The UK’s CeNes Pharmaceuticals has agreed to a takeover by Germany’s Paion AG in an all-share transaction that is valued at £10.9 million.

A deal of this type has been on the cards since February when CeNeS said it is “in discussions which may or may not lead to an offer for the company”. The firm’s share price has struggled over the last year as investors have become increasingly impatient about CeNeS’ inability to get a licensing partner for its lead product, M6G (morphine-6-glucuronide) for post-operative pain.

A lack of any concrete deal has reduced CeNeS’ value considerably which has created a vicious circle that has reduced its bargaining power and the firm has also just published its preliminary financial results for 2007 which show that it had cash at the end of the year of just £4.3 million.

The Paion agreement values each CeNeS share at 48.9p, a near-53% premium on the UK firm’s closing price on February 4 and each stockholder will receive 0.3521 Paion shares for every CeNeS share they hold. The combined group should have a combined cash balance of 49 million euros, and CeNeS chief executive Neil Clark said "the combination creates a diversified pipeline backed by a strong balance sheet and a proven management team”.

His counterpart at Paion, Wolfgang Sohngen, said the deal will help his firm “move away from being perceived as a one-product company”, namely its investigational stroke drug desmoteplase which recently stumbled in a late-stage trial. He added that by combining the two companies, “Paion is taking a first step towards creating a platform for building critical mass” and “we manage to carry the positive attitude of all parties involved in getting to today’s agreement on into the integration process, we will have a chance to build a substantial biopharmaceutical company with an extraordinary profile.”

At time of writing, a press conference is being held to discuss the merger and PharmaTimes World News will have more details on the deal tomorrow.