The planned merger, expected to close in Q3 of this year, will see Discovery effectively split in two, with the company's "shell" and cash joining with Infinity and all of Discovery's facilities sold to private companies.
"The move was prompted by increasing price pressures on large scale library synthesis services - our main source of income - from offshore competitors," Michael Venuti, Acting CEO of Discovery Partners told Outsourcing-Pharma.com.
"The business was proving unprofitable for a public company like ourselves that has a number of expensive administrative and regulatory processes to comply with. A private company that does not have these expenses as they do not have the same compliance obligations," he said.
Discovery is now seeking to sell its drug discovery services units in San Diego, California; Basel, Switzerland; and Heidelberg, Germany to a buyer that will assume the existing contract service commitments of the operations.
The priority is to transfer key personnel and service agreements to one or more qualified organisations that are currently performing such services at a level equal to those of Discovery, said the company.
These units currently focus on synthetic chemistry, assay development, high-throughput screening, and natural products, as well as other drug discovery assets, including ongoing service partnerships.
The company's compound management facility in San Francisco, currently under contract to the National Institute of Mental Health, National Institutes of Health (NIH), will continue to be fully staffed and operate as such, said the company.
Infinity Pharmaceuticals, operating from its current headquarters in Cambridge, Massachusetts will be the biopharma company to emerge from the merger.
It is anticipated that cash and cash equivalents for the combined company as of March 31, 2006 would be in excess of $100m (€81m), provide Infinity with sufficient funding to generate efficacy data on its lead drug candidate, as well as continue to advance the remainder of its pipeline.
Infinity currently has a lead product in multiple Phase I clinical trials, a second product scheduled to enter the clinic in late 2006, a pipeline of small molecule pre-clinical candidates, and partnerships with Novartis, Johnson & Johnson and Amgen.