Shares in UK drugmaker, SkyePharma, had dropped 11% by mid-day trading on the London Stock Exchange on September 28, following the announcement of plans to raise approximately £35 million via a substantially under-valued rights issue, for the purpose of supporting internal Phase III clinical development of its asthma candidate, Flutiform (formoterol plus fluticasone).

The firm’s proposal comprises a one-for-five rights issue of 125.6 million shares at 30 pence each, representing a sizeable discount to the prior day’s closing price of 52 pence.

According to chief executive Michael Ashton, who also revealed his intention to retire before the next annual general meeting, taking development of Flutiform in-house will “create significant additional value for shareholders.”

Flutiform, a combination product comprised of a bronchodilator and a steroid, is similar to GlaxoSmithKline’s £2.5 billion-a-year Advair (fluticasone propionate/salmeterol) and AstraZeneca’s Symbicort (budesonide/formoterol). SkyePharma believes that it will compete more closely with the latter drug, which has just been filed in the USA, rather than the more established Advair, and Industry observers have forecast peak annual sales for Flutiform in excess of $1 billion.

However, SkyePharma believes it unlikely that the drug will roll out in the USA before 2008. Phase III trials of Flutiform are scheduled for early next year, with a US filing expected in 2007 and subsequent launch in 2009. This could make Flutiform the third, or possibly even the second if there is a delay in Symbicort’s, combination asthma drug to enter the US market.

The stock had already taken a downturn that morning, following publication of the company’s first-half 2005 results, which showed that while sales enjoyed a moderate rise, losses crept up.

The group saw revenues rise 3% to £36 million for the six months ended June 30, but losses inched up to $9.1 million from the $8.6 million recorded for the like, year-earlier period, translating to a loss per share of 1.5 pence versus 1.4 pence. However, the company pointed our that loss for the first half of 2004 was reduced by an exceptional gain of £1.5 million and, according to the SkyePharma, results were largely in-line with expectations.

Commenting on SkyePharma’s performance during the period, Mr Ashton said: “The first half of 2005 has seen a number of significant achievements, including the approvals and subsequent launches of two important products, Triglide (fenofibrate) in the USA [[09/05/05c]] and Foradil Certihaler (formoterol fumarate) in Germany [[21/06/05g]], its first major market.”

With regard to the future, Mr Ashton noted: “We are determined to maximise the long-term return from our products and to move away from reliance on one-off milestone payments, which historically have made up the majority of our revenues. Where possible, we have also taken products further in development before out-licensing in order to optimise the returns we can obtain. Inevitably, this has brought a short-term penalty in terms of revenues and cashflow, but we are confident that this is the correct long-term approach, which will greatly enhance the value of our products to the company.”