By Matthew Willett
Lion Bioscience AG got a bright iDEA when it decided to buy Trega Biosciences Inc. for about $35 million in stock, a 96 percent premium to Trega's opening price Wednesday.
Heidelberg, Germany-based Lion will purchase the data analysis and information management company with $35 million in American Depository Shares, which are expected to be valued between $68 and $92 apiece.
Lion CEO Friedrich von Bohlen said the companies can combine to revolutionize drug discovery.
"Trega has a similar philosophy to the one we have," von Bohlen told BioWorld Today. "The real goal is not technology. The real goal is not software. The real goal is to address the deficiencies in research and development productivity and the effectiveness of the whole process. That cannot be changed by another software program; it has to be addressed by something different than has been done before."
To that end the companies' post-merger activities will focus on developing information management systems that run the length of the drug discovery process. Trega CEO Michael Grey said the expanded Lion will give researchers more fuel for intelligent decisions.
"The aim is to provide an integrated range of products to enable companies to do information-driven drug discovery," Grey told BioWorld Today. "The object is both improving the speed of drug discovery and enabling researchers to make better decisions along the way. It is turning data into information and then knowledge so researchers can make intelligent decisions about which compound to take forward. It's making better decisions more rapidly earlier in the process."
San Diego-based Trega's platform includes its iDEA predictive absorption, distribution, metabolism and excretion simulation system. The company also markets the ChemFolio libraries of small molecules. Lion's life sciences informatics business includes the SCOUT integration and analysis product line and i-biology, an overall research and development/information technology solution.
Trega's stock (NASDAQ:TRGA) opened Wednesday at 68.75 cents. Its stock gained 15.63 cents, or 23 percent, Wednesday to close at 84.38 cents. Lion (NASDAQ:LEON) gained $6 to close at $77.
The purchase at $1.35 per share is the product of years of falling stock prices at Trega, which had fallen 67 percent this year as of Friday and debuted on the market in March 1996 through a 3.8-million-share IPO at $8 per share.
Outside of a high point in the first quarter of this year - Trega closed at $13.375 on March 7 - the company's stock hasn't risen beyond its initial offering price since April of 1996.
"Against the current Trega price we believe this is an attractive price for Trega shareholders," Grey said. "I think it's a good deal for both companies' shareholders. We have the opportunity here to build a company where there is an integrated information approach to drug discovery, and we can build very rapidly significant value for Lion and Trega shareholders."
Von Bohlen agreed the price is fair.
"Analysts have asked why we'd pay more than a 100 percent premium, but I think it's a fair price," he said. "It reflects the market reality of the last few weeks and months. There's a fair upside potential and a nice upside to the Trega shareholders to have Lion stock, which is more volatile, hopefully, more one way than the other."