By Matthew Willett

MediChem Life Sciences Inc., providers of proteomic, computational chemistry and other drug development services to pharma and biotech companies, priced its initial public offering at $7 per share after dropping its price range since filing in June.

The offering, 6.4 million shares at $7 per share for gross proceeds of $44.8 million, comes as companies struggle in an IPO market that's seen three proposed biotech IPOs withdrawn since the end of June, when Signal Pharmaceuticals Inc. opted against trying the market's waters.

Since then, both Advanced Medicine Inc., a small-molecule drug discovery company, and DrugAbuse Sciences, a developer of novel therapeutics for alcohol and drug abusers, gave up hopes of trading publicly in August and October, respectively.

Lemont, Ill.-based MediChem's offering, through lead underwriter UBS Warburg LLC, of Stamford, Conn., is aimed at funding general corporate purposes. Underwriters include Chase H&Q, of San Francisco, and William Blair & Co. LLC, of Chicago. Underwriters have the option to purchase 810,000 shares to cover overallotments.

In addition to funding expansion of its sales and marketing abilities, MediChem plans to use the IPO proceeds to increase platform technology research and development, fund future acquisitions and pay back indebtedness.

The company dropped its offering price from a range of $10 to $12 per share to $7 to $9 per share before the pricing. It has about 25.4 million shares outstanding after the offering. MediChem trades on the NASDAQ exchange under the symbol "MCLS."

MediChem, founded in 1987, aims at bridging the gap between the genomics-driven explosion in drug targets and the industry's resources to develop those targets. It provides lead discovery services, proteomic analysis, lead optimization, chemical process identification, chemical synthesis and scale-up services.

MediChem spun out its drug discovery operation into a wholly owned subsidiary, Advanced Life Sciences, in 1998. Advanced Life operates as a "virtual" pharmaceutical company through a master service agreement for project management with MediChem.

MediChem also engages in a joint venture for drug discovery with the government of Malaysia. The joint venture, Sarawak MediChem Pharmaceuticals, is developing a set of potential anti-HIV products based on calanolides, a family of naturally occurring compounds discovered in the Sarawak tropical rainforest on the island of Borneo.

One anti-HIV compound from the joint venture is in Phase I trials. The company also has an anti-inflammatory treatment, an anticancer compound and two early stage antiviral/cancer compounds in preclinical investigation.

MediChem's proprietary technologies use automation to shorten the drug discovery process. Its AutoOptimize chemical production process identification system uses a combination of robotics and statistical analysis for rapid chemical process identification.

In May, MediChem acquired ThermoGen, of Chicago, for 3.45 million shares of stock and an option on 475,455 more shares. The acquisition of the biocatalysis service and provider company was aimed at adding efficiency to MediChem's chemical process development program and broadening its chemistry services menu.

At the same time, MediChem acquired Emerald BioStructures, of Seattle, for 1.58 million shares. The protein structure determination company broadened MediChem's technology to include proteomics services through an integrated platform for protein analysis.

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