Pharmacopeia Announces Plan to Spin-Off Pharmacopeia Drug Discovery Business to Stockholders

19-Dec-2003

Pharmacopeia, Inc. announced that its Board of Directors has approved a plan to separate its drug discovery and software businesses into two independent, publicly traded companies through the spin-off to its stockholders of the drug discovery unit. The transaction is intended to be tax-free to Pharmacopeia and its stockholders, and is expected to occur by the end of the first calendar quarter of 2004.

Pharmacopeia intends to effect the spin-off through a pro rata distribution of 100 percent of the common stock of Pharmacopeia Drug Discovery, Inc. (PDD), the wholly owned subsidiary through which Pharmacopeia conducts its drug discovery business. PDD intends to apply for listing on The NASDAQ National Market. After the spin-off, Pharmacopeia will continue to operate its Accelrys scientific software business, and intends to change its name after completion of the proposed spin-off to "Accelrys, Inc." to reflect this singular focus. The transaction is subject to the receipt of any required regulatory approvals, receipt of a favorable tax opinion, market conditions and final approval by the Pharmacopeia Board of Directors.

"We believe that the proposed spin-off will create an exciting opportunity for PDD as an independent drug discovery company, and will enable each of Accelrys and PDD to pursue its own focused strategy more effectively while addressing difficulties they have encountered under the current corporate structure," said Joseph A. Mollica, Ph.D., Pharmacopeia's Chairman, Chief Executive Officer and President. "The respective management teams at both Accelrys and PDD strongly believe that the two companies, as leaders in scientific software and collaborative drug discovery, are extremely well- positioned to stimulate innovation and growth in their own industries, and that separation of the two businesses will best facilitate their pursuit of those goals.

"The transaction will provide our stockholders with equity in two successful entities with significant growth potential," added Dr. Mollica. "Through the separation, each company effectively will be a `pure play' in its respective industry, which we believe will enhance its individual prospects for success. Moreover, in our view, the financial markets should be better able to assign more accurate valuations for each business.

"Over the last few years, it has become increasingly apparent to us that operating our scientific software and drug discovery businesses within a single publicly traded company has prevented each business from reaching its full potential," Dr. Mollica noted. "We believe that each company, as a stand-alone public entity with independent management, will be better able to focus on its specific objectives, adapt more readily to evolving marketplace conditions and capitalize on strategic opportunities. The spin-off will bring enhanced flexibility to each entity in structuring transactions to better meet customers' and collaborators' particular requirements, and will provide each business with its own equity `currency' for acquisitions and investments. We expect that both management teams will experience new freedom to pursue business alliances and research collaborations, and invest in compelling technologies, free from the strategic constraints of the other unit's business.

"We also will be able to design compensation programs, such as stock option and share ownership plans, more suited to the individual characteristics of each business, which will enhance each unit's ability to retain and attract the best management, scientific and technical talent. In addition, the spin-off will enable the executive management of each company to focus exclusively on the development of its business. Based on all these factors, it has become clear to us that the limited synergies we realize in our business development and R&D efforts across the two units no longer represent sufficient reason for these businesses to operate within one enterprise," Dr. Mollica continued.

Following the spin-off, Accelrys will continue to design, develop, market and support software and provide related services that facilitate the discovery and development of new products and processes in the pharmaceutical, biotechnology, chemical, petrochemical and materials industries. Accelrys' current Centers of Excellence in San Diego, California, Cambridge, United Kingdom, and Bangalore, India will be unaffected by the transaction. Pharmacopeia's Accelrys unit generated revenue of approximately $54.0 million for the first nine months of 2003 and $95.1 million for the full year 2002. It is expected that, immediately after completion of the spin-off, Accelrys will have between $90 million and $100 million in cash, with no debt. Accelrys headquarters will be located in San Diego, California after the spin- off.

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