Looking to bite deeply into its bioinformatics business, LION bioscience AG said it wants to partner or sell its drug discovery unit in a move designed to change its strategy and increase profitability.

"We've always seen our drug discovery unit as a way to showcase our IT solutions and demonstrate how it can speed up the drug discovery process," said Andrea Kreisselmeier, LION's vice president of corporate communications. "At the same time, we wanted to generate [intellectual property] and develop a technology platform. We've achieved all of those goals."

Although Heidelberg, Germany-based LION said the unit shaved 20 percent off drug discovery time through in silico procedures, it plans to focus less on its drug discovery and diagnostics business, marketed under the name iD3. Intellectual property in the form of lead series and co-factors is being secured through patent filings.

"We were faced with the decision of going further into the drug discovery process and becoming more of a drug discovery company or a little pharmaceutical company, but we decided we see our core strengths in providing IT solutions for the industry," Kreisselmeier said.

LION expects to have partnered or sold its drug discovery business by the end of the calendar year. Going forward, it plans to concentrate on the information technology side of its business. LION boasted more than 60 industrial and 130 academic customers for its integration solutions.

"We've conducted a market study that outlines this is a major market that's required by the industry," Kreisselmeier said.

During the last fiscal year, LION acquired Cleveland-based NetGenics Inc. in a move that merged SRS, LION's integration technology, with NetGenics' integration environment, DiscoveryCenter, and created a life sciences platform that includes biological and chemical information. (See BioWorld Today, Jan. 16, 2002.)

LION completed the deal for privately held NetGenics for 1.12 million LION shares, valued at $17.6 million at the time.

Kreisselmeier declined to provide a valuation for the drug discovery unit, but in a press conference, CEO Friedrich Von Bohlen said the company wants to use the iD3 partnership or investment proceeds to ease LION's net loss.

In its year-end report released Wednesday, LION reported a net loss to €54.6 million (US$51.3 million), more than double the loss of €23.9 million the year before. The company released more than 70 employees in February.

For the year, revenues grew more than 73 percent to €40.4 million from €23.3 million. As of March 31, LION had €124 million in cash and marketable securities on hand.

The company said it expects moderate revenue growth, from 5 percent to 20 percent, for the coming fiscal year, but is targeting a break-even in fiscal 2004.

The company's stock (NASDAQ:LEON) fell 75 cents Wednesday, or 15.3 percent, to close at $4.15.