RNS Number : 7452T
Skyepharma PLC
18 December 2012
 



SKYEPHARMA PLC - Year End Update

SkyePharma to receive $8 million settlement from AstraZeneca    

 

LONDON, UK, 18 December, 2012 - SkyePharma PLC (LSE: SKP) today provides an update on key events prior to the year end on 31 December 2012.  Trading has been in line with the Board's expectations.

 

Settlement with AstraZeneca

As announced on 7 March 2011, AstraZeneca discontinued the production of Pulmicort® pMDI (budesonide) 100 and 200 mg/dose HFA pMDI (pressurised metered dose inhaler) due to complex manufacturing issues related to technical aspects of their device.  Subsequently, AstraZeneca terminated its agreements with SkyePharma, which developed the formulation for Pulmicort® pMDI using its proprietary formulation technology.  SkyePharma has now negotiated terms to settle certain disputes arising from the termination and a final settlement amount of U.S.$8.0 million (£5.0 million) will be paid to the SkyePharma Group in January 2013.  This amount will be disclosed as exceptional income in the SkyePharma Group's income statement for 2012.

 

flutiform® - Europe

As announced on 3 July 2012, the European Commission adopted a decision in favour of granting marketing authorisations for flutiform®, which covers the 21 member states in the decentralised procedure.  To ‎date, marketing authorisations have been granted in 17 countries, with flutiform® launched in Germany, UK, Cyprus and the Netherlands and national marketing authorisations granted in Austria, Belgium, Bulgaria, Czech Republic, Denmark, Finland, Iceland, Ireland, Norway, Poland, Portugal, the Slovak Republic and Sweden.  In some countries, negotiations are required with national pricing and reimbursement authorities before the product can be made commercially available.  The Group's development, marketing and distribution partner, Mundipharma International Corporation Limited, aims to continue to launch as soon as possible through its network of independent associated companies once national approvals are granted and where relevant, reimbursement confirmed.

 

The Group is responsible for arranging the manufacture and supply of flutiform®, and has contracted with Sanofi to manufacture and assemble the product at its factory in Holmes Chapel, UK.  To support the anticipated growth of flutiform®, the Group expects to invest a further £2 to £3 million per annum in capital expenditure for the next three years to scale up and validate the manufacturing process at increased volumes. 

 

RAYOS® (LODOTRA®) - United States

On 3 December 2012, RAYOS® was launched in the United States by the Group's partner, Horizon Pharma, Inc. ("Horizon"), for the treatment of a broad range of diseases including rheumatoid arthritis, following approval by the U.S. Food and Drug Administration on 27 July 2012.  The Group is entitled to a low-mid single digit percentage royalty on net sales of RAYOS® in North America. 

 

 

Peter Grant, Chief Executive Officer of SkyePharma, commented:

"We are pleased to end the year having achieved several major product approvals and launches in 2012, most recently with the launch of RAYOS in the U.S.  These achievements have demonstrated the Group's expertise in the complex field of respiratory development and oral drug delivery, positioning SkyePharma as an attractive and experienced specialist for future partnering opportunities.  We enter 2013 in a significantly improved financial position having successfully restructured our debt and negotiated an $8 million settlement in respect of the cessation of Pulmicort pMDI."

 

Accounting Implications of Bond Proposals

The Bond Proposals announced on 23 August 2012 by SkyePharma (Jersey) Limited (the "Issuer") were approved on 24 September 2012.  Following implementation of the Bond Proposals, an aggregate principal amount of £22,184,483 of the £83,007,000 outstanding Convertible Bonds were converted into 22,184,483 Ordinary Shares in the Company, representing approximately 48.1 per cent. of the Company's enlarged share capital.  Following the conversion, a total of £60,822,124 6.5 per cent. 2024 Bonds are outstanding as non-convertible bonds with the following key amended terms:

 

-           Ordinary interest of 6.5 per cent. per annum, with an option (which the Issuer has  exercised), for the Issuer to defer payment of the next four semi-annual interest payments (totalling up to £7.9 million) until up to 4 November 2017, subject to the right to further deferrals ceasing on certain change of control events or a significant cash equity issuance.  Deferred interest will become payable earlier out of the proceeds, subject to restrictions, of certain cash equity issuances as well as on early redemption.

-           Additional interest of 3 per cent. per annum to 4 November 2017 (up to £9.3 million) and a redemption premium of 47.3 per cent. (£28.8 million) are both payable on redemption.

-           The earliest date when the Bondholders may ordinarily redeem the 2024 Bonds is 4 November 2017.

 

Part of the 2024 Bonds were initially unlisted, but, following the issue of a prospectus on 5 December 2012, these were admitted to trading on the regulated market of the London Stock Exchange and consolidated to form part of the same series as the rest of the 2024 Bonds.

 

The implementation of the Bond Proposals has resulted in an exceptional non-cash charge of £13.1 million in the Group's income statement in 2012 arising from comparing the carrying value of the bonds with the fair value of the 22.2 million shares issued and the fair value of the Bonds carried forward.  The cash costs of implementing the Bond Proposals will also be recorded as an exceptional pre-tax charge of approximately £2.3 million in 2012.

 

Following the implementation of the Bond Proposals, the ordinary financing charges in the Group's income statement will be higher than the historical charges due to the additional interest charge on the Bonds, the redemption premium and accounting for the liability falling due in just over five years' time (rather than through to the final maturity dates of 2024 and 2025) using a discount rate of 17 per cent.  

 

If there is no earlier redemption, due to a triggering event, the £60.8m 6.5 per cent. 2024 Bonds will be accounted for as if they will fall due on 4 November 2017.  This would give rise to the following ordinary financing charges in the Group's income statement and cash outflows in respect of the 2024 Bonds:

 

6.5 per cent. 2024 Bonds

2012

2013

2014

2015

2016

2017

Charge recorded in income statement
(£ million)

2.3*

10.0

11.8

13.3

14.9

13.9

Cash outflows (interest, capital repayment and redemption premium) (£ million)

Nil*

Nil

2.0

4.0

4.0

110.8

* From 24 September to 31 December 2012.          Assuming redemption at earliest Put date.

 

For further information please contact:

 

SkyePharma PLC

 

Peter Grant, Chief Executive Officer

+44 207 881 0524

 

 

FTI Consulting

 

Jonathan Birt/ Julia Phillips/ Susan Stuart

+44 207 831 3113

 

About SkyePharma PLC

SkyePharma uses its multiple drug delivery technologies and expertise to create pharmaceutical products.  The Group receives revenues from 13 approved products in the areas of inhalation, oral, topical and injectable delivery as well as generating income from the development of further products and technology licenses.  The Group's products are marketed throughout the world by leading pharmaceutical companies.  For more information, visit www.skyepharma.com.  

 


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