RNS Number:8370T
Skyepharma PLC
05 January 2004


For Immediate Release                                           5 January, 2004


                   SKYEPHARMA PROVIDES END-2003 TRADING UPDATE


LONDON, UK, 5 January 2004-- SkyePharma PLC (Nasdaq: SKYE; LSE: SKP) announces a
Trading Update for the year ending 31 December 2003.


As a result of delays in concluding a number of key deals in 2003, revenues for
the year will be substantially below the #85-100 million range indicated at the
time of the Interim Results in September and below the #70 million achieved in
2002. Milestone payments remain a major source of our revenues, and this
shortfall primarily arises because several key deals that we had expected to
conclude in 2003 are still in negotiation, with finalisation now expected in
early 2004. With revenues below our budgeted revenue target, coupled with
greater than expected research and development costs (arising from delays to
completion of agreements involving the transfer of costs to the partner), the
Company now expects to report a loss for the second half of 2003 albeit less
than the loss we reported for the first half. A number of key deals, potentially
involving total milestone payments of up to $200 million and double digit
royalty income, remain in advanced stage negotiation with multiple potential
partners. We remain confident that these agreements can be concluded on
satisfactory or better terms in the current year. This would have a
correspondingly positive impact on the profit already budgeted for 2004 (which
assumed these agreements were signed in 2003).


The company expects to have cash balances of approximately #20 million at 31
December 2003, marginally lower than as at 30 June 2003, with debt levels
marginally higher than as at 30 June 2003. However cash should increase
substantially in 2004 as the above deals are concluded.


During the second half of 2003, the company signed several new product
collaboration deals. Announced today is a further technology licence deal in the
pulmonary area that was signed with GlaxoSmithKline at the end of 2003. However,
discussions to finalise the major deals that we had expected to be concluded by
31 December remain ongoing. A signed term sheet is in place for one transaction,
which we would anticipate closing within the next few weeks. In addition one of
our pipeline products, due to be filed for approval with the FDA in March, is
currently under advanced review by several potential licensees. Our largest
licensing opportunity is a package of products in the pulmonary field, for which
we are also in advanced discussions with a number of parties. A major clinical
study published in November suggests a substantial increase in the potential
commercial value of the bronchodilator formoterol, both alone and in combination
with an inhaled steroid. Our own combination with the steroid fluticasone is
making very satisfactory progress in clinical development, with a Phase I trial
now completed. We believe that these factors have significantly raised the value
of our inhaled product range and support our stance that the Company should
refrain from entering any collaboration that undervalues this part of our
product pipeline. The Company is so convinced of the potential value of this
particular product opportunity that we have already rejected terms including
milestones of up to $90 million and double digit royalty returns. We remain
confident that we will be able to finalise a deal with an appropriate partner in
the first quarter of 2004.


While every effort was made to bring these deals to completion on appropriate
terms by the 2003 year-end, the Company strongly believes that it is in
shareholders' best interests to conclude the best deal possible for these
critical products. Unfortunately the time required for due diligence and the
final stages of negotiations does not always accommodate the constraints imposed
by a year-end date. Indeed, this restriction has proved a significant impediment
to obtaining the deal terms we feel that our products warrant. We remain
confident that this is only a delay and expect to conclude these agreements in
early 2004.


OUTLOOK FOR 2004

Turning to the current year, we see the outlook as very positive for the
Company. Revenues and cash will be improved by the finalisation of the deals
referred to above that are currently under discussion, augmented by anticipated
milestone payments from deals agreed in prior years. As important, we expect a
further significant increase in our royalty income, which is becoming an
increasingly dominant factor in our revenues and, importantly, also in our
profits. We had already budgeted a profit for 2004 (assuming the agreements
still in negotiation were signed in 2003) and deferral of those agreements to
the current year would therefore have a correspondingly positive impact.


With the completion of the development phase of our growth, we are further
reorganising our R&D operations and some other business functions in order to
align the development base with our projected future R&D activities. Regrettably
this will mean some redundancies but we expect to emerge from this
reorganisation in a leaner and fitter form. This will involve a one-off cash
cost of approximately #3.5 million and some associated non-cash asset
write-offs. These will be taken as exceptional charges in both 2003 and 2004 as
appropriate. Thereafter shareholders should expect to see growth in operating
profits more closely aligned with the future growth in royalty income that we
expect, generated by products such as DepoMorphineTM.


Commenting on the Trading Update, Chief Executive Michael Ashton said: "We are
disappointed that we have not been able to meet the ambitious target we set
ourselves in April of revenue growth in excess of 40%. On the positive side,
royalty income should more than triple for the full year after increasing
fourfold in 2002, fulfilling our expectations. With our main royalty-earning
products Paxil(R) CR and Xatral(R) OD/UroXatral(R) likely to be joined in
2004 by Foradil(R) CertiHaler and DepoMorphineTM, we expect this gratifying
trend to continue in the current year. We cannot stress sufficiently that rising
income from royalties is the key to future sustainable profit growth for
SkyePharma. At our present stage of development, revenues and profitability are
still largely dependent on the level and timing of milestone payments, which by
their nature are very difficult to predict. While we are striving to become
consistently profitable, it would clearly not be in shareholders' best interests
to enter into new agreements with milestone payments that would produce current
profitability if those upfront payments did not reflect the value of our
investment or came at the expense of future royalty streams.


"With our increasing royalty share, the deals currently under negotiation and an
improved cost base, I am excited by the prospects for 2004.


"I can also report that the Company has been in discussion with our partner
GlaxoSmithKline over the royalty rate we receive on sales of Paxil(R)? CR. Legal
advice received by SkyePharma leads us to believe that we are entitled to a
substantial increase in the royalty rate from the date of entry of generic
paroxetine in the US market. If we are unable to reach agreement on this issue,
there is an arbitration procedure in place."


                                      ends


A conference call on this Trading Update will be held today. Michael Ashton,
SkyePharma's Chief Executive Officer, will host the conference call. Investors
and other interested parties may access the conference call at 4:00 p.m. (GMT) /
11:00 a.m. (EST) by dialling +1 (612) 288 0337 for International callers and
(800) 230 1085 for US callers.


A replay will be available shortly after the conclusion of the conference call
by dialling +1 (320) 365 3844 for International callers and (800) 475 6701 in
the US and entering Access Code 716063.


The Company intends to publish its full-year results for 2003 at the end of
March.


SkyePharma PLC develops pharmaceutical products benefiting from world-leading
drug delivery technologies that provide easier-to-use and more effective drug
formulations. There are now nine approved products incorporating three of
SkyePharma's five technologies in the areas of oral, injectable, inhaled and
topical delivery, supported by advanced solubilisation capabilities. For more
information, visit www.skyepharma.com.


Except for the historical information herein, the matters discussed in this news
release include forward-looking statements that may involve a number of risks
and uncertainties. Actual results may vary significantly based upon a number of
factors, which are described in SkyePharma's 20-F and other documents on file
with the SEC. These include without limitation risks in obtaining and
maintaining regulatory approval for existing, new or expanded indications for
its products, other regulatory risks, risks relating to SkyePharma's ability to
manufacture pharmaceutical products on a large scale, risks that customer
inventory will be greater than previously thought, risks concerning SkyePharma's
ability to manage growth, market a pharmaceutical product on a large scale and
integrate and manage an internal sales and marketing organization and maintain
or expand sales and market share for its products, risks relating to the ability
to ensure regulatory compliance, risks related to the research, development and
regulatory approval of new pharmaceutical products, risks related to research
and development costs and capabilities, market acceptance of and continuing
demand for SkyePharma's products and the impact of increased competition, risks
associated with anticipated top and bottom line growth and the possibility that
upside potential will not be achieved, competitive products and pricing, and
risks associated with the ownership and use of intellectual property rights.
There can be no certainty that agreement in respect of the additional royalty
for Paxil(R)? CR claimed by the company will be reached with GlaxoSmithKline, or
that SkyePharma will succeed in the arbitration process or that an increased
royalty will be paid. SkyePharma undertakes no obligation to revise or update
any such forward-looking statement to reflect events or circumstances after the
date of this release.


For further information please contact:
SkyePharma PLC                                                 +44 207 491 1777
Michael Ashton, Chief Executive Officer
Peter Laing, Director of Corporate Communications              +44 207 491 5124

Sandra Haughton, US Investor Relations                          +1 212 753 5780

Buchanan Communications                                        +44 207 466 5000
Tim Anderson / Mark Court



                      This information is provided by RNS
            The company news service from the London Stock Exchange

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