SkyePharma defies rebels by appointing Karabelas to chair

The ailing drug developer SkyePharma snubbed rebel shareholders by appointing a non-executive director, Argeris "Jerry" Karabelas, as chairman yesterday, leaving investors determined to go ahead with an emergency meeting at which they hope to install their own candidate.

Shares in SkyePharma plunged 8.6 per cent as the company admitted it would sell its San Diego injectable medicines division, after failing to auction off the whole company. The division, which makes DepoCyt to treat a complication of cancer and Depodur for post-surgery pain, has attracted interest from several bidders and is worth about £100m, according to analysts. SkyePharma said it would use the sale proceeds to develop oral and respiratory medicines such as Flutiform, an experimental asthma drug.

Last month, disgruntled investors succeeded in ousting SkyePharma's founding chairman Ian Gowrie-Smith. Led by North Atlantic Value (NAV), the group which holds 14.2 per cent of the shares strongly condemned the appointment of Mr Karabelas, "an insider who is closely associated with the past five years of share price underperformance". They have been lobbying for the appointment of Bob Thian, the chairman of the filtration-paper maker Whatman, and vowed to push ahead with plans for an emergency shareholder meeting to get Mr Thian installed. Hopes for his appointment were dented this week when Whatman put out a profits warning.

Aspokesman for NAV said: "This is quite extraordinary action by the company, given that we've told them what we wanted and we are the owners of the business."

He said a "new, reforming chairman" from outside was needed, praising Mr Thian's track record at Whatman. The investor group claims to have 37 per cent backing (including its own shares) and will start canvassing smaller shareholders. Their motion would need 50 per cent support from investors voting at the meeting, which is several weeks away, to be successful.

Michael Ashton, the chief executive of SkyePharma, defended the company's move, describing Mr Karabelas as a "seasoned pharmaceuticals executive". The 57-year-old is a former chief executive of Novartis Pharma and previously served as president of the North American operations of SmithKline Beecham. He is an executive director of Care Capital, a specialist US healthcare investment fund, as well as a non-executive chairman of Human Genome Sciences.