Shares in SkyePharma have taken a hammering this morning after the UK drug delivery firm announced that attempts to refinance or renegotiate the terms of convertible bonds, an issue which has been the cause of some alarm for investors of late, have met with failure.

Around six weeks ago, SkyePharma issued a statement saying that detailed work was being carried out with a view to making a proposal to key bondholders and announcing “definitive” plans to sort the refinancing problem out. The company was also waiting on the results of a number of late-stage studies of its flagship asthma combination drug Flutiform (fluticasone and formoterol) which have since proved successful.

In anticipation of these positive results, SkyePharma says that meetings were held with a number of existing and potential investors and with certain key bondholders regarding a “specific” refinancing proposal. Holders of the bonds could demand repayment of £69.6 million in May next year and a further £20 million in June 2010.

However, though there was significant support, “in the light of current capital market conditions the discussions on the specific proposal are not being pursued at the present time”, the firm said. SkyePharma added that discussions “are now taking place with a small number of stakeholders to consider an alternative plan” and a further update will be given with the group’s half-year results on August 28.

Ken Cunningham, SkyePharma’s chief operating officer and chief executive-designate, told PharmaTimes World News that no details can be given just yet regarding the nature of the alternatives being explored. However he is enthusiastic about the possibilities of a solution being found saying “it is in no-one’s interests” to get to a situation whereby the firm became so financially strapped that it could not unlock the considerable value that its products, especially Flutiform, offers. Market conditions are just not right at the moment, he said, but the will is there to find a solution.

Nevertheless, this is a major blow for SkyePharma seeing as the last few weeks have seen Flutiform come through three Phase III efficacy studies with flying colours, boosting the share price, and the drug is well on-track for a US filing in the first quarter of 2009.

However any recent gains have been wiped out, and then some. At 10.40am, the stock had sunk almost 35% to 3.58 pence.