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Biotech / Medical : CNSI Cambridge Neuroscience -- Ignore unavailable to you. Want to Upgrade?

To: nigel bates who wrote (656)	10/5/2001 1:07:26 AM
From: Mike McFarland	Read Replies (1) \| Respond to of 675

Good website for UK biotech news: sharecast.com CPHAF has been a disaster for me, just like nearly everything else I own. I guess I'll roll around in the nettle patch...pull a few recent stories for CeNeS off the site. Try and go over in my mind how this disaster snuck up on me. CeNes Pharmaceuticals Tue 2 Oct 2001 LONDON (SHARECAST) - Widening half-year pre-tax losses of £18.3m (£15.6m) at CeNes Pharmaceuticals saw chief executive Daniel Roach step down and other directors depart according to The Daily Telegraph. The stock fell 1.25p to an all-time low of 14.5p as CeNes called a halt to a large part of its R&D programme in the face of growing losses and dwindling cash according to the Financial Times. ............................. Prelude Trust says has not sold Cenes Pharmaceuticals; holds 3.9 pct Fri 28 Sep 2001 16:04:48 LONDON (AFX) - Prelude Trust PLC said it has not sold any of its shareholding in Cenes Pharmaceuticals PLC and remains a holder of 6,239,740 shares, or 3.9 pct of Cenes' share capital. ak/ ...................... Shot in the arm for CeNeS By John Scrivens Mon 4 Jun 2001 LONDON (SHARECAST) - A stock overhang and fears of additional fund-raising have left drug developer CeNeS undervalued over the last nine months. The tough decision facing investors keen to buy into the £61m company that its house broker believes is worth more than four times as much has been when to buy. But that time may be now, following Friday's announcement of a turning point deal with Elan, the fast-growing Irish pharmaceuticals group. Not only does the deal secure CeNeS' near-term financing but it also eliminates market fears of a further fund raising that has helped to depress the share price. The collaboration establishes a joint venture to develop CeNeS' morphine derivative M6G for use in Elan’s Medipad drug delivery system. Followers believe that M6G could achieve £100m in sales, more than justifying CeNeS’ current market capitalisation of £61m. The shares rose on the news to 43p. The share price chart (showing a nine month decline from 92.5p to as low as 35p) suggests that a break above 43p is unlikely to hit any overhead resistance until 53p. Medipad is an electronically-controlled device worn on the abdomen by cancer patients. It allows frequent, small doses to be administered to relieve severe pain. Elan is already developing it with two other analgesics and plans to bring in M6G to add a third. M6G is believed to have the analgesic effects of morphine without many of the side-effects. As both M6G and Medipad are already in trials, the two companies can move rapidly to a Phase II clinical study of Medipad-delivered M6G. Under the deal, Elan will provide CeNeS with a $12m convertible loan, with up to a further $6.4m available to draw down at a later date. Elan will initially take a 19.9% stake in the joint venture, which could rise to 50% if the loans are converted to equity. Elan will also invest £5.6m in CeNeS in two stages at a 30% premium to the 60-day average share price. It will also receive 1.04m warrants, exercisable at 79p, would could bring in a further £8m of cash. The deal eliminates any need for CeNeS to dilute shareholders by raising new money at its current depressed share price - no higher than venture capitalists paid two years ago for a far smaller company when privately owned CeNeS was merged with struggling quoted drug delivery firm Core Group. Since then considerable progress has been made through a succession of deals strengthening both the R&D pipeline and providing a revenue stream. This is reflected in its revenues for 2000, which jumped to £6.6m up from £31,000 a year earlier as a result of the company's collaborative and trading activities. Over the past year CeNeS' aggressive growth plans have led to the signing of drug delivery collaborations with Serono, Bioglan Pharma, Cangene and two undisclosed companies. Its largest deal was the acquisition of US biotech company Cambridge Neuroscience (CNSI), completed in December 2000. This deal, valued at $44m at the time, was a cheap way for CeNeS to strengthen its drug development pipeline. CNSI provided six products in clinical development, $8m in cash and two partnerships with pharmaceutical multinationals with up to $42m in milestone payments, in addition to tax losses that more than offset the acquisition price. CeNeS has also announced plans to set up its own UK marketing operation and acquired rights to three painkillers from Glaxo Wellcome as well as licensing Xefo, a treatment for post-operative pain, from Nycomed Pharma which should be launched later this year. In December, it licensed US rights to its suppository formulation of morphine, Moraxen, to Amarin in return for a cash payment. Amarin, which is linked to Elan, will also pay for clinical trials needed to approve the drug in the US. The company’s R&D pipeline now includes three compounds in Phase II studies: sipatrigine for stroke, M6G and CNS 5161 for chronic neuropathic pain, with a fourth entering this development stage, CEE 03-310, for sleep disorders and substance abuse. The temporary downside of the CNSI acquisition for CeNeS was that it brought in the US-based hedge fund Biotechnology Value as a substantial investor. The fund decided to dump its entire stake in February as part of a policy of divesting itself of investments outside the US. This triggered an immediate collapse in the CeNeS share price. CeNeS is understandably bitter about the long-term effect on its shares and believes the fund could have achieved a much better price if it had managed the transaction more carefully as it claims to have a high degree of institutional support. In addition, 3i an original venture backer of both CeNeS and Core Group is reducing its stake through share sales in the market. Comparison of CeNeS with similarly sized UK biotech companies is difficult. No other companies have self-developed products on the market or a marketing division. CeNeS £61m market capitalisation and implied £50m technology value is remarkably low compared to those of Alizyme and KS Biomedix, both companies with R&D programmes at a similar stage. House broker Beeson Gregory has assigned a fair value of £282m to CeNeS, although this could be considered generous. But even a valuation of £90m, about 50% more than the current market cap, would be conservative by UK market standards. Buy for the long term. This article has been extracted and adapted from the latest edition of Biopoly, the new biotech investment newsletter. Download a sample copy at www.biopoly.com. uksharenet.co.uk