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MediChem to Cut Staff by 25 Percent in Restructuring and Laboratory Consolidation

NEW YORK, Sept. 20 – MediChem Life Sciences said Thursday it will cut 25 percent of its workforce by the end of the third quarter and reduce other operating expenses in a restructuring plan designed to save the company $5.5 million in 2002.

The staff reductions will mainly affect general and administrative positions, as the company consolidates its laboratory operations in its Woodridge Discovery Center in Woodridge, Illinois. MediChem said the cuts would not significantly affect the number of its scientific staff.

MediChem, a 14 year-old drug discovery company based in Woodridge, outside Chicago, is building capabilities in protein structure determination and biocatalysis around its traditional focus on medicinal chemistry. Last year, the company acquired Emerald Biostructures, a Bainbridge Island, Wash., company studying protein structure using x-ray crystallography, and Woodridge-based ThermoGen, which specializes in protein expression and biocatalysis. A spokesman was not immediately available to comment on how the company would distribute the cuts across the various businesses.

The staff reductions are expected to produce annual savings of approximately $3 million, and the additional planned cuts in operating expenses should result in further savings of $1.9 million in general and administrative expenses, and $600,000 in sales and marketing expenses. MediChem expects the restructuring to save the company $1.1 million in the fourth quarter of this year, and $5.5 million in 2002.

To allow for severance costs resulting from the staff cuts, the company expects to record a charge of $650,000 in the third quarter.

“I am confident the staff reductions will not affect current collaborations or have an effect on new business opportunities," Michael Flavin, president and CEO of MediChem, said in a statement. In its most recent deal, the company signed a two-year agreement with Rigel Pharmaceuticals for MediChem’s Emerald Biostructures division to determine the structures of proteins associated with cancer using x-ray crystallography.