Eli Lilly has announced plans to acquire SGX Pharmaceuticals in a move designed to boost its drug discovery efforts in the field of oncology.

Under the terms of the agreement, Lilly will pay $3.00 per share in cash, making for a total purchase price of $64.0 million. The offer from the Indianapolis-based drugs major represents a considerable premium on SGX’s closing price of $1.37 per share last night.

The two companies have been collaborating since 2003 and the acquisition will allow Lilly to integrate SGX's structure-guided drug discovery platform into its own efforts. It will also own FAST, SGX's fragment-based, protein structure-guided technology and have access to a portfolio of pre-clinical oncology compounds focused on a number of high-value kinase targets.

Steven Paul, executive vice president, science and technology for Lilly, said the firm is “excited to bring the scientific and technological expertise of SGX” into its own research organisation, “while at the same time expanding our presence in the San Diego area". Mike Grey, SGX chief executive, said that as the firm has evolved from a platform technology organisation to a drug discovery company, “we believe that this transaction represents a timely opportunity to place our programs and technology assets in the hands of a world-class company”.

Lilly will take an undisclosed charge in the second half of the year and if SGX decides to pull out of the deal, it would have to cough up a $2 million termination fee and up to $250,000 to cover Lilly's expenses. It seems unlikely that SGX will pull out seeing as how it had been pursuing a number of potential partnering opportunities for its oncology programmes but given the present economic situation, a takeover makes good financial sense.