By Mary Welch

LION Bioscience AG and Bayer AG entered in a $100 million, five-year partnership to create a research subsidiary in Cambridge, Mass., which, by using LION's information technology (IT)-based management system, will increase the speed and efficiency of Bayer's gene-discovery and drug-discovery efforts.

Bayer AG, based in Frankfurt, Germany, will make an up-front equity investment in LION, which represents about 10 percent of the company. During the five years, Bayer will fund all research and development efforts at LION's new subsidiary, LOPM Bioscience Research Inc. (LBRI). In addition, Bayer will pay an up-front fee on LION's existing IT solutions, management and setup costs. Any royalties on drugs developed from identified targets and markets are extra. Part of the $100 million includes an option for Bayer to purchase and absorb LBRI from LION.

"We are assuming that Bayer will spin out the subsidiary," said LION CEO Friedrich von Bohlen. "We expect it and included the price in the $100 million. The price is already set."

For its money, Bayer will get 500 new target genes, 70 new annotations on existing Bayer-owned gene targets and an undisclosed number of gene-expression markers and single nucleotide polymorphisms (SNPs). All targets will be identified and validated at LBRI using the IT systems. The data will be globally accessible to Bayer's scientists via the Internet. In addition, Bayer will receive unlimited, non-exclusive access to all software and IT-developments of LBRI.

"We are going to be kept busy," von Bohlen said. "It's a realistic number, but remember they are not validated targets. We have to show Bayer information that makes [the targets] worth investigating in more detail. It's all electronically derived."

LION, based in Heidelberg, Germany, will set up a team of at least 20 IT-system developers, software engineers and bioinformaticians in Cambridge.

"We chose Cambridge because there are a lot of companies and people involved in the genomics area," said von Bohlen. "The Boston area is a center of biotechnology resources including people, science, industry and culture that are essential to executing the visionary I-biology concept."

LBRI will identify and characterize targets and human genetic markers by in silico methods. This approach, called I-biology, provides a conceptual framework for data integration, software applications and consulting. It is based on a high-throughput alert system that screens all public domain and Bayer property genetic data on a daily basis, the company said.

Data will be analyzed by LION's functional algorithms in an automated fashion. These software modules will classify novel sequences into functional groups, analyze tissue distribution and expression patterns, predict three-dimensional structures, annotate known inhibitors and predict binding compounds.

In addition, LBRI will set up an advanced search and analysis program for the identification of genetic markers and SNPS, which will be classified into groups with functional relevance for particular diseases, patient stratification and pharmacogenetics.

All results will be documented in an Intranet-based system that can be accessed by both LBRI and Bayer researchers. Bayer will develop screening assays based on the identified targets.

"We started out selling software, but in the last 12 months, more companies are wanting solution integration software," von Bohlen said. "Software alone doesn't help. We saw no concept around the world that enables you to really broaden genomics and combinational chemistry."

Bayer and LION started talking last New Year's Eve in the Swiss Alps. Six months later, a deal was signed. "Bayer saw they had a flood of data they cannot handle," von Bohlen said. "So, we came up with this concept. Usually, you think of Bayer as a conservative company, but this group of people is very dynamic. They know that information management is the key. They are investing in integration, in I-biology, before anyone else is, as far as we know. Companies that don't invest in data management will lose."

The I-biology vision is to "integrate data from various sources and apply them for knowledge-sharing among a variety of people in several disciplines," von Bohlen said. "This leads to better decisions earlier in the research and development process, which means shorter times to market and fewer late-stage development failures."

Von Bohlen said he expects to make at least two more disclosures of partners for the I-biology approach by year's end.