Skyepharma's asthma delivery system could be a $500m blockbuster

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The Independent Online

There are countless companies that are no doubt glad to see the back of 2008, even if they are a little uncertain about what 2009 might bring. One of them is certainly the biotech group Skyepharma, whose annus horribilis last year saw its share price collapse under the weight of two convertible bonds worth £89m, on which investors had put options, exercisable this year and next.

The shares dropped from a year high of 744p to 116p, with some analysts predicting last year that had the bond investors so desired they could have forced the company out of business.

Indeed, last July, when the group's share price fell 32 per cent in one day – in pre-Lehman-collapse times, such falls were still considered astronomical – as talks between the company and its bondholders collapsed, the writing appeared to be on the wall.

So what a difference a few months makes. The group has always relied on its potential blockbuster asthma delivery system Flutiform, which was perhaps what saved the group from collapse, as investors recognised that Skyepharma was worth saving, and eventually renegotiated the terms of the deal by putting back the put dates on the bonds by several years.

Since the deal was struck, the news has got even better. Last week, a treatment called Lodotra, which treats arthritis and joint stiffness, was given approval to be used in Europe. The medicine uses Skyepharma's "Geoclock" technology, which ensures that the treatment takes effect at the necessary times.

While the group will not be able to suddenly pay back those troublesome bonds on the back of Lodotra's success – the company will receive a single-digit percentage royalty on net sales – it is at least a further step back from the precipice.

The group is desperately hoping that its filing for Food and Drug Administration approval for Flutiform, which is expected in before the end of March, is successful.

While the earnings from Geoclock will be welcomed, it is still Flutiform that excites analysts, with those at Piper Jaffray saying that the treatment could be worth as much as $500m (£328m).