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UPDATE: Lion to Gobble NetGenics for $17M; Deal Would Marry Bio and Chem Data

NEW YORK, Jan. 15 - Lion Bioscience plans to acquire NetGenics for approximately $17 million in stock, both firms announced on Tuesday.

The deal, anticipated to close before April, gives Lion control of NetGenics' DiscoveryCenter platform, its 60 scientists and bioinformaticists, and a deal the privately held informatics firm has recently struck with Schering.

"The integration of biological and chemical information is key and has been the missing link for large knowledge management solutions and unattainable for life science organizations up to now," the companies said in a joint statement. "Different disciplines can now easily be combined through the merger of Lion's ... SRS [technology] with NetGenics' integration environment DiscoveryCenter."

Under the terms of the deal, the German bioinformatics company will pay for the acquisition by trading 1.12 million shares of its stock, which closed at $15.70 in Nasdaq trading on Monday. The stock was off $.19, or 1.19 percent, at $15.51 in late-afternoon trading. 

The transaction is expected to close in the first three months of 2002, after which time NetGenics will become a wholly owned subsidiary of Lion, the companies said.

"Through the merger we overcome a major hurdle for the life science industry: the easy integration of information from different disciplines," said Friedrich von Bohlen, Lion's CEO. "By owning and merging SRS with DiscoveryCenter we can now offer the ultimate standard platform for parallel knowledge management of multiple disciplines to the whole life science industry as a product. Therefore we expect very strong demand from the industry for it."

Lion said the acquisition will position it to deliver i-biology tools "not only as custom-made service, but also as a modular off-the-shelf package for a broader audience in the pharma and life science communities."

Lion's recent deal with IBM to merge its SRS technology with the computer giant's DiscoveryLink platform will help bolster the offerings it hopes to generate from the NetGenics deal. Last November,the firms signed that lucrative deal, in which IBM would offer Lion's technologies as part of its own hardware and middleware, including its WebSphere Internet software, and Lion was to use the combined technologies in its drug-discovery efforts at its headquarters in Heidelberg, Germany.

NetGenics has a similar deal with IBM. In April last year the company integrated DiscoveryLink into Discovery Center and agreed to distribute the software. The company also has partnerships with Paradigm Genetics and Avalon Pharmaceuticals.

The collaboration with Schering gives the drug giant's gene bank researchers access to the DiscoveryCenter software and allows them to integrate genomic data throughout all of Schering and its units. The aim of that deal, according to NetGenics, is to provide a central point of access to annotated sequence and expression data.
The pending NetGenics-Lion marriage, meanwhile, is seen as "a very complementary merger both [firms], from a technology and business perspective" by Manuel J. Glynias, president and CEO of NetGenics. This is a statement he's quite happy to make.

The company, based in Cleveland, has been hurting recently: It earned $2.3 million during the first nine months of 2001 and spent $11.7 million during the same period. NetGenics also underwent a broad restructuring program in which it cut 30 percent of its workforce and closed or consolidated ancillary sites.

Its current cash position is "negligible," Glynias said in an interview, and Michael Clulow, who covers Lion for UBS Warburg, said that "NetGenics has an unhealthy balance sheet."

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