9th Jan 2007 07:01
Skyepharma PLC09 January 2007 NOT FOR PUBLICATION OR RELEASE, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN IN WHOLE OR PART Details of dial-in numbers for conference calls for journalists, analysts and investors are given below FOR IMMEDIATE RELEASE 9 JANUARY 2007 London, England, 9 January, 2007 - SkyePharma PLC (LSE: SKP; NASDAQ: SKYE) todayannounces the following: • The proposed sale of its Injectable Business* to Blue Acquisition Corp ("Purchaser") for a total consideration which could exceed US$82 million, much of which depends on the completion of the development and substantial future sales of DepoBupivacaine(TM). The consideration includes an initial payment of US$20 million (£10.2 million) (less costs, US$2 million (£1.0 million) paid into escrow, a working capital adjustment and certain liabilities described below), up to US$62 million (£31.7 million) of contingent milestone payments, plus a percentage of sales of certain future products for a defined period of time. In addition, the Injectable Business is retaining responsibility for certain royalty-related payments which, when made, will reduce the Continuing Group's debt to Paul Capital. • Proposed Placing of 61.2 million ordinary shares** to certain institutional shareholders for cash at a price of 24.5p per share, raising £14.8 million (net of expenses) (the "Placing"). • Both the Disposal and Placing are subject to shareholder approvals which are inter-conditional. An EGM to approve the Disposal and Placing will be held around the beginning of February 2007. • The proposed restructuring of the existing secured financing facility with Paul Capital to a fixed amortisable note ("Note") of US$92.5 million (£47.3 million) with up to an additional US$12.5 million (£6.4 million) payable if worldwide sales of DepoDur(TM) (a product of the Injectable Business) reach certain thresholds. The amounts payable by the Continuing Group under the Note will be reduced to the extent of payments made to Paul Capital by the Injectable Business after the Disposal. The total net present value of the maximum Note (without allowing for the benefit of any future royalty-related payments by the Injectable Business) is approximately £33 million. The value of the Paul Capital obligations in the Group's balance sheet as at 30 June 2006 was £42.0 million. • Taking account of the new committed financing of approximately £35 million announced on 27 December 2006 the total additional funds available to the Group in the short term would amount to approximately £53 million (net of costs). • The Disposal will eliminate the significant cash costs of operating and developing the Injectable Business. The Directors believe that, once these transactions are concluded, the Continuing Group will have a sound financial foundation on which to build its future and continue to execute its strategy of focussing on growing its pipeline of oral and inhalation products. A circular to shareholders (the "Circular") setting out the reasons for andbackground to the Disposal and the Placing will be sent to shareholders shortly. Further details of this announcement are set out below. *For the six months ended 30 June 2006, the Injectable Division, which comprisesthe Injectable Business together with an allocation of corporate and other Groupcosts, assets and liabilities, generated revenues of £3.9 million and anoperating loss of £11.7 million. Its products include DepoCyt(R), a treatmentfor a lymphomatous meningitis, and DepoDur(TM) for post operative pain. *\* The ordinary shares in the Placing have not been and will not be registeredunder the US Securities Act of 1933 and may not be offered or sold in the UnitedStates absent registration or an applicable exemption from registrationrequirements. Frank Condella, SkyePharma's Chief Executive, said: "At the beginning of 2006, we set out several objectives including: thelicensing of Flutiform(TM), our key inhalation product, and the disposal of ourInjectable Business. "In May and September we outlicensed Flutiform(TM) in the US and Europe,respectively. Today we are announcing the planned sale of the InjectableBusiness for an initial consideration of US$20 million together with contingencymilestone and sales-related payments which could be substantial ifDepoBupivacaine(TM) fulfils its potential under the new ownership. "The proposed Disposal will relieve the Company of a significant cash burn dueto operating losses and the potential costs of future development and capitalexpenditure of the Injectable Business. "The Disposal, Placing and Paul Capital Refinancing, along with the £35 millionCRC Financing announced on 27 December 2006, will put SkyePharma in a goodposition to build future value by further developing our strategic oral andinhalation products." Credit Suisse Securities (Europe) Limited ("Credit Suisse") is acting as sponsorand sole placing agent for SkyePharma and no one else, only in connection withthe issue of the Shareholder Circular and the Placing and will not beresponsible to anyone other than SkyePharma PLC for providing the protectionsafforded to clients of Credit Suisse nor for providing advice in relation to theShareholder Circular or the Placing or any other matter, transaction orarrangement referred to in this announcement. UBS Securities LLC ("UBS") is acting for SkyePharma and no one else, only inconnection with the Disposal, and will not regard any other person (whether ornot a recipient of this announcement) as its client in relation to the Disposaland will not be responsible for providing the protections afforded to itsclients nor for giving advice in relation to the Disposal or any transaction orarrangement to, or information contained in this announcement. Conference call details Frank Condella, Chief Executive Officer, and Peter Grant, Finance Director, willhost the following conference calls this morning for journalists, analysts andinvestors. 08.00 GMT: Newswire journalists - dial-in number +44 (0) 20 7138 0820 09.30 GMT: Analysts and investors - dial-in number +44 (0) 20 7138 0836 11.00 GMT: Journalists - dial-in number +44 (0) 20 7138 0817 For further information please contact: SkyePharma PLC +44 207 491 1777Frank Condella, Chief Executive Officer until noon GMT: +44 207 466 5000 thereafter: +44 207 491 1777Ken Cunningham, Chief Operating OfficerPeter Grant, Finance Director until noon GMT: +44 207 466 5000 thereafter: +44 207 491 1777 Credit Suisse + 44 207 888 8888Andrew Christie/Peter Hyde/Chris Byrne Buchanan Communications +44 207 466 5000Tim Anderson / Mark Court / Rebecca Skye Dietrich Notes for editors About SkyePharma SkyePharma PLC develops pharmaceutical products benefiting from world-leadingdrug delivery technologies that provide easier-to-use and more effective drugformulations. There are now eleven approved products incorporating SkyePharma'stechnologies in the areas of oral, injectable, inhaled and topical delivery,supported by advanced solubilisation capabilities. For more information, visitwww.skyepharma.com. About Blue Acquistion Corp. Blue Acquisition Corp., a Delaware USA, corporation is controlled and funded bya group of financial investors including MPM Capital, OrbiMed and SanderlingVentures which led the transaction.. ANNOUNCEMENT 9 January 2007 Disposal of Injectable Business, Contingent Placing and Refinancing 1. Introduction SkyePharma PLC (the "Company") has entered into an agreement for the sale (the "Disposal"), subject to certain conditions, of its Injectable Business to BlueAcquisition Corp, (the "Purchaser") for an initial cash consideration of US$20million (£10.2 million) (less costs, US$2 million (£1.0 million) paid intoescrow, a working capital adjustment and certain liabilities described in moredetail in section 4 below), up to US$62 million (£31.7 million) in contingentmilestone payments, and a percentage of sales of certain future products for adefined period of time. The Injectable Business is also retainingresponsibility for certain royalty-related payments which, when made, willreduce the Continuing Group's debt to Paul Capital. In addition, the Company announces a proposed placing and refinancing asfollows: - a placing, subject to certain conditions, of new ordinary shares toraise £14.8 million (net of expenses) ("the Placing") in order to provideadditional funds for future working capital purposes and support the workingcapital statement to be made by the Company in the Circular; - the proposed restructuring ("Paul Capital Refinancing") of theexisting secured financing facility with Paul Capital to a fixed amortisablenote ("Note") of US$92.5 million (£47.3 million) with up to an additionalUS$12.5 million (£6.4 million) payable if worldwide sales of DepoDur(TM) (aproduct of the Injectable Business) reach certain thresholds. The Note isrepayable in accordance with an amortisation schedule through to 2015. TheInjectable Business will retain responsibility to Paul Capital for its existingobligations to share royalties received in respect of DepoCyt(R) and DepoDur(TM),and, to the extent that these are made, the Continuing Group's liability will bereduced accordingly. The total net present value of the maximum Note (withoutallowing for the benefit of any of the future royalty-related payments by theInjectable Business referred to above) is approximately £33 million. The valueof the Paul Capital obligations in the Group's balance sheet as at 30 June 2006was £42.0 million. The placing and refinancing are additional to the new committed financing ofapproximately £35 million announced on 27 December 2006, which can, potentially,increase by a further US$15 million (£7.7 million) subject to due diligence andprogress with a specific product development. On completion of the necessary approvals, conditions and consents, the total newfunds available to the Continuing Group in the short term will amount toapproximately £53 million (net of costs). Due to its size, the Disposal requires the approval of the Company'sshareholders and accordingly a Circular setting out the reasons for andbackground to the Disposal and the Placing will be sent to shareholders shortly.This will be accompanied by a Notice convening an Extraordinary GeneralMeeting to be held around the beginning of February 2007 (the "EGM"), at whichResolutions will be proposed, inter alia, to approve the Disposal and issue ofshares under the Placing. In order to proceed with the Placing, Shareholder approval for the issue of theNew Ordinary Shares on a non pre-emptive basis will also be required. ThePlacing is also conditional on completion of the Disposal. Resolutions to beproposed at the EGM to approve the Disposal and the Placing (together the "Transactions") are, therefore, inter-conditional and accordingly all will needto be passed for the Transactions to proceed to completion. 2. Information on the Injectable Business The Injectable Business is based in San Diego, California, USA. Thebusiness formulates, develops and manufactures controlled-release injectableproducts based on two proprietary drug delivery platforms: DepoFoam(TM) andBiospheres(TM). Revenues are generated from two marketed products: DepoCyt(R) for lymphomatous meningitis and DepoDur(TM) for the treatment of post-surgical pain. Sales of DepoDur(TM) in the USA were only US$1.6 million (£0.8 million) in the first half of 2006 and marketing arrangements are under review. The Injectable Business also has a pipeline of projects in various stages ofdevelopment. These include controlled-release injectable formulations of anumber of Biologics products and DepoBupivacaine(TM), a long-acting injectableformulation of the local anaesthetic bupivacaine for the control ofpost-operative pain. The Directors believe that DepoBupivacaine(TM) addresses animportant area of unmet medical need and has major commercial potential but willrequire significant investment to take through Phase III trials, obtainregulatory approvals, and commence manufacturing and successfully market. The Injectable Business employs approximately 100 people and occupies twoleasehold facilities encompassing a total area of around 100,000 square feet.The manufacturing facilities are in compliance with FDA and EMEA regulations andhave been recently inspected. The Injectable Business can handle all aspects ofthe drug development and approval process but is currently heavily loss-makingdue to the low volume of sales of existing products and an infrastructuredesigned for a much greater throughput. The Group reports the results and net assets of the Injectable Business in itssegmental reporting within the Injectable Division, which comprises theInjectable Business together with an allocation of corporate and other Groupcosts, assets and liabilities. For the financial year ended 31 December 2005,the Injectable Division generated revenues of £10.5 million and operating lossesof £18.6 million. For the six months ended 30 June 2006, the InjectableDivision generated revenues of £3.9 million and an operating loss of £11.7million. As at 30 June 2006, including goodwill, the Injectable Division hadgross assets of £55.4 million and net assets of £25.4 million. The Disposal largely consists of the sale of the shares in SkyePharma, Inc. withthe assets and liabilities which relate to the Injectable Business excludingdebts owed from and to other subsidiaries within the Group. Current employeesof SkyePharma, Inc. will remain with the business as will long-term propertyleases and liability for part of the Group's Paul Capital royalty-basedfinancing obligations. The Continuing Group is making certain representationsand warranties in connection with the Disposal and US$2 million (£1.0 million)of the initial consideration is being placed into escrow for a minimum of 12months. The escrow does not serve as a cap to the Continuing Group'sresponsibility for its representations and warranties. On 8 January 2007, Endo Pharmaceuticals, Inc. ("Endo") gave notice that itintends to terminate the development and commercialisation agreement under whichit distributes DepoDur(TM) in the USA. Detailed discussions have taken placebetween Endo and the Group, which has consulted with the Purchaser, leading to adraft termination agreement, which is subject to approval of Paul Capital andits financial guaranty insurer. Paul Capital has been consulted and has statedthat it will recommend that its guaranty insurer gives such approval. TheDirectors believe that a termination agreement, including appropriate transitionarrangements, satisfactory to the Injectable Business, the Purchaser and theContinuing Group can be implemented rapidly and is in the interests of thoseparties and Paul Capital. The proposed termination by Endo has been taken intoaccount in agreeing, with the Purchaser, the terms of the Disposal of theInjectable Business, and the Directors believe that it will not affect theDisposal nor materially adversely affect the prospects for the Group if for anyreason the Disposal does not proceed. 3. Background to and reasons for the Disposal On 2 February 2006, the Company announced the outcome of itsStrategic Review. The Board concluded that in the interests of achievingsustainable profitability in the shortest reasonable time, SkyePharma shouldconcentrate on oral and inhalation products and divest its Injectable Business.In March 2006 the Company engaged UBS, a leading global investment bank withparticular expertise in the life sciences field, to commence a sale process forthe Injectable Business. As part of the process UBS contacted and solicitedindications of interest from over 120 parties. The Board judged that theproposed Disposal was the best proposal received in terms of value anddeliverability. The proposed Disposal would release cash and relieve the Company of asignificant cash burn due to operating losses and the potential costs of futuredevelopment and capital expenditure of the Injectable Business. The Boardbelieves that the Continuing Group should be able to achieve profitability morequickly and, with more focused resources, the Continuing Group will be in abetter position to further develop and market its pipeline of oral andinhalation products. The Board believes that the Disposal of the Injectable Business is an importantstep in restructuring and refocusing the Continuing Group on its core oral andinhalation business. The Board is confident that the strategy it has adoptedwill enable the Company to maximise the potential of Flutiform(TM) and otherpipeline products, to become profitable and to deliver long-term value forShareholders. 4. Principal terms of the Disposal Under the agreement for sale ("Sale and Purchase Agreement"), subject to thesatisfaction of certain conditions, the Group has agreed to make the Disposal tothe Purchaser, Blue Acquisition Corp, a Delaware, USA, corporation controlledand funded by a group of financial investors. The terms provide for the Groupto receive an initial payment of US$20 million (£10.2 million) (less costs, US$2million (£1.0 million) paid into escrow, a working capital adjustment, retentionof certain liabilities and costs of transitional services, which are describedmore fully below), up to US$62 million (£31.7 million) in contingent milestonepayments, and a percentage of sales of certain future products for a fixedperiod of time. The milestones of up to US$62 million (£31.7 million) depend onthe completion of Phase III trials and the achievement of certain launch andvarious substantial sales targets of DepoBupivacaine(TM). In addition, subject tothe successful development and launch of the relevant products, the ContinuingGroup will receive 3% of net sales worldwide of DepoBupivacaine(TM) and, subjectto a cap of 20% of the relevant royalty income, 3% of net sales worldwide ofcertain Biologics products. These percentage payments continue to be due, foreach country, for as long as the relevant products remain subject to patentprotection in that country, but may terminate earlier if, after five years fromthe date of Disposal, the Continuing Group commences development, manufacturing,marketing or sale of specific types of product. On completion, the Injectable Business will remain liable to Paul Capital forroyalty-related payments in respect of products transferred with the InjectableBusiness and any payments made in this respect will reduce the liability whichthe Continuing Group has under the proposed Paul Capital Note. As at the date of Disposal, general cash balances in the Injectable Businesswill be retained by the Continuing Group. The initial purchase price is subjectto a reduction if the working capital at the date of the completion of theDisposal is below an agreed minimum level. The Continuing Group has indemnifiedthe Purchaser against a range of potential breaches of representations andwarranties, generally typical of a sale and purchase agreement of this natureand has retained responsibility for certain specific disputed and aged potentialliabilities with a book value of approximately US$1 million (£0.5 million),certain liabilities up to approximately US$1.9 million (£1.0 million) in respectof employees, and for paying US$1 million (£0.5m) for certain transitionalservices. The US$2 million (£1.0 million) paid into escrow is to be held for atleast 12 months from the date of completion of the Disposal and any balanceremaining at that time is to be released for the benefit of the Continuing Groupto the extent that there are no indemnity or other claims against the Groupduring that 12 month period, or released at such later date to the extent notneeded to cover such claims. The Continuing Group has covenanted not to develop, manufacture, market or sellproducts which relate to specific technologies, substances, indications andproducts of the Injectable Business. Generally, the covenants continue for fiveyears after the date of Disposal. The Disposal, which is expected to be completed in early February 2007, isconditional, inter alia, on US Hart-Scott-Rodino (anti-trust) clearance, thefinalisation of the new Paul Capital agreements, certain consents from PaulCapital related to transitional arrangements of a product of the InjectablesBusiness, the non-occurrence of any material adverse events, and the approval ofShareholders at the EGM. The finalisation of the new Paul Capital agreementsand consents are being recommended by Paul Capital for approval by its financialguaranty insurer and note holders. The Sale and Purchase Agreement willterminate automatically if the relevant approvals and all other conditionsprecedent are not received on or before 30 April 2007. 5. Background to and reasons for the Placing As noted above, the Company is seeking to raise approximately £14.8 million (netof expenses) by way of a placing of 61,224,490 New Ordinary Shares at thePlacing Price of 24.5p per New Ordinary Share, representing approximately 8.12per cent of the Company's existing issued Ordinary Share Capital. Pursuant tothe terms of the Placing Agreement, and subject to satisfaction of theconditions of the Placing, these New Ordinary Shares have been placed with anumber of institutional investors. The New Ordinary Shares to be issuedpursuant to the Placing were offered to the Company's largest long-terminvestors on a non pre-emptive basis in order to provide additional funds forfuture working capital purposes and to support the working capital statement tobe made by the Company in the Circular. The Placing Price is at a 1.24% premiumto the average closing market price over the 30 days prior to today. ThePlacing is conditional on (inter alia) the passing of the Resolutions (in partto disapply the pre-emptive rights), the completion of the Disposal and thePlacing Shares being admitted to the Official List and trading on the LondonStock Exchange. Subject (inter alia) to the passing of the Resolutions it is expected that thePlacing will be effective and the Placing Shares will be admitted to trading onthe London Stock Exchange in early February 2007. The Placing Shares will,when issued, rank pari passu with the Existing Ordinary Shares including therights to all dividends and other distributions declared, made or paid after thedate of their issue. 6. Financing and Refinancing Christofferson Robb Financing On 27 December 2006, the Company announced that the Group had entered into anagreement with a specialist lending entity domiciled in Ireland and advised byChristofferson, Robb & Company ("CRC") for a 10-year secured amortising loanfacility of approximately £35 million (the "CRC Financing"). The facility comprises initial commitments of US$35 million and €26.5millionrepayable over 10 years based on a minimum amortization schedule. This scheduleis based on expected receipts from milestone and royalties in respect of certainproducts ("CRC Products"). Interest is generally charged on a quarterly basis atthe respective US and Euro three month LIBOR rates plus a 5.85% margin. Theloan facility is secured by assignments of certain assets including, onceimplemented, the receipts in respect of the CRC Products. There is also acovenant (negative pledge) not to grant further securities over the ContinuingGroup's assets and the requirement for prior consent from CRC for certaintransactions that could affect CRC's security and risk. There are provisionsfor the facility to be increased by a further US$15 million (£7.7 million)subject to due diligence and progress with a specific product development. Noneof the aforementioned products include Flutiform(TM). Paul Capital Refinancing In addition to the CRC Financing, the Group is restructuring its existingsecured financing facility with Paul Capital to a fixed amortisable note ("Note") of US$92.5 million (£47.3 million) with up to an additional US$12.5million (£6.4 million) payable if worldwide sales of DepoDur(TM) (a product ofthe Injectable Business) reach certain thresholds. This restructuring issubject to the completion of the Disposal and is conditional, inter alia, onapproval by Paul Capital's guaranty insurer and note holders which Paul Capitalhas agreed to recommend. The Note is repayable 2007 - 2015 using anamortisation schedule based on expected receipts from certain milestone androyalties in respect of certain products. The Note will be secured by themilestone and royalty receipts in respect of certain products (not includingFlutiform(TM)), already secured under the existing agreements with Paul Capital,including certain products of the Injectable Business. Under the terms of the Disposal, the Injectable Business will retainresponsibility to Paul Capital for its existing obligations to share royaltiesreceived in respect of DepoCyt(R) and DepoDur(TM). Any payments made to PaulCapital under this agreement will reduce the amounts payable by the ContinuingGroup under the Note. It is anticipated that the Company, Paul Capital and theBuyer will, prior to the EGM, procure the completion of definitive agreements toimplement this financial restructuring. The value of the Paul Capital obligations in the Group's balance sheet as at 30June 2006 was £42.0 million, based on the implicit interest rates of theexisting financing of 24% and 30%. The Note will not be interest bearing, andits total net present value (without allowing for the benefit of any futuresales-related payments by the Injectable Business) as at today's date, using asa benchmark the interest rate applicable to the CRC Financing, amounts toapproximately £33 million. The Paul Capital restructuring is a condition of theDisposal and, the Directors believe it significantly simplifies the Group'sfinancial structure by converting financial obligations from being based oncertain royalty income streams to mainly being a fixed Note amortisable over 9years. It also facilitates the Disposal by providing the Purchaser with astand-alone agreement with Paul Capital. 7. Financial position and use of proceeds The CRC Financing announced on 27 December 2006 has already provided additionalshort term funding of approximately £35 million and this has substantiallystrengthened the Group's balance sheet and secured the continuing FlutiformPhase III trials, most of which will be completed during the first half of 2007.The Directors estimate that the total net proceeds of the Disposal and thePlacing to be received on or shortly after completion of the Transactions willamount to a further £18 million, after repaying a secured finance facility ofUS$1.0 million (£0.5 million). Following the completion of the Transactions,the total new funds available to the Continuing Group in the short term willamount to approximately £53 million (net of costs). These net proceeds will be used to strengthen the Continuing Group's balancesheet, provide funds for general working capital purposes, the completion of theFlutiform(TM) project and other product approvals. As announced on 27 December 2006, the Flutiform(TM) project continues to operateto the original timescales with a target approval in the first half of 2009.The estimated costs to the Group to complete the development programme forFlutiform(TM) from now through to launch (excluding saleable launch stock) totalapproximately US$47 million (£23.9 million) of development expenditure and US$13million (£6.6 million) of capital expenditure. Allowing for costs incurred butnot yet paid, the Group's estimated cash outflows on Flutiform(TM) developmentfrom now through to launch (including capital expenditure) total US$70.0 million(£35.6 million). The Directors believe the CRC Financing and the completion of the Disposal,Placing and Paul Capital Refinancing would combine to deliver a more focused andfinancially secure Continuing Group. If the Disposal and Placing do not proceed the Directors would have to seek, inthe short term, an alternative solution for the Injectable Business to stemcontinuing operating losses. This would be likely to include rapid actions todownsize the existing Injectable Business whist retaining key resources requiredto seek a licensing partner for DepoBupivacaine(TM), which could take a numberof months. The Board believes that such options are likely to be materiallyworse for the Group than the Disposal and Placing. Depending on the terms oflicensing of DepoBupivacaine, the Company would probably still need to raisefurther funding to fund the continuing losses and reorganise the InjectableBusiness and for general working capital purposes for the rest of the Group. 8. Strategy for Continuing Group The Disposal would complete the strategic objectives which the newmanagement team set out to achieve in 2006. In addition, the Directors believethat the Placing and CRC Financing would significantly enhance the ContinuingGroup's financial position. The Continuing Group would now be able toconcentrate on developing its core oral and inhalation businesses. The Continuing Group's oral and inhalation pipeline includes SkyePharma's mostimportant project Flutiform(TM), a combination asthma product. The Directorsbelieve that Flutiform(TM) has substantial value as it is poised to enter alarge and rapidly growing market with currently limited competition. This isreflected in the attractive terms on which the Group licensed Flutiform(TM) toKos Pharmaceuticals for the US market (with an option on Canada) and Mundipharmafor the countries of the European Union and the rest of the world (with right offirst negotiation for Japan), with the exception of North and South America. TheDirectors also believe that the prospects for Flutiform(TM) will be enhanced byAbbott's recent acquisition of Kos. The core oral and inhalation business has eight products marketed by licensees,including Paxil CRTM, Xatral(R) OD and Triglide(TM). These products will continueto generate revenues and cash for the Company. There are also a number oflate-stage products that are close to commercial launch. Two examples ofproducts that have now been filed are: (i) a controlled release version of theoral asthma drug Zyflo(R) for Critical Therapeutics and (ii) Lodotra(TM), adelayed release formulation of an anti-inflammatory drug for rheumatoidarthritis for Nitec. These products are expected to start generating revenuesin 2007. The Continuing Group is seeking additional complementary projects to reinforceits pipeline. In June 2006, the Company's Business Review day disclosed two neworal modified release products about to enter clinical trials: a treatment forpain and inflammation and a novel approach to the treatment of sleep disorders.It also announced one new partnered project (a controlled release version ofSular(R) (Nisoldipine), the lead product of Sciele Pharma, its US partner forTriglide(TM)). Following completion of the Transactions, the Board expects to be able toprogress the development of a number of additional pipeline oral and inhalationproducts which would address important therapeutic areas and are at an earlystage of development. The Board's strategy is for the Continuing Group to fundcertain early stage development work whilst generally seeking contractdevelopment and collaboration partners to fund most new development projectsover the next two to three years. The Directors believe that completion of the Transactions will deliver a morefocused and financially secure Continuing Group and will provide the opportunityto attract new talent and reshape the composition of the non-executivemembership of the Board. 9. Current trading and prospects for the Continuing Group In common with similar businesses, the Continuing Group's revenuesare sensitive to the timing and recognition of milestone payments and upfrontpayments received on the signing of new agreements. Unaudited revenues for thefirst six months of 2006, at £25.6 million, were 29% below the £36.0 millionreported in the first half of 2005, primarily due to the phasing of recognitionof up-front revenues received in 2006 for the US marketing and distributionrights for Flutiform(TM). Whilst progress continues to be made with a number ofproducts, as anticipated there have been no significant product launches since30 June 2006 and revenues and underlying operating losses for the second halfare expected to be similar to those in the first half. Whilst maintaining the commitment to securing the development of Flutiform(TM),the new management team will continue to maintain tight control on overheads andseek additional operational efficiency improvements where appropriate. Phase III trials on Flutiform(TM) started in February 2006, as planned, andrepresent the Continuing Group's major development expenditure until anticipatedcompletion in mid-2007 with a view to filing with the FDA in late 2007. In viewof the level of this expenditure, and despite the sale of the loss-makingInjectable Business, the Group is expected to remain loss-making during 2007,especially in the first half year. Other product launches are planned over thenext 12 to 18 months and, together with continuing control of costs, theDirectors believe that this will help to reduce the scale of losses verysignificantly by 2008. The above financial information has been extracted without material adjustmentfrom the Company's unaudited interim results. 10. Circular and Extraordinary General Meeting A Circular to shareholders setting out the reasons for and background to theDisposal and the Placing will be sent to shareholders shortly. The Circularwill contain a notice of an extraordinary general meeting to consider thefollowing resolutions ("Resolutions"), all of which are stated to beinter-conditional: (i) an ordinary resolution to approve the terms of the Disposal as aClass 1 transaction for the purposes of the Listing Rules; (ii) an ordinary resolution to authorise the Directors pursuant tosection 80 of the Act to allot New Ordinary Shares up to a maximum aggregatenominal value of £6,122,449 in connection with the Placing (representingapproximately 8.12 per cent of the present issued share capital andapproximately 7.51 per cent of the enlarged issued share capital of the Companyfollowing the Placing) such authority to expire six months from the passing ofthe resolution; and (iii) a special resolution to disapply the statutory pre-emption rightscontained in section 89 of the Act in relation to the Placing up to an aggregatenominal amount of £6,122,449 (representing approximately 8.12 per cent of thepresent issued share capital and approximately 7.51 per cent of the enlargedissued share capital of the Company following the Placing) such authority toexpire six months from the passing of the resolution. If the Resolutions to be proposed at the extraordinary general meeting are notpassed, the Disposal and Placing will not proceed, and the Directors would haveto seek, in the short term, an alternative solution for the Injectable Businessto stem continuing operating losses. This would be likely to include rapidactions to downsize the existing Injectable Business whist retaining keyresources required to seek a licensing partner for DepoBupivacaine(TM), whichcould take a number of months. The Board believes that such options are likelyto be materially worse for the Group than the Disposal and Placing. Dependingon the terms of licensing of DepoBupivacaine, the Company would probably stillneed to raise further funding to fund the continuing losses and reorganise theInjectable Business and for general working capital purposes for the rest of theGroup. 11. Financial advice The Board has received financial advice from UBS in relation to the Disposal.In providing such advice to the Board, UBS has relied on the Board's commercialassessment of the Disposal. The Board believes that the Disposal is in the bestinterests of the Continuing Group and of Shareholders as a whole. Certain statements in this news release are forward-looking statements and aremade in reliance on the safe harbour provisions of the US Private SecuritiesLitigation Act of 1995. Although SkyePharma believes that the expectationsreflected in these forward-looking statements are reasonable, it can give noassurance that these expectations will materialize. Because the expectations aresubject to risks and uncertainties, actual results may vary significantly fromthose expressed or implied by the forward-looking statements based upon a numberof factors, which are described in SkyePharma's 20-F and other documents on filewith the US Securities and Exchange Commission. Factors that could causedifferences between actual results and those implied by the forward-lookingstatements contained in this news release include, without limitation, risksrelated to the development of new products, risks related to obtaining andmaintaining regulatory approval for existing, new or expanded indications ofexisting and new products, risks related to SkyePharma's ability to manufactureproducts on a large scale or at all, risks related to SkyePharma's and itsmarketing partners' ability to market products on a large scale to maintain orexpand market share in the face of changes in customer requirements, competitionand technological change, risks related to regulatory compliance, the risk ofproduct liability claims, risks related to the ownership and use of intellectualproperty, and risks related to SkyePharma's ability to manage growth. SkyePharmaundertakes no obligation to revise or update any such forward-looking statementto reflect events or circumstances after the date of this release. Neither this news release nor any copy of it may be taken or transmitted intothe United States, Australia, Canada or Japan. The information contained hereindoes not constitute an offer to sell or the solicitation of an offer to buy norshall there be any sale of the securities referred to herein in any jurisdictionin which such offer, solicitation or sale would be unlawful prior toregistration, exemption from registration or qualification under the securitieslaws of any jurisdiction. These materials are not an offer for sale of securities in the United States.Securities may not be sold in the United States absent registration or anexemption from registration under the US Securities Act of 1933. The Companydoes not intend to register any portion of such offering in the United States orto conduct a public offering of the ordinary shares in the United States. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
SKP.L