SkyePharma borrows £35m to help develop asthma drug
Jill Treanor
Thursday December 28, 2006
The Guardian
SkyePharma is borrowing £35m to help meet the rising costs of developing its Flutiform asthma drug.
The admission of rising development costs of its most high-profile drug comes at the end of a difficult year for the company, which has seen its share price halve and an embarrassing shareholder rebellion that forced out the founder and chairman, Ian Gowrie-Smith.
In an attempt to boost its fortunes, the drugs company has been looking for a buyer for its cash-hungry injectables business since February and told the City yesterday that it was in "exclusive negotiations" with a potential buyer. The company has promised to complete the sale by the end of the year and there is no indication that the target will not be met. It promised yesterday that an agreement would be reached "shortly".
Once the sale is agreed, SkyePharma will be focused on oral and inhalation products. Its update to the stock market initially prompted a fall in its share price of more than 6%, although the shares recovered to close at 27p, up 0.25p.
SkyePharma has great hopes for Flutiform, which it believes could be one of the industry's "blockbuster" drugs, generating $1bn (£500m) a year in sales. Though its development is on track to receive regulatory approval in the first half of 2009, it is costing more than the company originally budgeted for.
In September 2005 the company raised £35m through a rights issue to fund the development of Flutiform but it is now admitting it will need more cash to complete development of the drug. After discussions with the US drugs regulator, the food and drug administration, it will need to conduct three efficacy studies rather than two and increase the level of respiratory monitoring of patients.
It now expects to incur £24m of development expenditure and £6.6m of capital expenditure. Allowing for costs incurred but not yet paid, the company estimated that its cash flows to develop Flutiform from now to launch would reach £35.6m.
Its new £35m loan facility will be used to help cover this as well as bolster its balance sheet and provide funds for general working capital. The 10-year facility has been reached with a specialist lender domiciled in Ireland and advised by Christofferson, Robb & Co, a specialist money management firm. The facility, which has a costly interest rate set at the London interbank offer rate (Libor) plus 5.85%, has a dollar and a euro element and is secured against some of the firm's products. It can be raised by £7.6m subject to the progress of certain products but not Flutiform.
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