End game plays out for Tripos

STORY UPDATE

ST. LOUIS—July 5, 2007—Given the recent sale of its Discovery Research Sales and Services Business, Tripos was considered a "public shell" by the Nasdaq Listing Qualifications Department and therefore its common stock has been delisted from The Nasdaq Global Market. Going forward, bid/ask quotations will be made on the OTC Bulletin Board and the company will continue to be eligible for quotation on the Pink Sheets.

ST. LOUIS—The long road of divestiture finally came to end for Tripos in mid-May when the company announced it had off-loaded its Tripos Discovery Research (TDR) division located in Bude, England. The buyer, for the rather small sum of $350,000, is Commonwealth Biotechnologies Inc. (CBI), a Richmond, Va.-based CRO which specializes primarily in proteomic and genomic preclinical research.

The sale to Commonwealth comes roughly two months after Tripos announced it had terminated the sale agreement it had with New Jersey-based drug discovery company Provid Pharmaceuticals Inc. That deal, valued at $2 million and announced in January, fell apart when Provid wasn't able to raise the necessary financing by February 14.

While the $350,000 Tripos fetched from Commonwealth is a small fraction of what Provid had bid, Dr. John P. McAlister, president and CEO of Tripos, said it was the best deal for Tripos shareholders.

"At this point, Tripos management and the rest of the board were looking for the best offer and that was also predicated on the ability to get the deal done in a reasonable time frame," McAlister says. "We didn't want to end up in a situation where it couldn't be consummated. Commonwealth's offer was good, solid and could get the deal done."

For Commonwealth, company CEO Paul D'Sylva says, "I can't see how we can do anything but good things with this deal."

There is good reason for such optimism. Under the terms of the acquisition, CBI made an up-front payment of $350,000 to Tripos, which would be followed by payments of as much as $1.8 million generated from current TDR billings and receivables. But a key component of the deal is a concurrent sale-leaseback transaction with the Southwest England Regional Development Authority (SWERDA) under which TDR will net cash of more than $4 million and in turn sign a 12-year lease in Bude, as well as be released from grant repayment obligations to SWERDA and the English Department of Trade and Industry.

When it is all sorted out, D'Sylva says his company acquires TDR for $350,000 and begins its management of the turnaround with roughly $2 million in working capital. And by picking up TDR—which recorded revenues of $6.5 million in 2006—CBI has effectively added 50 percent more revenue for a very small investment.

But aside from the attractive finances of the deal, the TDR operation adds capabilities the company did not have previously.

"This acquisition fits our strategy and that is to become a comprehensive drug discovery services company," D'Sylva says. "TDR is very strong in medicinal chemistry, synthetic chemistry as well as having expertise in GPCRs. Combined with our strengths in peptide chemistry, immunology, proteomics and genomics, we think this puts us in a strong position as a provider of integrated research solutions."

Much of the strength of what CBI is acquiring from Tripos was built during what turned out to ultimately be the company's downfall: the three-year, $90 million research services deal TDR had with pharma giant Pfizer. This includes its proprietary LeadQuest and LeadStream compound libraries for screening potential new drugs.

"This is one of the best med-chem labs operating today," says D'Sylva. "They became very good at what they do working with Pfizer and have proprietary compounds and technology that you can't find anywhere else."

CBI plans to keep the operations for TDR centered in Bude and retain virtually all of the 36 people currently employed there.