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With Eos Merger, Pharmacopeia s Drug Discovery Gain also Helps Accelrys


Pharmacopeia and Eos Biotechnology announced plans last week to merge in a stock-for-stock transaction valued at approximately $197 million. While the merger was initiated primarily to boost Pharmacopeia’s slumping drug discovery revenues, Pharmacopeia’s Accelrys software unit also stands to benefit from the deal, according to executives at the companies.

“There are several benefits to this acquisition for Accelrys,” said Mike Stapleton, COO of the software unit. The staff at Eos, which uses a genomics-based approach to drug discovery that Pharmacopeia sees as a complement to its chemistry-based approach, has a strong background in biology and bioinformatics. Stapleton said this environment would serve as a great testing bed for the continuing development of Accelrys’ bioinformatics software.

In addition, Eos has compiled a set of gene expression databases containing more than 1 billion datapoints from both diseased and normal tissues, which Accelrys will eventually package and commercialize. “[Other Accelrys acquisitions] GCG and Synomics both have content that we sell, so this is consistent with our direction,” said Stapleton.

Eos has also developed a proprietary bioinformatics platform to identify disease-specific gene activity. Stapleton said future commercialization plans for this platform were still uncertain.

David Martin, CEO of Eos, was enthusiastic about the opportunity to commercialize and distribute the company’s data through Accelrys’ sales and marketing force of over 150 people. “It’s a very nice way for us to capture the value of what is currently a cryptic asset,” he said, noting that the company hadn’t previously considered its proprietary data a potential revenue generator.

“Right now it’s used for internal drug target discovery and development. But it’s highly valuable to us as a user, so we’re convinced it would be of value to others who are in the same business that we are,” said Martin.

Martin said he’s not concerned about offering the data to competitors. “We’ve filed patents to cover what we’re focused on, but other companies are going to focus on other opportunities from the same database so it’s not necessarily going to be competitive at all,” he said.

The Eos gene expression data offers “more comprehensive coverage of the human genome” than gene expression data currently available from other sources such as Gene Logic, Martin said. Stapleton added that “the expression data in the areas of validation that Eos has worked in is unique.”

Eos, based in South San Francisco, Calif., currently has a bioinformatics staff of around 12. Both Martin and Stapleton said it was too early to tell whether any bioinformatics staff changes would take place due to the merger. Martin will become president of Pharma-copeia’s drug discovery operation, which will include Eos, and will also join the Pharmacopeia board of directors.

“Accelrys will not be affected in terms of organizational structure,” Stapleton said.

Stapleton noted that the merger, which is expected to close during the fourth quarter of the year, came as part of Pharmacopeia’s June decision to “review its strategic alternatives” in light of the revenue gap between its drug discovery business, which is sluggish, and its software business, which is profitable. “This is the first result of that review process.”

Pharmacopeia said one option would be an initial public offering of Accelrys, but Stapleton said the earliest such a decision would be made would be at least one full year after the June 2001 launch of the unit.

“These are many factors out of our control that would determine such a decision,” Stapleton said. “It’s not always your own performance as a company that dictates whether an IPO is appropriate.”

Accelrys anticipates upwards of $100 million in revenues in 2002.

— BT


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