UK drug delivery company SkyePharma has reported net losses down in the first half of the year, but warned revenues and cash flow will come under pressure as it moves away from its current milestone-based revenue model.
The firm saw its net loss for the first half ended 30 June drop by 44 per cent to £10 million (€15m) in the wake of a healthy hike in royalties from four products, including a formulation of GlaxoSmithKline's antidepressant Paxil/Seroxat (paroxetine) and Xatral (alfuzosin), a treatment for benign prostatic hypertrophy. This was accompanied by a fall in R&D spending.
Skyepharma develops controlled-release drug delivery systems that reduce side effects and allow for fewer daily doses. It also formulates improved versions of generic drugs.
Overall, the company's sales grew 26 per cent to £29 million on higher milestone payments and royalty income. Meanwhile, contract and licensing revenues rose by the same margin to £14 million.
SkyePharma has said it will now concentrate on developing products that get a high percentage of sales as royalties from marketing partners, rather than large milestone payments as products go through regulatory hurdles and clinical trials. This would have a short-term impact in terms of cash flow and revenues, but would pay off in time by smoothing the revenue stream at the company.
To this end, the company had a major achievement in the first half with the US approval of DepoDur (morphine), a long-acting depot formulation of the widely used opioid analgesic. This will be launched by Endo Pharmaceuticals before the end of the year.
SkyePharma's contract and licensing revenues rose 26 per cent to £14.4 million, with sales from milestone payments and on newly signed deals totalling £11.5 million. This category included revenues from UK-based Medeus Pharma for the European marketing and distribution rights for DepoDur, and the licensing to Trigenesis of the rights to certain dermatological assets.
The company has not yet found a partner for its inhaled drug business, which is seen as a crucial factor if SkyePharma is to move into profit, as planned, for the full year.
Meanwhile, £3.5 million in revenue came from development milestones on projects such as GlaxoSmithKline's daily formulation of Requip (ropinirole; Phase III), AstraZeneca's environmentally-friendly version of its asthma drug Pulmicort (budesonide; Phase III); the first approval of a new version of Novartis' long-acting bronchodilator formoterol, and Phase II clinical trials of Novartis' beta agonist QAB 149, which could potentially become the first once-daily bronchodilator on the market.
Royalty income leapt 28 per cent to £10.3 million, while manufacturing and distribution revenues were up 22 per cent to £3.8 million, mainly due to higher production of the Foradil Certihaler for Novartis, SkyePharma said.