SKP.L Regulatory News (SKP)

16 Feb 2006 07:02

Skyepharma PLC16 February 2006 For Immediate Release 16 February 2006 SkyePharma issues EGM notice and recommends shareholders to vote against proposals LONDON, UK, 16 February 2006 - SkyePharma PLC (LSE: SKP; Nasdaq: SKYE)announces that it has today posted to shareholders the notice of theExtraordinary General Meeting ("EGM") to be held at The Sheraton Park LaneHotel, Piccadilly, London, W1J 7BX at 11.00 am on 9 March 2006. The Board of SkyePharma strongly urges shareholders to vote AGAINST resolution 1because it seeks to appoint Mr Robert Thian as a director as part of an apparentstrategy by a minority group of new shareholders to take control of the Companyby making Mr Thian a director and then attempting to force him upon the Board asan Executive Chairman. It is the Board's role to appoint the Chairman, having followed the appropriatecorporate governance procedures as part of its selection process. Accordingly,it has appointed Dr Argeris ("Jerry") Karabelas whose distinguished career inthe pharmaceutical industry speaks for itself and who the Board is confidentwill act in the interests of all the Company's shareholders. Given that Mr Thianhas rejected the possibility of any kind of non-executive role, the Board doesnot believe that the proposed election of Mr Thian on the basis suggested by theminority group would be appropriate for the following reasons: 1. the Company's Chairman should be independent and act in the interests of allshareholders and not for a minority group trying to dictate the strategy andmanagement of the Company. 2. it is for the Board, following the recommendations of the NominationsCommittee, to determine who is best placed to act as Chairman and not a group ofminority shareholders in pursuit of its own agenda. 3. the Chairman's role in a development stage company such as SkyePharma demandsrecent relevant pharmaceutical industry experience which Dr Karabelas clearlyhas and Mr Thian does not. 4. Dr Karabelas is leading an excellent new management team, with outstandingpharmaceutical experience and track records, in a new strategy to achievesustainable profitability within the shortest reasonable time and delivermaximum shareholder value. 5. an Executive Chairmanship runs counter to best corporate governance practice. Resolution 2 will be redundant as it seeks to unseat Directors appointed since27 January 2006 and the date of the meeting: there have been and will be no suchappointments. This resolution will therefore not be put to the meeting. The Board therefore strongly recommends that shareholders vote AGAINST the firstresolution. New senior management appointments On 2 February 2006, SkyePharma announced that following a review by itsNominations Committee of internal and external candidates, it had appointed DrKarabelas as Non-Executive Chairman. Dr Karabelas, aged 53, has had adistinguished career at senior levels in the global pharmaceuticals industry: hewas Chief Executive of Novartis Pharma and prior to that President of the NorthAmerican operations of SmithKline Beecham. He is currently an Executive Directorof Care Capital, a specialist US healthcare investment fund, and isNon-Executive Chairman of a number of pharmaceutical and healthcare companies,of which the largest is Human Genome Sciences, Inc. Dr Karabelas has been aNon-Executive Director of SkyePharma since 2000 and his familiarity with theCompany's business enables him to make an immediate and positive contribution asChairman. On 6 February 2006 SkyePharma announced that it had appointed a new seniormanagement team comprising Frank Condella as Chief Executive and Dr KenCunningham in the newly created post of Chief Operating Officer. This new rolewill focus on ensuring the effective development of SkyePharma's key productssuch as Flutiform(TM). Frank C. Condella Jr. was President of the European operations of IVAX prior toits acquisition by Teva for more than $7 billion in January 2006. He was closelyinvolved with IVAX's respiratory franchise, one of its three core therapeuticareas, including managing the acquisition and integration of 3M's brandedrespiratory business in Europe. Prior to joining IVAX in 2002, he occupiedsenior roles at Faulding Pharmaceuticals, Roche, and the Lederle unit ofAmerican Home Products. Mr Condella is 51 and has a BS Pharm degree and an MBAfrom Northeastern University in Boston. Dr Ken Cunningham was Chief Executive of the privately owned UK biotechnologycompany Arakis, recently acquired by the Japanese company Sosei for $200million. Dr Cunningham has extensive experience in the development ofrespiratory products and the Arakis lead product, a treatment for chronicobstructive pulmonary disease (COPD), was licensed to Novartis in 2005 in a dealworth up to $375 million. Prior to his appointment to the Arakis role in 2002,he was Vice President, European Affairs for Alza and before that was VicePresident for Clinical Development for Sequus Pharmaceuticals. Prior to that heheld a variety of clinical development and commercial strategy positions inGlaxo Wellcome and Warner-Lambert. Dr Cunningham, who is 53, qualified from StMary's Medical School, London University. Both Mr Condella and Dr Cunningham have considerable drug delivery experience,which the Board believes is an essential attribute in making an immediate andpositive contribution at SkyePharma and working effectively for the Company'sfuture. The Board does not believe that it is appropriate to subject its newexecutives to a vote prior to their joining the Company and being able to beginto make a contribution to the execution of the new strategy outlined below.However, it is envisaged that they will both join the Board before the nextAnnual General Meeting ("AGM") in June 2006 when shareholders will have ampleopportunity to assess their skills. Board structure Michael Ashton, Chief Executive of SkyePharma, announced in September last yearthat it was his intention to retire in 2006 on reaching the age of 60. MichaelAshton will continue to act as SkyePharma's Chief Executive until 1 March, whenFrank Condella can take up his appointment, and in order to facilitate thehandover process will remain on the Board as a Non-Executive Director until thenext AGM in June 2006. During 2005 Ian Gowrie-Smith, the Company's then Non-Executive Chairman,indicated to the Board his intention to stand down when a suitable replacementcould be identified. Mr Gowrie-Smith subsequently announced his resignation asNon-Executive Chairman on 23 January 2006 and his intention not to stand forre-election as a Non-Executive Director at the June 2006 AGM. With the EGMpending, Mr Gowrie-Smith decided in the interests of all shareholders to bringforward his resignation and resigned as a Director on 13 February. Theappointment of Dr Jerry Karabelas as Non-Executive Chairman was announced on 2February. Dr Karabelas has been a Non-Executive Director of SkyePharma since2000. In addition to Michael Ashton, two other Non-Executive Directors, Sir MichaelBeavis and Dr Keith Mansford, will be retiring this year and therefore will notbe standing for re-election at the Annual General Meeting in June. TheNominations Committee of the Board has therefore initiated the process offinding candidates for these posts. As part of this process, the NominationsCommittee has already met with Mr Thian and raised with him the possibility ofhis appointment as a Non-Executive Director, but he rejected that option makingit clear that his desire and that of his backers was solely to take on the roleof Executive Chairman. Based on the recommendations of the Nominations Committeeand after full consultation with shareholders in accordance with best practiceprocedures it is the intention of the Board to appoint two or more newNon-Executive Directors as soon as practicable. New strategy On 2 February the Company announced the outcome of its Strategic Review. TheBoard concluded that in the interests of returning the Company to sustainableprofitability in the shortest possible time, SkyePharma should concentrate onoral and pulmonary products and divest its injectable business interests, forwhich a number of potential purchasers were identified during the StrategicReview. The proposed divestment (which the Board expects to be subject toapproval by shareholders) would not only release cash but also relieve theCompany of a significant cash burn and future capital expenditure. The Boardbelieves that the residual business would be able to achieve sustainableprofitability within a reasonable timeframe. Furthermore, with greater resourcesthe Company would be in a better position to further develop its pipeline ofproprietary products, obtain more favourable financial terms from licensingpartners (for example by retaining co-promotion rights) and ultimately aim toadd a niche sales and marketing capability that would not only improve theprofitability of its current and pipeline products but also give it greatercontrol over their revenues. The injectables business, primarily located in San Diego, consists of twomarketed products, DepoCyt(R) for a complication of cancer and Depodur(R) forthe treatment of post-surgical pain, and a pipeline of projects in variousstages of development. These include controlled-release injectable formulationsof a number of biological products and DepoBupivacaine(TM), a long-actinginjectable formulation of the local anaesthetic bupivacaine for the control ofpost-operative pain. DepoBupivacaine(TM) has completed Phase II development andwill commence Phase III trials shortly. It has been licensed to Mundipharma forall territories outside North America and Japan and to Maruho for Japan. Inaddition, the Company has successfully formulated seven different proteinsincluding major commercial products such as G-CSF, EPO, IFN-(alpha) and IFN-(beta). It is anticipated that several of these products will enter Phase Itrials in 2007. The Board remains convinced that DepoBupivacaine(TM) addressesan important area of unmet medical need and has major commercial potential.However the Board is conscious of the fact that a substantial investment inclinical development would be required to maximise the potential ofDepoBupivacaine(TM) and of the protein pipeline. This development investment,together with the associated investment in manufacturing capacity, would notonly place a significant burden on the Company's current resources but alsoimpact the Company's profitability for several years. The Board believes that the injectables business is a valuable asset and thefunds raised by its divestment will be available to enhance the core oral andpulmonary business, including accelerating the development of certain pipelineproducts whose development has had to be delayed in recent years. Several ofthese products, albeit at an early stage of development, address importanttherapeutic areas such as gastrointestinal, diabetes and hypertension. Theresidual core business will consist of the oral and pulmonary products business,with development based in Muttenz, Switzerland and manufacture in Muttenz and inLyon, France. There are seven marketed oral and pulmonary products, includingPaxil CR(TM), Xatral(TM) OD and Triglide(TM), and a number of late-stageproducts that are close to the market. The pipeline includes SkyePharma's mostimportant project Flutiform(TM), a combination asthma product. The Board isconvinced that Flutiform(TM) has substantial value as it is poised to enter alarge and rapidly growing market with currently limited competition. The globalmarket for combination therapies for asthma was worth over $5 billion in 2005and is expected to exceed $10 billion by 2010. Combination therapies arecurrently the fastest growing component of the asthma market and by 2010 areprojected to account for over half of the total market. There is an additionalsubstantial market for these combination products in the treatment of COPD.Despite the eventual likelihood of additional entrants, both proprietary andgeneric, the Board believes that these competing products are unlikely to enterthe United States market before 2012 at the earliest, and therefore there is anopportunity to establish Flutiform(TM) as "best in class" combination therapy onthe United States market. The Company is just about to initiate Phase III trialsfor Flutiform(TM), on track for its target of filing with the FDA in 2007 andUnited States market entry in 2009. In addition, subject to the financial termsoffered for the injectable business, the Company may seek to retain certainrights in respect of DepoBupivacaine(TM). Background to the EGM In September 2005 the Company conducted a Rights Issue to raise the funds neededto take it's lead pipeline product, Flutiform(TM), through Phase III developmentitself rather than rely on funding by a partner. Michael Ashton, the Company'sChief Executive, also announced his intention to retire in 2006 on reaching theage of 60. The news that the Company had not yet secured a marketing partner forFlutiform(TM) coupled with the terms of the Rights Issue, which was on a deeplydiscounted basis, led to a sharp drop in the Company's share price. Although theshare price subsequently recovered, in November 2005 a group of the Company'smore recent shareholders, led by North Atlantic Value LLP ("the NAV group"),registered their criticism of the Company and their intention to seek to dismissthe Company's then Chairman, Ian Gowrie-Smith, and replace him, in an Executivecapacity, with Robert Thian, currently Chairman of Whatman plc, Southern WaterServices Ltd and Southern Water Capital Ltd. On 14 November 2005 the Company announced that it had received an unsolicitedapproach from a third party. The Board therefore decided to review all of itsstrategic options, including inter alia offers for the Company as a whole. TheBoard appointed Lehman Brothers as sole financial adviser to undertake thisreview. On 23 January 2006 Ian Gowrie-Smith announced his resignation as Non-ExecutiveChairman of the Company and that it was his intention not to stand forre-election as a Director of the Company at SkyePharma's 2006 Annual GeneralMeeting. On 13 February 2006 Mr Gowrie-Smith announced that he would bring this forwardand resign as a Director with immediate effect. Mr Gowrie-Smith, who foundedSkyePharma in 1996, stepped down from the role of Executive Chairman to aNon-Executive Chairmanship in 2004. It had been Mr Gowrie-Smith's intentionsince early 2005 to continue this process by resigning at an appropriate time,both as Chairman and as a Director. On 27 January 2006 the NAV group filed formal notice requisitioning an EGMseeking to dismiss Ian Gowrie-Smith and to appoint Mr Thian as a Director. Thestated intention of the NAV group in seeking Mr Thian's election as Director isto bring pressure on the Board to appoint him as Executive Chairman. Under UKcompany law an EGM must be held if requisitioned by members holding at least 10%of the issued share capital. The NAV group comprises Morley Fund Management andInsight Investment Management as well as North Atlantic Value LLP (part of the JO Hambro Capital Management Group) and represented 14.2% of SkyePharma's issuedshare capital at the time of the requisition. The vast majority of theshareholdings held by the NAV group have been acquired in the last nine months. Corporate governance The letter from the NAV group makes reference to "significant long termcorporate governance issues which have not been and are not being addressed bythe current Board" but significantly, in the view of the Board, makes no attemptto identify what exactly these issues may be. SkyePharma maintains the highest standards of Corporate Governance and rejectsany suggestion to the contrary. The resolutions proposed by the NAV group: You will find below a list of the resolutions proposed by the NAV group and anexplanation of why the Board of SkyePharma unanimously believes thatshareholders should vote AGAINST Resolution 1. The NAV group initially proposed to remove Ian Gowrie-Smith from the Board. MrGowrie-Smith, the Company's founder, stepped down as Executive Chairman tobecome Non-Executive Chairman in 2004. Continuing this process, he resigned asNon-Executive Chairman in January 2006 and has now also resigned as aNon-Executive Director. Dr Jerry Karabelas was appointed as Non-ExecutiveChairman in February 2006. As a resolution to remove Mr Gowrie-Smith as a Director of SkyePharma isentirely redundant the meeting will not need to consider any such proposal. Resolution 1. To appoint Robert Thian, who has confirmed his willingness to act,as a Director of the Company with immediate effect in the place of IanGowrie-Smith to hold office only during such time as Ian Gowrie-Smith would haveheld office if he had not retired Dr Karabelas, Mr Condella and Dr Cunningham are poised to implement the newstrategy outlined on page 5 above. This strategy has been set by the Board andthe Board believes will accelerate the Company's return to profitability whilecontinuing to maximise the value to shareholders of its pipeline. Dr Karabelas'familiarity with SkyePharma as Non-Executive Director since 2000 and hisknowledge of the pharmaceutical industry are also expected to facilitate rapidexecution of this plan. The Board is firmly of the opinion that to be of maximum benefit to the Company,the Chairman should have recent relevant experience of the therapeutic areas inwhich SkyePharma operates. This is particularly relevant when the Company isproposing to divest a significant asset, its injectables business, and isadopting a new strategy to drive for sustainable profitability in the shortestreasonable time. Dr Karabelas, who has had senior roles at two majorpharmaceutical companies as Chief Executive of Novartis Pharma and President ofNorth American operations for Smith Kline Beecham, satisfies this requirement. The minority NAV group shareholders are proposing that Mr Thian should beelected as a Director. The Board has been informed by this minority group,representing only a little over 14% of the issued share capital, that this wouldbe as a prerequisite to his subsequent appointment as Executive Chairman of theCompany. If the resolution to elect Mr Thian as a Director is passed, this wouldnot confer on him any executive responsibility, but would serve to increase thepressure on the Board to accede to the demands of a self-serving minority groupof shareholders who would be intent on disrupting the implementation of the newstrategy of the Board outlined on page 5 to satisfy their own agenda. The Nominations Committee of the Board has already met with Mr Thian and thepossibility of his joining the Board solely as a Non-Executive Director wasraised but Mr Thian informed the Nominations Committee that he had no interestin Non-Executive posts. The Board therefore assumes that Mr Thian's statedwillingness to act as a director extends only to taking on an executive role.The Board has no intention of being railroaded into making any such appointment,which it would see as inimical to the implementation of its new strategy andcontrary to the principles of sound corporate governance and management. It alsohas strong reservations as to whether Mr Thian would be independent as suggestedby the NAV group as it appears to the Board that Mr Thian would represent theinterests of that minority group and act to satisfy their own objectives ratherthan for the best interests of shareholders as a whole. Accordingly, toimplement its new strategy and for the reasons stated in this document the Boardconfirms that, in the event that he is elected as a director pursuant to thisresolution, Mr Thian will not be given any executive position on the Board. The appointment of Dr Jerry Karabelas as Non-Executive Chairman of SkyePharmawas announced on 2 February 2006 and the Board has every confidence in himfulfilling this role for the benefit of all shareholders. The Board sees no rationale for this resolution and strongly urges shareholdersto vote AGAINST it. Resolution 2. To remove any other person other than Robert Thian appointed as aDirector of the Company between the date of the requisition of the Meeting (27January 2006) and the date of the meeting (9 March 2006) in accordance withSection 303 of the Companies Act 1985. This second resolution will be redundant as no Director will be appointed to theBoard in this period. The Company has recently appointed a new Chief Executive, Frank Condella Jr.,and a new Chief Operating Officer, Dr Ken Cunningham. The Board does not believethat it would be appropriate to subject its new executives to a vote asDirectors prior to their joining the Company and being able to begin to make acontribution to the execution of the strategy. However, it is the Board'sintention to appoint its two new senior executives to the Board shortly afterthe EGM and ask shareholders to confirm such appointments at the next AGM in2006 when shareholders will have had an opportunity to assess their skills. As no Director has been or will be appointed to the Board in this period thisresolution is redundant and will not be put to the meeting. For further information please contact: SkyePharma PLC Michael Ashton, Chief Executive +44 207 491 1777Peter Laing, Director of Corporate Communications +44 207 491 5124Sandra Haughton, US Investor Relations +1 212 753 5780 Buchanan Communications +44 207 466 5000Tim Anderson / Mark Court Notes for editors About SkyePharma SkyePharma PLC develops pharmaceutical products benefiting from world-leadingdrug delivery technologies that provide easier-to-use and more effective drugformulations. There are now eleven approved products incorporating SkyePharma'stechnologies in the areas of oral, injectable, inhaled and topical delivery,supported by advanced solubilisation capabilities. For more information, visitwww.skyepharma.com. Certain statements in this news release are forward-looking statements and aremade in reliance on the safe harbour provisions of the U.S. Private SecuritiesLitigation Act of 1995. Although SkyePharma believes that the expectationsreflected in these forward-looking statements are reasonable, it can give noassurance that these expectations will materialize. Because the expectations aresubject to risks and uncertainties, actual results may vary significantly fromthose expressed or implied by the forward-looking statements based upon a numberof factors, which are described in SkyePharma's 20-F and other documents on filewith the SEC. Factors that could cause differences between actual results andthose implied by the forward-looking statements contained in this news releaseinclude, without limitation, risks related to the development of new products,risks related to obtaining and maintaining regulatory approval for existing, newor expanded indications of existing and new products, risks related toSkyePharma's ability to manufacture products on a large scale or at all, risksrelated to SkyePharma's and its marketing partners' ability to market productson a large scale to maintain or expand market share in the face of changes incustomer requirements, competition and technological change, risks related toregulatory compliance, the risk of product liability claims, risks related tothe ownership and use of intellectual property, and risks related toSkyePharma's ability to manage growth. SkyePharma undertakes no obligation torevise or update any such forward-looking statement to reflect events orcircumstances after the date of this release. This information is provided by RNS The company news service from the London Stock Exchange