By Mary Welch

MediChem Life Sciences Inc., which offers chemistry services for drug development, intends to raise $50 million in an initial public offering.

The proceeds will be used to purchase a $5 million minority interest in Illinois-based Advanced Life Sciences Inc. (ALS), a drug discovery company, repay $6 million of outstanding debt under its credit facility, and for general corporate purposes.

UBS Warburg LLC, of New York, is the lead underwriter. Chase H&Q, of New York, and William Blair & Co. LLC, of Chicago, are co-managers.

MediPharm said the net proceeds of this offering, together with cash generated from operations and borrowings, should be sufficient to cover operating expenses for the next 24 months, according to the filing.

The Lemont, Ill.-based company, through its MediChem Research, ThermoGen and Emerald BioStructures subsidiaries, provides services in seven areas: proteomics; combinatorial and computational chemistry; medicinal chemistry; biocatalysis; chemical process development; analytical and separations chemistry; and chemical synthesis and scale-up.

The company, which was started in 1987, has proprietary platform technologies in the areas of proteomics, biocatalysis, chiral chemistry and automated process research. These technologies use automation and optimization to compress the drug discovery process timeline. These services allow MediChem to develop effectively its clients' lead compounds through strategic drug development programs, it said.

It is the first independent chemistry company to offer a broad array of discovery-related medicinal chemistry services to pharmaceutical and biotechnology customers, it said in the filing.

The company's 10 largest customers accounted for 87 percent of its total contract revenues for 1999. Since its founding, the company has provided chemistry services on more than 490 products for more than 75 clients, including 15 of the top 25 pharmaceutical companies. More than 75 percent of its 1999 revenue came from existing companies.

The company posted contract revenues for 1999 of $13.4 million, with a net loss from operations of $1.7 million. As of March 31, it had $2.6 million in cash with first-quarter revenues of $4.1 million.

In May, it acquired Chicago-based ThermoGen Inc., a provider of biocatalysis services, and Emerald BioStructures, of Bainbridge Island, Wash., a provider of proteomics products and services, including high-throughput protein crystallization and 3-dimensional structure determination.

The company will reorganize immediately before this offering. The current holding company, MCR Holdings Inc., an Illinois corporation, will merge with and into an indirect wholly owned subsidiary, MediChem Life Sciences Inc., which will become the new holding company.

MediChem's proposed Nasdaq ticker symbol is MCLS.