LION bioscience AG is closing the door on drug discovery.

The Heidelberg, Germany-based firm said it is discontinuing its iD3 business by the end of the calendar year in order to focus on what it termed its core business - providing integration and decision support solutions for the life science industry.

The move is aimed at achieving LION's goal to break even in the fourth quarter of its next fiscal year. The current fiscal year will see savings from discontinuing drug discovery, as well as undetermined one-time charges resulting from the closing.

"The full impact really won't be felt until the next fiscal year's financials," LION media relations manager Patricia Hudson said. "The expenditures for the whole iD3 business amounted to roughly €20 million per year, and so the expectation is that after the one-time charges and affiliated issues surrounding the closing are resolved, the savings could be up to €20 million a year."

LION said over the next few months it would close its biology labs in Heidelberg and chemistry labs in San Diego, eliminating 86 full-time positions.

The company added it would continue efforts to commercialize intellectual property and technologies already developed by its drug discovery operations.

"There certainly is some value that can be extracted from iD3," Hudson said, though she declined to detail specific intellectual property and technologies from the discovery unit that would be commercialized.

The decision is part of a previously reported plan to focus LION's business around its core. LION said its information technology business, unlike pure-play IT companies, is aided by its knowledge in discovery-related science.

"What is unique about what LION can bring to the market is this combination of science and expertise," Hudson said. "The company profited enormously in terms of its know-how from what lab activities it had, and has already leveraged a lot of that expertise into integration solutions.

"Obviously, given the state of the market there was also a very compelling financial reason for discontinuing the drug discovery business - it's no secret that drug discovery is a very cost-intensive business."

She added that discontinuing drug discovery would have a direct cost-saving impact on LION's cash position, saying that its coffers hold a bit more than €100 million (US$98.5 million).

LION said its data and application integration business has more than 60 industrial and 130 academic customers worldwide. Its latest offering, the LION DiscoveryCenter integration platform, links chemistry and biology data regardless of format. It combines LION's SRS technology that integrates biology data with technology acquired from Cleveland-based NetGenics Inc. The €17 million transaction in January brought DiscoveryCenter to LION in exchange for about 1.12 million shares of LION.

Introduced at last month's Drug Discovery Technology conference in Boston, Hudson called DiscoveryCenter the centerpiece of LION's latest products.

"Again, that's where we see that LION has a unique advantage over so many of these other informatics players," she said. "It really is a question of having an integration platform that is robust enough and flexible enough to really deal with the amount and variety of research data that drug discovery companies have to deal with."

LION's shares (NASDAQ:LEON) climbed 85 cents Friday, or 25 percent, to close at $4.25.