U.S. drugmaker Upsher-Smith Laboratories is to buy British group Proximagen for 223 million pounds ($347 million) plus further payments potentially worth up to 134 million based on the success of two experimental drugs.

Wednesday's deal is the latest in a wave of acquisitions in the sector as drug companies scour the biotech landscape for promising new medicines with which to replenish their product pipelines.

Proximagen has drugs in early-stage development for central nervous system disorders, cancer and inflammation. It also has a treatment for obesity known as PRX00933, which got a boost in May when U.S. advisers backed a similar pill from Arena Pharmaceuticals.

Unlisted Upsher-Smith, which has worked with Proximagen since 2008, said the British firm's products had significant potential.

USL, a subsidiary of Upsher-Smith, will pay 320 pence for each Proximagen share and a further 192 pence per share in either cash or loan notes by way of contingent value rights (CVRs).

CVRs are increasingly being looked at as a tool to bridge differences between buyers and sellers in biotech transactions. They were used last year to seal Sanofi's $20.1 billion acquisition of Genzyme.

In this case, the CVRs are linked to the success of obesity drug PRX00933 and VAP-1, another medicine for rheumatoid arthritis.

Upsher-Smith already holds 16% in Proximagen, which also has drugs in development for Parkinson's disease, epilepsy, cognition and neuropathic pain.

Upsher-Smith's decision to snap up Proximagen follows a pattern of larger drug companies buying out smaller biotech rivals. But it is unusual in that the target is British, while most of the biotech companies acquired recently or now in play are U.S.-based.

Current U.S. biotech targets include Human Genome Sciences, which is being pursued by GlaxoSmithKline, and Amylin Pharmaceuticals, which is undergoing an auction process.

British biotech companies, by contrast, have often struggled to deliver returns to investors.

"This deal demonstrates that the UK biotechnology sector can, with supportive investors, bring together scientific excellence and business acumen and generate significant returns for shareholders," said Proximagen Chief Executive Kenneth Mulvany.

Upsher-Smith said it would fund the cash consideration by existing cash and debt facilities. It has already received commitments from Proximagen's directors and shareholders who hold about 72% of the company's shares to vote in favour of the deal.