By Randall Osborne

To supplement its combinatorial chemistry approach with bioinformatics, Pharmacopeia Inc. is buying out predictive modeling software designer Molecular Simulations Inc. (MSI) in a stock swap valued at about $133 million.

"We're going to be an information-based as well as a product-based company," said Joseph Mollica, president, chairman and CEO of Princeton, N.J.-based Pharmacopeia.

"As we envision it today, [the proportions] will be about equal, but how it sorts out in dollar revenue depends on the marketplace," Mollica added.

Under terms of the takeover, Pharmacopeia will acquire all of MSI's outstanding stock for about 7 million newly issued shares of Pharmacopeia stock, and will convert outstanding MSI options into Pharmacopeia options, potentially resulting in the issuance of 1.5 million more new Pharmacopeia shares.

Pharmacopeia's stock (NASDAQ:PCOP) closed Wednesday at $15.625, down $0.875. Based on 8.5 million shares at that price, the transaction — expected to close in the second quarter — is worth $132.8 million.

Using combinatorial chemistry and high-throughput screening, Pharmacopeia has compiled libraries consisting of 3.7 million small molecules. MSI, of San Diego, designs graphic software that Pharmacopeia will use to refine its drug discovery, Mollica said.

"We've got a strong chemical, experiential database, and now we've got software engineers writing software," Mollica said. "There's a continuum. The more you can string together, the more value you can add."

The transaction will be structured as a tax-free, stock-for-stock exchange and accounted for as a pooling of interests. MSI will become a wholly owned subsidiary of Pharmacopeia.

Pharmacopeia's core technology is its Encoded Combinatorial Libraries on Polymeric Support (ECLiPS). It uses solid phase synthesis, in which libraries of compounds are synthesized on tiny plastic beads that carry inert molecular tags added at each stage of synthesis. When the compound is seen to have activity, the set of molecular tags that identifies it can be read and the compound can be synthesized on a large scale.

Among the company's collaborations is a $40 million deal with Bristol-Myers Squibb Co., of New York, signed late last year to develop drugs targeting two chemokine receptors involved in atherosclerosis, glomerulonephritis, asthma and allergies. (See BioWorld Today, Dec. 3, 1997, p. 1.)

"We're able to make large numbers of compounds, and we can see patterns, relationships," Mollica said. "Once you've made millions of them, the dream and the vision is: Can we truly access this data to guide drug design?"

MSI can help, Mollica said. Founded in 1984, the company provides visual profiles of chemical behavior on computer screens. MSI recently added a Web-based architecture, expanding the availability of its software and libraries to any scientist using a Web browser. Its technology is installed at more than 3,500 sites, with an estimated 10,000 users.

BT Alex. Brown Inc., of New York, acted as financial advisor to Pharmacopeia in the buyout. MSI's advisor was Goldman, Sachs & Co., also of New York. *

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