Interim Management Statement

SKYEPHARMA PLC - INTERIM MANAGEMENT STATEMENT

LONDON, UK, 14 November 2011 - SkyePharma PLC (LSE: SKP) today publishes its Interim Management Statement for the period 1 July 2011 to 13 November 2011 and provides an update on key events since the half-year results announcement issued on 18 August 2011.

Pipeline and product updates

EXPAREL™

As announced on 31 October 2011, the United States Food and Drug Administration ("FDA") approved the New Drug Application ("NDA") for EXPAREL™ (bupivacaine liposome injectable suspension) 1.3% for administration into the surgical site to produce postsurgical analgesia. Under the terms of the sale of the Group's former Injectables Business, now called Pacira Pharmaceuticals, Inc. ("Pacira"), the Group is entitled to receive a milestone payment of U.S.$10 million (£6.2 million) on first commercial sale of EXPAREL™ in the United States. The Group is also entitled to receive three per cent of net sales of EXPAREL™ in the United States, Japan, the United Kingdom, France, Germany, Italy and Spain. Longer-term the Group is entitled to receive further contingent milestone payments up to an aggregate of U.S.$52 million (£32 million) from Pacira, depending on the following events occurring: (i) U.S.$4 million (£2.5 million) on first commercial sale in a major EU country (UK, France, Germany, Italy or Spain); (ii) U.S.$8 million (£5 million) if worldwide annual net sales reach $100 million; (iii) a further U.S.$8 million (£5 million) if worldwide annual net sales reach $250 million and (iii) a further $32 million (£20 million) if worldwide annual net sales reach $500 million.

Flutiform™

The European Marketing Authorisation Application ("MAA") for Flutiform™, filed by Mundipharma International Limited, continues to be reviewed under the decentralised procedure ("DCP") involving 22 member states. As announced on 18 October 2011, the UK (the Reference Member State for the review of Flutiform™) and almost all of the Concerned Member States were in agreement that the product was approvable, but a complete consensus was not achieved by Day 210 of the DCP, which was 17 October 2011. The procedure has now moved into a referral process during which the Member States involved will use their best endeavours to achieve a consensus on the final regulatory position of Flutiform™ within 60 days of the process commencing. The process commenced on 24 October 2011 and is scheduled to be concluded on 22 December 2011.

In the meantime, the manufacturing processes for Flutiform™ have been successfully validated and preparations are sufficiently advanced to enable launch in initial markets in Europe shortly after approval is received.

Good progress continues to be made with two Phase III clinical trials of Flutiform™ in Japan and the final pre-approval milestone is due shortly. The target remains to file the Japanese New Drug Application during Kyorin's fiscal year ending March 2013 and, subject to receiving approval, launch during Kyorin's fiscal year ending March 2015.

As announced on 28 July 2011, the Group entered into an exclusive Development, License and Marketing Agreement with Sanofi in Mexico, Central and South America for Flutiform™ and an initial milestone has been received. Preparations continue to be made for filing marketing authorisation applications throughout the region. The applications will be based on data included in, and subject to approval of, the European MAA.

A meeting has been held with the FDA at which it was confirmed that the scope of work that would currently need to be undertaken to meet the requirements for approval of Flutiform™ in the United States would be considerable. The FDA confirmed its current position that a substantial safety study would also need to be carried out post-approval, similar to that for currently marketed products containing a long-acting beta agonist. As previously announced, the Group does not plan to carry out substantive work on pursuing the NDA for Flutiform™ unless the costs are covered by a third party.

Lodotra®

SkyePharma's partner Horizon Pharma Inc has submitted a NDA to the FDA for Lodotra® for the treatment of active rheumatoid arthritis ("RA"). Lodotra® utilises SkyePharma's Geoclock™ technology to provide a proprietary delayed-release formulation of low-dose prednisone. Prednisone is currently approved in the United States for RA and commonly used to inhibit the production of various pro-inflammatory cytokines, which are proteins associated with joint inflammation in RA. SkyePharma is entitled to a low mid-single digit percentage royalty on net sales of Lodotra® in North America and a mid-single digit percentage royalty elsewhere. Lodotra® is manufactured in the Manufacturing Facility in Lyon which was recently leased by the Group to Aenova (see below).

SKP-1052

As announced on 2 September 2011, an initial 'Proof of Concept' study for the diabetes care product candidate SKP-1052 has been completed and the Group is now seeking a partner to fund further development from Phase I trials through to approval and, subject to approval, to market the product. It applies SkyePharma's Geoclock™ technology to improve the delivery of an existing marketed active pharmaceutical ingredient. The aim is to develop an innovative treatment option for the prevention of nocturnal drug-induced hypoglycaemia in patients with type 1 and 2 diabetes mellitus treated with insulin. SKP-1052 is targeted at the growing multi-billion dollar market for diabetes management.

Manufacturing

As previously announced, the entire pharmaceutical manufacturing business and the premises at Saint Quentin-Fallavier, Lyon, France ("Manufacturing Facility") have been leased to Aenova France SAS ("Aenova") for an initial period of two years, extendable for a further three years. The agreements came into effect on 16 August 2011, at which time the manufacturing business was transferred to Aenova as a going concern, including all employees, raw materials and work in progress, and, from that date, Aenova has managed and run the Manufacturing Facility. The alliance is a strategic move designed to increase utilisation of the factory and generate cash for the Group through rental income, reduced working capital and lower capital expenditure requirements. Aenova is making plans to increase utilisation of the Manufacturing Facility.

Trading

Trading to date has continued to be in line with the Board's expectations. However, given that Flutiform™ will not now be launched in 2011, total revenues for the year are expected to be lower than in 2010, as substantial non-recurring manufacturing volumes recorded last year are likely to be only partially offset by revenues from the manufacture of Flutiform™ this year. As reported previously, total costs are expected to be higher in 2011 than in 2010 due to costs relating to the Flutiform™ supply chain, although the Group continues to conserve cash where possible through careful cost and working capital control. 

Financial position

As announced with the interim results on 18 August 2011, the Group had cash of £20.8 million at 30 June 2011. As anticipated, there has been, and will continue to be, substantial cash outflows during the second half of 2011, due to costs incurred on preparing for the launch of Flutiform™. The Group cash position will be boosted by the U.S.$10 million (£6.2 million) milestone payment due when Pacira achieves the first commercial sale of EXPAREL™ in the United States. If Flutiform™ is approved in Europe, liquidity will be further boosted by launch milestones, although the Group is obliged to apply 50% of these Flutiform™ milestones as prepayments of the Paul Capital finance secured debt facility. A similar obligation for the CRC finance facility has been deferred, as announced on 1 August 2011. As previously announced, the Board continues to work with Jefferies International Limited which is advising on the Group's capital structure.

Dr Axel Müller, Chief Executive Officer of SkyePharma, said: "Trading continues to be in line with our expectations. The approval of EXPAREL™ in the United States was an important milestone for SkyePharma and we look forward to a successful launch of the product in the U.S. It was disappointing that a complete consensus was not reached on the European MAA for Flutiform™ by Day 210 of the Decentralised Process. We are continuing to work diligently and closely with Mundipharma to try to obtain a positive outcome for the Flutiform MAA by the end of 2011. We are also actively seeking a partner for our diabetes product candidate, SKP-1052."

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About SkyePharma PLC

Using its proprietary drug delivery technologies, SkyePharma develops new formulations of known molecules to provide a clinical advantage. The Group has twelve approved products in the areas of oral, inhalation and topical delivery. The Group's products are marketed throughout the world by leading pharmaceutical companies. For more information, visit www.skyepharma.com.