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Lion Firms Up Post-Trega Plan; Layoffs, New Hires Mark Cheminformatics Focus

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Lion Bioscience’s decision last week to lay off approximately 25 people from its staff of 120 at its San Diego operation, formerly Trega Biosciences, was spurred by the need to limit Trega’s focus to better match Lion’s business model, said Friedrich von Bohlen, CEO of Lion.

“In San Diego we offered three types of services: software, discovery, and a combinatorial library. We decided that combinatorial chemistry is not our core business,” said von Bohlen. “We decided to stay with our focus and reduce our activities in the combinatorial chemistry business.”

Lion has also halted its genome sequencing activity, which it began in 1997.

Approximately 20 percent of the San Diego workforce was let go in Lion’s plan to restructure the operation as an “R&D center of excellence” for chemistry, medicinal chemistry and computational sciences. Lion plans to develop predictive software tools at the facility for ADME (absorption, distribution, metabolism, and excretion), toxicology, and cheminformatics.

As part of the restructuring, Lion hired three new executives from cheminformatics company MDL Information Systems. Rudolph Potenzone will serve as president and CEO of Lion’s US operations, Daniel Keesman will be vice president of global sales and marketing, and Mark Canales will serve as senior vice president of cheminformatics development.

Potenzone replaces Michael Grey, who resigned from his position as CEO and president of Trega.

Von Bohlen said the restructuring falls in line with Lion’s goal to establish a horizontal enterprise-wide informatics system that combines biology, chemistry, and pre-clinical research with clinical data and information. The Trega acquisition, along with Lion’s recent partnerships with clinical software company Gesellschaft f r Medizinische Datenverarbeitung and cheminformatics provider Tripos have given Lion the opportunity to significantly expand beyond its bioinformatics roots.

“Lion is definitely strong in bioinformatics and is definitely strong in pre-clinical informatics through the merger with Trega. But Lion was not known to be strong in cheminformatics,” said von Bohlen. “Now that three key employees from MDL have joined Lion…we have, in addition to our collaboration with Tripos, very strong experience in the cheminformatics field, which fills the gap between biology and the pre-clinics.”

The San Diego facility will focus both on cheminformatics and lab synthesis and screening. The lab work will help “fine-tune the activities of the informatics development,” Potenzone said. “This will give us the opportunity to design tools and capabilities never before implemented and delivered in this marketplace.”

The San Diego R&D center and Lion’s Heidelberg facility will comprise “a comprehensive but controlled drug discovery pipeline from early discovery up to and including pre-clinical research,” said von Bohlen. The company uses its drug discovery capability to demonstrate how its IT solutions can improve productivity for prospective clients, von Bohlen said.

While Lion shores up its tools and expertise to address each stage of the drug discovery pipeline, von Bohlen noted that he still sees “one missing piece.”

“I think we need to get stronger in the pharmacogenetical side,” von Bohlen said. “We have some activities going on here but we face the reality that there are companies out in the field that have more than we have. We are observing these companies very carefully and it is likely that we will seek some partnerships.”

Von Bohlen explained that Lion’s partnership strategy enables the company to offer a range of tools while concentrating on its integration activities. “There are zillions of tools companies and we will never have a customer who says I don’t want any tool from them. So we have to face reality and say the customer will always blend on the application side, but the customer cannot blend on who he is giving the responsibility of building the corporate-wide solution.”

While acknowledging that tools are often a good way to forge a long-term relationship with a client, von Bohlen said that tool providers miss out on the upside potential of delivering system-wide solutions to customers. On top of the license fees it receives for its software solutions, Lion receives royalties and downstream fees for the integrated systems it builds for its clients.

Von Bohlen said that Lion would continue to seek partnerships for new tool offerings, but would be more likely to acquire companies that could add to its integration capabilities.

Lion is on track to become profitable in 2003 and has “lots of cash in the bank,” von Bohlen said. While the recent market downturn has not affected Lion’s business, he noted that it was a contributing factor in the decision to rein in the company’s sequencing and combinatorial chemistry activities.

“The markets force us now to come back to the basics of business and that is profit,” said von Bohlen. “The question is how do you want to become profitable and when. Everything else, let it go.” Von

Bohlen added that if Lion continues to focus on its core business, “we can stand up under any market conditions.”

— BT

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