Eli Lilly and Co. said yesterday that it will acquire SGX Pharmaceuticals in a $64 million cash deal that will pay shareholders in the San Diego biotech a substantial premium.
Lilly will pay $3 a share, or 119 percent above the stock's closing price of $1.37 yesterday. In after-hours trading, SGX shares jumped to the buyout price.
SGX, which employs 120 people, focuses on the discovery and development of cancer drugs. Its pipeline of experimental drugs and drug targets was attractive to Lilly, which like most pharmaceutical companies, is seeking to build a future pipeline of products.
But what makes SGX even more attractive to the big pharmaceutical company is its technology that allows scientists to see the structure of disease targets in the body so that a drug molecule can be designed to fit into it like a lock and key.
This gives Lilly the technology to investigate its products under development and make them better. It has used SGX technology on its targets in collaborations dating to 2003.
Lilly, based in Indianapolis, also collaborates with San Diego-based Amylin Pharmaceuticals in the co-marketing and sale of the diabetes drug Byetta.
“After a successful collaboration over the past several years, we are excited to bring the scientific and technological expertise of SGX into Lilly's research organization, while at the same time expanding our presence in the San Diego area,” said Steven Paul, Lilly's executive vice president, science and technology. “We will leverage the combined resources of both companies to strengthen our structural biology capabilities and seek out innovative therapies for patients.”
That bodes well for SGX employees, said Michael Grey, the company's chief executive.
“Obviously the technology component of SGX is important, but the most valuable part of any platform is the human capital that is an important part of this transaction,” Grey said.
However, he could not be more specific about the future of the SGX jobs.
SGX, formerly known as Structural Genomics, started out as a technology, or “platform” company, that gave drug discovery companies the tools they needed to improve the process for finding or discovering new products.
But the investment community eventually grew wary of platform companies, and many, including SGX, evolved into drug discovery companies. Drug discovery is a much longer proposition, taking up to 15 years and more than $1 million of investment, without a guarantee a product will make it to market.
Today, when it is difficult for big pharmaceuticals and tiny biotech companies to find investors, this deal looked like the best path forward for SGX shareholders, Grey said.
“We believe that this transaction represents a timely opportunity to place our programs and technology assets in the hands of a world-class company with the experience and resources to advance innovative treatments for patients,” he said.
The company's board unanimously supported the deal, which must be approved by shareholders before it can be completed later this year.
Terri Somers: (619) 293-2028; terri.somers@uniontrib.com
