AstraZeneca has agreed to buy Cambridge Antibody Technology in a transaction that would provide a near-term boost to its near-term pipeline, shortly after it was forced to abandon a drug for diabetes in late-stage trials.

The pharmaceutical major has offered £702 million ($1.3 billion) for CAT in a move that continues the expansion of its activities in biologic medicines. AstraZeneca already own a little over 19% of CAT - the UK’s biggest biotechnology company – and said it will pay £567 million to acquire the remainder.

AstraZeneca is the second big pharma company in as many weeks to lay the foundations for a biological future via an acquisition of a biotechnology player. The CAT offer comes shortly after Merck & Co earmarked $480 million to buy biologics manufacturing firm GlycoFi and antibody discovery outfit Abmaxis.

In a statement, AstraZeneca said it expects a quarter of its pipeline to be biologics by 2010.

“AstraZeneca now intends to create a major R&D capability to deliver biological therapeutics [that] will be distinct from but complementary to AstraZeneca’s small molecule capability,” it said.

Bringing CAT into the fold would add four monoclonal antibodies in clinical testing, including CAT-3888 in Phase II trials for hairy cell leukaemia and CAT-354 for severe asthma in Phase I, as well as the UK biotech’s broad technology platforms for the discovery and development of monoclonal antibody-based drugs.

CAT’s technology platform has already been validated with one product – Abbott Laboratories’ rheumatoid arthritis drug Humira (adalimumab) – already on the market and providing a royalty stream from sales of $1.4 billion in 2005, while six other CAT-derived antibodies are licensed to commercial partners.

AstraZeneca said it would expand the focus of CAT’s technology platform to take in an increased number of therapeutic categories, including respiratory and inflammation, oncology and infection, neuroscience, and cardiovascular and gastrointestinal drugs.

CAT’s chairman, Dr Paul Nicholson, said the company’s board had unanimously decided to recommend the offer to shareholders.

AstraZeneca’s decision to terminate development of Galida (tesaglitazar) last week is just the latest in a series of disappointments in the firm’s late-stage pipeline. The group has been trying to boost its pipeline of new drugs after a series of recent failures in late stage development, including Exanta (ximelegatran) for blood clots and Iressa (gefitinib) for lung cancer in 2004.

Last month, AstraZeneca appointed a senior executive – John Goddard – to a new role in charge of licensing and acquisitions in a bid to step up efforts to expand its product pipeline.

The CAT acquisition crowns a series of other buys in the biotechnology sector for AstraZeneca. It paid £195 million for a septic shock drug, CytoFab, from Protherics, and most recently bought joint rights to Abraxis Bioscience’s Abraxane cancer therapy for £112 million.

Meanwhile, in its traditional small-molecule business, AstraZeneca bought US biotech player KuDOS Pharmaceuticals for £121 million last year, licensed a drug for atherosclerosis from AtheroGenics in a deal valued at up to $1 billion, and also agreed a deal worth £173 million with US firm Targacept to develop a series of compounds for Alzheimer’s, schizophrenia and other central nervous system disorders.