SGX shares quickly rise to meet buyout offer

SGX shareholders gave the deal their nod of approval, driving the San Diego-based company's stock up $1.72 to $3.09. The deal offered by Eli Lilly is for $3 per share, more than double SGX's closing price Tuesday.

The companies have been partners since 2003.

"After a successful collaboration over the past several years, we are excited to bring the scientific and technological expertise of SGX into Lilly's research organization, while at the same time expanding our presence in the San Diego area," said Dr. Steven M. Paul, executive vice president of science and technology for Eli Lilly, in a statement.

The buyout offer comes at a good time for SGX, said Oppenheimer & Co. analyst Bret Holley, citing a lack of catalysts and a challenging financial environment. Without the offer, she said, the company's stock would have likely continued trading at a relatively depressed level.

"SGX's acceptance of this offer reflects the difficult circumstances that the company currently faces," she said, in a note to investors.

The buyout gives Eli Lilly an expanded biotech platform and a portfolio of potential cancer treatments. The companies expect the buyout to close in the second half of 2008, subject to SGX shareholder approval and antitrust clearance.

The bid comes amid a shift in big pharma's focus, with several of Eli Lilly's peers buying out smaller biotechs or internally forming biotech units.

Similar acquisitions have been made by New York-based Bristol-Myers Squibb Co., with its $234.6 million buyout of Kosan Therapeutics in May. Some of the buyouts, though, have been head turners. In November, Kenilworth, N.J.-based Schering-Plough Corp. completed a $14.43 billion takeover of Dutch biotech company Organon BioSciences.

Many of the largest drug developers have been undergoing cost cuts and job layoffs as key revenue drivers lose patent protection and face generic competition. With lackluster pipelines, a variety of companies are looking to biotech buyouts to help rebuild.