Upsher-Smith Laboratories of the USA has unveiled plans to buy the UK's Proximagen for at least £223 million.

Under the terms of the deal, the privately-owned Minnesota-headquartered group will initially pay £3.20 for each Proximagen share. The deal also includes contingent value rights plans worth a further £1.92 per share in either cash or loan notes. Including the latter, the deal could be worth £356.8 million.

The CVRs are linked to the progress through the clinic of Proximagen's obesity drug PRX00933, which has demonstrated significant weight loss in a Phase IIb clinical trial and the firm's VAP-1 antagonist, a first-in-class, oral small molecule for rheumatoid arthritis, which is in Phase I.

Upsher-Smith, which already has a 16% stake in Proximagen, noted that it has obtained "irrevocable undertakings" from the latter's stockholders who have 72.01% of the share capital. Those in favour of the deal include Proximagen’s largest shareholder, Invesco Asset Management, and Lundbeck, which bought a 9% stake last year.

Proximagen's pipeline consists of 15 programmes, covering neurology, inflammation and oncology. It has two drugs in the clinic for epilepsy -  naluzotan and tonabersat - and a grant was recently awarded by the Michael J Fox Foundation to fund development of the company's dopamine D1 positive allosteric modulator compound, acquired in late 2010 from GlaxoSmithKline for Parkinson's disease.

Upsher-Smith's move signals the sale of yet another UK biotech but Proximagen chief executive Kenneth Mulvany said the deal "demonstrates that the UK biotechnology sector can, with supportive investors, bring together scientific excellence and business acumen and generate significant returns for shareholders". He added that it returns "significant value to our investors who have continually been committed to Proximagen" who believed not only in its business model "but also in the UK’s ability to generate commercial returns from great science and innovation".

His counterpart at Upsher-Smith, Mark Evenstad, said "we have been very impressed with the quality and breadth of Proximagen’s portfolio of programmes". He added that having worked closely with the firm "as both a commercial partner and a strategic shareholder since 2008, we believe that Proximagen has significant potential".

The deal, which represents a premium (excluding the CVRs) of 16.4% to Proximagen's closing price on June 12, and 50.5% on the three-month average, will be funded through existing cash and a $300 million secured credit agreement.