SkyePharma signs licence deal in Japan

SkyePharma has signed a distribution and licensing agreement with a Japanese partner that the troubled drugs manufacturer hopes will help guide it towards recovery.

Kyorin Pharmaceutical is to guide its asthma treatment Flutiform though the approval process in Japan, awarding SkyePharma milestone payments as it passes regulatory hurdles, and eventually royalties on sales.

Shawn Manning, an analyst at Landsbanki, said he expected the group to earn about $10m (£5m) in upfront fees, but he said the longer term benefits could be much more substantial. "This is a $10bn market, which is dominated by just two products," he said. "A company like SkyePharma only needs a small market share to do very well."

The drug is not expected to gain regulatory approval in Japan until at least 2013. In the US, where the treatment is expected to be launched in 2010, SkyePharma has a similar agreement with the pharmaceutical giant Abbott.

SkyePharma has struggled in recent years against heavy debts and a lack of results. One analyst at Investec said recently: "Skyepharma is like an onion – you peel away the layers and find nothing in the middle." The group's shares closed yesterday at 8.75p, up more than 2 per cent on the day, but down from 11.75p on 4 April.

The most serious predicament for the group is two outstanding convertible bonds. Put options, which allow bond-holders the choice of selling the debt back to the company, are due on £89m worth of convertibles in 2009 and 2010. The company is set to try to renegotiate these deals with investors before the exercise dates.