RNS Number:5217J
Skyepharma PLC
02 April 2003
For Immediate Release 2nd April 2003
SKYEPHARMA PLC
PRELIMINARY RESULTS ANNOUNCEMENT
for the year ended 31st December 2002
Financial Highlights
* First year of profitable trading
* Turnover up 51% to #70 million (2001: #46 million)
* Operating profit #5 million (2001: operating loss #5 million)
* EBITDA #17 million (2001: #3 million)
* Net income #1 million (2001: net loss #9 million)
* Earnings per share 0.2 pence (2001: loss per share 1.8 pence)
* End-2002 cash #28 million (#51 million pro forma including Endo/Enzon)
Operating Highlights
* Nine approved products, three FDA-approved delivery technologies
* Paxil CR launched in USA; now one-third of new prescriptions
* DepoMorphine and Propofol IDD-D licensed to Endo for North America
* Novartis filed Foradi in USA and Europe
* New US and European licensees for Solaraze
* Strong pipeline: 1 filed, 2 in Phase III, 6 Phase II
Ian Gowrie-Smith, SkyePharma's executive chairman commented
"2002 was a very important year for SkyePharma. We achieved our first full
year's profit on turnover up 51% to #70 million. With turnover expectations in
the region of #100 million this year, we are confident of further significant
growth in profitability in 2003 and thereafter. Our recently announced
partnership with Endo Pharmaceuticals to market our lead products, DepoMorphine
and Propofol IDD-D, reinforces our confidence in continued growth in 2004 and
beyond."
For further information, please contact:
SkyePharma PLC Buchanan Communications Ltd
Ian Gowrie-Smith - Executive Chairman Tim Anderson / Nicola How
Michael Ashton - Chief Executive Officer Tel No: 020 7466 5000
Donald Nicholson - Chief Financial Officer
Peter Laing - Director of Corporate Communications
Today on Tel No: 020 7466 5000 and thereafter on Tel No: 020 7491 1777
CHAIRMAN'S STATEMENT
SkyePharma has completed its transformation from the developmental phase to
profitability. 2002 also included some major milestones in our planned
transition from being a provider of contract drug delivery services to becoming
a speciality pharmaceuticals company.
SkyePharma is evolving
2002 was a momentous year for SkyePharma. We achieved our first full year of
profitable trading. Although previous years have seen a pattern of declining
losses, it is gratifying to report that the commercial potential of our drug
delivery technologies is now reflected in profitability.
April saw the successful US launch of Paxil CR by our partner GlaxoSmithKline.
Paxil, an SSRI antidepressant, is GlaxoSmithKline's largest product, with US
sales alone of #1.4 billion in 2002. Paxil CR uses our proprietary GeoMatrix
technology to reduce gastrointestinal side-effects, a well-recognised problem
with this class of drug. Improved tolerability means a higher proportion of
patients remain on therapy. By the end of the year, Paxil CR accounted for over
30% of all new Paxil prescriptions, an initial growth rate that exceeded our own
estimates. The successful commercialisation of an improved version of a major
product such as Paxil CR strongly validates our oral delivery technology and
enhances SkyePharma's credibility in the global pharmaceutical marketplace.
Our portfolio of launched products is expanding...
Successful as Paxil CR is proving to be, it is important to emphasise the
growing strength and breadth of SkyePharma's product portfolio. There are now
nine approved products, validating three of our five delivery technology
platforms. Marketed products include Xatral OD, a once daily version of
Sanofi-Synthelabo's Xatral, used to treat the urinary symptoms of benign
prostatic hypertrophy. Xatral OD is currently on the market in Europe and
certain other markets and is awaiting approval in the USA. Another marketed
product is Solaraze, a topical gel for a common skin condition, now sold in the
US and Europe. Solaraze was launched in the US in January by Quintiles
Transnational Corp (Quintiles) and European marketing rights were transferred in
May to Shire Pharmaceuticals (Shire). Shire has subsequently also acquired
rights for Australia and certain Pacific Rim territories. At the end of the year
we transferred US rights for the injectable drug DepoCyt, a treatment for a
complication of late-stage cancer, to Enzon, a partner capable of providing the
focused marketing required for this product.
...and our development pipeline is also well-stocked
Over the next three years we anticipate the possible launch of four more
products, each of which we believe has the potential to generate sales-related
revenues that will equal or exceed that expected from Paxil CR. The four key
products are our own DepoMorphine, a long-acting injectable analgesic for pain
relief after surgery; a dry powder inhaler formulation of Novartis' asthma drug
Foradil; our own HFA-powered, metered dose inhaler (MDI) containing the
bronchodilator formoterol; and Propofol IDD-D, an improved formulation of the
sedative/anaesthetic propofol. Replacing less predictable contract development
and licensing revenues with sales-related revenue is central to our goal of
effecting a change in the quality of our earnings that, in turn, we expect to
underpin sustained and rising profitability.
At the end of the year, we licensed DepoMorphine and Propofol IDD-D to Endo
Pharmaceuticals (Endo) for North America. The agreement provided us with $25
million upfront, further milestone payments of up to $95 million and a share of
sales that ranges from 20% to 60%. We believe these terms validate the high
potential we see for these products and justify our decision to undertake Phase
III development ourselves instead of outlicensing the products at an earlier
stage. We expect to submit DepoMorphine for FDA approval around the middle of
this year. Propofol IDD-D, currently in Phase II, is expected to enter Phase III
clinical trials by the end of 2003.
Reinforcing our delivery expertise
The acquisition of RTP Pharma Inc. (RTP), a Canadian company, brought expertise
in solubilisation that complements our own techniques. We also acquired
remaining rights to three topical delivery technologies from Bioglan. As part of
the same transaction, we broadened our sustained-release injectable technology
with Biosphere, a technology that is complementary with our own DepoFoam. This
expands our ability to deliver biological drugs, an area of growing interest to
the pharmaceutical and biotechnology industries. We now believe we have the
broadest-available range of drug delivery technologies.
Further strategic collaborations
To meet growing interest in its delivery technologies among Japanese
pharmaceutical companies, we opened a local office in Osaka. A strategic
collaboration with the privately held Japanese company Kowa Company Ltd (Kowa)
led to a #25 million purchase of a 5% equity stake in SkyePharma in June. Kowa
is currently considering obtaining a 50% interest in SkyePharma's manufacturing
facility in Lyon and we are also evaluating the application of SkyePharma's drug
delivery technologies to Kowa's products and pipeline.
Our licensing agreement with Enzon Pharmaceuticals, Inc. (Enzon) for DepoCyt was
accompanied by a broad strategic collaboration to exploit our respective
delivery technologies. Enzon's proprietary PEG modification technology
complements our own sustained-release injectable delivery systems, particularly
in the increasingly important area of biological drugs. We look forward to
working with Enzon to develop future products, which will be jointly funded by
the partners.
Corporate governance issues
SkyePharma as a company is committed to being a responsible corporate citizen
whose operations are conducted with the highest ethical principles and in the
best interests of all stakeholders, be they shareholders, employees, customers
or neighbours. You will find in this year's report a new section on corporate
social responsibility matters.
During the year we appointed two new non-executive directors. David Ebsworth,
chief executive of Oxford GlycoSciences and formerly chief executive of Bayer
Pharmaceuticals, was appointed in April, followed in October by Torao Yamamoto,
senior managing director of the pharmaceutical division of Kowa.
The current year
We believe current and future years will show a pattern of sustained
profitability and significant growth. For the current year, we anticipate
turnover in the region of #100 million. This target largely depends on the level
of milestone payments we expect to receive, although these partly relate to
prior year agreements. In 2003, as in prior years, our revenues are likely to
remain concentrated in the latter part of the year and therefore it is possible
that we may report a loss for the first half of the current year. As our
pipeline of new products comes to market, we expect more predictable and regular
royalty income and profit sharing progressively to replace milestone payments as
our primary source of revenues.
The road ahead
We are proud to have successfully achieved our stated objective of moving into
profit for the financial year 2002. Now we must build on this foundation by
ensuring sustained and growing profitability. We remain committed to realising
this mission through using our leading drug delivery technologies for the
development and commercialisation of enhanced therapeutics, both for partners
and for our own account.
Ian Gowrie-Smith
Executive Chairman
OPERATIONAL REVIEW
On the market
A key event of the year was undoubtedly the US launch of Paxil CR by our partner
GlaxoSmithKline. The SSRI antidepressant Paxil (paroxetine) was
GlaxoSmithKline's largest product in 2002, with US sales alone of #1.4 billion.
Paxil CR is now marketed in the USA for treating depression and a second
indication, panic disorder. Paxil CR has now been filed for another
depression-related indication, social anxiety, and is currently in late-stage
clinical trials for pre-menstrual dysphoric disorder (continuous usage filed,
intermittent use to be filed later this year). The latter indication will be
unique to Paxil CR as Paxil had never been filed for this indication. We have
been gratified by the successful US launch of Paxil CR, which is rapidly
displacing the older version of Paxil. By the end of February 2003, Paxil CR had
captured one-third of new US prescriptions for the Paxil franchise - and no less
than 7% of all new US prescriptions for SSRI antidepressants.
Our second oral product on the market is a once-daily version of
Sanofi-Synthelabo's Xatral (alfuzosin), a treatment for the urinary symptoms of
benign prostatic hypertrophy, a common condition affecting middle aged males.
Xatral OD has now been launched throughout Europe and also in Canada and other
territories in Africa, Asia and Latin America. The older multi-dose version of
Xatral has now been withdrawn from the market in some areas. Our partner
Sanofi-Synthelabo reports that combined sales of both versions rose by 24% in
2002 to Euro182 million, an excellent performance considering the
deceleration in the growth of the entire European pharmaceutical market last
year. The older version of Xatral, which had to be taken three times a day, had
never been launched in the US. Our improved version, to be known as UroXatral in
the US market, was filed with the FDA in December 2000 and received an
"approvable" letter in October 2001. Additional data requested by the FDA was
filed by Sanofi-Synthelabo in December 2002 and we anticipate a US launch later
this year. Sanofi-Synthelabo continues to invest in the development of this
product with Phase III trials ongoing for a second indication, acute urinary
retention.
A third oral product, re-formulated by SkyePharma for the Therabel Group, was
approved by the Belgian regulatory authorities last year for local marketing.
Coruno is a once-daily Geomatrix formulation of molsidomine, used to treat
angina pectoris, a common symptom of coronary heart disease. Therabel estimates
that sales will rise to around $40 million in several years' time, following
further European launches.
DepoCyt is our first sustained-release injectable product to reach the market.
It is a treatment for lymphomatous meningitis, a serious complication of the
later stages of non-Hodgkin's lymphoma. DepoCyt, a long-acting formulation of
the chemotherapy drug cytarabine, provides effective treatment and only needs an
injection every two weeks against every two days for conventional cytarabine. A
Phase IV trial is ongoing, the results of which should provide the data required
to expand the indication to neoplastic meningitis associated with solid tumours,
a more common form of this distressing condition. DepoCyt received FDA approval
in 1999 as an orphan drug and has since been marketed in the US by Chiron
Corporation. However during 2002 we decided to reacquire US product rights from
Chiron and Canadian marketing rights from Paladin Labs Inc and to relicense
DepoCyt to Enzon. At the end of last year Enzon paid $12 million for the North
American rights to DepoCyt. We believe that Enzon, which already successfully
sells one oncology product, OncasparTM, can provide the focused marketing
support required for a niche product like DepoCyt. Enzon concurs with our view
that the market for DepoCyt is largely under-developed. Sales of DepoCyt in
North America in 2002 were around $5 million, well below the peak market
potential we see of approximately $50 million. In Europe, DepoCyt was licensed
to Elan Pharmaceuticals (Elan) but following recent well-publicised financial
problems Elan decided not to proceed with the planned establishment of an
oncology business unit. We intend to relicense DepoCyt in Europe and expect the
product to be launched in the second half of the year.
Solaraze is a topical treatment for actinic keratosis, an increasingly common
pre-cancerous skin condition caused by excessive exposure to the sun. Solaraze
was originally licensed to Bioglan Pharma plc (Bioglan) in both the US and
Europe but once Bioglan was placed in administration, marketing rights reverted
to SkyePharma. We relicensed Solaraze to Quintiles in the USA which launched the
product in January 2002. In Europe we relicensed Solaraze to Shire in May 2002
for #15 million (of which #2.1 million is contingent on conditions that include
launch in various territories). Shire has now launched Solaraze in six
countries. Shire has recently reinforced its commitment to this product by
agreeing to pay up to #2.2 million (including milestone payments) for rights to
Solaraze in Australia and certain Pacific Rim territories. The incidence of
actinic keratosis is exceptionally high in Australia so we expect the results of
an ongoing clinical trial in that country to be helpful in supporting marketing
efforts elsewhere.
Strategic developments
In March 2002, we announced the acquisition of the outstanding 59.8% of the
voting shares in RTP. This completed the acquisition we had initiated in August
2001 and described in last year's Annual Report. Under various arrangements we
have issued, in total, 50 million shares with a consideration value of US$56.5
million (#39.4 million) including acquisition costs. RTP, a Canadian company,
expands our expertise in solubilisation technology and brought a pipeline of
products in development. This includes two late-stage products, the
lipid-lowering agent fenofibrate, and Propofol IDD-D, a nanoparticulate
formulation of the injectable anaesthetic and sedative propofol, currently in
Phase II trials. We decided to develop Propofol IDD-D ourselves although North
American rights have since been licensed to Endo. In order to help fund the
clinical development of Propofol IDD-D and certain other projects (notably our
own aerosol inhaler version of the bronchodilator formoterol), we entered into a
second agreement with Paul Capital Royalty Acquisition Fund ("Paul Capital").
The details of this agreement, under which Paul Capital will provide US$30
million over the next two years in exchange for a share of future royalties on a
basket of our products, are discussed in the Financial Review.
In May, Bioglan's administrators sold Bioglan AB, Bioglan's Swedish subsidiary,
to the Swedish healthcare company Wilh. Sonesson. At that time we acquired the
drug delivery business of Bioglan AB for #3.6 million in cash. This brought us
full rights to several topical delivery technologies and Biosphere, a
sustained-release injectable technology that complements our own DepoFoam. We
had previously entered into a development and licensing agreement with Bioglan
for some of these technologies in January 2001.
Finally, in January 2003 we made an investment of #2.0 million to acquire a
26.7% stake in Micap, a small UK company developing a novel encapsulation
technology based on yeast cells. Originally developed for use in the food
industry, there are several potential applications of this technology to oral
and topical drug delivery, including taste-masking for unpleasant-tasting
medicines. SkyePharma has an option over the pharmaceutical applications of
Micap's technology.
Operational management reinforced
During the year we made some important appointments to strengthen and expand our
operational management team. In January 2002, Dr Paul Wotton was appointed as
Global Head of Business Development. Paul was formerly a senior executive with
Eurand and Penwest and had previously worked for Merck and Abbott Laboratories.
In May 2002, Steven Thornton was appointed as President of SkyePharma Inc., our
US subsidiary. Steven had held management posts at Elan, Bayer Pharmaceuticals
and Eli Lilly. In August Neal Fitzpatrick became Vice President of Global
Marketing, coming from similar roles at Wyeth and Bristol-Myers Squibb. In
addition during the year Dr Dick Jones joined us to become Senior Vice-President
for Research and Development at SkyePharma Inc., after research management posts
at Genentech, Liposome Technology and Matrix Pharmaceuticals, and Phil Duffy
became Senior Vice-President, Operations, having previously held senior
management roles in the pharmaceutical industry, most recently at Ligand
Pharmaceuticals and Schein Bayer Pharmaceutical Services.
On the Way
We now have several products in late-stage clinical development that we believe
have considerable commercial potential. In contrast with previous years, we have
undertaken the development of two of these products, DepoMorphine and Propofol
IDD-D, ourselves.
Foradil Certihaler is a new version of Novartis' asthma treatment Foradil
(formoterol). We developed the multi-dose dry-powder inhaler device and also the
formulation that ensures dose consistency regardless of storage conditions.
Novartis filed the product with US and European regulatory authorities in
December 2002, triggering a milestone payment to us. On normal approval
timelines, Foradil Certihaler should reach the market in 2004. The current
version of Foradil, using Novartis' own single-dose inhaler, had global sales in
2002 of $260 million. Novartis will market Foradil Certihaler in Europe but in
the US the Foradil franchise is sub-licensed to Schering-Plough Corporation - a
commercial decision we welcome given the latter's strong position in the US
asthma market. SkyePharma will receive a royalty on product sales and will also
manufacture for both parties.
DepoMorphine is our new analgesic for post-operative pain. Our sustained-release
injectable technology means a single epidural injection immediately before
surgery maintains a therapeutically effective level of morphine for 48 hours -
the period of peak pain. Phase III trials in hip arthoplasty, lower abdominal
surgery, caesarian section, knee surgery and major abdominal surgery are now
complete. The double-blind placebo-controlled pivotal trial, involving 200 hip
surgery patients, confirms that DepoMorphine is safe and effective and achieved
its primary end-point (a reduction in demand for post-operative fentanyl, a
short-acting analgesic available on demand to all patients). We expect to file
DepoMorphineTM with US and European regulatory authorities in mid-year.
In December, we granted North American rights to DepoMorphine and a second
product, Propofol IDD-D, to Endo. We received $25 million upfront and additional
payments on achievement of milestones of up to $95 million, and our share of
combined sales (out of which we will bear manufacturing costs) varies between
20% and 60%. Endo, a US speciality pharmaceutical company with a 230-strong
sales force, had 2002 revenues of $399 million. In 2001 we decided to take
DepoMorphine through Phase III development ourselves (funded by a
royalty-sharing agreement with Paul Capital), expecting that Phase III data
would support superior licence terms. We feel that the Endo licence fully
justifies this decision, with additional licences, in Europe, Japan and other
territories, still to come.
Propofol IDD-D is a novel formulation of a widely used injectable anaesthetic
and sedative. Our formulation will not support microbial growth, a recognised
problem with current versions, and should provide uninterrupted sedation for 24
hours, making it ideal for the fast-growing intensive care market. We commenced
Phase II trials last year (also funded by a royalty-sharing agreement with Paul
Capital). We expect Phase III trials to start later this year. Propofol IDD-D
was licensed in December to Endo for North America and FDA approval would
trigger payment of over half of the $95 million contingent milestones in this
agreement. We expect to license Propofol IDD-D in Europe this year.
In trials
SkyePharma has a well-stocked product pipeline, with no less than eight products
currently in the early stages of clinical trials. Below we feature some of the
more promising projects.
In the oral area, we are conducting clinical studies of our once-daily version
of the Parkinson's disease drug Requip (ropinirole) for our partner
GlaxoSmithKline. Requip is a dopamine agonist, a class of drug increasingly
recommended as first-line treatment for Parkinson's, but the current version has
to be taken three times a day. Our once-daily Geomatrix version is not only more
convenient for patients but also leads to more consistent levels of the drug in
the blood. We have now completed Phase II studies and expect to commence the
Phase III trial later this year.
We are also developing an undisclosed oral product for Merck KGaA. This project,
involving our controlled-release technology, has successfully completed Phase II
trials and is expected to enter Phase III development later this year.
Currently we are developing two asthma drugs in metered-dose inhalers (MDIs)
powered by a hydrofluoroalkane (HFA) propellant gas. These HFA-MDIs are
replacing the older MDIs powered by chlorofluorocarbons (CFCs) whose use is
being phased out because of the effect of CFCs on the ozone layer. However
replacing CFCs with HFAs is not straightforward and requires modification of
virtually every component of the MDI device and the manufacturing and filling
process. The first is an HFA-MDI version of AstraZeneca's inhaled steroid
Pulmicort (budesonide) for the European market. This project has completed
pharmacokinetic studies and should commence Phase III pivotal trials in the
second half of this year. SkyePharma is also developing an HFA-MDI version of
the long-acting bronchodilator formoterol. This has now completed Phase II
development and is expected to commence Phase III trials in mid-year, on track
for planned filing in 2004. We anticipate selecting a suitable marketing partner
this year.
DepoBupivacaine, our sustained-release injectable version of the local
anaesthetic bupivacaine, is in preclinical studies in the USA. We believe that
we will be able to extend the useful anaesthesia period from 12-18 hours to up
to 3 days. This should make the product suitable for the control of
post-operative pain in patients undergoing certain particularly painful
procedures such as knee arthroscopy and facial plastic surgery. Our agreement
with Endo for North American rights to DepoMorphine and Propofol IDD-D includes
an option over DepoBupivacaine, on terms that will be negotiated at the
conclusion of our Phase II studies.
Early-stage development
We also have many projects ongoing in our laboratories. Some of these are
feasibility studies for partners, while others are projects that we may decide
to develop ourselves before seeking licensees. A few examples are highlighted
below.
The delivery of protein drugs is an increasingly important challenge for the
pharmaceutical industry. There are already over one hundred protein or peptide
drugs on the market (with many hundreds more in clinical development) and this
type of drug normally cannot be given orally because proteins will not survive
passage through the digestive system. However the short half-life of most
protein drugs means that injections usually need to be given frequently and as
injections are unpopular with patients, compliance tends to be poor. Our two
sustained-release injectable technologies, DepoFoam and Biosphere, make us
well-positioned to add value to currently marketed proteins and peptides and to
develop new compounds. Two projects in this field were commenced during 2002.
With DepoFoam, we announced a collaboration agreement with the UK company
GeneMedix plc (GeneMedix) to develop a sustained-release injectable formulation
of a protein drug, recombinant Interferon alpha-2b. This is used for the
treatment of hepatitis C and our target is a single injection that would
maintain therapeutically effective blood levels of interferon for up to 28 days.
With Biosphere, we have successfully completed proof of principle studies with
another protein drug, human growth hormone, and will commence clinical trials
shortly.
Our 2001 strategic collaboration with Astralis Ltd (Astralis) covers the
development of Psoraxine, a unique injectable treatment for psoriasis, a chronic
skin disorder that affects approximately 3% of the world population. There is no
approved cure for psoriasis and most approved treatments provide only temporary
or incomplete relief and may also cause serious side effects. Psoraxine is a
protein that stimulates cells from the patient's immune system to reverse the
inflammatory process responsible for psoriasis symptoms. Astralis has completed
clinical studies in Venezuela using first generation Psoraxine to treat nearly
3,000 psoriasis patients, the vast majority of whom responded positively with
few side effects. We are working with Astralis to develop a second-generation
product, now being produced in the USA, and to validate the promising results
from Venezuela in US clinical studies that will be used for regulatory and
marketing approval. Following the recent completion of toxicological studies,
Astralis expects authorisation to commence US clinical trials later this year.
One of the major trends in asthma therapy in recent years has been the rapid
adoption of combination therapy. Physicians have found that combining an
anti-inflammatory inhaled steroid with a long-acting bronchodilator produces a
synergistic effect. We have ongoing feasibility studies involving several
combinations of the long-acting bronchodilator formoterol with various inhaled
steroids, both in our dry-powder inhaler and metered dose aerosol versions. We
would look to take the selected candidates into clinical development this year.
Conclusion
We are well-positioned to build upon our pipeline, composed of both internal
projects and partnered products. We expect a growing proportion of our revenues
to come from royalties from marketed products and from those that have been
outlicenced but have still to reach the market. This will reduce our dependence
on milestone payments, improve the quality of our earnings and underpin the
company's continuing profitable growth.
Michael Ashton
Chief Executive Officer
FINANCIAL REVIEW
Turnover
Turnover for the year ended 31 December 2002 increased by 51% to #69.6 million,
compared to #46.1m in 2001. This represents a cumulative annual growth of 41%
since 1996.
Contract research and development revenue, increased by 45% to #55.4 million.
Milestone payments and payments received on the signing of agreements amounted
to #47.7 million and included revenue from Shire for the rights to market
Solaraze in Europe, Endo for the US and Canadian marketing and distribution
rights for DepoMorphine and Propofol IDD-D and from Enzon for the rights to
DepoCyt in North America. A key milestone was also received from GlaxoSmithKline
for the completion of Phase II clinical trials for Requip in November 2002.
Milestone payments and payments on signing will continue to be an important
component of revenue in the near term.
Manufacturing and distribution revenues increased by 15% to #7.4 million
compared to #6.4 million in 2001. This comprises contract manufacturing of #5.4
million and SkyePharma's share of DepoCyt sales and manufacturing, which
amounted to #2.0 million. Included in contract manufacturing revenue is some
#1.8 million in respect of Foradil DPI for Novartis and #1.0 million from Kowa
under our collaboration on NK-104.
Royalty income of #6.8 million has increased more than fourfold from #1.5
million in 2001 and derives principally from Paxil CR, which was launched in the
US in April 2002, Xatral OD and Solaraze.
Cost of sales
Cost of sales consists of research and development expenditures, including: the
costs of certain clinical trials incurred on behalf of our collaborative
partners; the direct costs of contract manufacturing; direct costs of licensing
arrangements and royalties payable. Cost of sales were #24.8 million in 2002
compared to #18.8 million in 2001. The resulting gross profit increased by over
64% to #44.7 million compared to #27.3 million in 2001, primarily as a result of
the increased milestone payments and payments received on the signing of
agreements.
Expenses
Selling, marketing and distribution expenses were #4.8 million, unchanged
compared to 2001. Our own research and development expenses in the period
increased by #11.4 million, or 63%, to #29.3 million, due to an increased
expenditure on projects such as DepoMorphine, formoterol HFA, budesonide HFA and
Propofol IDD-D.
Amortisation of intangible assets increased by #2.7 million to #6.5 million in
2002. This includes an increase in the amortisation charge on goodwill of #1.5
million relating to the acquisition of RTP and Bioglan AB. In addition there are
increased amortisation charges on intellectual property in respect of DepoCyt
licenses.
Other administration expenses were #13.7 million in 2002 compared to #12.2
million in 2001. The increase mainly relates to the inclusion of the
administration costs of SkyePharma's new operations in Canada and Sweden and
one-off charges relating to professional fees resulting from the transactions
undertaken during the year.
Other operating income
In December 2000 SkyePharma signed an agreement with Paul Capital to fund the
clinical development and regulatory submission of DepoMorphine in return for a
sale of a portion of future royalty and revenue streams from DepoMorphine,
Xatral OD, Solaraze and DepoCyt. During 2002, SkyePharma received #6.4 million
of cash under this agreement and recognised income of #9.7 million in line with
expenditure on the project. No royalty payments were made to Paul Capital under
this agreement during the year.
In March 2002 SkyePharma signed a second agreement with Paul Capital principally
to fund the clinical development of Propofol IDD-D and formoterol HFA. In
return, SkyePharma has agreed to sell a portion of the potential future royalty
and revenue streams from these, and seven other products from the drug pipeline
to Paul Capital. SkyePharma received #11.6 million of cash and recognised income
of #4.5 million on a cost to complete basis. During the year royalty payments of
#0.7 million were made to Paul Capital under this agreement. Further details are
provided in note 3; Other operating income.
Deferred income
The Directors continue to believe that the Group's revenue recognition policy is
appropriate, reflecting on the one hand the appropriateness of recording revenue
where costs associated with the revenue have been expensed and the deferral of
revenue where there are future obligations connected with the revenue.
During 2002, the Group deferred a further net #6.3 million of turnover and other
income under this policy, including amounts relating to the licensing agreements
with Endo, Enzon and Shire, in addition to the #11.7 million deferred at the end
of 2001. This results in a total deferral of #18.0 million by the end of 2002
comprising:
31 December 31 December
2001 Received Recognised 2002
#m #m #m #m
Contract development
and licensing revenue 7.0 58.6 (55.4) 10.2
Other operating
income 4.7 17.3 (14.2) 7.8
11.7 75.9 (69.6) 18.0
This deferred income will be released in later years in line with the related
costs or as associated obligations under the relevant contracts are satisfied.
Operating results
SkyePharma achieved its first full year profit after tax of #1.1 million in 2002
compared to a net loss of #9.5 million in 2001.
The Group also achieved a profit on ordinary activities before tax of #1.3
million in 2002, after a net interest payable charge of #3.4 million (2001: #3.7
million), which compares to a loss on ordinary activities before tax of #9.4
million in 2001. Earnings before Interest, Tax, Depreciation and Amortisation ("
EBITDA"), a commonly used performance indicator, was #17.3 million in 2002
compared with #3.4 million in 2001.
Comparing the first half of 2002 with the second half, the Group recorded an
operating profit of #6.7 million in the second half compared to an operating
loss of #2.0 million in the first half. The periods compare as follows:
First Half Second Half Year ended
2000 2002 31 December 2002
#m #m #m
Turnover 27.7 41.9 69.6
Gross Profit 15.4 29.3 44.7
Operating (Loss)/ Profit (2.0) 6.7 4.7
(Loss)/Profit before tax (4.0) 5.3 1.3
This continues a trend we have seen in previous years where there is higher
income in the second half compared to the first, and we expect this trend to
continue in the near term.
The acquisition of SkyePharma Canada Inc (formerly RTP Pharma Inc) in 2001
contributed revenue of #3.9 million in 2002, but negatively impacted the 2002
full year results by #1.9 million (2001: #0.6 million), primarily due to the
amortisation of goodwill. In addition the acquisition of the drug delivery
business of Bioglan AB in the first half of 2002 negatively impacted full year
results for the Group by #1.6 million (2001: #nil), being primarily the
operating loss of the Swedish unit.
Earnings per share for the year increased by 2.0 pence per share to 0.2 pence
per share (2001: 1.8 pence loss per share). Foreign currency exchange movements
did not have a material impact on the results of operations in 2002 compared
with 2001.
Cash balances and cashflow
SkyePharma achieved its objective for the year of maintaining the cash neutral
position it achieved in the second half of 2001. At 31 December 2002 SkyePharma
had cash and short-term deposits less overdrafts ("net cash") of #28.1 million
compared with net cash of #25.3 million at 31 December 2001.
However, the liquidity of the Group is significantly higher if cash receipts
from the licensing deals with Endo and Enzon, signed in late December 2002 and
received on 3 January 2003, are taken into account. Including these receipts net
cash amounts to #51.0 million and represents an increase of #25.7 million from
31 December 2001.
In 2002 there was a net cash inflow from operating activities of #1.6 million
for the full year, excluding the cash received from Endo and Enzon on 3 January
2003, compared to #5.9 million in 2001. Purchases of tangible fixed assets were
#3.2 million and purchases of intangible assets amounted to #3.0 million.
During the first half of 2002 the Group purchased the drug delivery business of
Bioglan AB for #3.6 million in cash and the assumption of #0.4 million of net
liabilities.
Purchases of fixed asset investments were #6.3 million, of which #5.2 million
was in respect of the acquisition of 750,000 Series A convertible preferred
shares of Astralis Ltd and #1.1 million was spent on the purchase of SkyePharma
shares by the SkyePharma PLC General Employee Benefit Trust for the Deferred
Share Bonus Plan as part of the Group's hedging strategy.
SkyePharma received #26.2 million of cash during the year from the issue of
Ordinary Shares. Of this #25.3 million was received in June 2002 following a
strategic investments by Kowa, a leading Japanese company with substantial
pharmaceutical interests and #0.9 million was received in respect of the
exercise of employee share options over Ordinary Shares and 'B' Warrants. All
outstanding 'B' Warrants which were not exercised lapsed on 31 December 2002.
Balance sheet
The Group balance sheet at 31 December 2002 shows shareholders' funds of #124.3
million (2001: #95.1 million). At 31 December 2002, goodwill, written off to the
profit and loss account reserve amounted to #147.6 million (2001: #152.5
million).
At 31 December 2002 SkyePharma had fixed asset investments totalling #19.9
million. The investments, explained more fully in note 8; Fixed Asset
Investments, include Astralis Ltd, a US company, and Transition Therapeutics
Inc, a Canadian company.
The Group's fixed asset investments are held in development stage pharmaceutical
companies, and are held as long term investments associated with collaboration
agreements or as part of SkyePharma's long-term strategy. During the last year
world stock markets have experienced substantial declines, and development stage
healthcare companies suffered some of the worst declines. The Board continues to
review the underlying performance of the individual companies and does not
believe that current market conditions provide a reliable basis for valuing
these investments. The investments have therefore been carried at cost on the
basis that there has been no permanent diminution in value. The Group will
continue to monitor its investments and the underlying value of the companies
closely.
Current asset investments include a #3.25 million, 5% coupon, convertible loan
note from GeneMedix PLC. This has been recorded at #2.0 million at 31 December
2002 being the lower of cost and net realisable value assuming conversion.
At 31 December 2002 bank and other non-convertible debt amounted to #11.3
million (2001: #14.5 million) consisting principally of a #7.8 million (2001:
#7.4 million) property mortgage secured on the Swiss assets. In addition the
company has 6% Convertible Bonds due 2005 of #58.4 million (#58.0 million). Net
of cash and short term deposits this amounts to #41.6 million (2001: #47.2
million).
Throughout the majority of 2002, #30 million of the 6% Convertible Bonds were
subject to an interest rate swap agreement, swapping a fixed rate obligation of
6% for a floating rate, which at 31 December 2002 was paying a floating rate of
5.75%. The swap is cancellable at the option of the fixed rate payer.
Following the US launch and first commercial sale of Paxil CR by GlaxoSmithKline
in April 2002, all 12 million 'A' Deferred Shares were converted into 12 million
Ordinary Shares in August 2002 with no impact on shareholders' funds.
The SkyePharma 'B' Warrants, which entitled holders to exercise ten 'B' Warrants
to acquire one Ordinary Share at an effective price of 40 pence, lapsed on 31
December 2002.
Forward looking statements
The foregoing discussions contain certain forward-looking statements with
respect to certain development projects, potential collaborative partnerships,
results of operations and certain plans and objectives of SkyePharma. These
include in particular the statements regarding potential turnover expectations
in 2003, sales revenue from Paxil CR and other products, both currently marketed
and under development, possible launch dates for new products and the
expectation of achieving sustained profitability and continued growth.
By their nature forward-looking statements involve risk and uncertainty that
could cause actual results and developments to differ materially from those
expressed or implied. The significant risks related to SkyePharma's business
are discussed in SkyePharma's SEC filings under the caption "Risk Factors".
Donald Nicholson
Finance Director
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year to Year to
31 December 31 December
Notes 2002 2001
#'000 #'000
Turnover 2 69,573 46,126
Cost of sales 2 (24,830) (18,820)
Gross profit 44,743 27,306
Selling, marketing and distribution expenses (4,769) (4,804)
Administration expenses
Amortisation (6,506) (3,824)
Other administration expenses (13,686) (12,201)
(20,192) (16,025)
Research and development expenses (29,285) (17,918)
Other operating income 3 14,219 6,342
Operating profit/(loss) 2 4,716 (5,099)
Associated undertaking
Share of loss of associated undertaking - (75)
Amortisation of goodwill - (503)
- (578)
Total operating profit/(loss): Group and share of
associates 4,716 (5,677)
Interest receivable 4 1,081 1,251
Interest payable 5 (4,464) (4,951)
Profit/(loss) on ordinary activities before taxation 1,333 (9,377)
Taxation (224) (75)
Retained profit/(loss) 1,109 (9,452)
Earnings per Ordinary Share 6
Basic 0.2p (1.8p)
Diluted 0.2p (1.8p)
There was no material difference between the profit/(loss) on ordinary
activities before taxation and the historical cost profit/(loss) before taxation
in 2002 and 2001. All results represent continuing activities.
See Notes to the Preliminary Announcement.
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Year to Year to
31 December 31 December
2002 2001
#'000 #'000
Profit/(loss) attributable to shareholders 1,109 (9,452)
Net currency translation effect 903 28
Lapse of warrants 1,096 271
Total recognised gains and losses for the year 3,108 (9,153)
The 'B' Warrants relating to the acquisition of Krypton lapsed on 31 December
2002. The fair value of the lapsed warrants of #1,096,000 has been transferred
from non-distributable reserves to retained profits. In 2001 the class 'C'
Warrants relating to the debenture issue lapsed. The fair value of the warrants
at issue of #271,000 was transferred from non-distributable reserves to retained
profits. The lapse of warrants represents a transfer of value from the warrant
holders to existing shareholders. In accordance with FRS4; Capital instruments,
this is shown as a recognised gain, although total shareholders' funds remain
unchanged.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Year to Year to
31 December 31 December
2002 2001
#'000 #'000
Shareholders' funds at the beginning of the year 95,145 68,952
Total recognised gains and losses for the year 3,108 (9,153)
Goodwill adjustments on deferred consideration 4,837 148
Equity shares issued/allocated, net of expenses 43,816 29,599
Exercise of share options, net of expenses 700 459
Non-equity shares converted to equity shares (11,310) -
(Decrease)/increase in shares and warrants to be issued (5,780) 5,780
Revaluation of shares and warrants to be issued (4,837) (148)
Issue of warrants 311 -
Exercise of warrants (624) (56)
Lapse of warrants (1,096) (436)
Net movement in the year 29,125 26,193
Shareholders' funds at the end of the year 124,270 95,145
CONSOLIDATED BALANCE SHEET
31 December 31 December
Notes 2002 2001
#'000 #'000
Fixed assets
Intangible assets 7 100,015 98,228
Tangible assets 45,504 44,952
Investments 8 19,902 14,211
165,421 157,391
Current assets
Stock 1,256 2,278
Debtors 35,207 14,022
Investments 1,961 -
Cash and short-term bank deposits 28,061 26,892
66,485 43,192
Creditors - amounts falling due within one year
Deferred income (15,069) (11,690)
Other creditors (19,402) (23,498)
(34,471) (35,188)
Net current assets 32,014 8,004
Total assets less current liabilities 197,435 165,395
Creditors - amounts due after more than one year
Convertible bonds due 2005 (58,377) (57,962)
Deferred income (2,960) -
Other creditors (11,627) (12,220)
(72,964) (70,182)
Provisions for liabilities and charges (201) (68)
Net assets 124,270 95,145
Capital and reserves
Share capital 62,546 58,402
Share premium 316,419 287,357
Shares and warrants to be issued - 10,617
Other reserves 9,311 10,720
Profit and loss account (264,006) (271,951)
Shareholders' funds
Attributable to equity interests 112,960 72,525
Attributable to non-equity interests 11,310 22,620
124,270 95,145
Approved by the Board of Directors on 2 April 2003 and signed on its behalf by:
I R Gowrie-Smith
Executive Chairman
D Nicholson
Finance Director
See Notes to the Preliminary Announcement
CONSOLIDATED CASH FLOW STATEMENT
Year to Year to
31 December 31December
Notes 2002 2001
#'000 #'000
Net cash inflow from operating activities (b) 1,552 5,909
Returns on investments and servicing of finance
Interest received 943 2,741
Interest paid (3,913) (4,370)
Interest element of finance lease payments (130) (170)
(3,100) (1,799)
Taxation (224) (75)
Capital expenditure and financial investment
Purchase of intangible fixed assets (3,035) (310)
Purchase of tangible fixed assets (3,238) (7,673)
Purchase of fixed asset investments (6,285) (8,273)
(12,558) (16,256)
Acquisitions
Purchase of drug delivery business of
Bioglan AB 9 (3,595) -
Purchase of RTP Pharma Inc. - (4,118)
Net cash acquired with RTP Pharma Inc. - 5,436
(3,595) 1,318
Cash outflow before use of liquid resources
and financing (17,925) (10,903)
Management of liquid resources
Net (increase)/decrease in amounts held on
short-term bank deposit (3,872) 14,668
Financing
Issue of Ordinary Share capital 26,168 468
Issue of warrants 311 -
Debt due within one year:
Repayment of loans (2,992) (4,502)
Debt due beyond one year:
Repayment of loans (929) (85)
Capital element of finance lease payments (937) (772)
21,621 (4,891)
Decrease in cash (176) (1,126)
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
(a) Reconciliation of movements in net debt
Year to Year to
31 December 31 December
2002 2001
#'000 #'000
Decrease in cash in the year (176) (1,126)
Cash outflow from decrease in debt and
lease financing 4,858 5,454
Cash outflow/(inflow) from increase/(decrease)
in liquid resources 3,872 (14,668)
Change in net debt resulting from cash flows 8,554 (10,340)
Amortisation of issue costs on convertible bonds (415) (416)
Finance leases acquired with subsidiary (361) -
New finance leases (91) (95)
Chiron promissory note (621) -
Translation difference (1,505) (21)
Movement in net debt in the year 5,561 (10,872)
Net debt at beginning of the year (47,162) (36,290)
Net debt at end of the year (41,601) (47,162)
Net debt is defined as cash and liquid resources less borrowings.
(b) Reconciliation of operating profit/(loss) to net cash inflow from
operating activities
Year to Year to
31 December 31 December
2002 2001
#'000 #'000
Operating profit/(loss) 4,716 (5,099)
Depreciation 6,101 4,778
Amortisation 6,506 3,824
Decrease/(increase) in stock and work in progress 1,022 (642)
Increase in debtors (21,585) (7,478)
Increase in deferred income 6,339 11,690
(Decrease)/increase in other creditors (313) 1,688
Increase/(decrease) in provisions 133 (2,051)
Other (1,367) (801)
Net cash inflow from operating activities 1,552 5,909
c) Analysis of net debt
Acquisitions
At 1 (excluding Non- At 31
January Cash cash and cash Exchange December
2002 flow overdrafts) changes movements 2002
#'000 #'000 #'000 #'000 #'000 #'000
Cash at bank and in hand 9,451 (1,828) - - (229) 7,394
Bank overdraft (1,618) 1,652 - - (34) -
Short-term bank deposits 17,441 3,872 - - (646) 20,667
25,274 3,696 - - (909) 28,061
Debt due within one year (4,792) 2,992 - - (42) (1,842)
Debt due after one year (7,961) 929 - (621) (470) (8,123)
Convertible bonds (57,962) - - (415) - (58,377)
Finance leases (1,721) 937 (361) (91) (84) (1,320)
(72,436) 4,858 - (1,127) (596) (69,662)
Total (47,162) 8,554 (361) (1,127) (1,505) (41,601)
Cash at bank and in hand and short-term bank deposits are aggregated on the
balance sheet. Debt includes a bank loan, secured mortgage, the Chiron
promissory note and convertible bonds.
Non-cash changes relate to the amortisation of the issue costs on the
convertible bonds, the issue of the Chiron promissory note and the inception of
new finance leases.
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1 Accounting policies
Accounting convention and presentation
The results for the year ended 31 December 2002, extracted from audited
financial statements, have been prepared in accordance with the accounting
policies set out in the Report and Accounts for the year ended 31 December 2001.
The Group has applied one new accounting standard during the period. The
publication of FRS19; Deferred Tax has not required any amendment to the Group's
existing accounting policies. The financial information in this statement does
not constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985.
The financial information for the year ended 31 December 2001 has been extracted
from the Statutory Accounts for that period which have been delivered to the
Registrar of Companies. The Auditors' Report on these Accounts was unqualified
and did not contain a statement under Section 237 of the Companies Act 1985.
Revenue recognition
Turnover comprises contract development and licensing, royalty income and
manufacturing and distribution. Contract development and licensing income
represents amounts invoiced to customers for services rendered under development
and licensing agreements including milestone payments and technology access
fees. Contract revenue is recognised when earned and non-refundable and when
there are no future obligations pursuant to the revenue, in accordance with the
contract terms. Refundable contract revenue is treated as deferred until such
time as it is no longer refundable. Royalty income represents income earned as a
percentage of product sales. Advance royalties received are treated as deferred
income until earned, when they are recognised as income. Manufacturing and
distribution revenues principally comprise contract manufacturing fees invoiced
to third parties and income from product sales.
Research and development costs
Research costs are charged as an expense in the period in which they are
incurred. Development costs are also recognised as an expense in the period in
which they are incurred, unless all of the criteria are met for asset
recognition. The major asset recognition criteria include: the ability to
define clearly the product or process, demonstration of its technical
feasibility and that a commercial market for it exists. Development costs
recognised as an asset do not exceed the probable net amount to be recovered in
marketing the product or process and they are amortised over the estimated
economic life.
Foreign currency transactions
Foreign currency transactions by Group companies are recorded in local currency
at the exchange rate ruling on the date of transaction. Assets and liabilities
expressed in foreign currencies are translated into sterling at the exchange
rates ruling at the balance sheet date. Exchange differences which relate to the
retranslation of net assets of overseas companies are taken directly to
reserves. All other foreign exchange differences are taken to the profit and
loss account in the year in which they arise. The Group uses the average
exchange rates prevailing during the year to translate the results of overseas
subsidiaries into sterling and year-end rates to translate the net assets of
those undertakings.
2 Segmental analysis
The Group's operations relate wholly to one class of business, pharmaceuticals.
Further analysis of turnover, operating profit/loss and net assets by
geographical area is set out below, together with an analysis of cost of sales.
Year to Year to
31 December 31 December
2002 2001
#'000 #'000
(a) Turnover
By class of business:
Pharmaceuticals
Contract development and licensing
Milestone payments 47,736 28,379
Research and development costs recharged 7,705 9,857
55,441 38,236
Royalties receivable 6,751 1,468
Manufacturing and distribution 7,381 6,422
69,573 46,126
By location of customer:
North America 34,047 5,482
UK 21,000 21,411
Europe 10,333 16,511
Rest of the world 4,193 2,722
69,573 46,126
By location of operation:
Europe 34,449 30,268
North America 35,124 15,858
69,573 46,126
Year to Year to
31 December 31 December
2002 2001
#'000 #'000
(b) Cost of sales
By class of business:
Pharmaceuticals
Contract development and licensing (12,649) (7,917)
Royalties payable (1,374) (572)
Manufacturing and distribution (10,807) (10,331)
(24,830) (18,820)
Year to Year to
31 December 31 December
2002 2001
#'000 #'000
(c) Operating profit/(loss)
By class of business:
Pharmaceuticals 4,716 (5,099)
By location of operation:
UK (7,695) (6,840)
Europe 7,652 6,985
North America 4,759 (5,244)
4,716 (5,099)
3 Other operating income
Paul Capital Royalty Acquisition Fund have provided a total of $30 million
between 2000 and 2002, to fund the clinical development and regulatory
submission of DepoMorphine, in return for the sale of a portion of future
royalty and revenue streams from DepoMorphine, Xatral OD, Solaraze and DepoCyt.
Income of #9.7 million (2001: #6.3 million) was recognised as other operating
income under this agreement on a cost to complete basis. No royalty payments
have been made to Paul Capital under this agreement during the year.
In March 2002 the Group announced another transaction under which Paul Capital
will pay SkyePharma a further $30 million during 2002 and 2003, principally to
fund the clinical development of Propofol IDD-D and HFA-formoterol. In return,
SkyePharma has agreed to sell a portion of the potential future royalty and
revenue streams from these, and seven other products from the drug pipeline to
Paul Capital. Income of #4.5 million (2001: #nil) was recognised as other
operating income under this agreement on a cost to complete basis. Royalty
payments of #0.7 million ($1 million) have been made to Paul Capital under this
agreement during the year, and are included within royalties payable.
4 Interest receivable
Year to Year to
31 December 31 December
2002 2001
#'000 #'000
Interest 1,081 1,215
Share of interest receivable of associate - 36
1,081 1,251
5 Interest payable
Year to Year to
31 December 31 December
2002 2001
#'000 #'000
Interest payable on bank loans, overdrafts and other loans:
Repayable within five years, not by instalments 88 91
Repayable within five years, by instalments 112 470
Repayable wholly or partly in more than five years 373 360
Finance leases 130 170
Interest on convertible bonds 3,761 3,860
4,464 4,951
6 Earnings per Ordinary Share
Year to Year to
31 December 31 December
2002 2001
Basic and diluted attributable profit/(loss) (#'000) 1,109 (9,452)
Basic weighted average number of shares
in issue ('000) 577,018 526,250
Dilutive potential Ordinary Shares ('000) 20,077 -
Diluted weighted average number of shares
in issue ('000) 597,095 526,250
For diluted earnings per Ordinary Share, the weighted average number of Ordinary
Shares in issue is adjusted to assume conversion of all dilutive potential
Ordinary Shares. In 2001 there was no difference between basic and diluted
earnings per Ordinary Share since all potential Ordinary Shares were
anti-dilutive. Shares held by the SkyePharma PLC General Employee Benefit Trust
are excluded from the weighted average number of shares.
7 Intangible fixed assets
Intellectual Development
Goodwill property costs Total
Group #'000 #'000 #'000 #'000
Cost
At 1 January 2002 75,762 30,496 1,716 107,974
Exchange adjustments - 663 62 725
Additions 285 3,401 - 3,686
Acquisitions 3,970 - - 3,970
At 31 December 2002 80,017 34,560 1,778 116,355
Amortisation
At 1 January 2002 6,154 2,974 618 9,746
Exchange adjustments - 82 6 88
Charge for the year 3,799 2,483 224 6,506
At 31 December 2002 9,953 5,539 848 16,340
Net book value at 31 December 2001 69,608 27,522 1,098 98,228
Net book value at 31 December 2002 70,064 29,021 930 100,015
In May 2002, SkyePharma acquired the entire drug delivery business of Bioglan AB
for #3.6 million in cash and the assumption of #0.4 million of net liabilities.
The acquired rights included Bioglan's Biosphere injectable technology and those
rights to DermaStick, Crystalip and ES-Gel topical technologies that had
remained with Bioglan after the January 2001 development and commercialisation
licensing agreement with Bioglan. See note 9; Acquisitions.
8 Fixed Asset Investments
Unlisted
investments Own shares Total
#'000 #'000 #'000
Cost
At 1 January 2002 13,659 552 14,211
Additions 5,215 1,070 6,285
Charge for the year - (594) (594)
At 31 December 2002 18,874 1,028 19,902
Astralis Limited
Astralis Ltd is an emerging biotechnology company based in the US, and engaged
primarily in the research and development of novel treatments for immune system
disorders and skin diseases. The company is currently developing two products.
Its primary product, Psoraxine, is an innovative vaccine under development for
the treatment of psoriasis. The company's second product is for the treatment
of leishmaniasis.
During the year SkyePharma acquired a further 750,000 series A convertible
preferred shares of Astralis Limited for #5.2 million ($7.5 million). As at 31
December 2002 the total SkyePharma holding was 200,000 common shares, 20,000
warrants and 1,750,000 series A convertible preferred shares, representing
approximately 23.0% of the ordinary share capital assuming conversion. The
shares, warrants and convertible preferred shares are held at cost of #12.7
million. As at 31 December 2002, Astralis had net assets of #4.9 million and a
retained loss for the year of #12.2 million.
Transition Therapeutics Inc.
Transition Therapeutics Inc. is a biopharmaceutical company based in Canada and
engaged primarily in the business of developing products for the treatment of
multiple sclerosis, diabetes and restenosis.
As at 31 December 2002, the total SkyePharma holding of Transition Therapeutics
was 4,930,814 shares, representing approximately 8.2% of the ordinary share
capital. The shares are recorded at cost of #2.2 million.
Cade Struktur Corp.
As at 31 December 2002, the total SkyePharma holding of Cade Struktur Corp., a
Canadian company, was 869,086 shares, representing approximately 16.8% of the
ordinary share capital. SkyePharma has not attributed a value to these shares
and they have been recorded at zero cost. The shares were originally acquired
consequent upon the acquisition of the assets of Hyal Pharmaceutical Corp.
Other investments
The Group has other investments of #4.0 million in a collaborative partner based
in the US, representing approximately 14.2% of the ordinary share capital
assuming conversion, recorded at Directors' valuation based on a number of
considerations including comparable transactions and discounted future cash
flows.
Own shares
During 2001 the Company established an employee share ownership trust, the
SkyePharma PLC General Employee Benefit Trust. The purpose of the trust is to
hold shares in the Company, which may subsequently be awarded to Directors and
employees under the Deferred Share Bonus Plan and Share Purchase Plans. During
the year, the trust purchased 2 million shares and 893,415 shares were allocated
at an average price of 66 pence per share. As at 31 December 2002 the trust held
1,805,681 shares at a carrying value of #1.0 million with a market value of #0.7
million. This shortfall is not considered to represent a permanent diminution in
value.
9 Acquisitions
Drug delivery business of Bioglan AB
On 13 May 2002 SkyePharma acquired the entire drug delivery business of Bioglan
AB, of Sweden, for #3.6 million in cash including acquisition costs and the
assumption of #0.4 million of net liabilities.
The acquired rights include Bioglan's Biosphere injectable technology and those
rights to DermaStick, Crystalip and ES-Gel topical drug delivery technologies
that remained with Bioglan after the January 2001 development and
commercialisation licensing agreement.
The acquisition method has been adopted and goodwill of #4.0 million arose on
the acquisition. By consideration of the likely commercial life of the
technology acquired, the Directors have determined that a suitable period over
which to amortise the goodwill is 20 years.
Book values and
provisional fair values
#'000
Fixed assets
Tangible assets 676
Current assets
Debtors 44
Creditors - amounts falling due within one year (1,095)
Net current liabilities (1,051)
Net liabilities (375)
Satisfied by:
Cash 3,500
Expenses relating to the transaction 95
Consideration 3,595
Goodwill 3,970
Results of the drug delivery business of Bioglan AB
The drug delivery business of Bioglan AB prior to the acquisition formed part of
Bioglan AB and did not report as a separate unit. During the period 13 May 2002
to 31 December 2002 the drug delivery business of Bioglan AB contributed #0.5
million to turnover, a loss of #1.5 million to operating profit and a cash
outflow of #1.3 million to net cash inflow from operating activities
This information is provided by RNS
The company news service from the London Stock Exchange
END
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