Wednesday, April 12, 2006

Company Update: Discovery Partners and Infinity Pharmaceuticals To Merge
Ticker: DPII
Price: $2.54
Market Cap: $67.15 million
Net Current Asset Value: $85 million

Today Discovery Partners, which we recently featured on March 17th and March 3rd announced intentions to merge with Infinity Pharmaceuticals, a private company. Under the agreement, Infinity would own 69% of the new company, current Discovery Partners ahareholders would hold the balance. The new company will focus on cancer drug discovery and development.

The stock was up as high as $2.84, but closed at $2.54, up 5.4 percent on heavy volume. Clearly, the market, (and frankly your editor as a shareholder)does not know what to make of this merger. Since Infinity is not publicly traded, there is not a great deal of information available. It is difficult to calculate what a 31 percent stake in this new entity may be worth. It is clear however, that Discovery's cash position made it an attractive merger candidate to Infinity.

To a NCAV investor, a merger or takeover (which was part of our speculation in our March 3rd report)can be the key to unlocking value. In this case, it's too early to tell whether this deal will do that. We simply don't have enough information.
While its great to be right, we're not sure what the payoff will be. Stay tuned.

*The author has a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.

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