West Coast Editor

Struggling LION bioscience AG said its operating forecast for the current fiscal year and the next one cannot be achieved, and the firm is reducing its staff by half and changing the structure of its board.

"Some tough decisions were made, but it had to happen," said Tracy Coffey, spokeswoman for Heidelberg, Germany-based LION.

The company's stock (NASDAQ:LEON) closed Thursday at $1.53, down 6 cents.

LION said its number of employees would drop from 142 as of Sept. 30 to between 50 and 70 in the course of fiscal-year 2005 to 2006, when the company aims to reach profitability.

"The business plan is viable, and I think this will work," Coffey said. A day earlier, the firm said it had re-appointed its executive board, and it named Thure Etzold CEO and appointed Peter Willinger chief financial officer.

LION will concentrate its bioinformatics efforts, led by the core product SRS data-integration platform, in the existing subsidiary in Cambridge, UK. The chemoinformatics push, spearheaded by the core product LeadNavigator software, will continue at the facility in Cambridge, Mass. The Heidelberg office will be reduced to basic headquarters functions, with staff assigned to the chemoinformatics partnership with Leverkusen, Germany-based Bayer AG. (See BioWorld Today, June 24, 1999.)

"The change to the company itself - having the biology and chemistry separated from LION - is fundamental," Coffey said.

LION's co-CEOs and supervisory board resigned in October, citing prohibitive costs for obtaining new directors and officers' insurance. Daniel Keesman, chief operating officer and co-CEO, and Martin Hollenhorst, chief financial officer and co-CEO, stepped down. (See BioWorld Today, Oct. 20, 2004.)

The firm's supervisory board next appointed Joseph Donahue and Thure Etzold co-CEOs. Then the supervisory board itself resigned, citing the same reason that sent Keesman and Hollenhorst packing. A new supervisory board was put in place Nov. 4. Under the latest arrangement, Donahue moves from the executive board and remains responsible for global sales while continuing as president of LION bioscience Inc., its U.S. subsidiary.

LION's recent woes offer a stark contrast to the firm's wildly successful initial public offering, which raised about $181 million in the summer of 2000, helped by a mini-boom in Germany. (See BioWorld Today, Aug. 14, 2000.)

"The bubble burst, and I think it's been a huge period of consolidation," Coffey said. "9/11 didn't help. We lost our CFO," Klaus Sprockamp, who was in the World Trade Center during the attacks. Coffey herself was just going in; it was her first day of work. (See BioWorld Today, Sept. 18, 2001.)

"LION's had to make a lot of cutbacks but we still have a really strong franchise," she said. "In comparison to other players in the industry, I think LION is still seen as formidable."

Shares of LION trade on Neuer Markt as well as Nasdaq, although this month LION said it will voluntarily delist its American depository shares from Nasdaq and terminate its American depository receipt facility, effective at the close of trading Dec. 22.

"While we were thrilled to be listed on Nasdaq, it wasn't paying off," Coffee told BioWorld Today. Although trading volume is low in the U.S., being listed on Nasdaq and registered with the SEC represents between 7 percent and 7.5 percent of LION's costs, she added.