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Lion Posts First Profit for Bioinformatics Unit; No New Timeline for Delayed Sale

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Lion Bioscience reported the first-ever profitable quarter for its bioinformatics business last week, but company officials were unable to provide an expected closing date for the sale of the unit, which was originally expected to wrap up before the end of the summer [BioInform 08-08-05].

"Perhaps our assumption to get the deal done before summer was just too optimistic," Lion CFO Peter Willinger told BioInform last week. Nevertheless, he said, "we are still very much convinced that we can close this deal soon, and we are working together with the interested party to get all the information that is required delivered [to them], and we are close to getting the deal done."

Willinger did not disclose the entity that is purchasing the bioinformatics business, but he did confirm that Lion is in discussions with only one party. At one point, more than 20 potential buyers were bidding for the bioinformatics unit [BioInform 05-30-05].

Willinger also declined to take a stab at a new closing date. "That also depends on the party that wants to acquire it, and therefore it's difficult to make an exact date," he said.

He noted that Lion hopes to wrap the deal up quickly "to give our customers some confidence [about] how to proceed with SRS," but pointed to the segment's second-quarter profitability as proof that any uncertainty surrounding the delayed sale didn't negatively impact the business as much as it could have.


"Perhaps our assumption to get the deal done before summer was just too optimistic," but "we are still very much convinced that we can close this deal soon, and we are working together with the interested party to get all the information that is required delivered [to them], and we are close to getting the deal done."

"We are quite happy that this is the first time we have achieved a positive result, which is remarkable under the conditions of the current sales process," he said.

Lion said in its second-quarter financial statement that the bioinformatics segment "is not negatively impacted by the sales process," and was "able to close new customer contracts" during the quarter.

But the bioinformatics business, which Lion now lists as discontinued operations, was only able to crawl out of the red by dramatically cutting its expenses for the quarter — counteracting a 40-percent year-over-year slide in revenues.

Total revenues for the quarter ended Sept. 30 fell to €1.5 million ($1.8 million), from €2.6 million in the prior-year period. All revenues reported for the current quarter came from the discontinued bioinformatics business. In the year-ago period, €2.5 million came from the bioinformatics business and €100,000 came from Lion's continuing operations, which the company intends to maintain as a holding company following the sale of the bioinformatics unit.

Total expenses for the bioinformatics business fell to €1.2 million from €5.0 million in the second quarter of 2004. These expenses included €631,000 in R&D spending for the bioinformatics business, down from €1.4 million in the prior-year period. Lion also lowered the expenses for its continuing operations to €500,000 from €900,000 in the prior-year period.

Lion's total headcount, which has been declining steadily since it peaked at nearly 600 in 2003, is now down to 49 employees: five in Heidelberg, Germany; 39 in Cambridge, UK; and five in Cambridge, Mass.

The company's total net loss fell to €105,000 in the second quarter from €3.44 million in the comparable period of 2004. The discontinued bioinformatics business posted a profit of €227,000, compared to a loss of €2.88 million in the same period of last fiscal year, while the net loss for Lion's continuing operations was €300,000 compared to €600,000 in the prior-year period.

Lion said in a statement that its overall net loss resulted primarily "from the ongoing sales process of the bioinformatics business and from legal and consulting fees."

Lion held €8.8 million in cash and cash equivalents as of Sept. 30, and €14.8 million in marketable securities.

For its full fiscal year, which ends March 31, 2006, Lion said it expects its continuing activities to reach break-even. "Including the one-time gain of the sale of the bioinformatics unit, a positive result is probable," the company said.

— Bernadette Toner ([email protected])

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