Ebb & Flow

Investors tired of waiting for two promised large-scale bioinformatics deals from Lion hammered the stock last week, sending it to a 2002 low of E10.47 on Thursday. Over the week, LIO lost E3.2 (23%) to E10.7, pushing its market cap down to E201 million ($175 million).

Several analysts downgraded the stock last week, as a result of LIO's third quarterly report on Feb. 6. With figures just meeting expectations, analysts are worried about earnings prospects, and they continued to express doubts about LIO's bioinformatics business model.

In 1999 LIO did a $100 million deal to provide a company-wide informatics backbone for Bayer . Although the company announced a marketing collaboration with IBM in December, another mega-IT deal hasn't emerged (see BioCentury Extra, June 24, 1999, & BioCentury, Dec. 3, 2001).

"Lion's Bayer collaboration fanned sky-high expectations," said DG Bank analyst Thomas Hoeger. "And people have expected more to come, as Lion has repeatedly predicted since May of last year that it would announce two major new i-biology deals soon. So far, none of them has turned up. Now investors begin to realize that this deal is almost impossible to top anyway and start asking whether it is really possible to earn a lot with bioinformatics."

Earlier this month, analysts at HSBC Trinkhaus & Burkhardt downgraded the company to "reduce" based on their doubts about the business model (see BioCentury, Feb. 4).

LIO admitted it has had more trouble getting mega-deals than it anticipated. "Doing a $100 million deal is more difficult than upgrading from single-digit

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