Warning on deals hits SkyeParma

A SHOCK profits warning and a £3.5m hit at drugs development group SkyePharma sent its shares plunging by more than 17% today, making it the biggest FTSE 250 faller.

The 13p slump to 62 1/4p follows the group's inability to conclude several key deals with partners in the development of a series of drugs that would have provided milestone payments of $200m (£111.6m) and 'double-digit royalty income'.

SkyePharma is also absorbing a £3.5m cost associated with research and development redundancies and asset write-offs.

It is forecasting a loss for the second half of 2003 although not as much as the £11m deficit in the first half of the year. In 2002 the group achieved a first-time profit of £4m.

SkyePharma says several key deals are still in negotiation and chief executive Michael Ashton is confident 'agreements can be concluded on satisfactory or better terms in the current year'.

The difficulty for SkyePharma is that its deals with major companies such as GlaxoSmithKline and AstraZeneca are often protracted and complicated. One such deal for the group is a treatment for lung problems.

SkyePharma today revealed that it had rejected terms with an unnamed pharmaceuticals company that would have provided milestone payments of up to $90m and double digit royalty terms.

It is now in negotiations with another company offering even better terms and hopes to finalise a deal in the first quarter of 2004.