Recommended Acquisition of CENES PHARMACEUTICALS PLC by PAION AG

Summary

• The management board of Paion and the board of directors of CeNeS are pleased to announce that they have reached agreement on the terms of the recommended acquisition of all the issued and to be issued share capital of CeNeS by Paion (the “Acquisition”) . The Acquisition will be implemented by way of a Court sanctioned scheme of arrangement under Part 26 of the Companies Act 2006.
  
  
• The Acquisition is intended to create a substantial international biopharmaceutical company with a pipeline of clinical drug candidates focused on innovative drugs for the treatment of thrombotic diseases and central nervous system (“CNS”) related interventions in the hospital setting. The Enlarged Group will have the financial and management resources to progress the development of the pipeline to maximise shareholder value. As at 31 December 2007, Paion and CeNeS together had approximately €49 million in cash and cash equivalents.
  
  
• Under the terms of the Acquisition, CeNeS Shareholders will receive 0.3521 New Paion Shares for each CeNeS Share held.
  
  
• The Acquisition values each CeNeS Share at 48.9 pence and CeNeS’s ordinary share capital on a fully diluted basis at approximately £10.9 million (based on the Closing Price of a Paion Share on 9 April 2008 of €1.74 and an exchange rate of €1.2536 = £1).
  
  
• The terms of the Acquisition represent a premium of 52.7 per cent. to the Closing Price of 32 pence per CeNeS Share on 4 February 2008, the last Business Day before CeNeS announced that it was in discussions that may or may not lead to an offer, and a premium of 32.1 per cent. to the Closing Price of 37 pence per CeNeS Share on 9 April 2008, the last Business Day before this announcement .
  
  
• The New Paion Shares to be issued are expected to represent approximately 31.9 per cent. of the issued share capital of Paion as enlarged by the Acquisition.
  
  
• Following completion of the Acquisition, it is proposed that all Paion Shares including the New Paion Shares, will be listed on the Regulated Market (Regulierter Markt) of the Frankfurt Stock Exchange and admitted to trading on AIM.
  
  
• Paion and CeNeS have agreed that, on completion of the Acquisition, Gavin Kilpatrick (currently Chief Scientific Officer of CeNeS) will be appointed to the management board of Paion.
  
  
• It is also intended that, following completion of the Acquisition, Alan Goodman (currently Chairman of CeNeS) will become a member of the supervisory board of Paion.
  
  
• The CeNeS Directors, who have been so advised by Nomura Code, consider the terms of the Acquisition to be fair and reasonable. In providing their advice to the CeNeS Directors, Nomura Code has taken into account the commercial assessments of the CeNeS Directors.
  
  
• Accordingly, the CeNeS Directors unanimously recommend that CeNeS Shareholders vote in favour of the resolutions to be proposed at the Court Meeting and the General Meeting (or in the event that the Acquisition is implemented by way of a Takeover Offer, accept or procure acceptance of such offer) as the CeNeS Directors have irrevocably undertaken to do in respect of their own aggregate beneficial holdings of 371,415 CeNeS Shares, representing (as at the date of this announcement) approximately 1.7 per cent. of the existing issued ordinary share capital of CeNeS.
  
  
• In addition, as at 9 April 2008 (the latest practicable date prior to the date of this announcement), irrevocable undertakings to vote in favour of the Scheme and the Acquisition at the Court Meeting and the General Meeting (or, in the event that the Acquisition is implemented by way of a Takeover Offer, to accept or procure acceptance of such offer) have been received from Gartmore Investment Management in respect of 3,986,016 CeNeS Shares, from Avlar Bioventures Fund II in respect of 2,436,449 CeNeS Shares, from ATM Investment Limited in respect of 154,605 CeNeS Shares, from Avlar Bioventures Limited in respect of 58,047 CeNeS Shares, from the Avlar Pension Fund in respect of 33,333 CeNeS Shares and from Gavin Kilpatrick (Chief Scientific Officer of CeNeS) in respect of 15,079 CeNeS Shares.
  
  
• In addition, as at 9 April 2008 (the latest practicable date prior to the date of this announcement) a letter of intent to vote in favour of the Scheme and the Acquisition at the Court Meeting and the General Meeting has been received from Universities Superannuation Scheme in respect of 1,081,162 CeNeS Shares.
  
  
• Accordingly, Paion has received irrevocable undertakings and a letter of intent in respect of, in aggregate, 8,136,106 CeNeS Shares, representing approximately 37.1 per cent. of CeNeS’s existing issued share capital.
  
  
• The irrevocable undertakings given by the CeNeS Directors, Avlar Bioventures Fund II, ATM Investment Limited, Avlar Bioventures Limited, the Avlar Pension Fund and Gavin Kilpatrick will cease to be binding if (i) Paion announces (with the consent of the Panel) that it does not intend to proceed with the Acquisition; or (ii) the Acquisition lapses or is otherwise withdrawn.
  
  
• The irrevocable undertaking given by Gartmore Investment Management will cease to be binding if: (i) a higher competing offer is made for CeNeS Shares which represents (in the reasonable opinion of Gartmore Investment Management) an improvement of more than 10 per cent. of the value of the consideration available under the Acquisition as at the date on which such higher competing offer is made; (ii) Paion (with the consent of the Panel) announces that it does not intend to proceed with the Acquisition; or (iii) the Acquisition lapses or is otherwise withdrawn.
  

Dr Wolfgang Söhngen, CEO of Paion, commented: “With its combined strong development portfolio targeted at both cardiovascular and CNS-related conditions, I believe the Enlarged Group will be well-positioned to successfully implement its realigned strategy. While we will continue to participate in the upside potential of Desmoteplase we will now focus on a portfolio of drug candidates with a diversified risk profile and move away from being perceived as a ‘one-product company’. By combining the two companies, Paion is taking a first step towards creating a platform for building critical mass. If 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.”

Neil Clark, CEO of CeNeS, added: “We are pleased to have reached agreement with Paion and are excited by the potential of the Enlarged Group. The combination creates a diversified pipeline backed by a strong balance sheet and a proven management team. The Enlarged Group will be well-placed to achieve significant clinical and commercial milestones over the next 24 months.”

The Acquisition is subject to a number of conditions including the approval of CeNeS Shareholders and the sanction of the Court. Such conditions and further terms are set out in Appendix I to this announcement and will be set out in full in the Scheme Document. The Scheme Document will be sent to CeNeS Shareholders as soon as practicable.

This summary should be read in conjunction with, and is subject to, the full text of this announcement and the appendices thereto. Appendix I to this announcement contains the conditions to, and certain further terms of, the Acquisition. Appendix II to this announcement contains further details of the bases and sources of certain information contained in this announcement. Appendix III to this announcement contains further details relating to the irrevocable undertakings and the letter of intent received by Paion and Appendix IV contains definitions of certain terms used in this summary and in this announcement.

Enquiries:

Paion
Dr Wolfgang Söhngen, CEO
+49 (0) 241 4453 0

Landsbanki (Financial adviser to Paion)
Shaun Dobson, Managing Director
Thilo Hoffmann, Associate Director
+44 (0) 20 7426 9000

CeNeS
Neil Clark, CEO
+44 (0) 1223 266 466

Nomura Code (Financial adviser to CeNeS)
Uli Kinzel, Director
Jonathan Senior, Director
+44 (0) 20 7776 1200

Landsbanki, which is authorised and regulated in the UK by the Financial Services Authority, is (in its function as financial adviser) acting for Paion and no-one else in connection with the Acquisition and will not be responsible to anyone other than Paion for providing protections afforded to clients of Landsbanki or for giving advice in relation to the Acquisition nor any other matter referred to in this announcement.

Nomura Code, which is authorised and regulated in the UK by the Financial Services Authority, is acting for CeNeS and no-one else in connection with the Acquisition and will not be responsible to anyone other than CeNeS for providing the protections afforded to clients of Nomura Code or for giving advice in relation to the Acquisition nor any other matter referred to in this announcement.

Overseas jurisdictions

This announcement does not constitute an offer or invitation to acquire or exchange securities in Paion or CeNeS or the solicitation of any vote or approval in any jurisdiction. This announcement does not constitute a prospectus or a prospectus equivalent document. The Acquisition will be made solely through the Scheme Document, which will provide and contain the full terms and conditions of the Acquisition, including details of how to vote in respect of the Acquisition. Any response to the Acquisition should be made only on the basis of the information contained in the Scheme Document.

The implications of the Scheme for overseas CeNeS Shareholders may be affected by the laws of the relevant jurisdictions. Such overseas CeNeS Shareholders should inform themselves about and observe any applicable legal requirements. It is the responsibility of each overseas CeNeS Shareholder to satisfy himself as to the full observance of the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental, exchange control or other consents which may be required to be observed and the payment of any issue, transfer or other taxes in such jurisdictions. The distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore persons in such jurisdictions into whose possession this announcement comes should inform themselves about and observe such restrictions. This announcement has been prepared for the purposes of complying with the Code and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction other than the United Kingdom.

Notice to US shareholders of CeNeS

For US securities law purposes, the exchange offer described in this announcement will be made for the securities of a foreign company by means of a scheme of arrangement under Part 26 of the United Kingdom Companies Act 2006. The New Paion Shares will not be registered under the Securities Act in reliance on the exemption from registration contained in Section 3(a)(10) of the Securities Act. The offer is subject to disclosure and procedural requirements of a foreign country that are different from those which would apply to a public offering of securities in the United States. Financial statements relating to CeNeS and Paion included or incorporated in the Scheme Document will be prepared in accordance with foreign accounting standards that may not be comparable to the financial statements of United States companies.

It may be difficult for you to enforce your rights and any claim you may have arising under United States federal securities laws, since CeNeS is located in a foreign country, and some or all of its officers and directors may be residents of a foreign country. You may not be able to sue CeNeS or its officers or directors in a foreign court for violations of the US securities laws. It may be difficult to compel CeNeS and its affiliates to subject themselves to a US court’s judgment.

This document has not been reviewed by any federal or state securities commission or regulatory authority in the United States, nor has any such commission or authority passed upon the accuracy or adequacy of this document. Any representation to the contrary is unlawful and may be a criminal offence.

Forward-looking statements

This announcement includes forward-looking statements with respect to the financial condition, results of operations and businesses of Paion and CeNeS and certain plans and objectives of the Paion Directors and the CeNeS Directors with respect to them. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as “anticipate”, “expect”, “estimate”, “intend”, “plan”, “goal”, “believe”, “will”, “may”, “should”, “would”, “could”, or other words of similar meaning. These statements are based on assumptions and assessments made by the Paion Directors and the CeNeS Directors in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe appropriate. By their nature, forward-looking statements involve risk and uncertainty, because they relate to events and depend on circumstances that will occur in the future and the factors described in the context of such forward-looking statements in this announcement could cause actual results and developments to differ materially from those expressed in or implied by such forward-looking statements.

These risks and uncertainties include, among others, the risk that (1) neither Paion nor CeNeS have been profitable to date and may together as the Enlarged Group never achieve profitability; (2) the Enlarged Group will to a large extent rely on collaborations with third parties to progress the development of its drug candidates; (3) the Enlarged Group might not succeed in entering into collaborative agreements with third parties for the further clinical development and marketing for its drug candidates, including M6G, and thus might not be able to complete the clinical development of these drug candidates in a timely manner or at all; (4) M6G, the CeNeS Group’s most advanced drug candidate, is subject to limited intellectual property protection and is developed for a price-sensitive market segment; (5) the Enlarged Group may have difficulty integrating its two constituent businesses, may have to incur significant expenses in doing so and any expected synergies or other benefits may fail to materialise or be less pronounced than expected; and (6) the Scheme may not be completed or completion may be delayed, including the risk that required shareholder and other approvals for the Scheme may not be obtained.

Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. CeNeS and Paion assume no obligation to update or correct the information contained in this announcement.

Dealing disclosure requirements

Under the provisions of Rule 8.3 of the Code, if any person is, or becomes, “interested” (directly or indirectly) in 1 per cent. or more of any class of “relevant securities” of CeNeS or Paion, all “dealings” in any “relevant securities” of that company (including by means of an option in respect of, or a derivative referenced to, any such “relevant securities”) must be publicly disclosed by no later than 3.30 pm (London time) on the London business day following the date of the relevant transaction. This requirement will continue until the date on which the Scheme becomes effective or the Acquisition lapses or is otherwise withdrawn or on which the “offer period” otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an “interest” in “relevant securities” of CeNeS or Paion, they will be deemed to be a single person for the purpose of Rule 8.3.

Under the provisions of Rule 8.1 of the Code, all “dealings” in “relevant securities” of CeNeS or of Paion by CeNeS or Paion, or by any of their respective “associates”, must be disclosed by no later than 12.00 noon (London time) on the London business day following the date of the relevant transaction.

A disclosure table, giving details of the companies in whose “relevant securities” “dealings” should be disclosed, and the number of such securities in issue, can be found on the Panel’s website at www.thetakeoverpanel.org.uk.

“Interests in securities” arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an “interest” by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities.

Terms in quotation marks are defined in the Code, which can also be found on the Panel’s website. If you are in any doubt as to whether or not you are required to disclose a “dealing” under Rule 8, you should consult the Panel.