Merger Update

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.

16 May 2016

Proposed recommended all share merger of Vectura Group plc and Skyepharma PLC

The boards of Vectura Group plc ("Vectura" or the "Company") and Skyepharma PLC ("Skyepharma") are pleased to announce that the Competition and Markets Authority (the "CMA") has confirmed that the proposed recommended all share merger of Vectura and Skyepharma (the "Merger") does not qualify for investigation under the Enterprise Act 2002. This confirmation satisfies the CMA clearance condition to the implementation of the proposed Merger (including the Scheme) as set out in the announcement of the proposed Merger released on 16 March 2016 and in Part 3 (Conditions to and Further Terms of the Merger) of the Scheme Document sent to Skyepharma's shareholders on 8 April 2016.

All references in this announcement to times are to times in London (unless otherwise stated).

Capitalised terms used but not otherwise defined in this announcement shall have the meaning given to them in the combined Class 1 circular and prospectus published by Vectura on 8 April 2016.

In accordance with Rule 26.1 of the City Code on Takeovers and Mergers, a copy of this announcement will be available on the Company's website at www.vectura.com and on Skyepharma's website at www.skyepharma.com by no later than 12.00 p.m. on the business day following this announcement.

Enquiries

J.P. Morgan Cazenove and Rothschild are acting as joint sponsors and joint financial advisers to Vectura in connection with the Merger. J.P. Morgan Cazenove and Peel Hunt are acting as joint corporate brokers to Vectura in connection with the Merger.

IMPORTANT NOTICE

The information contained in this announcement is for information purposes only and does not purport to be full or complete. The information in this announcement is subject to change.

The content of the Company's website, Skyepharma's website and any website accessible by hyperlinks on the Company's website or Skyepharma's website is not incorporated into, and does not form part of, this announcement.

This announcement is for information purposes only and is not intended to and does not constitute or form part of any offer or invitation to purchase or subscribe for, or any solicitation to purchase or subscribe for ordinary shares in any jurisdiction. No offer or invitation to purchase or subscribe for, or any solicitation to purchase or subscribe for, ordinary shares will be made in any jurisdiction in which such an offer or solicitation is unlawful.

The release, publication or distribution of this announcement in, into or from jurisdictions other than the United Kingdom may be restricted by the laws of those jurisdictions and therefore persons into whose possession this announcement comes should inform themselves about, and observe, any applicable restrictions. Any failure to comply with such restrictions may constitute a violation of the securities laws of such jurisdictions.

This announcement is not intended to, and does not, constitute or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities or the solicitation of any vote or approval pursuant to the Scheme or otherwise, in any jurisdiction in which such offer, invitation or solicitation is unlawful. Nothing in this announcement should be relied upon for any other purpose.

The implications of the Merger for persons resident in, or citizens of, jurisdictions outside the United Kingdom may be affected by the laws of the relevant jurisdictions. Such Overseas Shareholders should inform themselves about and observe any applicable legal requirements. It is the responsibility of each Overseas Shareholder to satisfy itself 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, or the compliance with other necessary formalities which are required to be observed and the payment of any issue, transfer or other taxes due in such jurisdiction.

This announcement has been prepared for the purposes of complying with English law and the City Code on Takeovers and Mergers 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 of jurisdictions outside the United Kingdom. Overseas Shareholders should consult their own legal and tax advisers with regard to the legal and tax consequences of the Scheme to their particular circumstances.

Shareholders (including, without limitation, nominees, trustees or custodians) of Vectura or Skyepharma who would, or otherwise intend to, forward this announcement to any jurisdiction outside the United Kingdom, should seek appropriate independent professional advice before taking any action.

The New Vectura Shares have not been and will not be registered under the US Securities Act 1933, as amended (the "Securities Act") or under the securities laws of any state or other jurisdiction of the United States and are expected to be issued in reliance upon the exemption from the registration requirements of the Securities Act provided by Section 3(a)(10). US persons should note that the Scheme relates to the shares of an English company which are not registered under the US Exchange Act and is being implemented under English company law. Neither the tender offer rules nor the proxy solicitation rules under the US Exchange Act will apply to the Scheme. The Scheme will be subject to the disclosure requirements and practices applicable in the United Kingdom to mergers implemented by schemes of arrangement, which differ from the disclosure requirements of the US proxy solicitation rules and tender offer rules. The financial statements included in the Scheme Document have been prepared in accordance with accounting standards applicable in the United Kingdom and may not be comparable to the financial statements of US companies. Shareholders (whether or not US persons) who are or will be affiliates (within the meaning of the Securities Act) of Vectura or Skyepharma prior to, or of Vectura after, the Merger will be subject to certain restrictions on transfers of the New Vectura Shares received pursuant to the Merger.

The New Vectura Shares have not been approved or disapproved by the SEC, any state securities commission in the United States or any other US regulatory authority, nor have such authorities passed upon or determined the fairness or merits of the New Vectura Shares or upon the adequacy or accuracy of the information contained in this announcement. Any representation to the contrary is a criminal offence in the United States.

If, in the future, Vectura exercises the right to implement the Merger by way of a takeover offer, the Offer will be made in compliance with procedural and filing requirements of the US securities laws, including under Section 14(e) of the US Exchange Act and Regulation 14E thereunder.

In addition to any such Offer, Vectura, certain affiliated companies and the nominees or brokers (acting as agents) may make certain purchases of shares in Skyepharma outside such Offer during the period in which such Offer would remain open for acceptance, such as in open market or privately negotiated purchases.

Vectura and Skyepharma are organised under the laws of England. Some or all of the officers and directors of Vectura and Skyepharma are residents of countries other than the United States. The significant majority of the assets of Vectura and Skyepharma are located outside the United States. As a result, it may not be possible to enforce rights and claims US persons may have arising under the US federal securities laws or the laws of any state or territory within the United States. It may not be possible to sue Vectura or Skyepharma or their respective officers or directors in a non-US court for violations of US securities laws. It may be difficult to compel Vectura, Skyepharma and their respective affiliates to subject themselves to the jurisdiction and judgment of a US court.

The price and value of securities can go down as well as up. Past performance is not a guide to future performance. The contents of this announcement are not to be construed as legal, business, financial or tax advice. Each Vectura Shareholder, Skyepharma Shareholder or prospective investor should consult his, her or its own legal adviser, business adviser, financial adviser or tax adviser for legal, business, financial or tax advice.

Notice to all investors

J.P. Morgan Limited, which conducts its UK investment banking businesses as J.P. Morgan Cazenove ("J.P. Morgan Cazenove"), is authorised and regulated in the United Kingdom by the Financial Conduct Authority ("FCA"). J.P. Morgan Cazenove is acting exclusively for Vectura and no one else in connection with the Merger and the contents of this announcement and will not regard any other person as its client in relation to the matters in this announcement and will not be responsible to anyone other than Vectura for providing the protections afforded to clients of J.P. Morgan Cazenove or for providing advice in relation to the Merger, the contents of this announcement or any other matters referred to herein.

N M Rothschild & Sons Limited ("Rothschild"), which is authorised by the Prudential Regulation Authority ("PRA") and regulated in the United Kingdom by the FCA and the PRA, is acting exclusively for Vectura and for no one else in connection with the Merger and the contents of this announcement and will not regard any other person as its client in relation to the matters in this announcement and will not be responsible to anyone other than Vectura for providing the protections afforded to clients of Rothschild, or for providing advice in relation to the Merger, the contents of this announcement or any other matters referred to herein.

Lazard & Co., Limited ("Lazard"), which is authorised and regulated in the United Kingdom by the FCA, is acting exclusively as financial adviser for Skyepharma and no one else in connection with the matters described in this announcement and will not be responsible to anyone other than Skyepharma for providing the protections afforded to clients of Lazard nor for providing advice in relation to the matters referred to in this announcement. Neither Lazard nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard in connection with this announcement, any statement contained herein or otherwise.

Aside from the responsibilities and liabilities, if any, which may be imposed by the FSMA or the regulatory regime established thereunder, or under the applicable regulatory regime of any jurisdiction where exclusion of responsibility or liability under the relevant regulatory regime would be illegal, void or unenforceable, none of J.P. Morgan Cazenove, Rothschild or any of their respective affiliates accepts any responsibility or liability whatsoever or make any representation or warranty, express or implied as to the contents of this announcement, including its accuracy, fairness, completeness or verification or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the Merger or the New Vectura Shares and nothing in this announcement is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or future. Each of J.P. Morgan Cazenove and Rothschild and their respective affiliates accordingly disclaims to the fullest extent permitted by law all and any responsibility or liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this announcement or any such statement. Each of J.P. Morgan Cazenove and Rothschild and/or their affiliates provides various investment banking, commercial banking and financial advisory services from time to time to the Company.

No person has been authorised to give any information or to make any representations other than those contained in this announcement and, if given or made, such information or representations must not be relied on as having been authorised by the Company, J.P. Morgan Cazenove or Rothschild. Subject to the Listing Rules, the Prospectus Rules and the Disclosure and Transparency Rules, the issue of this announcement shall not, in any circumstances, create any implication that there has been no change in the affairs of the Company since the date of this announcement or that the information in it is correct as at any subsequent date.