SkyePharma in Swiss coup

SkyePharma, the fledgling pharmaceutical group formerly known as Black & Edgington, is expected to more than quadruple its stock market value after buying Jago Holding, a Swiss drug research company, in a deal worth up to pounds 305m. Jacques Gonella, owner of Jago, will be paid pounds 105m in cash, pounds 22.9m in shares and could pick up pounds 167m over 10 years, under the earn- out terms of the purchase.

The acquisition comes just four months after the former marquee-hiring group reversed into Krypton, a Gibraltar-based pharmaceuticals company controlled by the chairman, Ian Gowrie-Smith, in a pounds 37m deal.

The shares, quoted on the Alternative Investment Market, were suspended at 9p yesterday. Over the next 10 days, SBC Warburg is leading a "bookbuilding" placing and open offer to raise pounds 135m from investors at home and overseas to finance the initial cash payment for Jago plus working capital. Existing holders can subscribe at the rate of between 105 and 125 shares for every 100 held after a one for 10 capital consolidation. The final price will depend on demand, but is expected to be in the range of 84p to 100p a share. It is hoped that the shares will be relisted on the main market in April.

The Jago deal is being presented as a reflotation of SkyePharma. Mr Gowrie- Smith, who was the moving force behind the relaunch of Medeva as a generics- led drugs company, said yesterday: "It's been a long time in the coming, but my ambition is to create another pharmaceuticals company ... and I couldn't wish for more than bringing together Jago and SkyePharma."

Founded in 1983 by Mr Gonella, Jago claims a list of blue chip pharmaceutical companies for its drug delivery technologies, including Eli Lilly, Procter & Gamble and SmithKline Beecham. The main one is Geomatrix, which controls the release of drugs in tablet form, obviating the need to take several doses in a day or increasing the ability of an active ingredient to target a particular part of the body. By combining the technology with existing drugs, Mr Gowrie-Smith believes this could extend the protected life of pharmaceuticals coming off patent over the next six years. The market for these so-called generics is expected to rise from $4.3bn to $14bn over that period.

The company already has three Geomatrix-linked products on the market in the cardio-vascular (high blood pressure) and anti-inflammatory therapeutic areas.

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