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SkyePharma looks at options after bid approach

Shares in UK drug delivery firm rise by 7 per cent after possible sale is mooted

UK drug delivery specialist SkyePharma has announced a strategic review of its business after receiving an unsolicited takeover approach from an unnamed source.

The firm, which develops its own products as well as helping manufacturers make more effective formulations of their existing products, said it had hired US investment bank Lehman Brothers as sole financial advisor to examine its strategic options, including a possible sale.

ìThere is no certainty that the review will result in any change to the present ownership structure of the company,î SkyePharma said in a statement.

SkyePharma has several licensing deals with other drug makers, including GlaxoSmithKline (GSK) for its antidepressant Paxil CR. Analysts believe this string of partnerships will deter larger pharma companies from bidding due to the conflicts of interest with existing operations that might arise.

Analyst Jeremy Batstone at stockbroker Charles Stanley said SkyePharma's ìbroad range of small productsî made it less attractive to a larger company..

ìA private equity firm could extract more value by keeping some parts of the business and selling off other parts,î he said.

In a research note, analysts at Numis said the unnamed bidder was most likely private equity as ìthe company wouldn't fit easily into a larger companyî.

Other potential bidders could be US drug delivery rival Alkermes and two of SkyePharma's existing partners: Endo Pharmaceutical of the US and privately owned Zeneus Pharma.

Shares in Skyepharma hit a 10-year low last month after the firm announced a deeply discounted rights issue to fund crucial late-stage clinical trials of its biggest pipeline hope, the asthma inhaler Flutiform.

The drug could generate annual sales of more than $1bn (?575m) and would rival GSK's Seretide and AstraZeneca's Symbicort if approved.

SkyePharma is the third European drugs business in a month to indicate that it may be sold. Last week Europe's biggest biotech firm Serono said it had hired Goldman Sachs to seek alternatives while German firm Altana said it had also hired the bank to examine options for its pharmaceutical unit.

Last week SkyePharma confirmed that HBM BioVentures, a fund chaired the former chief financial officer of Roche, Henri Meier, had increased its stake in the firm to 6.63 per cent from 5.17 per cent.

30th September 2008

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