Drug developer Eli Lilly and Co will buy San Diego-based biotech company SGX Pharmaceuticals for about $64 million in cash in an effort to expand its drug discovery efforts, the companies said yesterday.

Under the terms of the agreement, Lilly will acquire all of the outstanding shares of SGX common stock at a price of $3 per share, for a total purchase price of approximately $64 million.

This marks a 100 per cent plus premium on the latter's closing price of $1.37 on Monday. Consequently, post announcement, SGX shares quickly jumped in after-hours trading, soaring to $2.87. In comparison, shares of Eli Lilly rose $2.25, or 4.9 per cent, to close at $48.46.

The acquisition will allow Lilly to integrate SGX's structure-guided drug discovery platform into its drug discovery efforts. It will also give Lilly access to Fast, SGX's fragment-based, protein structure guided drug discovery technology, and to a portfolio of preclinical oncology compounds focused on a number of high-value kinase targets.

The ongoing collaboration also provides Lilly with access to the SGX synchrotron beamline facility, SGX-Cat, which is a synchrotron facility enabling X-ray crystallography and protein structure determination built by SGX at the advanced photon source located at the Department of Energy's Argonne National Laboratory in Chicago, Illinois.

"We will leverage the combined resources of both companies to strengthen our structural biology capabilities and seek out innovative therapies for patients," said Steven M Paul, executive vice president of science and technology for Eli Lilly, in a statement.

The board of directors of SGX voted unanimously to approve the merger agreement and to recommend that its shareholders approve the transaction. The transaction is expected to close in the second half of 2008.

"We believe that this merger provides an excellent opportunity for the potential of SGX's platform and pipeline to be realised, while simultaneously providing our shareholders with attractive financial terms," said Mike Grey, SGX's CEO.

Since entering into an initial collaboration in 2003, Lilly has partnered with SGX to determine 3-dimensional structures of key Lilly drug targets utilizing SGX's proprietary x-ray crystallography technology.

The ongoing collaboration also provides Lilly with access to the SGX synchrotron beamline facility, SGX-CAT, which is a state-of-the-art synchrotron facility enabling X-ray crystallography and protein structure determination built by SGX at the Advanced Photon Source (APS) located at the Department of Energy's Argonne National Laboratory in Chicago, IL.

Eli Lilly and Company is a global pharmaceutical company and one of the world's largest corporations. Eli Lilly's global headquarters is located in Indianapolis, Indiana, in the US. The company was founded in 1876 by a pharmaceutical chemist, Eli Lilly, after whom the company was ultimately named.

A Fortune 500 corporation, Eli Lilly had revenues of $18.6 billion in 2007, making it the 148th largest company in the United States and the 10th largest corporation by global pharmaceutical sales. The company is publicly traded on the New York Stock Exchange and is a member of the S&P 500 stock index. Eli Lilly is one of the Nifty Fifty stocks that propelled the late 20th century bull market.