Lilly Will Buy SGX Pharmaceuticals for $64 Million

Eli Lilly & Co., the first company to market insulin, said it would buy SGX Pharmaceuticals Inc., a maker of experimental cancer drugs, for $64 million in cash, reported The Bloomberg.

Lilly will pay $3 a share for San Diego-based SGX, which has no marketed products, according to a statement today from the companies. The offer is more than double the $1.37 price for SGX on the Nasdaq Stock Market at 4 p.m. New York time. SGX shareholders will vote on the deal by the end of September, said Michael C. Grey, SGX's chief executive officer, in a conference call with analysts today.

SGX entered into a collaboration with Indianapolis-based Lilly in 2003. SGX's technology enabled Lilly to model molecules it was targeting for therapy in three dimensions. SGX had a drug fail last year in the second of three phases of testing needed to gain U.S. approval and another fail in the first phase in February, analyst George Zavoico of Cantor Fitzgerald in New York said in a telephone interview today.

``They needed a unique financing partner, or to be acquired,'' Zavoico said. ``Clearly Lilly liked their partnership, although we don't know why, since Lilly and SGX have been silent on what they're doing.''

SGX reviewed the options presented by its financial advisers from Lazard Capital Markets and concluded that several factors, including the difficult environment now for obtaining financing, led them to agree to a deal with Lilly, Grey said.

Lilly will take a charge in the second half of the year, said spokesman Mark Taylor. If SGX decides not to go ahead with the deal, the company would have to play Lilly a $2 million termination fee and up to $250,000 to cover the drugmaker's expenses, according to a regulatory filing today.

SGX's existing agreement with Novartis AG, Switzerland's biggest drugmaker, for a follow-up to Novartis' Gleevec cancer medicine, will not interfere with the acquisition, Grey said. SGX may receive royalties on those compounds, according to the company's Web site.

Todd Myers, chief financial officer of SGX, wasn't immediately available to comment.