the three months ended June 30, 2002, compared with the same period in 2001, in which three customers represented 62%, 14%, and 13%, respectively, of contract revenues. Revenues from two customers represented 63% and 10%, respectively, of contract revenues for the six months ended June 30, 2002, compared with the same period in 2001, in which three customers represented 49%, 23%, and 10%, respectively, of contract revenues.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

        The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements based upon current expectations that involve risks and uncertainties. In this Quarterly Report on Form 10-Q, the words "intend," "anticipate," "believe," "estimate," "plan" and "expect" and similar expressions as they relate to Abgenix are included to identify forward-looking statements. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below and under the heading "Additional Factors that Might Affect Future 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 cancer, inflammatory and autoimmune disorders, transplant-related diseases, cardiovascular disease and infectious diseases. We have proprietary technologies that facilitate rapid generation of highly specific, antibody therapeutic product candidates that contain fully human protein sequences and that bind to disease targets appropriate for antibody therapy. In this Quarterly Report on Form 10-Q we refer to these candidates as fully human antibody therapeutic product candidates. We developed our XenoMouse® technology, a technology using genetically modified mice to generate fully human antibodies. We also own a technology that enables the rapid identification of antibodies with desired function and characteristics, referred to as SLAM™ technology. In our XenoMax™ technology, we use SLAM technology to select and isolate antibodies with particular function and characteristics from antibody-producing cells generated by XenoMouse animals. We believe XenoMax technology enhances our capabilities in product development and flexibility in manufacturing. We intend to use our technologies to build a large and diversified product portfolio that we expect to develop and commercialize through joint development and licensing arrangements with pharmaceutical companies and others, and through internal product development programs. We have entered into a variety of contractual arrangements with multiple pharmaceutical, biotechnology and genomics companies involving our XenoMouse technology. Two of our customers, Pfizer, Inc. and Amgen, Inc., have initiated clinical trials with fully human antibodies generated from XenoMouse animals. In addition, as of June 30, 2002, we had four proprietary antibody product candidates in clinical trials, one of which we had agreed to co-develop and commercialize with Immunex Corporation (recently acquired by Amgen, Inc.) and one of which we had agreed to co-develop and commercialize with SangStat Medical Corporation.

        As of June 30, 2002, we had entered into contracts covering numerous antigen targets with thirty-one customers to use our XenoMouse technology to generate and/or develop the resulting fully human antibodies. As of June 30, 2002, we had also entered into one agreement in which we licensed our SLAM technology to one party on a non-exclusive basis for the purpose of generating and using antibodies other than antibodies derived from XenoMouse technology or other technology that involves the use of non-human animals, and on a co-exclusive basis for the purpose of antigen discovery. We do not currently intend to license our SLAM technology for use by any other parties. Pursuant to our XenoMouse contracts, we and our customers intend to generate antibody product candidates for the treatment of cancer, inflammation, autoimmune diseases, transplant rejection, cardiovascular disease, growth factor modulation, neurological diseases and infectious diseases. We expect that substantially all of our revenues for the foreseeable future will result from payments under these and other contracts. We have also licensed technology from third parties for use in conjunction with our proprietary technology. The terms of our contractual arrangements vary, but can generally be categorized as follows:

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Antigen Target Sourcing Contracts—We have entered into several target sourcing contracts with genomics and biopharmaceutical companies that may enable us to generate a pipeline of proprietary fully human antibody product candidates. Typically, these contracts provide for us to

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make fully human antibodies to the antigen targets provided or identified by our collaborators. The contracts typically contain provisions that allow either Abgenix or our collaborator to evaluate and select particular antibodies from the pool of generated antibodies for further development and commercialization. The party selecting an antibody for further development or commercialization will generally pay to the other party license fees, milestone payments and royalty payments on any eventual product sales, in exchange for rights to develop and commercialize the product. In connection with these arrangements, we may also agree to make a strategic purchase of the common stock of a collaborator to enhance the strength of our relationship. For example, we have made equity investments in CuraGen Corporation and MDS Proteomics Inc. in connection with our collaborations with these parties.

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Proprietary Product Development—In July and August 2000, we entered into two joint development and commercialization agreements. One of these agreements is with Immunex for ABX-EGF, a fully human antibody we created. Under the agreement, Immunex paid us an initial license fee at signing and a second license fee in May 2001. We and Immunex will share equally in all development costs and any profits from sales of collaboration products. We and Immunex also share responsibility for product development. We will be responsible for completing the ongoing Phase I trial and any additional Phase I trials that are initiated, and both companies share responsibility for the execution of Phase II trials across a variety of indications. Immunex will have primary responsibility for Phase III clinical trials and will market any potential products, while we will have co-promotion rights. The other agreement is with SangStat Medical Corporation for ABX-CBL, an antibody we developed. Under that agreement, SangStat paid us an initial license fee in 2000 and a second milestone payment in June 2001, and has agreed to make a final milestone payment in 2002. We and SangStat will share equally in all development costs and any profits from sales of collaboration products. We and SangStat also share responsibility for product development, including the ongoing Phase II/III clinical trials. SangStat will market any potential product and we will be responsible for manufacturing ABX-CBL.

We intend to build our product portfolio by using our XenoMouse and XenoMax technologies to generate antibodies to antigen targets that we source, self-funding clinical activities to determine preliminary safety and efficacy, and entering into additional development and commercialization agreements with pharmaceutical and biotechnology companies. We plan to enter into agreements to use our XenoMax technology to assist our licensees and collaborators in isolating antibodies with desired function and characteristics. These arrangements may involve sharing of costs and profits.

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Technology Out-Licensing—We have licensed our XenoMouse technology to third parties for the purpose of generating antibody product candidates to one or more specific antigen targets provided by the customer. We have also licensed our SLAM technology for use by one party. In some cases in which we license XenoMouse technology, we provide our mice to the customers who then carry out immunizations with their specific antigen targets. In other cases, we immunize the mice with the customers' antigen targets for additional compensation. The customer generally has an option for a period of time to acquire a product license for any antibody identified using XenoMouse technology that the customer wishes to develop and commercialize. The financial terms of these agreements may include license fees, option fees and milestone payments paid to us by the customers. Based on our agreements, these payments and fees would average from approximately $7.0 million to $10.0 million per antigen target if our customer takes the antibody into development and ultimately to commercialization. Additionally, our license agreements entitle us to receive royalties on any future product sales by the customer. We may also agree to purchase the common stock of some of our customers, or they may agree to purchase our common stock, in connection with these licensing arrangements.

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