Calling the move “not only logical, but necessary,” DeCode Genetics Inc. said it is buying MediChem Life Sciences Inc. in a stock swap worth about $83.6 million.

“We needed the chemistry,” DeCode CEO Kari Stefansson said. “When we decided to look at the chemistry, MediChem became very attractive fairly soon. We have done fairly thorough due diligence. They got a very good review and we feel we got a very good deal for our money.”

For its money, Reykjavik, Iceland-based DeCode gets Woodridge, Ill.-based MediChem’s high-throughput integrated chemistry platform, its 163 employees and their experience in structural proteomics; lead discovery and optimization; combinatorial, computational and medicinal chemistry; and protein crystallography.

MediChem spoke of an efficient blending and an anticipated bright future.

“I’d just like to say how pleased we are to be joining forces with DeCode and to put our skills and experience to work to create what we think will become one of the leading genes-to-drugs organizations,” Michael Flavin, founder, president, CEO and chairman of MediChem, said in a conference call, adding that the companies expect to “streamline the process of turning genomics discovery into candidate drugs ready for clinical trials.”

The terms of the stock exchange stipulate that MediChem shareholders receive 0.3099 shares of newly issued DeCode stock for each share of MediChem, giving MediChem stockholders an equity stake in the merged company of about 15.7 percent. Based on DeCode’s stock price of $9.80 at the close of business Monday, the purchase price for each MediChem share is figured at $3.04. DeCode said it expects to issue about 8.3 million shares in the deal, giving it about 54.3 million shares outstanding. The merger is expected to close in the second quarter.

“It’s about a 40 percent markup from where [MediChem] was trading a few days ago, but they are a vastly underrated company,” Stefansson told BioWorld Today. “This was a modest markup for the value we got. Everyone will agree that it was well within the range of what you would expect when acquiring a company like this.”

MediChem’s stock (NASDAQ:MCLS) rose 45 cents Tuesday, or about 19.2 percent, to close at $2.80. DeCode’s stock (NASDAQ:DCGN) fell 56 cents to end the day at $9.24.

DeCode, notable in the industry for both its population genomics core and its location, found it was requiring chemistry expertise. It identified three ways to fulfill that need outsourcing, internal growth or acquisition. Believing cultivating it internally might take too long, DeCode opted for acquisition.

“We are an Icelandic company; we are located on a little, dark, wet rock in the North Atlantic,” Stefansson said. “It is difficult to build up chemistry in Iceland, because there isn’t much in the country. America is the desired location for that.

“It wasn’t the goal to expand into the United States I mean, I love the country but it wasn’t the goal. The goal is to go from genes to drugs as quickly as possible and develop as good drugs as possible. And if expanding in America helps us to do that, then that’s what we’ll do.”

The U.S. expansion is sizable. With the completion of the merger, DeCode will have MediChem’s 100,000-square-foot facility in Woodridge, its 40,000-square-foot center in Lemont, Ill., and MediChem’s wholly owned subsidiaries: ThermoGen, Emerald BioStructures and Advanced X-Ray Analytical Services. Stefansson said all facilities would remain open, and although there would be some consolidation of operations, MediChem’s 107 chemists would be retained.

DeCode’s unique site in the world Iceland being an isolated location with a somewhat self-mixing gene pool and the company’s leading position in population genomics have given rise to four business areas: informatics, database services, diagnostics and drug development. It has gene discovery projects in 50 diseases, revenue-producing deals in each of its four areas and, now, the chemistry experience it needs.

“We feel that we have been doing our business plan well and are active,” Stefansson said. “There are not many competitive organizations [to DeCode] when it comes to gene discovery in common diseases.

“Cloning of disease genes is an extremely good way for getting drug targets, which is king these days. We are the ultimate gene cloning organization, so we feel we are in a very good position.”