Lion Bioscience this week officially closed the lid on its history as a bioinformatics company with the acquisition of the operational business of drug-development firm Axaron Bioscience.
Just days after reporting its first profitable fiscal year, which it attributed to the sale of its bioinformatics business to BioWisdom (see sidebar for financial details), Lion announced that its supervisory board had approved the acquisition of Axaron in order to reinvent itself as a drug-development company.
"After having sold the bioinformatics unit, we said, 'This is a step out of the bioinformatics business and we are now looking for something else, which is drug discovery,'" Franz-Werner Haas, general counsel of Lion, told BioInform. Axaron focuses on central nervous system disorders, particularly stroke.
Lion had previously not disclosed its plans for the remaining business after selling its bioinformatics group in March 2005, stating publicly only that it was evaluating a number of options, including acting as a holding company that would manage and invest the firm's â‚¬23.4 million ($29.9 million) in remaining cash [BioInform 03-21-05].
Then in February this year, Peter Willinger, CFO of Lion at the time and now CEO of the new entity, hinted that the company was considering other options for the continuing operations [BioInform 02-03-06]. Now, under the terms of the Axaron transaction, Lion will invest its remaining cash in the new drug-development firm.
"It's not a Lion story -- it's not a bioinformatics story -- and it is not the story of Axaron. It will be a new story of going into drug discovery in the area of stroke, and therefore we think it would be a good idea to change the name of the publicly listed company."
Axaron's majority shareholder, chemistry giant BASF, will invest an additional $8.96 million in the new company, and two investment firms led by SAP founder Dietmar Hopp -- DH-Capital and OH Beteiligungen -- will contribute $26.89 million, bringing the total funding for the new firm to approximately $65 million.
As an intermediary step, the Hopp family, Axaron, and BASF had created a firm called Sygnis Bioscience, which will assume the business activities of Axaron after its shareholders approve the sale, expected to take place at the company's annual general meeting on Aug. 10.
Lion will then acquire all shares of Sygnis with 78.6 percent of its approved capital. In exchange for these shares, around 7.8 million new Lion shares will be issued to Sygnis shareholders.
Following the transaction, the Hopp family will own 20.5 percent of the new firm; Friedrich von Bohlen, founder and chairman of Lion's supervisory board, will own 7.6 percent; BASF and Bayer, an early investor in Lion, will own 5.1 percent each, and Lion shareholders will own 61.7 percent.
Von Bohlen currently owns 10.6 percent of Lion and Bayer owns 7 percent.
The two Hopp investment companies and BASF have also committed an additional â‚¬18 million to the new company. These firms have also offered to acquire all shares from Lion's existing shareholders at â‚¬1.82 per share -- a 5-percent premium over their closing price the day before the acquisition was announced. Shareholders are free to sell their shares or continue to invest in the new company, Haas said.
Lion's shares rose 27 percent the day of the announcement, closing at â‚¬2.20 -- a new 52-week high.
Lion Posts First Fiscal Profit after
Lion Bioscience said last week that the sale of its bioinformatics business helped it reach profitability for the 2005/2006 fiscal year -- the first profitable year in the company's history.
In March, Lion sold its bioinformatics operations to UK-based BioWisdom for â‚¬4 million ($5.1 million) [BioInform 04-07-06].
Lion's results for the quarter ended March 31 include a positive impact of â‚¬2.1 million ($2.7 million) from the sale, which includes the sales proceeds "less transferred book values as well as selling costs," the company said.
For the full year, the company recorded a profit of â‚¬1 million, compared to a net loss of â‚¬12.9 million in the 2004/2005 fiscal year.
Revenues including the bioinformatics group, which the company has recorded as discontinued operations, totaled â‚¬6.2 for the fiscal year, compared to â‚¬10 million in fiscal year 2004/2005.
Revenues from continuing operations were â‚¬600,000 for the year, and were due to in-licensed products from Lion's US subsidiary in Cambridge, Mass.
Cash and cash equivalents, including marketable securities, totaled â‚¬23.4 million as of March 31.
While the combined company will operate under the Lion name and trade under the LIO ticker symbol on the Deutsche BÃ¶rse, there's a strong chance that the new entity will change its name -- likely at the company's next general meeting this fall, Haas said.
"We will broach the next general meeting with the idea of changing the name of the company," he said. "It's not a Lion story -- it's not a bioinformatics story -- and it is not the story of Axaron. It will be a new story of going into drug-discovery in the area of stroke, and therefore we think it would be a good idea to change the name of the publicly listed company."
Axaron, like Lion, is based in Heidelberg, Germany. The company was founded in 1997 as a joint venture between BASF and Lynx Therapeutics (now Solexa). Axaron became an independent firm in 2001 and currently has 35 employees. The company has raised a total of â‚¬47 million since 1997.
AX200, the company's lead candidate for the treatment of strokes, is currently being tested in a phase IIa clinical trial. Lion expects this clinical trial to be completed by the end of 2008, and has estimated the potential market for the drug at $1.3 billion per year.
Bolstered by its status as a publicly traded firm and its influx of cash, the new entity is expected to continue to expand "through a combination of organic growth and product acquisitions," Axaron and Lion said in a statement.
The acquisition is subject to the approval of Axaron shareholders at the company's general meeting in August, but Haas noted that BASF owns 85 percent of Axaron's shares and has already agreed to the transaction, so the deal is expected to proceed as planned.
-- Bernadette Toner ([email protected])