Sinclair Pharma warns on Atopiclair deal

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The Independent Online

Sinclair Pharma, a drugs development group which floated at the tail end of last year, warned its revenues for the current year would be hit because of problems with a key licensing deal. The company had hoped to book some £6m in licensing fees for its Atopiclair gel, a product for mouth ulcers and other minor oral lesions, for the 2004 financial year that ended last month.

The company said it had not managed to pull off an agreement in time and revenues would be £3m for the year, down from £9.1m achieved in 2003. The shares closed down 19 per cent to close at 112.5p after the disappointing news. Sinclair Pharma made an operating profit of £2.9m in 2003. Now it is unclear whether the 2004 figures, due to be announced in October, will show a profit.

The company prospectus had said that it is "profitable, experiencing strong growth". It stated that the directors are "confident" that the "results for the year ending 30 June 2004 will further demonstrate the group's progress". That message was reiterated at the interim results stage earlier this year.

Yesterday Sinclair said: "Licensing discussions with distribution partners, particularly for Atopiclair, continue to make good progress, though in the case of Atopiclair are taking longer than the company had originally anticipated." However, the company also delivered two positive announcements yesterday. Sinclair Pharma said that its Decapinol mouthwash, for tackling bacteria within dental plaque, had been approved for use as a "device" in the European Union. The company also said that Atopiclair had received US approval.

Michael Flynn, the chief executive, said that while Atopiclair was taking longer than anticipated, the development of Decapinol was "way in advance" of expectations. He said that Decapinol was the company's "biggest" product and that Atopiclair would "definitely" receive a licensing in the current financial year. Analysts at Nomura said: "The trading update had more good news than bad, in our view, but the market may well choose to focus on the bad part as this concerns Atopiclair, a product for which Sinclair has high hopes."

Dr Flynn insisted that the company was "still experiencing strong growth in product sales" and that "nothing" in the prospectus was misleading.

He said that a row that took place earlier this year over the company's flotation prospectus had resulted from a "misunderstanding" about the ingredients of Atopiclair between Sinclair Pharma and a leading City pharmaceuticals analyst at Numis Securities, Robin Gilbert. Numis declined to comment on the Sinclair trading statement.

Sinclair was founded by Dr Flynn, the former chief scientific officer and chief executive at Cortecs, now Provalis, who quit when the company came close to collapse in 1998. It admitted that several important drugs were not as far advanced through trials as previously indicated.