SkyePharma looks to Paxil for a cure as first profits arrive at last

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The Independent Online

Skyepharma, whose drug delivery technology has been licensed to some of the world's largest drug firms, has gone into profit for the first time.

The company confirmed it made a net operating profit of £2.2m in the second half of 2001, and promised that profitability is sustainable.

Ian Gowrie-Smith, its chairman, said: "There is no going back from this point. The whole philosophy now is to seek as rapid an increase in profit as we can handle."

SkyePharma's technology is used in treatments for cancer, pre-cancerous skin complaints, and dermatology. Royalty income and payments for research and development collaborations pushed turnover up 90 per cent to £46.1m last year, and pre-tax losses reduced to £9.4m from £19.7m in 2000.

The company has 14 drugs undergoing human trials, and at least another dozen in pre-clinical studies, but it was news of recent and imminent product launches that pushed the shares a penny higher, to 68p, after yesterday's annual results.

In particular, the company gave more details on the launch of a new version of Paxil, GlaxoSmithKline's blockbuster anti-depressant, which uses SkyePharma's controlled-release technology. Mr Gowrie-Smith predicted its 3 per cent cut of sales could amount to £10m a year and amounted to a "transformation" of his company. GSK said last month it would be launching the new Paxil CR at the end of April.

GSK has had regulatory approval to sell the product since 1999 and the City had given up hope it would ever be launched. The delay had created doubts over management credibility, Mr Gowrie-Smith said.

"The potential of Paxil CR has now become clearer, even to us," he said. "Never in our wildest moments did we expect a broad-fronted launch by GSK of Paxil CR as a stand-alone product, but there will be 11,000 salesmen trying to sell it from next week."

It also emerged yesterday that SkyePharma is in exclusive talks with a potential new marketing partner for its Solaraze product, a rub-on gel to combat actinic keratosis, a pre-cancerous skin complaint.

Bioglan, which did have the rights to sell Solaraze in Europe and the US, has gone bust. SkyePharma received an additional payment when Bioglan transferred the US rights to Quintiles last year, and the company looks set to get another payment when the European rights are transferred to the new partner by the end of this month.

Mr Gowrie-Smith said: "We have effectively sold the rights to Solaraze twice in the US and are about to sell them a second time in Europe."

SkyePharma insisted it had avoided the imprudent accounting practices that have dogged the biotech sector, and said it was deferring £11.7m of income from projects where the company has ongoing liabilities.

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