BioWorld International Correspondent

LONDON - CeNeS Pharmaceuticals plc said it sold three pharmaceutical products it acquired in September 2000 as the basis for a pharmaceutical business, for £9 million (US$14.2 million), giving it sufficient funding for two years.

The company said the money will be spent on Phase III trials of its lead product, M6G, in post-operative pain, and further Phase II trials of its second product, CNS 5161, in neuropathic pain.

The news sent CeNeS shares up by 57 percent to 2.27 pence. With a market capitalization of £4.8 million, CeNeS is now trading below its cash reserves, making it an attractive takeover target in the wave of consolidation that is breaking over the UK sector.

Neil Clark, chief operating officer, said the disposal would enable Cambridge-based CeNeS to expand its clinical programs in pain relief, adding, "In the medium term CeNeS will also be in a much stronger position from which to negotiate partnership deals for these assets and take advantage of other strategic opportunities that may arise."

The three pharmaceutical products being sold, Diconal, Cyclimorph and Valoid, were acquired from GlaxoWellcome plc for £10 million, and in the year ended December 2002, generated turnover of £3.4 million. Their disposal will make a severe dent in CeNeS' turnover, which was £5.1 million in 2002. The sale, to Waymaker Healthcare plc of Basildon, is subject to shareholder approval.

M6G (morphine-6-glucuronide) was partnered with Elan Pharmaceuticals Corp., of Dublin, Ireland, but Elan's financial imbroglio meant it could not fund Phase III development. Having secured further funding, Cambridge-based CeNeS is back on track to launch M6G in 2005. The joint venture with Elan is still in existence, with talks going on to restructure it. However, CeNeS has the right to find a new partner, and the strategy is to sign one when Phase III is completed.

M6G is a metabolite of morphine, with equivalent analgesic effects, but a better side-effect profile, causing less nausea and vomiting.

The sale of the pharmaceutical products is the culmination of a far-reaching restructuring of CeNeS, which commenced in late 2001. The company has sold or closed all noncore assets to concentrate on its pain portfolio, cutting headcount from 85 to 11. As a result losses fell from £64.6 million in 2001 to £6.3 million in 2002.

The pharmaceutical products division was set up to provide a cash cow to fund R&D, and performed to plan in 2002-03. But Chairman Alan Goodman said, "Following the receipt of several unsolicited offers, the board took the view that, in light of the poor funding environment, the investment needed in CeNeS' late-stage clinical assets and the financial restructuring of CeNeS' partner, Elan, the realization of a significant amount of cash was the best plan."

Clark added, "After a very difficult 18 months, CeNeS is now securely established as a small, well-funded biotechnology company."