SkyePharma chairman at war with house broker CSFB

Ian Gowrie-Smith described a negative investment note published by CSFB as the "pathetic act" of a "peeved" analyst, and warned he would review SkyePharma's relationship with the bank. The drug company launched a massively discounted rights issue this week, after failing to find a partner to fund trials of its new asthma drug.

Andrew Sinclair, at CSFB, removed the drug, Flutiform, from his financial forecasts because of the uncertainty and concluded a note to clients by saying that backing the rights issue would be "putting significant faith in a management team which to date has failed to deliver a partner for Flutiform". Mr Gowrie-Smith accused Mr Sinclair yesterday of being "peeved" after supporting SkyePharma shares before a rights issue announcement that sent them sharply lower. "I understand that he is professionally pissed off," Mr Gowrie-Smith said. "It can only be interpreted as a pathetic act that diminishes his professional stature."

CSFB told clients that Mr Sinclair's views had been distorted after editing by compliance officers, who patrol the Chinese walls between departments of an investment bank to prevent bias and conflicts of interest.

Sources at CSFB claimed that because strict rules prevent the publication of investment research that induces people to take part in a fund-raising conducted by another part of the business, Mr Sinclair was forced to take out forecasts for Flutiform and withdraw all positive statements from the piece. Mr Gowrie-Smith said he did not believe that was the full explanation, and that he expected CSFB to make up for the débâcle by marketing the rights issue aggressively over the coming days. SkyePharma is guaranteed its £35m to fund trials of Flutiform, but CSFB could be left trying to find buyers for a significant proportion of the rights if Mr Sinclair's views are shared by investors.

"It will be interesting to see the sales desk generating purchase orders [for SkyePharma shares] over the course of the rights issue," Mr Gowrie-Smith said. "Then we will see if the house as a whole has done right by its client." He added: "We will be reviewing the relationship. I expect we'll be under review by them as a client and they will be under review from our point of view."

A spokeswoman for CSFB said the bank "fully upholds the independence and integrity of its research", and Mr Sinclair refused to comment. SkyePharma shares were 41p yesterday, compared with a rights price of 30p.

OUTLOOK, PAGE 51

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