Skye boosted by US approval

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SKYEPHARMA, the drug delivery group, is set to near-double sales in 1999 after US regulators approved its new version of SmithKline Beecham's best-selling anti-depressant Paxil.

The US Food and Drug Administration yesterday gave the green light to Paxil CR, a controlled release version of SB's blockbuster. The ruling sent SkyePharma shares surging 2.5p to 85p. The new tablet uses SkyePharma's technology to control the discharge of Paxil in the body, boosting its ability to treat depression.

The FDA ruling triggers a series of payment of up to $19m (pounds 12m) from SB to SkyePharma. The small biotechnology company will receive a lump sum of around $2m immediately and a royalty of around 3 per cent on sales of the new version of the drug.

Paxil is one of SB's best-selling products, with sales last year of more than $1.7bn. Analysts believe the controlled release version will sell about $550m this year, netting SkyePharma a royalty of almost $17m. SkyePharma's sales totalled about $20m in 1997.

Ian Gowrie-Smith, Skye-Pharma chairman, said SB's payments would help his company meet its target of posting its first profit next year. He said the company was working on a number of other products, including a heart drug with Eli Lilly and an asthma inhaler with Swiss giant Novartis.

City analysts welcomed the deal but said the potential of Paxil CR depended on SB marketing efforts. Genghis Lloyd-Harris at Credit Suisse First Boston said: "It is good news that they have got approval for the drug. The question is: `Is it going to be a big drug or a small drug?' And that depends on SB marketing muscle."

Other observers said Paxil CR's future could be jeopardised by a legal challenge to SB's patents in the US and Canada. Mr Lloyd-Harris, who has a 94p target price, said these uncertainties could limit the stock's upside potential.