Today, Monsanto Company (NYSE: MON) and Icoria, Inc. (Nasdaq SC: ICOR) announced that Monsanto has acquired selected agricultural assets of biotechnology research company Icoria for $6.75 million in cash, installment and milestone payments, plus additional considerations.

The transaction closed yesterday, with the transition to be fully implemented by May 9, 2005.

The acquired assets are related to the field of transgenic traits for agriculture, which has been the focus of research conducted under an existing six-year, $55-million agreement signed in 1999 between Monsanto and Icoria, formerly Paradigm Genetics. Under this agreement, Icoria analyzed genes in its Arabidopsis thaliana GeneFunction Factory™ platform. Icoria met virtually all of the financial milestones under this agreement, and many genes have moved into Monsanto’s corn and soybean research-and-development (R&D) testing pipeline. Such genes may affect valuable agronomic traits, such as increased growth rates and stress resistance.

By acquiring those assets of Icoria that are focused on agriculture-related functional genomics and transgenic applications, Monsanto gains exclusive access to Icoria’s advanced discovery platform. In addition, Monsanto will assume occupancy and lease obligations for a building in Icoria’s research facility in Research Triangle Park, N.C., in which Icoria has conducted its GeneFunction Factory™ research. Monsanto will offer jobs to a large portion of Icoria’s skilled workforce currently involved in the agriculture-based functional genomics program.

“Over the past five years, Icoria’s contributions in functional genomics have been an important part of Monsanto’s industry-leading R&D program,” said Stephen Padgette, Ph.D., vice president of biotechnology for Monsanto. “Today’s announced transaction allows us to bring Icoria’s valuable capabilities in-house, contributing to Monsanto’s ability to identify and develop new genes for crop products in areas like agronomic traits, enhanced nutritional content and improved yield properties.”

Icoria will use proceeds from the sale to accelerate development of its health care business and to fund an internal drug and diagnostics discovery program focused on diabetes, obesity and other metabolic disorders.

“The sale of these assets, the reduction of our headcount by more than a third and the assignment of our remaining five-year lease on our agricultural research facility reduces our expenses dramatically without significantly reducing Icoria’s ability to generate revenue,” said Heinrich Gugger, Ph.D., president and CEO of Icoria. “It also allows Icoria to aggressively pursue its health care strategy.”

Icoria, Inc. is a biotech company that uses gene expression, metabolomics and tissue feature profiling to identify biomarkers to accelerate drug discovery. In addition to its internal drug discovery program, the company provides services to clients in the pharmaceutical, biotech, agriculture, academic and public health research sectors, and has major contracts with the National Institute of Environmental Health Sciences and Pioneer Hi-Bred International (a subsidiary of DuPont). Icoria also has a major grant from the National Institute of Standards & Technology's Advanced Technology Program.

Monsanto Company (NYSE: MON) is a leading global provider of technology-based solutions and agricultural products that improve farm productivity and food quality.

Icoria to focus on healthcare biotechnology, expects benefit of $15 million from agriculture asset divestiture

Biotechnology company Icoria, Inc. (Nasdaq SC: ICOR) announced today that it is transitioning from agricultural R&D activities to concentrate on an aggressive program to discover and validate targets and potential drug candidates for the treatment of diabetes, obesity and liver injury. The company will leverage its metabolomics expertise, gene expression profiling proficiency, quantitative tissue analytics software and proprietary computational capabilities to focus on biomarker-enabled drug discovery.

The transition is facilitated by the sale of Icoria’s agricultural genomics assets to Monsanto Company and by an amendment to the existing Monsanto contract. This transaction will have a $15 million direct impact to Icoria, including cash consideration of $6.75 million, reduced lease obligations of $5.2 million and $3 million in net cash flow benefit from the amendment. In addition, Icoria expects to yield $4 million in annual savings associated with lower general and administrative costs. Cash of $4.75 million was paid at signing with the remaining $2 million due in January 2006.

“This agreement is a win for Icoria’s shareholders,” said Steve Burrill, Chairman of the Icoria Board of Directors. “Icoria is now a streamlined, pure-play healthcare focused biotech with a stronger balance sheet and a lower burn rate.”

“The sale of the majority of our agricultural R&D assets to Monsanto is highly strategic for Icoria,” said Heinrich Gugger, Ph.D., President and CEO. “It allows us to explore broader strategic options and focus resources on the healthcare market and on our own program of biomarker identification and biomarker-enabled drug discovery in diabetes, obesity and related disorders.”

New Company Direction “The Monsanto deal is a bold step that reduces the size of Icoria and complexity of our business model,” said Gugger. "We will be lean and focused with a much lower cost structure.”

Icoria, which ended 2004 with 188 employees, expects to have fewer than 120 by the end of the second quarter. In addition to the approximately 60 employees that are expected to join Monsanto, Icoria recently reduced staffing at its Pittsburgh office. Approximately 20 Icoria personnel will provide transition services to Monsanto through the end of the year.

After the divestiture, the company’s business activities will include:

Biomarkers and Drug Discovery, which uses metabolomics, gene expression profiling and quantitative tissue analysis to identify novel diagnostics, drug targets, and drug candidates. These platforms are core to the company’s internal discovery program but will also be available to pharmaceutical and biotechnology companies through research partnerships.

Paradigm Array Labs™, which provides GLP-compliant RNA preparation, transcript profiling and data analysis and microarray services using Affymetrix Genechip® Gene Expression Analysis Arrays, Agilent Oligo Microarrays and proprietary MirChip™ technology Icoria developed with Rosetta Genomics, as well as Laser Capture Microdissection and the ability to process paraffin-embedded tissues. Paradigm Array Labs is primarily a service organization, providing array processing on a fee-for-service basis, as well as supporting Icoria’s internal development programs.

“Despite the scientific success and commercial progress of our agricultural business, we do not believe that the limited growth potential of a consolidating agricultural market can support us in the long term,” said Gugger. “We will exit the agricultural business after our contractual obligations with Pioneer Hi-Bred and DuPont Crop Sciences draw to a close.”

“I am very pleased that so many of our people will be able to continue to develop this exciting discovery platform under the auspices of a large, global agricultural company,” continued Gugger. “Monsanto has more resources to fund and develop the GeneFunction Factory™ platform in transgenic plant applications than Icoria could hope to provide.”

Biomarker Enabled Drug Discovery

Biomarker-enabled drug discovery represents a new approach that seeks to develop safer, more effective drugs at reduced cost and risk by identifying biological characteristics, or biomarkers, that are used to monitor drug action, predict patient response and stage disease. Icoria combines data from a variety of sources to discover biomarkers that associate closely with a disease state or the effects of a drug. These biomarkers can be used in the drug development process to select doses, stratify patients and provide sensitive, early signals of drug efficacy or adverse response.

The importance of biomarkers in guiding patient selection and medical decision-making has been highlighted in an FDA guidance document called “Challenge and Opportunity on the Critical Path to New Medical Products” issued in March 2004.

“Our biomarker and target discovery platform integrates gene expression, metabolomics, and quantitative tissue analysis with strong capabilities in computational biology,” said Thomas Colatsky, Vice President of Healthcare Research. “We are already working with several pharmaceutical and biotechnology clients to discover biomarkers using individual components of our platform on a standalone basis. In our internal development programs, we use the combined analysis of all three data streams to discover unique biomarkers and previously unidentified drug targets. These will become part of an evolving portfolio of proprietary therapeutic products for Icoria.”

Icoria’s internal development programs will focus on the diabetes and metabolic disorders therapeutic area for three reasons: A critical need for new drugs and diagnostics in a therapeutic area with a growing patient population; initial research the company has done in preclinical models of disease; and Icoria’s extensive knowledge of liver injury and metabolism, based on the company’s gene expression, metabolomic and histomorphometry studies. Diabetes is also an area where Icoria’s research staff has previous drug discovery and development experience at leading pharmaceutical companies.

“In diabetes, we are interested in biomarkers that may detect the disease at an earlier stage than current tests. We are also interested in the role of liver metabolism in the development and progression of insulin resistance and obesity. Our plan is to identify new drugs and drug targets that build on a clearer picture of the multiple stages of diabetes and how it affects the body,” said Colatsky.

Icoria reports Q4 and year-end results

Biotech company Icoria, Inc. (Nasdaq SC: ICOR), today announced record revenue of $24.6 million in 2004, a 16 percent increase over 2003. The company reported revenue of $6.3 million for the fourth quarter of 2004 and a net loss of $4.1 million, or $0.11 per share. The fourth quarter results include a $1.9 million one-time write-off of intangible assets related to the March 2004 acquisition of TissueInformatics.Inc. Excluding the write-off of intangible assets, the net loss for the fourth quarter would be $2.2 million, or $0.06 per share. Quarterly revenue declined from the record third quarter of 2004 revenue of $7.1 million, but was 16 percent higher than the fourth quarter of 2003.

The net loss for 2004 was $14.4 million, or $0.40 per share, compared to $12.2 million, or $0.38 per share for 2003. Excluding the write-off of intangible assets, the net loss for 2004 would be $12.5 million, or $0.35 per share. Expenses in 2004 grew as Icoria invested in its healthcare business, including the TissueInformatics.Inc acquisition.

As of December 31, 2004, the company had $9.6 million in unrestricted cash, cash equivalents and short-term investments.

Management Discussion

“While we achieved record revenue in 2004, it was below our expectations, largely due to a lack of new commercial activity in quantitative tissue analytics,” said Heinrich Gugger, Ph.D., President and CEO. “Although the TissueInformatics.Inc acquisition has proven valuable in our internal discovery efforts, we failed to meet our external milestones. It became clear that additional market preparation and product development would be needed before we could successfully market quantitative tissue analysis. As a result, we are writing off the intangible assets that relate to TissueInformatics.

“Despite the revenue shortfall, we closed the year within our projected cash target of $9 to $10 million. Our cash position will be bolstered by the announcement today that we are selling selected agricultural assets to Monsanto for $6.75 million in cash and other considerations in a deal that will have a $15 million direct benefit to Icoria. In addition to the cash component, the transaction reduces our lease obligations by $5.2 million and gives Icoria $3 million in net cashflow benefits from an amendment to the existing Monsanto contract. We also expect to see $4 million in annual savings associated with lower general and administrative costs.

“This agreement marks our transition out of the agricultural market and creates a streamlined healthcare-focused biotechnology company. We will concentrate on biomarker-enabled drug discovery and our internal program to discover and validate targets and potential drug candidates for the treatment of diabetes, obesity and livery injury,” concluded Gugger.

Significant Fourth Quarter Activities

During the fourth quarter of 2004, Icoria raised $5 million gross proceeds through the sale of a three-year Secured Convertible Term Note (“Note”) in a private placement with The Laurus Master Fund, Ltd. This note is payable in cash or convertible into shares of Icoria’s common stock at a fixed conversion price of $0.53 per share beginning in May 2005.

In December, Icoria moved from the Nasdaq National Market to the Nasdaq Small Cap Market. As a result of that move, and pursuant to the Rules of the National Association of Securities Dealers, the Staff of the Nasdaq Stock Market granted Icoria until June 2005 to bring its share price above the $1 minimum bid price required for listing on the Nasdaq SmallCap Market.