By Mary Welch

Discovery Partners International Inc. (DPI), which sells a broad range of products and services to help the drug discovery process, filed to raise $115 million in an initial public offering.

Chase H&Q and Lehman Brothers, both of New York, are co-lead underwriters for the offering, and Warburg Dillon Read LLC, of New York, is the co-managing underwriter.

The San Diego-based company intends to use the proceeds for the continued development and manufacturing of existing products as well as new ones. In addition, the company may use a portion of the net proceeds to acquire new business technologies, hire additional personnel and expand its facilities.

According to the registration statement, the company, with its existing cash and proceeds from the IPO, should have enough operating funds to last at least through 2001.

DPI was formed in October 1998 with a mission to become a provider of drug discovery tools and services to the pharmaceutical industry. Toward that aim, the company focuses on the drug discovery process following the identification of a drug target through entrance into clinical trials.

The company develops and sells libraries of drug-like compounds, proprietary instruments, consumables and computational tools to generate compound libraries, and test, screen and optimize potential drugs.

It offers large, ready-made proprietary libraries of highly characterized, drug-like compounds and sells Directed Sorting instrument systems to help customers rapidly build compound libraries. The company also has expertise in development assays and offers high-throughput screening services. In addition, it offers medicinal chemistry lead optimization services.

According to the registration statement, the company intends to add products and services at the early stages of drug discovery in drug target validation and at the later stages, including expanding absorption, distribution, metabolism and excretion (ADME) and toxicology services.

DPI recently has acquired three businesses: Axys Advanced Technologies Inc., (AAT), of South San Francisco; Discovery Technologies Ltd., of San Diego; and Structural Proteomics. It spent $5 million in cash to acquire Discovery Technologies. In April, DPI acquired AAT, a wholly owned subsidiary of Axys Pharmaceuticals Inc., also of South San Francisco, in exchange for 7.4 million shares of common stock, a promissory note, and $50,000 in cash. At the time of the deal, AAT's stake in DPI was worth about $60 million (see BioWorld Today, April 13, 2000, p. 1). This month, DPI acquired 75 percent of the outstanding shares of Structural Proteomics for $1 million in cash and 150,000 shares of common stock.

The company generated more than $10.5 million in revenues on a combined pro forma basis during the first quarter of 2000. In 1999, on a pro forma basis, the company posted revenues of $27 million, and a net loss of $3.8 million. The number of shares used in calculating the 1999 pro forma net loss per share, basic and diluted, was 15.1 million. The company ended the year with $984,000 in cash.

Among the largest shareholders are Axys Pharmaceuticals with 43.2 percent of the shares prior to this offering; Enterprise Partners, of La Jolla, Calif., with 13.4 percent; Mayfield Fund, of Menlo Park, Calif., with 13 percent; and Crosspoint Ventures, of Irvine, Calif., with 10.8 percent.

Discovery Partners International's proposed Nasdaq ticker symbol is DPII.

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