1 Sep 2008 18:33
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN, INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA, HONG KONG, NEW ZEALAND AND JAPAN, OR INTO ANY OTHER JURISDICTION WHERE THE EXTENSION OR AVAILABILITY OF THE PLACING AND OPEN OFFER WOULD BREACH ANY APPLICABLE LAW
SKYEPHARMA PLC
Proposed Amendments to Convertible Bonds and £18.4 million (net) Underwritten Placing and Open Offer Completes Corporate Refinancing
1 September 2008 - SkyePharma PLC ("SkyePharma" or the "Company"), announces today proposals for renegotiated terms for the 2024 and 2025 convertible bonds, extending put dates to 2013 and 2014 respectively and resetting the conversion price, a related fully underwritten Placing and Open Offer of 1,401,780,736 New Ordinary Shares to raise £18.4 million (net of expenses), and a Share Capital Reorganisation. The New Ordinary Shares have been placed by Credit Suisse and Piper Jaffray, the Company's brokers, with a range of existing and new institutional and strategic investors.
A shareholder circular (which is also a prospectus) being issued by the Company and containing details of the Placing and Open Offer and Share Capital Reorganisation is expected to be posted to Shareholders shortly. Shareholders in the United States will not receive a prospectus but will instead receive a circular containing a Notice of General Meeting.
Summary
Negotiated agreement with majority of bondholders on changes in terms and conditions of the 2024 and 2025 bonds. The proposals have already been agreed by 69.9% of the 2024 bondholders and 100% of the 2025 bondholders and are to:
Fully underwritten Placing and Open Offer to raise approximately £18.4 million (net of expenses)
Conditional placing of 1,401,780,736 New Ordinary Shares at a price of 1.5 pence per share (subject to the effect of the Share Capital Reorganisation), subject to clawback under the Open Offer
Open Offer to Qualifying Shareholders on the basis of 172 New Ordinary Shares for every 100 Existing Ordinary Shares
Placing and Open Offer fully underwritten by Credit Suisse and Piper Jaffray
All SkyePharma Directors are taking up their entitlements under the Open Offer and are also taking up Placing shares, investing in aggregate up to £140,496
Qualifying Shareholders are entitled to take up shares in the Open Offer pro-rata to their existing holdings
The funds will be used to provide working capital to enhance the Company's core oral and inhalation business and to meet the expenses of the Bond Proposals and the Placing and Open Offer
The Bondholder Resolutions are subject, in the case of the 2024 Bonds, to the approval of bondholders at a meeting scheduled for 10.00 am on 25 September 2008 and, in each case, are subject to the Resolutions being approved
The Placing and Open Offer is subject to the passing of certain Shareholder Resolutions to be considered at the General Meeting to be held at the offices of Fasken Martineau Stringer Saul LLP, 17 Hanover Square, London W1S 1HU on 19 September 2008 at 11.00 am and the Bondholder Resolutions being approved by the Bondholders
Share Capital Reorganisation by way of subdivision and consolidation of Existing Ordinary Shares resulting in existing shareholders receiving 1 New Consolidated Ordinary Share for every 100 Existing Ordinary Shares
Ken Cunningham, previously SkyePharma's Chief Operating Officer, becomes Chief Executive. Frank Condella, current CEO, to become Non-Executive Director, as indicated in 21 May 2008 announcement
Dr Ken Cunningham, CEO of SkyePharma, commented: "We are delighted to announce the successful renegotiation of the convertible bonds and related fundraising. This completes the corporate refinancing of SkyePharma which began shortly after the new team joined in 2006. We are grateful to our existing investors for their patience and support during this period, as well as to new investors for their participation in today's fundraising. SkyePharma is now in a position to move forward and create value for shareholders. We are excited about the prospects for growth, with Flutiform™ close to filing in both the US and Europe and our portfolio of other marketed and pipeline products making strong progress."
"On behalf of the Board, I would also like to pay tribute to Frank Condella who has led the Company through this restructuring period and stands down from his position as Chief Executive today. We congratulate him on his achievements at SkyePharma and are delighted that he has agreed to remain on the Board as a Non-Executive Director of the Company."
Enquiries
| SkyePharma PLC | +44 (0) 207 491 1777 |
| Dr Ken Cunningham/Peter Grant | |
| Financial Dynamics | +44 (0) 207 831 3113 |
| David Yates/Ben Atwell | |
| Credit Suisse Securities (Europe) Limited | +44 (0) 207 888 8888 |
| George Maddison/Stephanie Leouzon/Antony Isaacs/Chris Byrne | |
| Piper Jaffray Ltd | +44 (0) 20 3142 8700 |
| Neil Mackison /James Steel/Jamie Adams |
Credit Suisse Securities (Europe) Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting for the Company as sponsor, financial advisor, joint broker and joint underwriter in connection with the Placing and Open Offer and not for any other person and will not be responsible to any other person for providing the protections afforded to its customers or for providing advice in relation to the Placing and Open Offer, the contents of the Prospectus and, if relevant, the accompanying documents or any arrangements referred to therein.
Piper Jaffray Ltd, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting for the Company as joint broker and joint underwriter in connection with the Placing and Open Offer and not for any other person and will not be responsible to any other person for providing the protections afforded to its customers or for providing advice in relation to the Placing and Open Offer, the contents of the Prospectus and, if relevant, the accompanying documents or any arrangements referred to therein.
This press announcement has been issued by SkyePharma PLC and is the sole responsibility of SkyePharma PLC.
THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS AND INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY ORDINARY SHARES REFERRED TO IN THIS ANNOUNCEMENT EXCEPT ON THE BASIS OF INFORMATION IN THE PROSPECTUS TO BE PUBLISHED BY THE COMPANY IN CONNECTION WITH THE PROPOSED PLACING AND OPEN OFFER. COPIES OF THE PROSPECTUS WILL, FOLLOWING PUBLICATION, BE AVAILABLE FROM THE COMPANY'S REGISTERED OFFICE.
This announcement and the information contained herein is not an offer of securities for sale or a solicitation to buy any securities in the United States (including its territories and possessions, any State of the United States and the District of Columbia). The securities discussed herein have not been and will not be registered under the US Securities Act of 1933 (the "US Securities Act"), and may not be offered or sold in the United States absent registration or an exemption from registration under the US Securities Act. No public offering of the securities discussed herein is being made in the United States. The securities discussed herein have not been, nor will they be, registered under the applicable securities laws of Australia, Canada, Hong Kong, New Zealand or Japan.
This announcement is not for distribution directly or indirectly in or into the United States, Canada, Australia, Hong Kong, New Zealand or Japan.
This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities. Any purchase of, or application for, the New Ordinary Shares should be made only on the basis of information contained in the Prospectus to be sent to Qualifying Shareholders shortly and any supplement thereto. The offer and the distribution of this announcement and other information in connection with the listing and offer in certain jurisdictions may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.
This announcement does not constitute the solicitation of any vote or approval in any jurisdiction.
This document is issued by SkyePharma and approved solely for the purposes of Section 21(2)(b) of the Financial Services and Markets Act 2000 by Credit Suisse Securities (Europe) Limited and Piper Jaffray Ltd.
Any person (including without limitation, custodians, nominees and trustees), who may have a contractual or legal obligation or may otherwise intend to forward this announcement and any accompanying documents to any jurisdiction outside the UK should seek appropriate advice before taking any action. No one (including custodians, nominees and trustees) should send, issue, mail or in any way distribute, either through CREST or otherwise, this announcement, the Prospectus, the Application Form, the Form of Proxy or any other document connected with the Placing and Open Offer in or into the United States. Subject to certain exceptions, you should not send, issue, mail or in any way distribute, either through CREST or otherwise, this announcement, the Prospectus, the Application Form, the Form of Proxy or any other document connected with the Placing and Open Offer in or into Australia, Canada, Hong Kong, New Zealand or Japan.
Prices and values of, and income from, shares may go down as well as up and an investor may not get back the amount invested. It should be noted that past performance is no guide to future performance. The contents of this announcement should not be construed as legal, business or tax advice. Each prospective investor should consult his, her or its own independent legal adviser, financial adviser or tax adviser for advice. None of SkyePharma, Credit Suisse Securities (Europe) Limited and Piper Jaffray Ltd or any of their respective representatives is making any representation to any offeree or purchaser of the New Ordinary Shares regarding the legality of an investment in the New Ordinary Shares by such offeree or purchaser or acquirer under the laws applicable to such offeree or purchaser or acquirer.
No representation or warranty, express or implied, is made by Credit Suisse Securities (Europe) Limited and Piper Jaffray Ltd as to the accuracy, completeness or verification of the information set forth in this announcement, and nothing contained in this announcement is, or shall be relied upon, as a promise or representation in this respect, whether as to the past or the future. Credit Suisse Securities (Europe) Limited and Piper Jaffray Ltd do not assume any responsibility for its accuracy, completeness or verification and accordingly disclaim, to the fullest extent permitted by applicable law, any and all liability whether arising in tort, contract or otherwise which they might otherwise be found to have in respect of this announcement.
The delivery of this announcement shall not, under any circumstances, create any implication that there has been no change in the affairs of the Group since the date of this announcement nor that the information in it is correct as of any subsequent time.
This announcement may contain forward-looking statements that reflect the Group's current expectations regarding future events, including the clinical development and regulatory clearance of the Group's products, the Group's ability to find partners for the development and commercialisation of its products, the Group's liquidity and results of operations, as well as the Group's future capital raising activities. Forward-looking statements involve risks and uncertainties. Actual events could differ materially from those projected herein and depend on a number of factors, including the success of the Group's research strategies, the applicability of the discoveries made therein, the successful and timely completion of clinical studies, the uncertainties related to the regulatory process, the ability of the Group to identify and agree beneficial terms with suitable partners for the commercialisation and/or development of its products, the acceptance of the Group's products by consumers and medical professionals, and the ability of the Group to identify and consummate suitable strategic and business combination transactions.
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN, INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA, HONG KONG, NEW ZEALAND AND JAPAN, OR INTO ANY OTHER JURISDICTION WHERE THE EXTENSION OR AVAILABILITY OF THE PLACING AND OPEN OFFER WOULD BREACH ANY APPLICABLE LAW.
SKYEPHARMA PLC
Placing and Open Offer of 1,401,780,736 New Ordinary Shares, at 1.5 pence per New Ordinary Share (subject to the effect of the Share Capital Reorganisation) and restructuring of the Convertible Bonds
Introduction
SkyePharma announces today that it proposes to raise approximately £18.4 million (net of expenses) by means of a fully underwritten Placing and Open Offer of 1,401,780,736 New Ordinary Shares, at 1.5 pence per New Ordinary Share (subject to the effect of the Share Capital Reorganisation). The New Ordinary Shares are being offered to Qualifying Shareholders only (being SkyePharma Shareholders on the register of members at the Record Date other than SkyePharma Shareholders who are located in or have registered addresses in the United States, Australia, Canada, Hong Kong, Japan, New Zealand and holders of ADRs (including the ADR depositary and its nominee or custodian), pursuant to the Open Offer on the following basis:
172 New Ordinary Shares for every 100 Existing Ordinary Shares
held at the close of business on 27 August 2008 and so in proportion for any other number of Ordinary Shares then held.
As it is not possible as a matter of UK company law to issue shares at a discount to their nominal value, the Company is required to implement the Share Capital Reorganisation prior to the completion of the Placing and Open Offer. As further described below, in addition to reducing the nominal value of the Existing Ordinary Shares and the New Ordinary Shares, the Share Capital Reorganisation will result in a consolidation in order to create a higher trading price per Ordinary Share and thus reduce the share price volatility that results from a lower absolute share price. Although this will reduce the number of shares you hold, it will not, by itself, affect the market value of your holding. Under the Share Capital Reorganisation, Shareholders will receive 1 Consolidated New Ordinary Share for every 100 New Ordinary Shares proposed to be held and will, in fact, pay 150 pence per Consolidated New Ordinary Share rather than 1.5 pence per New Ordinary Share.
The Issue Price of 1.5 pence per New Ordinary Share represents a 62.50 per cent. discount to the Closing Price of an Existing Ordinary Share of 4 pence on 29 August 2008 (being the last business day prior to the publication of the Prospectus) and a 73.91 per cent. discount to the Closing Price of an Existing Ordinary Share of 5.75 pence on 1 September 2008 (being the Closing Price earlier today).
Credit Suisse and Piper Jaffray have placed 1,401,780,736 New Ordinary Shares (subject to the effect of the Share Capital Reorganisation) pursuant to the Placing (including the Directors' Shares) and Open Offer subject to clawback to satisfy valid applications by Qualifying Shareholders under the Open Offer. The Placing includes New Ordinary Shares and Convertible Non-Voting Shares which will be conditionally placed with HBM. Where there is sufficient take up of the Open Offer, the clawback from HBM's placing commitment will operate to reduce the number of Convertible Non-Voting Shares before reducing the number of New Ordinary that are conditionally placed with HBM.
Credit Suisse and Piper Jaffray have agreed, as agents for the Company, to make the Open Offer in relation to 1,401,780,736 New Ordinary Shares to Qualifying Shareholders at the Issue Price.
The issue of the New Ordinary Shares under the Placing and Open Offer has been fully underwritten by Credit Suisse and Piper Jaffray, subject to certain conditions as set out in the Placing Agreement, further details of which are set out in paragraph 22 of Part 8 of the Prospectus.
The Directors, who in aggregate hold 1,809,349 Ordinary Shares representing approximately 0.22 per cent. of the existing issued ordinary share capital of the Company, have irrevocably undertaken to take up their entitlements in full in respect of an aggregate of 3,112,080 New Ordinary Shares (of aggregate value £46,678.50) and have also agreed to subscribe for New Ordinary Shares up to a value of £93,817.50 (being the Director's Shares) under the Placing, subject to clawback to satisfy valid applications under the Open Offer. In addition, HBM has agreed conditionally to subscribe for New Ordinary Shares and Convertible Non-Voting Shares with a value of £11.4 million under the Placing, subject to clawback to satisfy valid applications under the Open Offer. The issue of New Ordinary Shares and Convertible Non-Voting Shares to HBM under the Placing is subject to the approval of the Shareholders.
In conjunction with, and interconditionally with, the Placing and Open Offer, SkyePharma (Jersey) Limited is proposing to make certain changes to the 2024 Bond Terms and Conditions and the 2025 Bond Terms and Conditions.
The Bond Proposals involve:
(i) the 2024 Bond Amendments - certain changes to the 2024 Bond Terms and Conditions to effect (a) the amendment of the conversion price from 95 pence per Initial Ordinary Share to 371 pence per Ordinary Share (with a nominal value of £1.00), being equivalent to 3.71 pence per Initial Ordinary Share and reflecting, amongst other things, the effect of the Share Capital Reorganisation and (b) the replacement of the put dates falling on 4 May 2009, 4 May 2011, 4 May 2014 and 4 May 2019 with put dates falling on 4 November 2013, 4 November 2015, 4 November 2017 and 4 November 2020; and
(ii) the 2025 Bond Amendments - certain changes to the 2025 Bond Terms and Conditions to effect (a) the amendment of the conversion price from 58 pence per Initial Ordinary Share to 382 pence Ordinary Share (with a nominal value of £1.00), being equivalent to 3.82 pence per Initial Ordinary Share and reflecting, amongst other things, the effect of the Share Capital Reorganisation and (b) the replacement of the put dates falling on 3 June 2010, 3 June 2012, 3 June 2015 and 3 June 2020 with put dates falling on 3 December 2014, 3 December 2016, 3 December 2018 and 3 December 2021.
A meeting of the 2024 Bondholders has been convened on 25 September 2008 at which resolutions to approve the 2024 Bond Amendments will be proposed.
Irrevocable undertakings have been received from holders of 69.9 per cent. of the outstanding 2024 Bonds to vote in favour of the 2024 Bond Resolution. If holders of 75 per cent. or more in principal amount of the 2024 Bonds are represented at the Bondholder Meeting and not less than 75 per cent. of the votes cast are in favour of the 2024 Bond Resolution, the 2024 Bond Resolution will be passed on the first call. In the event that the Bondholder Meeting is not quorate on the first call, it will be adjourned for not less than 14 days and not more than 42 days. In order for the Bondholder Meeting to be quorate at an adjourned meeting, holders of not less than 25 per cent. in principal amount of the 2024 Bonds should be represented at the adjourned Bondholder Meeting. The 2024 Bond Resolution will be passed at an adjourned Bondholder Meeting if not less than 75 per cent. of the votes cast are cast in favour of the 2024 Bond Resolution.
The 2025 Bond Amendments are expected to be implemented by way of written resolution. Irrevocable undertakings have been received from holders of 100 per cent. of the outstanding 2025 Bonds to sign the 2025 Bond Resolution. The 2024 Bond Resolution will be conditional on the 2025 Bond Resolution being passed and vice versa.
The Placing and Open Offer is conditional upon the Bond Resolutions being passed. The Bond Resolutions are conditional upon the Resolutions being passed at the General Meeting and will not be effective until receipt by the Company of the proceeds of the Placing and Open Offer. The Bond Proposals are, inter alia, conditional upon Resolution 7 being passed at the General Meeting to approve the issue of Ordinary Shares arising upon conversion of Convertible Bonds taking the Bond Amendments into account.
Funds raised by the Placing and Open Offer will be used to provide working capital to enhance the core oral and inhalation business and in particular to protect shareholders' interests in Flutiform™ and other pipeline products, to enable the Group to become profitable and deliver long-term value for Shareholders, and to meet the expenses of the Bond Proposals and of the Placing and Open Offer.
The Directors believe that Flutiform™ has substantial value as it is poised to enter a large and rapidly growing market with currently limited competition. Without the proceeds of the Placing and Open Offer an alternative solution will need to be found to refinance or renegotiate the Convertible Bonds well before the earliest put date in May 2009, and there is a risk that Shareholders may not be able to benefit from the substantial prospects for the Company's approved products and development projects, in particular Flutiform™.
Due to its size and level of discount, the issue of New Ordinary Shares in connection with the Placing and Open Offer requires the approval of Shareholders of SkyePharma. The issue of Ordinary Shares upon conversion of the 2024 Bonds and the 2025 Bonds, following the implementation of the Bond Amendments also requires the approval of the Shareholders. Shareholders will find at the end of, and forming part of, the Prospectus a Notice of General Meeting convening a general meeting to be held on 19 September 2008 where Resolutions will be proposed at the General Meeting to authorise the Company to issue New Ordinary Shares and Convertible Non-Voting Shares pursuant to the Placing and Open Offer at the Issue Price and to authorise the issue of Ordinary Shares upon conversion of the 2024 Bonds and the 2025 Bonds in accordance with the Bond Proposals. The Placing and Open Offer is also conditional on the passing of the Bond Resolutions. Furthermore, Shareholders should note that the Resolutions to be proposed at the General Meeting to approve the Placing and Open Offer are conditional on the Resolutions to approve the Share Capital Reorganisation and the Resolution to increase the Company's authorised share capital being approved and accordingly all the resolutions will need to be passed for the Placing and Open Offer to proceed.
In addition, the Company wishes to create a new class of convertible non-voting ordinary shares of £1.00 each which may, as described below, need to be placed with HBM as part of the Placing and Open Offer in order to ensure that HBM's voting rights (together with those of its concert parties) in the capital of the Company remain below 30 per cent. The Convertible Non-Voting Shares will rank pari passu in all respects with the Ordinary Shares of £1.00 each (including as to dividends and rights to return of capital on a winding up) save that the holder(s) of the Convertible Non-Voting Shares, will not be entitled to attend or vote at general meetings of the Company (other than in respect of resolutions to wind up the Company or vary, modify, alter or abrogate any of the rights attaching to the Convertible Non-Voting Shares).
The Convertible Non-Voting Shares will be convertible into Ordinary Shares of £1.00 each (having the rights set out in the Resolutions) on a one-for-one basis and (subject to clause (b) below) the Company will promptly make an application for a listing (on the same market or exchange on which the Ordinary Shares of the Company are then listed) of the ordinary shares arising on conversion: (i) at any time at the option of HBM; or (ii) automatically upon the transfer by HBM of the Convertible Non-Voting Shares to a third party that is not acting in concert with HBM, provided that; (a) immediately following any such conversion, the holder of the Convertible Non-Voting Shares (together with its concert parties) will be interested in shares representing less than 30 per cent. of the voting rights in the capital of the Company; and (b) a notice of conversion shall specify the number of shares to be converted and such conversion shall take effect seven days after service of a valid notice, unless the Company is required to issue a prospectus in connection with the listing of the ordinary shares upon such conversion, when the conversion will only take effect 3 months after the date on which: (A) the notice of conversion is received by the Company; or (B) the transfer of the Convertible Non-Voting Shares takes effect, as applicable, and during that 3-month period the Company will be required to prepare and issue a prospectus in respect of such listing.
Effects of the Transactions on capital structure
The capital structure of the Company will be as follows:
(a) showing the effect of the Placing and Open Offer following the Share Capital Reorganisation:
| Number of Consolidated Ordinary Shares | % Following the Placing and Open Offer | ||
| Existing Ordinary Shares in consolidated form | 8,149,888 | 36.76 | |
| Consolidated New Ordinary Shares relating to the Placing and Open Offer | 14,017,807 | 63.24 | |
| 100.00 |
(b) showing the effect of the Placing and Open Offer, the Share Capital Reorganisation, and assuming the full conversion of Convertible Bonds, taking into account the Bond Proposals:
| Number of Consolidated Ordinary Shares | % Following the Placing and Open Offer | % Assuming full conversion of Bonds | |||
| Existing Ordinary Shares in consolidated form | 8,149,888 | 36.76 | 17.65 | ||
| Consolidated New Ordinary Shares relating to the Placing and Open Offer | 14,017,807 | 63.24 | 30.37 | ||
| 100.00 | |||||
| Consolidated Ordinary Shares arising on conversion of 2024 Bonds | 18,758,490 | 40.64 | |||
| Consolidated Ordinary Shares arising on conversion of 2025 Bonds | 5,235,602 | 11.34 | |||
| 100.00 |
This table has been prepared on the basis that no Convertible Non-Voting Shares are required to be issued. In order to ensure that HBM (together with its concert parties) holds less than 30 per cent. of the voting rights in the capital of the Company, Convertible Non-Voting Shares may be issued to HBM under the Placing. The Company anticipates that, depending on the number of shares taken up under the Open Offer, among other things, the maximum number of Convertible Non-Voting Shares that may be required to be issued to HBM will be approximately 3,000,000. The issue of Convertible Non-Voting Shares will be matched by a corresponding decrease in the number of Consolidated New Ordinary Shares issued. The maximum anticipated number of Convertible Non-Voting Shares would represent 13.38 per cent. of the issued share capital following the Placing and Open Offer and 6.42 per cent. of the issued share capital assuming full conversion of the Bonds.
The purpose of the Prospectus is to provide you with details of the Placing and Open Offer, and to explain why the Directors believe that the Placing and Open Offer is in the best interests of SkyePharma and its Shareholders as a whole. A Form of Proxy, an Application Form for Qualifying non-CREST Shareholders and pre-paid envelope will also be enclosed with the Prospectus.
Further details of the Placing and Open Offer and how Qualifying Shareholders can apply for New Ordinary Shares under the Open Offer are set out in the Chairman's letter in Part 1 of the Prospectus, in the letter from Credit Suisse and Piper Jaffray in Part 2 of the Prospectus and, where relevant, in the Application Form.
The Placing and the Open Offer is conditional, inter alia, upon the Bond Resolutions being approved by the 2024 Bondholders and 2025 Bondholders, and the passing of the Resolutions at the General Meeting to be held at the offices of Fasken Martineau Stringer Saul, 17 Hanover Square London W1S 1HU, on 19 September 2008 at 11.00 am. A notice convening the General Meeting is set out at the end of the Prospectus.
1. Description of SkyePharma
SkyePharma strives to deliver a clinical benefit for patients by using its multiple delivery technologies to create enhanced versions of existing pharmaceutical products as well as products incorporating new chemical entities.
SkyePharma's business model is to apply its proprietary technologies to partners' products under development contracts and also to develop its own products then out-license them for further development and marketing.
The Group has 12 approved products, in the areas of oral, inhalation and topical delivery, as well as a number of products in development. The Group's products are marketed throughout the world by leading and speciality pharmaceutical companies, including GSK, AstraZeneca, sanofi-aventis and Sciele. The Group's approved products are in various stages of their expected patent-protected lives, and range from recently launched products, such as Requip® Once-a-Day, Pulmicort® in Europe and the new formulation of Sular® in the United States, to longer-standing products such as Paxil CR™, Xatral® OD/Uroxatral®, Solaraze® and Triglide®. The product pipeline includes Lodotra™, which the Directors believe should be launched in the near term, together with a number of developments which are at an early stage. Details of products are set out in Part 4 of the Prospectus.
In the first half of 2008, Group revenues totalled £28.4 million, including royalty income of £11.6 million. The pre-exceptional operating loss amounted to £2.2 million after incurring research and development expenditure of £10.6 million, mainly on the development of Flutiform™, which the Directors believe is the Group's most important pipeline product. Expenditure on research and development is expected to reduce as the core clinical programme for the development of Flutiform™ reaches a conclusion and the Directors expect costs to be further offset, in the medium term, by following a strategy of developing products in collaboration with third parties.
The Group's manufacturing facility in Lyon, France, manufactures a number of the Group's products, including Coruno®, diclofenac-ratiopharm®-uno, Triglide®, the new formulation of Sular®, Foradil® Certihaler™ and Lodotra™. Madopar DR® is manufactured at the Group's facility in Muttenz, Switzerland.
Background on Flutiform™
Although the Directors believe that there are reasonable prospects for growth of the business from the approved and pipeline products, the Directors believe that Flutiform™ is the key pipeline product, and potential growth driver. Flutiform™ HFA-MDI is a fixed-dose combination of formoterol and fluticasone in a MDI and is in Phase-III development. The product incorporates a fast onset long-acting beta-agonist (formoterol propionate) with the most commonly prescribed inhaled steroid (fluticasone fumarate) in combination with an environmentally-friendly aerosol propellant (HFA) and is being developed for the treatment of asthma. Flutiform™ is aimed at the market for combination steroid and long-acting beta-agonist inhalers which is forecast to be approximately U.S.$10 billion worldwide by 2010, when the Board expects Flutiform™ to be in the market in both the United States and Europe. The Board has a target of achieving a 10 per cent. market share, as the third entrant to the market in the United States and fourth in the European Union.
Flutiform™ is licensed to Abbott in the United States and to Mundipharma in the rest of the world (apart from Japan and the Americas) and to Kyorin for Japan. Discussions are continuing to outlicense Flutiform™ for Canada and the Board has plans to pursue partnering of the product in Latin America after the NDA has been filed with the FDA.
The development currently comprises four main programmes of work:
Core clinical programme, comprising one safety study and three Phase-III clinical efficacy studies, supported by various Phase-I/II studies which have been completed. The results of the three Phase-III clinical efficacy studies were announced on 30 April 2008, 17 June 2008 and 3 July 2008 respectively and in all cases the results of a top line analysis of the level of improvement in FEV1 (forced expiratory volume in the first second), the primary endpoint measured, showed statistically significant differences in favour of Flutiform™ compared with both fluticasone and formoterol taken alone and, where applicable, showed a statistically significantly lower level of discontinuations due to asthma exacerbations when compared with placebo. The safety study results have been the subject of a scientific poster presented during the American Thoracic Society meeting in Toronto, Canada on 20 May 2008. The author of the poster, Dr. Ekkehard Beck, stated "Study results suggest that long term treatment with Flutiform™ 100/10µg and Flutiform™ 250/10µg will be a safe therapy for patients with persistent asthma." This programme is the responsibility of the Group.
Chemistry, manufacturing and control development, which is the responsibility of the Group.
Additional studies for the United States to support the NDA comprising one clinical efficacy study and some additional Phase I work. Abbott has financial responsibility for this work and for filing the NDA.
Additional clinical programme to support the MAA for Europe, which is being managed by Mundipharma.
In addition, the Group is currently responsible for the supply chain for Flutiform™, but is seeking to transfer the management and some of the risks and responsibilities of the supply chain to a third party.
Abbott is responsible for any additional marketing studies for the United States market and Mundipharma is responsible for marketing studies in Europe and certain other territories. Kyorin is responsible for any clinical studies and regulatory submissions for Japan. The Directors believe that further indications, such as paediatric use and higher dose in the United States, COPD and other potential applications may be developed by Abbott and/or Mundipharma.
The status of the major aspects of the current development programme is as follows:
| Description | Number of subjects* | Responsibility | Status | |
| Description | Number of subjects* | Responsibility | Status | |
| Core clinical programme | ||||
| Safety study (SKY2028-3-003) | Long-term 6/12 month safety study | 472 | SkyePharma | Results announced in November 2007 and presented in detail in a scientific poster presented during the American Thoracic Society meeting in Toronto, Canada in May 2008. Results demonstrated that the drug was well tolerated in the study patients. |
| Efficacy study (SKY2028-3- 002) | Double-blind, 12 week, superiority to single actives in mild to moderate asthma | 357 | SkyePharma | Results announced in April 2008. Primary endpoints were met: the levels of improvement in FEV1 showed statistically significant differences in favour of Flutiform™ compared with both fluticasone and formoterol taken alone. |
| Efficacy study (SKY2028-3-004) | Double-blind, 12 week, placebo-controlled, superiority to single actives, placebo in moderate to severe asthma sufferers | 557 | SkyePharma | Results announced on 17 June 2008. Primary endpoints were met: the levels of improvement in FEV1 showed statistically significant differences in favour of Flutiform™ compared with both fluticasone and formoterol taken alone and showed a statistically significantly lower level of discontinuations due to asthma exacerbations when compared with placebo. |
| Efficacy study (SKY2028-3-001) | Double-blind, 12 week, placebo-controlled, superiority to single actives, placebo in mild to moderate asthma sufferers | 475 | SkyePharma | Results announced on 3 July 2008. Primary endpoints were met :the levels of improvement in FEV1 showed statistically significant differences in favour of Flutiform™ compared with both fluticasone and formoterol taken alone and showed a statistically significantly lower level of discontinuations due to asthma exacerbations when compared with placebo. |
| Chemistry, manufacture and control | Formulation, stability, etc. | N/A | SkyePharma | Work is at an advanced stage to support the United States and EU filings. |
| Additional work for NDA (United States) | ||||
| Efficacy study (SKY2028-3-005) | Double-blind, 12 week, superiority to single active (fluticasone) | 438 | Abbott | Fully recruited and study ongoing. Results expected Q4 2008. |
| HPA axis study (SKY2028-1-003) | Double-blind, 6 week, placebo controlled, effect of Flutiform™ (250/10 and 100/10), prednisone and placebo on the Hypothalmic-Pituitary-Adrenal Axis. With mild to moderate asthma. | 171 | Abbott | Fully recruited. Results expected Q4 2008. |
| Pharmacokinetic study (SKY2028-1-004) | Open-label, multiple-dose exposure study, to compare the pharmacokinetics of fluticasone and formoterol Combination (Flutiform™ 250/10) in a single inhaler (SkyePharma HFA pMDI) with the administration of fluticasone (250µg) alone in healthy male and female subjects. | 36 | SkyePharma | Clinical work completed |
| Clinical work for EMEA (EU) | ||||
| Paediatric study (FLT 3502) | 12 week, open-label, non-inferiority to comparator (Seretide) | 211 | Mundipharma | Results announced on 15 April 2008. Primary endpoints were met: analysis of results showed non-inferiority to Seretide |
| Efficacy study (FLT 3501) | 12-week, open-label, non inferiority to comparator (Seretide) | 182 | Mundipharma | Results announced on 22 July 2008. Primary endpoints were met: analysis of results showed that there was an improvement in lung function from the baseline measurement using FEV1 whilst the performance of Flutiform™ was not statistically inferior to that of Seretide®. |
| Efficacy study (FLT 3505) | 12-week, open-label , non inferiority, comparator to the two active components (fluticasone and formoterol) administered concurrently | 196 | Mundipharma | Results announced on 22 July 2008. Primary endpoints were met: analysis of results showed that Flutiform™ is not inferior compared with the concurrent administration of fluticasone and formoterol. |
| Higher dose strength efficacy study (FLT 3503 ) | 8-week, double-blind, superiority to fluticasone comparator, non-inferiority to the two active components (fluticasone and formoterol) administered concurrently | Over 400 | Mundipharma | Recruitment started August 2008 |
* In studies for the NDA for the USA the number of subjects is the total number actually recruited or planned to be recruited. Not all subjects are expected to complete the studies. In studies for the MAA the number of subjects in completed studies is the total number of subjects which met the requirements for the per protocol analysis.
Abbott has exclusive rights to market Flutiform™, subject to FDA approval, in the United States, and a right of first negotiation for Canada. In addition to the U.S.$25 million (£12.5 million) signing payment already received, the agreement with Abbott provides for SkyePharma to receive time-dependent milestones on acceptance of filing and approval together with up to U.S.$60 million (£30.0 million) sales-related milestones. Based on the current project plan, the milestone receivable on acceptance by the FDA of the NDA is expected to be U.S.$2 million (£1.0 million) and the milestone receivable on approval is expected to be U.S.$37.5 million (£18.8 million) or U.S.$25 million (£12.5 million), depending whether approval is in the second half of 2009 or 2010. The royalty rate on sales in the United States escalates upwards from a Mid Teens percentage. If certain of Abbott's development costs exceed U.S.$20.5 million the excess is recoverable out of up to 25 per cent. of any post-approval milestone and royalty payments until such time as 100 per cent. of the excess is recovered.
Mundipharma has exclusive rights to Flutiform™ in Europe and other territories outside the Americas and Japan. The licensing agreement provides for the Group to earn up to €82 million (£63.1 million) in milestones, of which €15 million (£10.1 million at that time) was paid upfront, up to €12 million (£9.5 million) is earmarked to cover specific development costs, up to €15 million (£11.9 million) is due on launch and up to €40 million (£31.6 million) is sales related. In addition, the Group is entitled to royalties as a percentage escalating upwards from 10 per cent. on net sales. As described above, clinical studies are being conducted in Europe to support regulatory approval in adults (lower and middle strengths) and paediatrics. These European clinical studies are being paid for by Mundipharma, but are part reimbursable by the Group, up to a total of €12 million (£9.5 million), out of the €12 million milestone the balance of which, now agreed at €3 million (£2.4 million), is payable to SkyePharma on the earlier of the completion of the studies or 31 December 2008. In addition, development work is being carried out for Europe on a higher strength version of Flutiform™ funded by Mundipharma and partially reimbursed by the Group through reductions in royalties and sales-related milestones for a limited period of time.
Mundipharma, which is responsible for the clinical programme for Flutiform™ for regulatory approval in Europe, has been reviewing its plans for filing and marketing the product in light of discussions with regulatory authorities and advisers. The previous plan was to file for approval of the lower and middle strengths for use in adults around the end of 2008 and to follow on with a later filing for the higher strength once additional clinical studies had been concluded. Mundipharma recently informed the Company that as a result of discussions with the authorities it has decided to file for all three strengths in one application, and launch them together, rather than having a phased approach. This will have the effect of bringing forward the likely launch timing for the higher dose strength by six to nine months whilst holding back the launch of the low and middle strengths by a similar amount of time. The expected date for filing of the MAA for all three strengths is the third quarter of 2009. The Directors believe that the medium term financial effect of an earlier launch of the higher dose, which is forecast to represent a substantial part of sales, should compensate for the effect of holding back the launch of the lower strengths.
In addition, under new EU regulations, there is a requirement to have an agreed Paediatric Investigation Plan ("PIP"). The recently formed Paediatric Committee ("PDCO") of the European Medicines Agency has reviewed the plans for Flutiform™ and, in a report, has recommended changes to the paediatric development plan. There will be further discussions with the PDCO to agree the PIP. This is likely to result in the requirement for additional work to obtain a paediatric indication in Europe and to mean that the MAA for paediatrics will be filed after the MAA for adults.
In July 2008, the Group entered into an amendment agreement with Mundipharma to make a number of changes to its existing licence agreement. It was agreed (as noted above) that €3 million (£2.4 million) would be paid to the Group as the agreed balance of the €12 million (£9.5 million) milestone due from Mundipharma less the Group's reimbursement to Mundipharma to contribute to the cost of the European clinical studies to support regulatory approval in adults (lower and middle strengths) and paediatrics. SkyePharma and Mundipharma also agreed that in the event that PDCO requests additional work to obtain a paediatric indication SkyePharma would reimburse Mundipharma for half of the cost of this work up to €3.5 million (£2.8 million) through a reduction in launch milestones of the same amount, or payable on 30 June 2011 if the amount has not been reimbursed to Mundipharma by that date. The amendment also allows Mundipharma to develop at its cost and market Flutiform™ with a specific new breath-actuated actuator, which the Directors believe will enhance the sales of the product. Mundipharma will pay SkyePharma royalties escalating upwards from 10 per cent. on net sales of Flutiform™ whether or not incorporating the new actuator, but the rate of escalation of royalties will be reduced from the date of launch of the enhanced device in certain countries to reflect the additional sales potential of the enhanced device and Mundipharma's costs to acquire and develop the actuator. Mundipharma and SkyePharma have agreed to negotiate an agreement for Mundipharma to manufacture and supply or have manufactured and supplied the filled canister for use with the new actuator.
In August 2008 SkyePharma entered into agreements with Abbott and Mundipharma relating to payment terms for the supply of Flutiform™. Coupled with agreed terms of supplier credit these will largely eliminate the need for investment in working capital for the Flutiform™ supply chain.
Kyorin has exclusive rights to market Flutiform™ in Japan. The Board has plans to pursue partnering the product in Latin America after the NDA has been filed with the FDA.
The Board believes that Flutiform™ has a high probability of successful development and if the regulatory process follows normal timelines, it believes that Flutiform™ could be filed for approval in the United States in the first quarter of 2009 and approved and launched in Europe and the United States in 2010.
2 Board
In line with the Board succession plan announced on 21 May 2008, the Board confirms that Frank Condella has stepped down from his position as Chief Executive Officer concurrent with announcing the Transactions and has been replaced by Dr Ken Cunningham, formerly Chief Operating Officer. Frank Condella will remain on the Board and will become a Non-Executive Director on 1 November 2008 following a brief hand-over period.
3 Background to and reasons for the Placing and Open Offer
Strategy
SkyePharma's business strategy is to become one of the world's leading speciality drug delivery companies using its proprietary technologies and competitive capabilities, particularly in the areas of oral and inhalation drug delivery, to produce new formulations of existing pharmaceutical ingredients that meet market needs and provide benefits to patients. Whilst continuing to benefit from existing approved products, the Group aims to enhance its product pipeline by identifying additional candidate products through its own research as well as collaborations with partner companies.
SkyePharma strives to deliver a clinical benefit for patients by using its multiple delivery technologies to create enhanced versions of existing pharmaceutical products as well as products incorporating new chemical entities.
The Board's plan for achieving these objectives includes the following elements:
completion of the development and delivery to market of Flutiform™;
completion of further outlicensing deals including Flutiform™ for Canada and Foradil® Certihaler™ for the United States;
expansion of collaborative partner-funded development programmes;
improvement of the profitability of manufacturing operations; and
drive to profitability through growing revenues and containing costs.
Financing
The Group's total net debt, based on SkyePharma's unaudited accounts as at 30 June 2008 totalled £109.4 million and comprises the following:
| £ millions | |
| Convertible Bonds (at book value) | (65.0) |
| Paul Capital funding liabilities (included at net present value) | (20.0) |
| CRC funding liabilities | (37.7) |
| Property mortgage | (6.9) |
| Bank overdraft and borrowings | (1.3) |
| Finance lease liabilities | (0.1) |
| Total indebtedness | (131.0) |
| Less cash and cash equivalents | 21.6 |
| Net debt | (109.4) |
Including the Convertible Bonds debt at face value of £89.6 million (rather than at the value required by IFRS) net debt was £134.0 million as at 30 June 2008.
Convertible Bonds
The Convertible Bonds comprise £69.6 million 6 per cent. 2024 Bonds and £20.0 million 8 per cent. 2025 Bonds outstanding as at 30 June 2008. At present, the 2024 Bonds may be converted into Ordinary Shares at a 95 pence conversion price, and may be put for repayment by the 2024 Bondholders at par on 4 May 2009, 4 May 2011, 4 May 2014 or 4 May 2019. At present, the 2025 Bonds may be converted into Ordinary Shares at a conversion price of 58 pence per share and may be put for repayment by the 2025 Bondholders at par on 3 June 2010, 3 June 2012, 3 June 2015 or 3 June 2020.
Reasons for the Placing and Open Offer
Given that the SkyePharma share price, which was 4 pence as at 29 August 2008 and has traded at levels of between 2.5 pence and 17.5 pence over the last twelve months, is significantly lower than the conversion price of the 2024 Bonds (95 pence) and given the forecast cashflows of the Company, the Board believes that it is likely that the 2024 Bondholders would require repayment on 4 May 2009 and that, in such circumstance, SkyePharma is unlikely to be able to meet such a demand for repayment from cashflows arising from normal trading activities.
On 26 April 2007, the Board announced that it intended to seek to refinance the Convertible Bonds well before May 2009 in order to ensure that the earliest redemption dates were extended to match more closely the Group's expected cash inflows. Furthermore, on 27 March 2008, the Board announced that it had carried out a detailed appraisal of a number of potential approaches to renegotiate or refinance the Convertible Bonds well before the earliest repayment date of May 2009 under the put options. On 8 July 2008, the Company announced that meetings had been held with a number of existing and potential investors and with certain key Bondholders regarding a specific proposal to refinance the Convertible Bonds, but, although there had been significant support, in the light of the then current capital market conditions the discussions on the specific proposal were not being pursued at that time.
The Directors have continued to appraise a number of potential approaches to renegotiate or refinance the Convertible Bonds in a timely and cost-effective manner, and also a variety of strategic options for the Company. In this appraisal the Directors have had regard to the Group's working capital requirements, including the cash required to service debt obligations and establish the supply chain for Flutiform™, as well as of the likelihood of success of the potential approaches to renegotiating or refinancing the Convertible Bonds. The Directors have also considered general financial and industry market conditions as well as continued progress with the Group's business, especially the development, approval and launch in the United States and Europe of Flutiform™. Based on these considerations, the Board believes that, in these circumstances, the Placing and Open Offer in conjunction with the Bond Proposals provide the most appropriate, cost-effective and timely method of refinancing the Group.
Funds raised by the Placing and Open Offer will be used to provide working capital to enhance the core oral and inhalation business and in particular to protect shareholders' interests in Flutiform™ and other pipeline products, to enable the Group to become profitable and deliver long-term value for Shareholders, and to meet the expenses of the Bond Proposals and of the Placing and Open Offer..
The Directors believe that Flutiform™ has substantial value as it is poised to enter a large and rapidly growing market with currently limited competition. Without the proceeds of the Placing and Open Offer an alternative solution will need to be found to refinance or renegotiate the Convertible Bonds well before the earliest put date in May 2009, and there is a risk that existing Shareholders may not be able to benefit from the substantial prospects for the Company's approved products and development projects, particularly Flutiform™.
The Board believes that the strategy it has now adopted and the measures set out above will protect the interests of all stakeholders and provide the best opportunity to maximise shareholder value and achieve a greater degree of operating and financing flexibility for the Company. The Board therefore believes that the raising of £18.4 million (net of expenses) through the Placing and Open Offer is in the best interests of SkyePharma and its Shareholders as a whole.
4 Details of the Placing and Open Offer
Pursuant to the Placing and Open Offer, Credit Suisse and Piper Jaffray have placed the New Ordinary Shares conditionally with new and existing investors, subject to clawback to satisfy valid applications by Qualifying Shareholders under the Open Offer. New Ordinary Shares and Convertible Non-Voting Shares with a value of £11.4 million have been conditionally placed with HBM and Shareholders are being asked to approve the issue of such New Ordinary Shares and such Convertible Non-Voting Shares to HBM as required by the Listing Rules.
A combination of New Ordinary Shares and Convertible Non-Voting Shares are being conditionally placed with HBM as part of the Placing in order to ensure that HBM's voting rights in the capital of the Company remain below 30 per cent, further details of which are set out below.
Pursuant to the Open Offer, arrangements have been made with Credit Suisse and Piper Jaffray, on behalf of the Company, to invite Qualifying Shareholders to apply to subscribe for 1,401,780,736 New Ordinary Shares at the Issue Price of 1.5 pence per New Ordinary Share (subject to the effect of the Share Capital Reorganisation), on the basis of
172 New Ordinary Shares for every 100 Existing Ordinary Shares
held by such Qualifying Shareholders and registered in their name as at the close of business on the Record Date.
Qualifying Shareholders may apply for any whole number of New Ordinary Shares up to their maximum allocation which, in the case of Qualifying non-CREST Shareholders, is equal to the number of Open Offer Entitlements as shown on their respective Application Form or, in the case of Qualifying CREST Shareholders, is equal to the number of Open Offer Entitlements standing to the credit of their respective stock accounts in CREST. Qualifying Shareholders with holdings of Existing Ordinary Shares in both certificated and uncertificated form will be treated as having separate holdings for the purpose of calculating their entitlements under the Open Offer.
The Issue Price represents a discount of 62.50 per cent. to the middle market price of the Existing Ordinary Shares at the close of business on 29 August (being the last business day before the publication of the Prospectus) and a 73.91 per cent. discount to the Closing Price of an Existing Ordinary Share of 5.75 pence on 1 September 2008 (being the Closing Price earlier today) and therefore approval of Shareholders to the issue of the New Ordinary Shares at the Issue Price is being sought at the General Meeting in accordance with Listing Rules requirements.
In setting the Issue Price the Directors have considered the economic incentive which needed to be given to investors to secure sufficient participation in the Placing and Open Offer to ensure its success and raise very significant equity compared with the current market capitalisation of the Company. Accordingly the Directors believe that both the Issue Price and the discount are reasonable.
New Ordinary Shares representing fractional entitlements will not be allotted to Qualifying Shareholders and, where necessary, entitlements to New Ordinary Shares will be rounded down to the nearest whole number. The New Ordinary Shares will be issued in the form of Consolidated Ordinary Shares following the Share Capital Reorganisation and, when issued and fully paid, will rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends or other distributions made, paid or declared after the date of their issue. Under the Share Capital Reorganisation, Shareholders will receive 1 Consolidated New Ordinary Share for every 100 New Ordinary Shares proposed to be held and will pay 150 pence per Consolidated New Ordinary Share rather than 1.5 pence per New Ordinary Share.
The issue of the New Ordinary Shares under the Placing and Open Offer has been fully underwritten by Credit Suisse and Piper Jaffray, subject to certain conditions set out in the Placing Agreement, further details of which are set out in paragraph 22 of Part 8 of the Prospectus.
Application has been made for the Open Offer Entitlements to be admitted to CREST. It is expected that the Open Offer Entitlements will be admitted to CREST by 4 September 2008. The Open Offer Entitlements for valid market claims only will also be enabled for settlement in CREST on 4 September 2008. No Open Offer Entitlements will be credited to the CREST accounts of CREST Participants who are located in, or have registered addresses in the United States.
For applications under the Open Offer to be valid, in respect of Qualifying non-CREST Shareholders, validly completed Application Form and payment in full must be received by 11.00 am on 24 September 2008. If you are a Qualifying CREST Shareholder the relevant CREST instructions must have matched as explained in the Prospectus by no later than 11.00 am on 24 September 2008. The Placing and Open Offer is conditional upon, inter alia, the passing of the Resolutions at the General Meeting and Admission becoming effective. It is expected that Admission will become effective and dealings in the New Ordinary Shares will commence at 8.00 am on 26 September 2008. The New Ordinary Shares will, when issued and fully paid, rank pari passu in all respects with, and carry the same voting rights as, the Existing Ordinary Shares.
The Placing and Open Offer are subject to a number of other conditions, including the approval of the Bond Resolutions, which are referred to in paragraph 2 of Part 3 of the Prospectus.
HBM is currently interested in 91,800,000 Ordinary Shares (11.26 per cent.) and has agreed conditionally to subscribe for New Ordinary Shares and Convertible Non-Voting Shares with a value of £11.4 million.
The Convertible Non-Voting Shares comprise a new class of convertible non-voting ordinary shares of £1.00 each a number of which will be conditionally placed with HBM as part of the Placing and Open Offer in order to ensure that HBM's voting rights (together with those of its concert parties) in the capital of the Company remain below 30 per cent. If HBM (together with its concert parties) were to hold greater than 30 per cent. of the voting rights in the capital of Company, it could be required to make a mandatory cash offer to all Shareholders in accordance with the Takeover Code. The Convertible Non-Voting Shares will rank pari passu in all respects with the Ordinary Shares of £1.00 each (including as to dividends and rights to return of capital on a winding up) save that the holder(s) of the Convertible Non-Voting Shares, will not be entitled to attend or vote at general meetings of the Company (other than in respect of resolutions to wind up the Company or vary, modify, alter or abrogate any of the rights attaching to the Convertible Non-Voting Shares).
The Convertible Non-Voting Shares will be convertible into Ordinary Shares of £1.00 each (having the rights set out in the Resolutions) on a one-for-one basis and (subject to clause (b) below) the Company will promptly make an application for a listing (on the same market or exchange on which the Ordinary Shares of the Company are then listed) of the ordinary shares arising on conversion: (i) at any time at the option of HBM; or (ii) automatically upon the transfer by HBM of the Convertible Non-Voting Shares to a third party that is not acting in concert with HBM, provided that; (a) immediately following any such conversion, the holder of the Convertible Non-Voting Shares (together with its concert parties) will be interested in shares representing less than 30 per cent. of the voting rights in the capital of the Company; and (b) a notice of conversion shall specify the number of shares to be converted and such conversion shall take effect seven days after service of a valid notice, unless the Company is required to issue a prospectus in connection with the listing of the ordinary shares upon such conversion, when the conversion will only take effect 3 months after the date on which: (A) the notice of conversion is received by the Company; or (B) the transfer of the Convertible Non-Voting Shares takes effect, as applicable, and during that 3-month period the Company will be required to prepare and issue a prospectus in respect of such listing.
Further details of the Placing and Open Offer are set out in the letter from Credit Suisse and Piper Jaffray in Part 2 of the Prospectus and, where relevant, in the accompanying Application Form.
5 Amendments to the Convertible Bonds
The Bond Proposals summarised below and further described in Part 3 of the Prospectus are conditional on the receipt by SkyePharma of the proceeds of the Placing and Open Offer and the implementation of the Share Capital Reorganisation as described elsewhere in the Prospectus.
The Bond Proposals are conditional on the passing of Resolution 7 at the General Meeting as set out in the Notice of General Meeting at the end of the Prospectus.
In conjunction with, and interconditionally with, the Placing and Open Offer SkyePharma (Jersey) Limited is proposing to make certain changes to the 2024 Bond Terms and Conditions and the 2025 Bond Terms and Conditions.
The Bond Proposals involve:
(i) the 2024 Bond Amendments-certain changes to the 2024 Bond Terms and Conditions to effect (a) the amendment of the conversion price from 95 pence per Initial Ordinary Share to 371 pence per Ordinary Share (with a nominal value of £1.00), being equivalent to 3.71 pence per Initial Ordinary Share and reflecting, amongst other things, the effect of the Share Capital Reorganisation and (b) the replacement of the put dates falling on 4 May 2009, 4 May 2011, 4 May 2014 and 4 May 2019 with put dates falling on 4 November 2013, 4 November 2015, 4 November 2017 and 4 November 2020; and
(ii) the 2025 Bond Amendments-certain changes to the 2025 Bond Terms and Conditions to effect (a) the amendment of the conversion price 58 pence per Initial Ordinary Share to 382 pence per Ordinary Share (with a nominal value of £1.00), being equivalent to 3.82 pence per Initial Ordinary Share and reflecting, amongst other things, the effect of the Share Capital Reorganisation and (b) the replacement of the put dates falling on 3 June 2010, 3 June 2012, 3 June 2015 and 3 June 2020 with put dates falling on 3 December 2014, 3 December 2016, 3 December 2018 and 3 December 2021.
A meeting of the 2024 Bondholders has been convened on 25 September 2008 at which resolutions to approve the 2024 Bond Amendments will be proposed.
Irrevocable undertakings have been received from holders of 69.9 per cent. of the outstanding 2024 Bonds to vote in favour of the 2024 Bond Resolution. If holders of 75 per cent. or more in principal amount of the 2024 Bonds are represented at the Bondholder Meeting and not less than 75 per cent. of the votes cast are in favour of the 2024 Bond Resolution, the 2024 Bond Resolution will be passed on the first call. In the event that the Bondholder Meeting is not quorate on the first call, it will be adjourned for not less than 14 days and not more than 42 days. In order for the Bondholder Meeting to be quorate at an adjourned meeting, holders of not less than 25 per cent. in principal amount of the 2024 Bonds should be represented at the adjourned Bondholder Meeting. The 2024 Bond Resolution will be passed at an adjourned Bondholder Meeting if not less than 75 per cent. of the votes cast are cast in favour of the 2024 Bond Resolution.
The 2025 Bond Amendments are expected to be implemented by way of written resolution. Irrevocable undertakings have been received from holders of 100 per cent. of the outstanding 2025 Bonds to sign the 2025 Bond Resolution. The 2024 Bond Resolution will be conditional on the 2025 Bond Resolution being passed and vice versa.
Shareholders will be asked to approve Resolution 7 at the General Meeting to authorise the issue of Ordinary Shares that would arise upon the conversion of the 2024 Bonds and 2025 Bonds following the implementation of the Bond Amendments.
The Placing and Open Offer is conditional upon the Bond Resolutions being passed. The Bond Resolutions are conditional upon the Resolutions being passed at the General Meeting and will not be effective until receipt by the Company of the proceeds of the Placing and Open Offer. The Bond Proposals are, inter alia, conditional upon Resolution 7 being passed at the General Meeting to approve the issue of Ordinary Shares arising upon conversion of Convertible Bonds taking the Bond Amendments into account.
Following the Bond Resolutions becoming effective, the Supplemental Trust Deeds will be executed to implement the Bond Amendments.
6 Share Capital Reorganisation
Share split
The current nominal value of 10 pence of each Existing Ordinary Share exceeds the proposed Issue Price of 1.5 pence for each New Ordinary Share. As a matter of UK company law, it is not possible for the Company to issue shares at less than their nominal value and therefore in order to effect the Placing and Open Offer, it is proposed that the Company's share capital be reorganised as follows:
(1) each of the 814,988,800 Initial Ordinary Shares in issue as at the date of the Prospectus (being the Existing Ordinary Shares) will be subdivided into 1 Interim Ordinary Share and 9 "C" Deferred Shares; and
(2) each of the 373,011,200 Initial Ordinary Shares which, as at the date of the Prospectus, are unissued will be subdivided into 10 Interim Ordinary Shares.
The "C" Deferred Shares so created will have no voting or dividend rights and, on a return of capital, the right only to receive the amount paid up thereon after the holders of Ordinary Shares have received £1 million per ordinary share held by them. Subject to the terms of the following paragraph, the "C" Deferred Shares will not be transferable. The "C" Deferred Shares are, therefore, of no value and all of the value that is currently attributable to the Existing Ordinary Shares will be attributable to the Interim Ordinary Shares in issue following the implementation of the share split. The Company therefore may in due course repurchase all of the "C" Deferred Shares without making any payment to the holders thereof. No application will be made for the "C" Deferred Shares to be listed.
The rights of the "C" Deferred Shares will allow a reduction of capital which cancels the "C" Deferred Shares for no consideration or a transfer of all the "C" Deferred Shares to be executed by a person nominated by the Directors on behalf of the beneficial owners. The purpose of this is either to have the "C" Deferred Shares owned by a single person who will assist the Company as necessary or to facilitate the purchase of such Deferred Shares by the Company. Accordingly, the Directors may nominate the Company Secretary as the person to execute a transfer of all of the "C" Deferred Shares in due course.
The proportion of the issued ordinary share capital of the Company held by each Shareholder following the share split will, save for any fractional entitlements, remain unchanged. Aside from the different nominal value, each Interim Ordinary Share of 1 pence will carry the same rights as set out in the Company's articles of association that currently attach to the Existing Ordinary Shares.
Share consolidation
At the levels at which the Company's shares have traded over recent months (averaging 3 pence over the last 30 days and 4 pence over the last 90 days), small absolute movements in the share price represent large percentage movements, resulting in considerable share price volatility. In addition, the Board believes that the bid-offer spread on shares priced at low absolute levels can be disproportionate to the share price, to the detriment of Shareholders.
In order to ensure that, following the Placing and Open Offer and Subdivision described above, the number of shares in issue and likely share price is appropriate for a company of SkyePharma's size in the UK market, the Board considers it desirable to effect a 1 for 100 share consolidation of the Interim Ordinary Shares as set out below:
(1) every 100 Interim Ordinary Shares in issue following the subdivision of the Initial Ordinary Shares will be consolidated into one Consolidated Ordinary Share; and
(2) every 100 Interim Ordinary Shares not in issue following the subdivision of the Initial Ordinary Shares will be consolidated into one Consolidated Ordinary Share.
In order for the consolidation of the Interim Ordinary Shares referred to in subparagraphs (1) and (2) above to take place, a small number of Initial Ordinary Shares have been issued so that in each case the consolidations proposed in subparagraphs (1) and (2) above will not result in the creation of a fraction of a Consolidated Ordinary Share.
Any individual fractional entitlements arising on the consolidation of the Interim Ordinary Shares will be sold in the market on behalf of the Shareholder so entitled save that where the net proceeds are less than £5.00 per entitled Shareholder, then the net proceeds of such sale will be retained for the benefit of the Company.
The proportion of the issued ordinary share capital of the Company held by each Shareholder following the Share Capital Reorganisation will, save for any fractional entitlements, remain unchanged. Apart from having a different nominal value, each Consolidated Ordinary Share of £1.00 will carry the same rights as set out in the Company's articles of association that currently attach as the Existing Ordinary Shares.
The Board believes that, irrespective of whether the Placing and Open Offer proceeds, the Share Capital Reorganisation will give the Company greater flexibility than it currently has to optimise its share capital structure in the future. Subject to the Shareholders approving the necessary resolutions, the Share Capital Reorganisation will take place irrespective of whether or not the Placing and Open Offer proceeds.
The Share Capital Reorganisation requires the approval of Shareholders in general meeting and thus resolutions will be proposed at the General Meeting to implement the Share Capital Reorganisation.
In addition, in order to implement the Placing and Open Offer and to ensure the availability of sufficient Ordinary Shares to satisfy obligations to allot shares in future, including in particular allotments on conversion of the 2024 Bonds and the 2025 Bonds following the Bond Amendments, the Company is proposing to increase its authorised share capital to £140,000,000 (representing an increase of 16.67 per cent.).
No new certificates will be issued in respect of the Interim Ordinary Shares immediately following the sub-division of the Initial Ordinary Shares. New certificates in respect of both the Consolidated Ordinary Shares and the Consolidated New Ordinary Shares will be issued following the conclusion of the Placing and Open Offer. After despatch of definitive share certificates, certificates for Existing Ordinary Shares will cease to be valid for any purpose whatsoever.
All Existing Ordinary Shares standing to the credit of CREST accounts will be consolidated into Consolidated Ordinary Shares at 8.00 am on 22 September 2008.
Impact of the share consolidation on the Open Offer
As set out in paragraph 5 of Part 1 of the Prospectus, the Open Offer is, in effect, being made to Qualifying Shareholders on the basis of:
172 New Ordinary Shares for every 100 Existing Ordinary Shares
Note however, that under the Share Capital Reorganisation, Shareholders will in fact receive one Consolidated New Ordinary Share for every 100 New Ordinary Shares proposed to be held and will in fact pay 150 pence per Consolidated New Ordinary Share rather than 1.5 pence per New Ordinary Share.
Accounting for the share consolidation the Open Offer is actually being made on the basis of:
1.72 Consolidated New Ordinary Shares of £1.00 each per share for every
100 Existing Ordinary Shares of 10 pence each
and the Application Form and Open Offer Entitlements will be expressed in this form.
7 Current trading and prospects for the Group
The unaudited interim results of the Group for the 6 months ended 30 June 2008 were announced on 28 August 2008.
The Group achieved revenues of £28.4 million in the first half of 2008, 44 per cent. above the £19.7 million reported for the Continuing Operations in the first half of 2007. The increase was due to growth in royalties and manufacturing revenues from the launch of recently approved products and additional contract development revenues.
The pre-exceptional operating loss of £2.2 million was 75 per cent. lower than the operating loss for the Continuing Operations recorded in the first half of 2007. The loss was after charging £10.6 million (2007: £13.8 million) on research and development, mainly on the continuing development of Flutiform™. After net finance costs, the Group incurred a loss before tax and exceptional items of £4.0 million (2007: £14.1 million).
An exceptional charge of £2.4 million has been taken in the first half year for legal, taxation, accounting and other professional costs related to work on the convertible bonds. Additional costs are being incurred in the second half of 2008.
The net result for the continuing business after exceptional items, net finance charges and tax was a loss of £6.8 million (2007: £14.2 million).
The interim results are set out in full in Part 6 (B) of the Prospectus.
Once the Transactions are completed, the Directors remain optimistic about prospects for growth of the business. Over the next eighteen months, notwithstanding the effect of generic competition on the sales of Paxil CR™, the Directors expect to see further growth in revenues from sales of recently approved products, such as Requip® Once-a-day and Pulmicort® HFA-MDI in Europe and ZYFLO CR®, the new formulation of Sular®, and from Lodotra™ in Europe, once approved. The ongoing rate of expenditure on non-funded research and development is expected to reduce significantly with the completion this year of the core clinical programme and CMC package for the NDA filing of Flutiform™ in the United States and the Board expects costs to be further offset, in the medium term, through contributions from partners on collaborative development projects.
Once Flutiform™ is approved and launched in the United States and Europe, the Board believes that there will be exciting prospects for growth in both revenues and positive cashflow.
Prospectus Available for Inspection
Copies of the Prospectus will be available for inspection during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted) at the offices of Fasken Martineau Stringer Saul LLP, 17 Hanover Square, London, W1S 1HU until the conclusion of the General Meeting or any adjournment thereof.
Placing and Open Offer Statistics
| Issue Price per New Ordinary Share | 1.5 pence |
| Number of Existing Ordinary Shares in issue at the date of this Announcement | 814,988,800 |
| Number of New Ordinary Shares to be allotted pursuant to the Placing and Open Offer | 1,401,780,736 |
| Number of New Ordinary Shares which are the subject of irrevocable undertakings to take up Open Offer Entitlements | 3,112,080 |
| Number of Consolidated Ordinary Shares in issue immediately following the Placing and Open Offer | 22,167,695 |
| Gross proceeds of the Placing and Open Offer | £21.0 million |
| Estimated expenses of the Placing and Open Offer | £2.6 million |
| Estimated proceeds of the Placing and Open Offer net of expenses | £18.4 million |
| Estimated expenses of the Bond Proposals | £2.4 million |
The number of Consolidated Ordinary Shares in issue immediately following the Placing and Open Offer assumes that:
(1) no options are exercised under the Company's Option Schemes;
(2) none of the "D" Warrants or "E" Warrants are exercised;
(3) none of the 2024 Bonds or the 2025 Bonds are converted into Ordinary Shares between the date of the Prospectus and the date of completion of the Placing and Open Offer; and
(4) no Convertible Non-Voting Shares are issued.
Expected Timetable of Principal Events
| Record Date for entitlements under the Open Offer | 27 August 2008 |
| Announcement of the Placing and Open Offer | 1 September 2008 |
| Announcement of Bond Proposals | 1 September 2008 |
| Publication of Bond Circular | 1 September 2008 |
| Open Offer Entitlements credited to stock accounts of Qualifying CREST Shareholders in CREST | by 4 September 2008 |
| Recommended latest time for requesting withdrawal of Open Offer Entitlements from CREST | 4.30 pm on 17 September 2008 |
| Latest time and date for receipt of Forms of Proxy | 11.00 am on 17 September 2008 |
| Record Date for Share Consolidation | 19 September 2008 |
| General Meeting | 11.00 am on 19 September 2008 |
| Latest time for depositing Open Offer Entitlements into CREST | 3.00 pm on 19 September 2008 |
| Commencement of dealings in Consolidated Ordinary Shares | 8.00 am on 22 September 2008 |
| Consolidated Ordinary Shares credited to CREST | 22 September 2008 |
| Latest time and date for splitting Application Form (to satisfy bona fide market claims only) | 3.00 pm on 22 September 2008 |
| Latest time and date for receipt of validly completed Application Form and payment in full under the Open Offer and settlement of relevant CREST instruction | 11.00 am on 24 September 2008 |
| Bondholder Meeting | 10.00 am on 25 September 2008 |
| Admission and commencement of dealings in Consolidated New Ordinary Shares | 8.00am on 26 September 2008 |
| Consolidated New Ordinary Shares in definitive and uncertificated form in respect of the Open Offer credited to stock accounts in CREST | 26 September 2008 |
| Expected date of despatch of definitive share certificates for Consolidated New Ordinary Shares in certifcated form | week commencing 29 September 2008 |
| Expected date of execution of Supplemental Trust Deeds implementing Bond Amendments | 1 October 2008 |
Enquiries
| SkyePharma PLC | +44 (0) 207 491 1777 |
| Dr Ken Cunningham / Peter Grant | |
| Financial Dynamics | +44 (0) 207 831 3113 |
| David Yates/Ben Atwell | |
| Credit Suisse Securities (Europe) Limited | +44 (0) 207 888 8888 |
| George Maddison/Stephanie Leouzon/Antony Isaacs/Chris Byrne | |
| Piper Jaffray Ltd | +44 (0) 20 3142 8700 |
| Neil Mackison /James Steel/Jamie Adams |
Credit Suisse Securities (Europe) Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting for the Company as sponsor, financial adviser, joint broker and joint underwriter in connection with the Placing and Open Offer and not for any other person and will not be responsible to any other person for providing the protections afforded to its customers or for providing advice in relation to the Placing and Open Offer, the contents of the Prospectus and, if relevant, the accompanying documents or any arrangements referred to therein.
Piper Jaffray Ltd, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting for the Company as joint broker and joint underwriter in connection with the Placing and Open Offer and not for any other person and will not be responsible to any other person for providing the protections afforded to its customers or for providing advice in relation to the Placing and Open Offer, the contents of the Prospectus and, if relevant, the accompanying documents or any arrangements referred to therein.
This press announcement has been issued by SkyePharma PLC and is the sole responsibility of SkyePharma PLC.
THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS AND INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY ORDINARY SHARES REFERRED TO IN THIS ANNOUNCEMENT EXCEPT ON THE BASIS OF INFORMATION IN THE PROSPECTUS TO BE PUBLISHED BY THE COMPANY IN CONNECTION WITH THE PROPOSED PLACING AND OPEN OFFER. COPIES OF THE PROSPECTUS WILL, FOLLOWING PUBLICATION, BE AVAILABLE FROM THE COMPANY'S REGISTERED OFFICE.
This announcement and the information contained herein is not an offer of securities for sale or a solicitation to buy any securities in the United States (including its territories and possessions, any State of the United States and the District of Columbia). The securities discussed herein have not been and will not be registered under the US Securities Act of 1933 (the "US Securities Act"), and may not be offered or sold in the United States absent registration or an exemption from registration under the US Securities Act. No public offering of the securities discussed herein is being made in the United States. The securities discussed herein have not been, nor will they be, registered under the applicable securities laws of Australia, Canada, Hong Kong, New Zealand or Japan.
This announcement is not for distribution directly or indirectly in or into the United States, Canada, Australia, Hong Kong, New Zealand or Japan.
This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities. Any purchase of, or application for, the New Ordinary Shares should be made only on the basis of information contained in the Prospectus to be sent to Qualifying Shareholders shortly and any supplement thereto. The offer and the distribution of this announcement and other information in connection with the listing and offer in certain jurisdictions may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.
This announcement does not constitute the solicitation of any vote or approval in any jurisdiction.
This document is issued by SkyePharma and approved solely for the purposes of Section 21(2)(b) of the Financial Services and Markets Act 2000 by Credit Suisse Securities (Europe) Limited and Piper Jaffray Ltd.
Any person (including without limitation, custodians, nominees and trustees), who may have a contractual or legal obligation or may otherwise intend to forward this announcement and any accompanying documents to any jurisdiction outside the UK should seek appropriate advice before taking any action. No one (including custodians, nominees and trustees) should send, issue, mail or in any way distribute, either through CREST or otherwise, this announcement, the Prospectus, the Application Form, the Form of Proxy or any other document connected with the Placing and Open Offer in or into the United States. Subject to certain exceptions, you should not send, issue, mail or in any way distribute, either through CREST or otherwise, this announcement, the Prospectus, the Application Form, the Form of Proxy or any other document connected with the Placing and Open Offer in or into Australia, Canada, Hong Kong, New Zealand or Japan.
Prices and values of, and income from, shares may go down as well as up and an investor may not get back the amount invested. It should be noted that past performance is no guide to future performance. The contents of this announcement should not be construed as legal, business or tax advice. Each prospective investor should consult his, her or its own independent legal adviser, financial adviser or tax adviser for advice. None of SkyePharma, Credit Suisse Securities (Europe) Limited and Piper Jaffray Ltd or any of their respective representatives is making any representation to any offeree or purchaser of the New Ordinary Shares regarding the legality of an investment in the New Ordinary Shares by such offeree or purchaser or acquirer under the laws applicable to such offeree or purchaser or acquirer.
No representation or warranty, express or implied, is made by Credit Suisse Securities (Europe) Limited and Piper Jaffray Ltd as to the accuracy, completeness or verification of the information set forth in this announcement, and nothing contained in this announcement is, or shall be relied upon, as a promise or representation in this respect, whether as to the past or the future. Credit Suisse Securities (Europe) Limited and Piper Jaffray Ltd do not assume any responsibility for its accuracy, completeness or verification and accordingly disclaim, to the fullest extent permitted by applicable law, any and all liability whether arising in tort, contract or otherwise which they might otherwise be found to have in respect of this announcement.
The delivery of this announcement shall not, under any circumstances, create any implication that there has been no change in the affairs of the Group since the date of this announcement nor that the information in it is correct as of any subsequent time.
This announcement may contain forward-looking statements that reflect the Group's current expectations regarding future events, including the clinical development and regulatory clearance of the Group's products, the Group's ability to find partners for the development and commercialisation of its products, the Group's liquidity and results of operations, as well as the Group's future capital raising activities. Forward-looking statements involve risks and uncertainties. Actual events could differ materially from those projected herein and depend on a number of factors, including the success of the Group's research strategies, the applicability of the discoveries made therein, the successful and timely completion of clinical studies, the uncertainties related to the regulatory process, the ability of the Group to identify and agree beneficial terms with suitable partners for the commercialisation and/or development of its products, the acceptance of the Group's products by consumers and medical professionals, and the ability of the Group to identify and consummate suitable strategic and business combination transactions.
Definitions
| "2024 Bond Amendments" | the proposed amendments to the 2024 Bond Terms and Conditions as set out in Part 3 of the Prospectus |
| "2024 Bondholders" | holders of the 2024 Bonds |
| "2024 Bond Resolution" | the resolution to approve the 2024 Bond Amendments to be proposed at the Bondholder Meeting |
| "2024 Bonds" | the £69,594,000 6 per cent. guaranteed convertible bonds due 2024 issued by SkyePharma (Jersey) Limited |
| "2024 Bond Terms and Conditions" | the terms and conditions of the 2024 Bonds as set out in the trust deed dated 4 May 2004, as supplemented by the supplemental trust deed dated 29 July 2004, constituting the 2024 Bonds |
| "2025 Bond Amendments" | the amendments to the 2025 Bond Terms and Conditions as set out in Part 3 of the Prospectus |
| "2025 Bondholders" | holders of the 2025 Bonds |
| "2025 Bond Resolution" | the written resolution to approve the 2025 Bond Amendments |
| "2025 Bonds" | the £20,000,000 8 per cent. guaranteed convertible bonds due 2025 issued by SkyePharma (Jersey) Limited |
| "2025 Bond Terms and Conditions" | the terms and conditions of the 2025 Bonds as set out on the reverse of the 2025 Bonds in the trust deed dated 3 June 2005, constituting the 2025 Bonds |
| "Abbott" | Abbott Respiratory LLC which changed its name from Kos Life Sciences LLC on 24 July 2008 |
| "Acts" or "Companies Acts" | CA 1985 and CA 2006 |
| "Admission" | the admission of the Consolidated New Ordinary Shares to (i) the Official List; and (ii) trading on the London Stock Exchange's market for listed securities becoming effective in accordance with, respectively, the Listing Rules and the Admission and Disclosure Standards |
| "Admission and Disclosure Standards" | the requirements contained in the publication "Admission and Disclosure Standards" containing, inter alia, the admission requirements to be observed by companies seeking admission to trading on the London Stock Exchange's market for listed securities |
| "ADR" | an American depositary receipt |
| "Application Form" | the personalised application form accompanying the Prospectus on which Qualifying Shareholders may apply for Consolidated New Ordinary Shares at a price of 150 pence each under the Open Offer |
| "AstraZeneca" | AstraZeneca AB, a subsidiary of AstraZeneca PLC |
| "Board" or "Directors" | the board of directors of SkyePharma whose names are set out in paragraph 13 of Part 8 of the Prospectus or from time to time as the context may require |
| "Bond Amendments" | the 2024 Bond Amendments and 2025 Bond Amendments |
| "Bondholder Meeting" | the meeting of the 2024 Bondholders convened on 25 September 2008 at which resolutions to approve the 2024 Bond Amendments will be proposed and considered |
| "Bondholders" | the 2024 Bondholders and 2025 Bondholders |
| "Bond Proposals" | the proposals in respect of the 2024 Bonds and the 2025 Bonds as set out in Part 3 of the Prospectus |
| "Bond Resolutions" | the 2024 Bond Resolution and the 2025 Bond Resolution |
| "CA 1985" | Companies Act 1985 (as amended from time to time) |
| "CA 2006" | Companies Act 2006 (as amended from time to time) |
| ""C" Deferred Shares" | deferred shares of 1 pence each in the capital of the Company created by the Subdivision |
| "certificated" or "in certificated form" | where a share or other security is not in uncertificated form |
| "Closing Price" | the closing middle market quotation of an Existing Ordinary Share as published in the Daily Official List |
| "CMC" | chemistry, manufacture and control |
| "Company" or "SkyePharma" | SkyePharma PLC (registered number 107582) and/or where the context so admits one or more of its subsidiary undertakings |
| "Company Secretary" | John Murphy or the company secretary of the Company from time to time as the context may require |
| "'Consolidated New Ordinary Shares"' | the 14,017,807 Consolidated Ordinary Shares of the Company to be issued pursuant to the Placing and Open Offer |
| "Consolidated Ordinary Shares" | means ordinary shares of £1.00 each in the capital of the Company following consolidation |
| "Consolidation" | the consolidation of every 100 Interim Ordinary Shares in issue into 1 Consolidated Ordinary Share and the consolidation of every 100 Interim Ordinary Shares not in issue into 1 Consolidated Ordinary Shares. |
| "Continuing Operations" | the Group excluding the Injectable Business which was sold in March 2007 |
| "Convertible Bonds" | the 2024 Bonds and the 2025 Bonds |
| "Convertible Non-Voting Shares" | the convertible non-voting shares to be created by the passing of Resolution 3 |
| "COPD" | chronic obstructive pulmonary disease |
| "CRC" | Christofferson, Robb & Company LLC |
| "Credit Suisse" | Credit Suisse Securities (Europe) Limited |
| "CREST" | a relevant system (as defined in the CREST Regulations) in respect of which Euroclear is the operator (as defined in the CREST Regulations) |
| "CREST Participant" | a person who is, in relation to CREST, a system-participant (as defined in the Regulations) |
| "CREST Regulations" | the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), as amended from time to time |
| "Daily Official List" | the daily official list of the London Stock Exchange |
| "Directors' Shares" | the 62,545 New Ordinary Shares that certain of the Directors have agreed to subscribe for or purchase as part of the Placing |
| "EMEA" | the European Medicines Evaluation Agency |
| "EU" | European Union |
| "Euroclear" | Euroclear UK & Ireland Limited |
| "Existing Ordinary Shares" | the Initial Ordinary Shares in issue at the Record Date and prior to the Share Capital Reorganisation (including the Consolidation) becoming effective |
| "FDA" | the United States Food and Drug Administration |
| "Form of Proxy" | the form of proxy accompanying the Prospectus for use by holders of Existing Ordinary Shares at the General Meeting |
| "FSMA" | the Financial Services and Markets Act 2000, as amended |
| "General Meeting" | the general meeting of the Company convened for 11.00 am 19 September 2008, notice of which accompanies the Prospectus and including any adjournment thereof |
| "GSK" | GlaxoSmithKline PLC |
| "Group" | SkyePharma and its subsidiary undertakings and, where the context permits, each of them |
| "HBM" | HBM BioVentures (Cayman) Limited |
| "HFA" | hydrofluoroalkane |
| "IFRS" | the International Financial Reporting Standards |
| "Initial Ordinary Shares" | means ordinary shares of 10 pence each in the capital of the Company |
| "Injectable Business" | means the business sold to Blue Acquisition Corp (now Pacira Inc) in March 2007 |
| "Interim Ordinary Shares" | means ordinary shares of 1 pence each in the capital of the Company created by the Subdivision |
| "Issue Price" | 1.5 pence per New Ordinary Share |
| "Issuer" | SkyePharma (Jersey) Limited |
| "Kyorin" | Kyorin Pharmaceutical Co Ltd, a subsidiary of Kyorin Co., Ltd |
| "Latin America" | all of the Americas south of the United States |
| "Listing Rules" | the listing rules of the UK Listing Authority made pursuant in Part VI FSMA, as amended from time to time |
| "London Stock Exchange" | London Stock Exchange PLC |
| "MAA" | Marketing Authorisation Application for European approval |
| "MDI" | metered dose inhaler |
| "Mid Teens" | 13.5 per cent. up to and including 17.5 per cent. |
| "Mundipharma" | Mundipharma International Corporation Limited |
| "NDA" | New Drug Application |
| "New Ordinary Shares" | the 1,401,780,736 new Ordinary Shares relating to the Placing and Open Offer; following the Share Capital Reorganisation, these will be issued in Consolidated form (as 14,017,807 Consolidated New Ordinary Shares) |
| "Notice of General Meeting" | notice of the General Meeting, a copy of which is set out at the end of the Prospectus |
| "Official List" | the Official List of the UK Listing Authority |
| "Open Offer" | the conditional invitation to Qualifying Shareholders to apply for up to 1,401,780,736 New Ordinary Shares at a price of 1.5 pence each on a pre-emptive basis |
| "Open Offer Entitlements" | the pro rata entitlement to subscribe for Open Offer Shares, allocated to a Qualifying Shareholder pursuant to the Open Offer |
| "Open Offer Shares" | the 1,401,780,736 New Ordinary Shares for which Qualifying Shareholders are being invited to apply at a price of 1.5 pence each under the terms of the Open Offer; following the Share Capital Reorganisation these will be issued in consolidated form as 14,017,807 Consolidated New Ordinary Shares at a price of 150 pence each, and the Application Form is expressed in this form |
| "Option Schemes" | the Company's share option schemes further details of which are set out in paragraph 8.2.1 of Part 8 of the Prospectus |
| "Ordinary Shares" | ordinary shares in the capital of the Company |
| "Panel" | the Panel on Takeovers and Mergers |
| "patent" | a patent application or granted patent |
| "Paul Capital" | Paul Capital Royalty Fund LP formerly Paul Capital Royalty Acquisitions Fund |
| "pence" or "p" | decimalisation of £/sterling |
| "Piper Jaffray" | Piper Jaffray Ltd. |
| "Placing" | the conditional placing of New Ordinary Shares and to the extent necessary, of the Convertible Non-Voting Shares, subject to clawback pursuant to the Open Offer |
| "Placing Agreement" | the conditional agreement dated 1 September 2008 between Credit Suisse, Piper Jaffray and the Company relating to the Placing and Open Offer, details of which are set out in paragraph 22 of Part 8 of the Prospectus |
| "Prospectus" | the prospectus expected to be posted to Shareholders comprising a prospectus relating to the Company for the purpose of the Placing and Open Offer and Admission |
| "put options" | the right to require the Issuer to redeem the 2024 Bonds and the 2025 Bonds in the principal amount of £69.6 million and £20.0 million respectively |
| "Qualifying CREST Shareholders" | Qualifying Shareholders whose Ordinary Shares on the register of members at the close of business on the Record Date are in uncertificated form |
| "Qualifying non-CREST Shareholders" | Qualifying Shareholders whose Ordinary Shares on the register of members at the close of business on the Record Date are held in certificated form |
| "Qualifying Shareholders" | SkyePharma Shareholders on the register of members at the Record Date other than SkyePharma shareholders who are located in or have registered addresses in the United Sates, Australia, Canada, Hong Kong, Japan, New Zealand and holders of ADRs (including the ADR depositary and its nominee or custodian) |
| "Record Date" | the close of business on 27 August 2008 |
| "Resolutions" | the resolutions set out in the Notice of General Meeting at the end of the Prospectus |
| "sanofi-aventis" | sanofi-aventis AS or the sanofi-aventis group as the context may require |
| "Sciele" | Sciele Pharma, Inc |
| "Shareholders" | the registered holders of Ordinary Shares |
| "Share Capital Reorganisation" | together the Subdivision and the Consolidation |
| "SkyePharma (Jersey) Limited" | SkyePharma (Jersey) Limited registered in Jersey with number 87564 |
| "sponsor" | Credit Suisse |
| "Sterling" or "£" | the lawful currency for the time being in the UK |
| "stock account" | an account within a member account in CREST to which a holding of a particular share or other security in CREST is credited |
| "Subdivision" | the subdivision of each of the Existing Ordinary Shares into 1 Interim Ordinary Share and 9 "C" Deferred Shares and the subdivision of each of the unissued Initial Ordinary Shares into 1 Interim Ordinary Share on the terms described in the Prospectus |
| "Supplemental Trust Deeds" | means the second supplemental trust deed in relation to the 2024 Bonds and the supplemental trust deed in relation to the 2025 Bonds which will be entered into to effect the Bond Amendments if the Bond Resolution are passed and the proceeds of the Placing and Open Offer are received |
| "Takeover Code" | the City Code on Takeovers and Mergers |
| "Transactions" | the Placing, Open Offer and Bond Proposals |
| "UK" or "United Kingdom" | the United Kingdom of Great Britain and Northern Ireland |
| "UK Listing Authority" | the Financial Services Authority in its capacity as competent authority under FSMA |
| "uncertificated" or "in uncertificated form" | recorded on the relevant register of the share or security concerned as being in uncertificated form in CREST and title to which may be transferred by means of CREST |
| "United States" or "USA" | the United States of America, its territories and possessions, any State of the United States of America and the District of Columbia, and all other areas subject to its jurisdiction |
| "U.S.$" | United States dollars, currency of the United States |
| "€" | Euro |
For the purposes of this Announcement, "subsidiary" and "subsidiary undertaking" have the meanings given by the Companies Acts.