Interview – Unshackled SkyePharma goes hunting

After completing a near-miraculous balance sheet restructuring this year, SkyePharma can at last focus on its underlying business in what its chief executive, Peter Grant, calls “our new, unshackled state”.

And Mr Grant is direct about what this means: “We’re in the market for deals,” he tells EP Vantage. The first such tie-up, covering a Pulmagen Therapeutics inhaled combination project yesterday, marks SkyePharma’s entry into chronic obstructive pulmonary disease. Investors can rest assured that more deals will follow, with oral as well as inhaled technologies.

Thanks to a £112m ($187m) equity raise in March the group’s gross debt has been cut from £101m at the end of last year to around £30m now. The resulting reduction in interest payments, combined with eight recent product approvals, should enable SkyePharma to reach sustainable profitability at last.

What now?

However, the company has no desire to start selling its own drugs, unlike its UK respiratory competitor Vectura, for instance, says Mr Grant. This raises an obvious question: what to do now?

Clearly sitting back and just watching the royalties roll in is not an option – nice though this might be after SkyePharma’s turbulent past few years. Hence the renewed focus on licensing, finding new assets as well as seeking new partners for its own technologies and formulations; a full-time head of business development is about to be named, says Mr Grant.

The Pulmagen deal centres on SKP-2075, a combination of a low dose of the generic bronchodilator theophylline with a steroid, which SkyePharma aims to take through phase II before licensing out.

This is hardly the type of triple combination or muscarinic-antagonist beta-agonist cutting-edge COPD science being done by competitors, but perhaps this is the point. Recent turbulence in the respiratory markets has seen GlaxoSmithKline come under severe pricing pressure, and a resurgent AstraZeneca acquire assets from Pearl Therapeutics and Almirall.

“If you go for 50% market share you worry about blockbuster dynamics,” says Mr Grant. A niche product, like the group’s own asthma drug Flutiform, for instance, leaves a lot more room to manoeuvre.

Pulmagen typifies the sort of deal Mr Grant wants to do in inhalation, which in the early stages he says is “technically interesting, but financially not so interesting. Here we want to do things ourselves.”

This means developing projects – SkyePharma has metered-dose as well as dry-powder inhaler technologies – until strong phase II proof-of-concept data yield an asset that can be licensed out. “We took Flutiform into phase III but we don’t want to do that again,” says the chief exec.

Oral technology is another story. Here SkyePharma has “three ideas” for early licensing, relating to three separate delivery technologies applicable to old molecules, lifecycle management products or new chemical entities. “We’re looking at a classic licensing model,” says Mr Grant.

“We’re also looking at other technologies to acquire that can be developed with relatively little spend.”

Long-term partners

It is notable that many of SkyePharma’s partners, Mundipharma included, are longstanding ones, implying the possibility of repeat business – something that bodes well for future business development.

With Glaxo, for instance, interaction regarding Paxil CR or the Theravance-partnered respiratory drugs on which SkyePharma receives a royalty is with the alliance manager, so “the contacts are there”, says Mr Grant. If a future collaboration were to be suggested between the two companies, “no one at GSK is going to ask, ‘Why are you dealing with SkyePharma?’”

AstraZeneca is another company with which SkyePharma had worked, though the deal, on the Pulmicort metered-dose inhaler, did not go so well. Still, at termination “Astra said, ‘Keep in touch, we’re still friends’. Perhaps one day they’ll get rid of Turbohaler and get a decent inhaler.”

In the meantime, SkyePharma can take comfort that it now has a supportive investor base (With a little help from biotech fever, SkyePharma throws off its albatross, March 31, 2014). “We raised £112m [in March], but we could have raised double,” says Mr Grant. “And not just because of market conditions.”

As well as the Flutiform royalty from Mundipharma investors can look to Exparel, a postsurgical analgesic sold by Pacira, which is yielding a 3% royalty plus milestones. If consensus forecasts of blockbuster revenue by 2020 are accurate these could amount to $48m in the next three years.

The Glaxo/Theravance projects will also generate cash, and, though they have had difficult launches, with SkyePharma’s interest capped at £9m a year the exposure is limited.

Mr Grant admits that tidying up the group’s capital structure was a “long, tortuous haul”. Now that several things have come together it is down to SkyePharma to seize the opportunity.

To contact the writer of this story email Jacob Plieth in London at [email protected] or follow @JacobEPVantage on Twitter

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