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M&A II Medichem’s Little Miracle: DeCode Deal Eases Pain of 2001

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MediChem CEO Mike Flavin prefers to call it a merger. With the estimated 29 percent premium DeCode Genetics paid in its $84 million acquisition of MediChem, Flavin can pretty much call it whatever he wants.

The first whispers of an acquisition came last November, after many discussions about how the two companies could best work together, Flavin says. “The most optimal way for us to proceed was to come together. We really wanted to effect this one-plus-one-equals five equation.”

In the equation, MediChem becomes a wholly owned subsidiary of DeCode, continuing to run its Woodridge, Ill.-based operations out of the US while DeCode remains in Iceland. Flavin contends that his company had what DeCode needed — the genes-to-drug know-how — while DeCode had what MediChem needed: targets. “We overlap very little,” Flavin says. Good news for employees, because it means few if any expected job cuts. “As a matter of fact, I anticipate job growth over the next 12 to 18 months.”

If so, it would be a relief for MediChem after the last 18 months, during which the company saw sizable layoffs as it consolidated various businesses despite an IPO in October 2000. An exception was one of its own acquisitions, Emerald BioStructures, which continued to hire as it became a valued proteomics component.

MediChem will retain its customers (including AstraZeneca, Bristol-Myers Squibb, Pfizer, and Pharmacia). “Over time, we’ll be feeding in the potential drug targets that DeCode has identified using their gene mapping technologies,” Flavin says.

He adds that acquisitions (or mergers) such as this one will become more and more commonplace in time. “If you look at the industry, the coming together of biology and chemistry, the forces will continue to act to bring those companies together,” he says. “[This] is indicative of not only what has been happening, but of what will continue to happen.”

— Meredith Salisbury

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