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Oxford Molecular to Sell Remaining Business to Pharmacopeia, Disband

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After months of speculation, British bioinformatics company Oxford Molecular Group said it would sell its software division to Pharmacopeia, a drug discovery services company, and liquidate the remainder of its assets.

The announcement puts an end to the uncertainty surrounding the fate of Oxford Molecular, but it raises a big question for other struggling bioinformatics companies: Can such software companies survive as stand alone entities? Over the past few years, several bioinformatics companies have either been gobbled up by bigger genomics companies or expanded their offerings.

Pharmacopeia agreed to purchase Oxford Molecular’s software subsidiaries, which includes Genetics Computer Group, a developer of widely-used bioinformatics software, as well as a cheminformatics holding in a deal valued at approximately $27 million. The transaction will include cash and the assumption of certain liabilites.

The acquisition, Pharmacopeia’s third in two years, further extends the Princeton, NJ-based company’s informatics capabilities in drug discovery. The company purchased Molecular Simulations, a provider of molecular modeling and simulation software, two years ago and cheminformatic company Synopsys Scientific Systems of Leeds, UK, in February.

“The acquisition of Oxford Molecular’s software business is strategically very significant for Pharmacopeia,” Joseph Mollica, the company’s chairman, president, and CEO, said in a statement. “We believe their bioinformatics products are unmatched in quality and scientific utility.”

Mollica said he was especially excited about Oxford’s functional genomics and proteomics capabilities. GCG’s sequence analysis strength would be combined with Pharmacopeia’s strength in determining protein structures and functions, he said.

Oxford Molecular acquired GCG in 1997 but has been racked with financial problems since. In 1999, Oxford posted losses of 26 million pounds ($39 million). In July Oxford sold its Cambridge Discover Chemistry division to Millennium Pharmaceuticals for $50 million, further raising questions about what would become of the software division.

 “GCG is a very strong brand name – recognized worldwide and used worldwide,” said Joleen Rau, marketing manager of bioinformatics at GCG. Yet sales have been disappointing this year due in part to uncertainty about the company’s future. Because of the steep losses and flagging investor confidence, Rau said the company believed it was in the shareholders’ best interest to sell its software division and close up shop.

After divesting itself of its software units, Oxford Molecular will liquidate the remainder of its assets. The company expects to return between 41 pence and 44 pence per share to shareholders. That should offer some comfort to investors who have seen the stock plummet to a low of 20 pence earlier this year after reaching a high of 260 pence in February 1998.

Shares in Oxford Molecular, which are traded on the London Stock Exchange, climbed almost 10 percent to 34 pence immediately following news of the sale.

The pending liquidation of Oxford Molecular underscores the difficulties many bio-informatics companies face.  Many of the leading independent players in the field just a couple of years ago no longer exist or have broadened their scope outside of bioinformatics. 

Last year Molecular Applications Group dissolved and divvied up its technologies and staff between Celera and Affymetrix; bioinformatic software-developer Pangea Systems became the genomic-research Internet portal DoubleTwist; and Neomorphic has expanded its business model to include drug target discovery in addition to software development.   

Founded in 1982 out of the University of Wisconsin, Madison, GCG was a pioneer in the field of bioinformatics and  a leading software provider to researchers. Drawn by its reputation, Oxford Molecular scooped it up for $20 million.

The current deal is subject to shareholder approval. A vote is expected to take place within 60 days.

Oxford Molecular said it plans to change its name to OM 2000 as it prepares to sell off its remaining assets.

Aaron J. Sender

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