SkyePharma jumps 9% on morphine deal

SkyePharma, the mid-cap drugs delivery group, has sealed the first of three delayed licensing deals, signing up Medeus Pharma, the new drugs group chaired by Sir Richard Sykes, to market a slow-release morphine injection.

An agreement - worth up to €100m (£66m) in milestone payments with royalties on top - had been expected last year and the delay contributed to a profits warning that informed shareholders the company would report a loss for 2003.

Shares in SkyePharma jumped 9 per cent to 69.75p on hopes that a second, larger deal will follow imminently. The company said last week that it would hold back its annual results until substantial deals had been signed, but added that it would report by the end of April.

Sir Richard, the rector of Imperial College and the former chairman of Glaxo Wellcome, is the figurehead at Medeus, which is backed by Apax Partners, the venture capital group.

Medeus will give SkyePharma a 35 per cent share of European sales of DepoMorphine, increasing to 50 per cent as certain sales thresholds are met. The drug, whose sales are forecast to reach $200m annually, is already licensed in the US.

SkyePharma's upfront payment under the new deal - believed to be less than £5m - was less than expected and puts more pressure on the company to deliver other licensing deals if it is to return to profitability as promised this year.

Jonathan Senior, at Evolution Beeson Gregory, said: "Repeated disappointments in terms of near-term profitability have damaged management credibility. The company should do all it can to manage the current situation appropriately to prevent itself being hung by its own petard once again."

SkyePharma says the three deals that have slipped over from 2003 will bring in profits on top of those that were already being expected for 2004. Michael Ashton, the chief executive, said: "The structure of this agreement represents a strategic shift away from upfront milestone payments towards deriving a greater share of future revenues from our products."