By Mary Welch

In an all-stock transaction, UK-based CeNeS Pharmaceuticals plc signed a definitive merger agreement with Cambridge NeuroScience Inc. (CNSI) in a deal worth between $30 million and $44 million, depending on the eventual stock price.

"We had been looking for quite a little while for a merger partner," said David Gwynne, CNSI's vice president of biotechnology and business development. "This is a very good fit, in terms of technology, product pipeline and personality. They gave us a very decent premium on the stock price and are interested in not making too many changes here."

CNSI's stock gained 18.75 cents, or 11.5 percent, Tuesday to close at $1.812. It has traded between 84.8 cents and $3.62 over the past 52 weeks.

The deal calls for CNSI shareholders to receive CeNeS shares equal to a value of $2.25 for each CNSI share. If the price of CeNeS stock increases up to 12.5 percent by the closing, CNSI shareholders will receive CeNeS shares equal to $2.25 per share, while an increase of greater than 12.5 percent would result in a fixed amount of shares.

If the price of CeNeS stock decreases as much as 22.5 percent, CNSI shareholders will receive additional shares to maintain the value of the transaction.

If the deal had closed on Monday, the day the papers were signed, CNSI stockholders would have received 34.3 million shares of CeNeS stock in a transaction worth about $42 million.

The deal is expected to close in the third quarter. Adams Harkness & Hill Inc., of Boston, assisted Cambridge, Mass.-based CNSI in the deal.

"It's not a fixed-price deal," Gwynne told BioWorld Today. "But overall, it represents between 22 percent and 30 percent of CeNeS."

The merged company will have six compounds in clinical trials and eight collaborations with pharmaceutical partners.

Daniel Roach, CEO of Cambridge, UK-based CeNeS, told BioWorld International, "This is extremely positive for us. It's an extremely good fit, bringing together our expertise in ion channels and stroke and in chronic pain, complementary collaborations and strong product portfolios."

The merger combines both companies' interest in central nervous system disorders and pain control. The combined company will have a product pipeline headed by Moraxen, a novel formulation of morphine, which was submitted for marketing approval in the UK. The company may work on bringing the product to the U.S. for FDA approval at a later date.

The new company, which will retain the CeNeS name, will have five different pain programs: Moraxen for post-operative pain; M6G for post-operative pain; an opioid analgesic for cancer breakthrough pain; and CNS 5161 for neuropathic pain, the latter three of which are in Phase II trials, and analgesic tripeptides in the preclinical stage.

In addition, the merged firm will have drugs in Phase II trials for the treatment of stroke, sleep disorders and substance abuse. Preclinical research projects are focused on schizophrenia, multiple sclerosis and glaucoma.

"It's really remarkable all the points of synergy and complementary issues that exist, all the way from pain control to the engine room of drug discovery in ion channels," said Robert McBurney, CNSI's new president and CEO. McBurney was the company's senior vice president and chief scientific officer. Former CNSI President and CEO Harry Wilcox resigned but will remain on the board.

Within the ion channel field both companies have significant intellectual property and tangible assets. The new company will have a library of more than 2,000 compounds specifically targeted to ion channels, and a portfolio of 45 issued and 15 pending U.S. patents. In addition it has a proprietary ion channel screening technology that automates the process of measuring electrical currents across cell membranes.

CNSI's technology includes a range of proprietary compounds known as ion channel blockers that act on specific nerve cells to modify their activity or to minimize their destruction in degenerative disorders of the central nervous system. Its lead ion channel blocker, CNS 5161, a selective NMDA ion channel blocker being developed to treat neuropathic pain, has completed two Phase I tests. Other possible indications include stroke, brain and spinal cord injury, glaucoma and peripheral neuropathies.

CNSI has been looking to sell its technology since early 1998, when it stopped two Phase III trials of Cerestat, its ion channel blocker for treating stroke and traumatic brain injury. Following the Phase III failures, CNSI's partner, Boehringer Ingelheim GmbH, of Ingelheim, Germany, pulled out of a collaboration that was worth up to $60 million. (See BioWorld Today, March 11, 1998, p. 1; Dec. 17, 1997, p. 1; and July 14, 1998, p. 1.)

The plan is to keep CNSI intact and operating as a stand-alone subsidiary of CeNeS.

"We thought it was interesting that we're both from Cambridge," Gwynne said. "Except one Cambridge is 900 years older than the other."

CNSI will drop its OTC Bulletin Broad listing but CeNeS may apply for a listing on Nasdaq at a future date, Gwynne said. CeNeS is listed on the London Stock Exchange.

Editor's note: BioWorld International correspondent Nuala Moran contributed to this story.