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Pharmacopeia Will Acquire MSI, Expand Drug Discovery Efforts

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PRINCETON, NJ--Earlier this month Pharmacopeia here announced an agreement under which it will acquire San Diego-based Molecular Simulations in a stock swap deal. The boards of both companies have approved the transaction, which is valued at approximately $140 million. The acquisition, which will result in a merger of complementary drug-discovery technologies, should close during the second quarter of this year.

Pharmacopeia will offer 7 million newly issued shares of its common stock for all of Molecular Simulations' outstanding shares, and convert the acquiree's options into Pharmacopeia options, which could result in the issuance of an additional 1.5 million new shares. The deal remains subject to approval by regulators and shareholders. BT Alex. Brown acted as financial advisor to Pharmacopeia on the deal, while Goldman, Sachs advised Molecular Simulations.

Once the acquisition is consummated, Molecular Simulations will become a wholly owned subsidiary of Pharmacopeia. Michael Savage, president and CEO of Molecular Simulations, will remain as president of that division, reporting to Joseph Mollica, Pharmacopeia's chairman, president, and CEO. Savage and one other Molecular Simulations board member will be added to Pharmacopeia's Board of Directors.

"Each company's strengths complement the other," Mollica commented. "We believe that Pharmacopeia's ability to design and synthesize large, rationally designed libraries that expedite the drug discovery process will be further refined by Molecular Simulations' molecular design and analysis tools. Our scientists will be able to work closely with Molecular Simulations scientists to more tightly integrate computational, combinatorial, and experimental chemistry. These complementary strengths combined with Molecular Simulations' emerging web-based applications will help position us to take drug discovery to a new level.''

Molecular Simulations' bioinformatics capabilities will be important for the new entity, Mollica continued. "The power of the combined company lies in Molecular Simulations' ability to develop software to access the wealth of data inherent in Pharmacopeia's large and growing database of structure-activity relationships," he explained. "This information will be used to validate existing design tools and to develop new capabilities for use by Pharmacopeia, Molecular Simulations, and each company's respective customers."

Savage agreed, "The ability to directly apply our technology in Pharmacopeia's drug design process will enable us to further enhance our portfolio of scientific simulation software. By enhancing our products, we would be able to offer more value to our current and prospective customers and improve Pharmacopeia's ability to achieve further success on behalf of their customers and within their internal programs. In addition, by combining the two companies, we significantly expand the scope of products and services we can now offer to our more than 10,000 users, including most major pharmaceutical and chemical companies."

According to Molecular Simulations, its software is installed in around 3,500 sites, with approximately 10,000 users. Pharmacopeia uses its ECLiPS proprietary tagging technology to generate large libraries of small molecules, and then screen them with the latest high-throughput technology. The company currently has collaborations with Akzo Nobel/NV Organon, Bayer, Berlex Laboratories, Bristol-Myers Squibb, Daiichi, Novartis, Schering-Plough, Zeneca, Regeneron Pharmaceuti cals, and other biotechnology companies and research laboratories.

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