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IP from Bayer Deal to Appear in Lion s Products; First Lead Engine Module to Launch this Month

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Lion’s five-year target discovery collaboration with Bayer may have expired on June 30, but the technology and expertise developed as part of that project will live on, according to a company executive.

Daniel Keesman, Lion’s co-CEO and COO, told BioInform last week that Lion has the rights to commercialize all the intellectual property generated as part of the LBRI deal, as well as that of a second collaboration with Bayer to build a pharmacophore informatics (PIx) platform.

The first fruits of these projects will appear in two products that Lion will launch later this month, Keesman said. Some features developed at LBRI will be included in the 1.1 release of Lion Target Engine, and key components of the cheminformatics know-how that Lion picked up in the PIx project will appear in the first module of the Lion Lead Engine product, LeadNavigator. Both offerings are scheduled for a late August release, Keesman said.

Lion received its final payment for the LBRI project in its first fiscal quarter, which ended June 30. The expiration of this deal will negatively impact the company’s future revenues, but Keesman said that the order pipeline for SRS and Target Engine is increasing, and that the company’s sales team is seeing “a very positive response” from potential customers for the upcoming LeadNavigator product.

Lion’s expansion into cheminformatics is a result of the Bayer collaboration as well as broader market demands. The company’s own experience with Bayer in the LBRI collaboration illustrates the pharmaceutical industry’s current strategy to shift R&D resources downstream, Keesman said. Although Lion fulfilled the original objectives of the LBRI project, and delivered around 1,600 targets, “Bayer did not feel it was necessary to extend [the collaboration] because their strategy has shifted during the last five years,” he said. “In 1999, Bayer entered into agreements with Millennium, Curagen, and Lion because they didn’t have enough targets. Five years later, they have enough targets. …The bottleneck has shifted to other things.”

Lion is following the shift in that bottleneck downstream to lead identification, and plans to leverage the experience it has gained in the PIx collaboration — along with several strategic partnerships — to build up its suite of cheminformatics software. Lion has already announced a cheminformatics development partnership with Deltasoft, and Keesman said that the company plans to enter similar partnerships with other cheminformatics companies. In addition, Keesman said, Lion and Bayer are in “continuous” discussions regarding an extension of the PIx collaboration.

Keesman said that Lion plans to continue its “cost optimization” strategy over the next few quarters, with the goal of reducing its cash burn to zero in its fourth fiscal quarter, which ends March 31, 2005. Keesman stressed that “there are no major layoffs planned” because the company’s current headcount of 150 has reached “critical mass.”

Lion is also planning to delist from Nasdaq and deregister from the Securities and Exchange Commission, but the company has not yet begun what Keesman described as a “long and complicated process” in accomplishing this goal. A number of “preconditions” stand in the way, Keesman said, such as the requirement that Lion have fewer than 300 US shareholders before delisting. The company expects to eventually save as much as €400,000 per quarter once this is accomplished, but any savings would not impact Lion’s bottom line until its 2005/2006 fiscal year.

— BT

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