Innovata has confirmed that it is in early-stage negotiations with fellow UK company SkyePharma, although shares in the latter company fell on the news.

SkyePharma’s shares fell by 15% to 47.5 pence on news of Innovata’s interest, and observers said the decline may reflect investor disappointment that an outright bid had not been forthcoming, or indeed that an earlier rumour that Novartis was interested in the company may not be true.

On November 14, Skyepharma’s shares leaped 10% on news of an unsolicited bid for the company, coming as it did on the tail of a difficult patch for the drug delivery specialist. In September, the company's stock price slid to a two and a half year low after it announced a discounted rights issue to support clinical development of its asthma drug Flutiform (formoterol plus fluticasone), a fixed dose combination of a corticosteroid and beta agonist that will compete with blockbuster products such as GlaxSmithKline's Advair/Seretide (salmeterol and fluticasone) and AstraZeneca's Symbicort (formoterol and budesonide).

Meanwhile, SkyePharma’s first-half results were lacklustre with widening losses and revenues inching up just 3%.

Innovata, formed by the merger of ML Laboratories and Quadrant Technologies in the summer, specialises in the development of respiratory drugs. It has a portfolio of inhaler devices, including the already-marketed Clickhaler (from ML) and S2 dry powder inhaler (from Quadrant). A merger with SkyePharma would boost its respiratory product pipeline, as well as bring in a number of other technologies and royalties from marketed products.

Innovata will likely be particularly interested in Flutiform, which addresses a market for combination asthma drugs that is currently represented only by the GSK and AstraZeneca products, is worth around $5 billion at present and is growing fast, forecast to exceed $6 billion in 2006.

Innovata has not divulged what form a combination with SkyePharma would take, and the lack of detail prompted suggestions that other companies may come forward and bid for SkyePharma, which has delivery technologies suitable for the whole range of oral, inhaled, injectable and topical delivery, as well as a solubilisation business designed to improve the bioavailability of poorly-soluble drugs. Along with Novartis, Roche has also been linked to the UK firm, as have private equity firms.