Eli Lilly to Buy SGX Pharmaceuticals for $64 Million

Drug developer Eli Lilly will buy SGX Pharmaceuticals for about $64 million in cash in an effort to expand its drug discovery efforts, the companies said Tuesday.

Indianapolis-based Eli Lilly will pay $3 per share for the San Diego-based biotech company, marking a premium of more than double SGX's closing price of $1.37 Tuesday. The companies have been collaborating since 2003 and the deal will now allow Eli Lilly to expand its biotechnology development platform along with a portfolio of potential cancer treatments.

SGX shares quickly jumped to within range of the buyout price in after-hours trading, soaring to $2.87.

"We will leverage the combined resources of both companies to strengthen our structural biology capabilities and seek out innovative therapies for patients," said Steven M. Paul, executive vice president of science and technology for Eli Lilly, in a statement.

Eli Lilly is among several large pharmaceutical companies who have bought biotechnology operations in a bid to expand development pipelines. In November, Kenilworth, N.J.-based Schering-Plough bought Dutch biotech company Organon BioSciences for about $14.43 billion.

Eli Lilly, which sells Byetta for diabetes and Cymbalta for depressive disorder, among other products, said it expects a charge for the SGX buyout, but did not provide an estimate. The deal is expected to close in the second half of 2008 and is still contingent on SGX shareholder approval and antitrust clearance.

"We believe that this merger provides an excellent opportunity for the potential of SGX's platform and pipeline to be realized, while simultaneously providing our shareholders with attractive financial terms," said Mike Grey, SGX's chief executive.

Shares of Eli Lilly rose $2.25, or 4.9 percent, to close at $48.46.