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CBS on SKP |
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This page now has other info from other sources.
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The shares soared under the Tech boom, but have drifted back - see chart below from Ample. |
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Data due April 2nd. |
SkyePharma boosted by hope of rerating SKYEPHARMA enjoyed the best rise in a lacklustre FTSE 250 on hopes that shares in the drugs group will be rerated in the wake of Wednesday’s full-year figures. SkyePharma is expected to report a modest maiden profit of £200,000 on Wednesday, against a £9.5 million loss for 2001. However, Merrill Lynch yesterday played down the significance of the level of 2002’s earnings and instead looked forward to the prospect of stellar growth this year. The US broker concedes that the recent pace of product development news has been slow, but expects this to change over the next few months. In particular, it awaits SkyePharma’s submission of Depomorphine, its treatment for post-operative pain, with US regulators, probably in June, and the US launch of Xatral OD, a treatment for a prostrate condition from Sanofi-Synthelabo of France, on which SkyePharma is due to receive royalties. With Merrill repeating its “buy” advice and 80p price target, SkyePharma put on 4½p at 47¼p. The FTSE 100 eased 0.8 points to 4,016.3. |
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Tip From CBS |
CBS MarketWatch – 3rd March 2003 Reach for the Skye American investors are spoilt for choice when it comes to the biotechnology sector, yet there could be some potentially rich pickings for those prepared to travel across the pond to Old Blighty. |
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March 2003 |
One company worth a close look is London-based drug delivery group SkyePharma Plc, which is on the threshold of achieving maturity and offers considerable growth potential. The good news is that the shares (SKYE: news, chart, profile) are still reasonably cheap and have yet to attract a glamour rating enjoyed by so many "jam tomorrow" businesses in the US. But perceptions are likely to change as its 2002 results, due within a month, and a patent issue, remove some of the uncertainty overhanging the stock. SkyePharma develops novel devices and processes to improve the way existing medicines are administered to patients. As a result, it starts off with an advantage over pure biotech companies, which face a considerable risk that a brand-new concoction made in the lab after years of expensive research fails to get past regulatory hurdles. The group's proprietary technology is of potential value to many drug companies that either want to extend the patent life of their existing drugs by adopting a new method of delivery, or to simply improve the quality of treatment to patients. In return, SkyePharma receives license payments as well as on-going royalties linked to future sales of a drug. The group has expertise in a wide range of methods of delivery. It can make pills dissolve more slowly, once swallowed, so that the drug works over a longer period. It can enable inhalers to work better so that powdered-drugs they contain don't congeal with moist breath. Or it can add a magic ingredient to an injection-delivered drug so that patients need fewer jabs - a great boon for the many millions who hate needles! Not surprisingly, SkyePharma has commercial tie-ups with many drug majors including GlaxoSmithKline (GSK: news, chart, profile) and Novartis (NVS: news, chart, profile), which are applying its technology to launch new versions of their big selling drugs. The group has about a dozen projects for new drugs or approved products on the market. That means it is now poised to transform from a development stage company into a profitable business with growing revenue streams, starting this year. The big breakthrough is likely to come from Paxil CR, a faster-acting version of Glaxo's blockbuster anti-depression drug. This drug has been on sale since last year and U.S. doctors seem to like the newer version. It now accounts for 32 percent of all new prescriptions written for Paxil, suggesting that the newer version itself could become a $1 billion a year drug. SkyePharma gets a 3 percent royalty on Paxil CR sales, a small slice from a mega-sized cake. On the other hand, the group is entitled to fatter slices of royalties from its family of injectible painkillers through its joint ventures with U.S.-based Enzon (which is planning a merger with NPS Pharmaceuticals) and Endo. The royalty rate for one, DepoMorphine, a post-operative painkiller, could be as high as 60 percent subject to sales targets being achieved. Developed by SkyePharma, it is supposed to be filed for approval with the FDA later this year. Peter Laing, corporate communications director at SkyePharma, said "This product has huge potential for us and could become more important than Paxil CR. It is being described as revolutionary in some circles." Other exciting products on the way include a long-acting respiratory drug, Foradil, owned by Swiss giant Novartis. The new version was filed with the FDA last December and could be on the market by late this year. Meantime, expect positive news soon from SkyePharma's novel cream for pre-cancerous skin ailments caused by too much sun. The product, Solaraze, was approved for sale a year ago, but is only now gaining momentum after SkyePharma relicensed marketing rights to Quintiles in the US and Britain's Shire Pharmaceuticals in Europe and Australia. SkyePharma's late-stage product pipeline means the group is expected to move into profits this year. However, the shares have yet to catch the limelight. One reason is that Glaxo's original patent on Paxil is being challenged by generic drug makers in U.S. courts within a few weeks. While the case does not directly affect Paxil CR, the newer version, Laing concedes that it may have some knock-on effect on its future sales potential. Even so, the upside potential for SkyePharma is much greater than the downside risk for long-term investors. At a guess, the odds of Glaxo winning its case are more than even. Victory could also be a big boost for SkyePharma and perhaps help to double its share price over the next 12 months. Lose, and the shares could easily halve. Another drag on the share price is that the group will remain heavily reliant on one-off payments from deal making until royalty streams build up over the next few years. Still, investors are likely to gain more confidence once it reports its 2002 results. Some British investors want to be see it deliver on its promise to report a significant profit for the year. That will depend on whether it can book a $25 million license payment from Endo in last year's results or this year. But this has become an issue tied-up in emotion. What matters more is that the money is already in SkyePharma's bank account and has helped to swell its estimated cash balances to about a $100 million. The group was also cash flow neutral in the first half and a full year profit of any size should warm investor sentiment. Valuing SkyePharma is still dependent on forecasting future sales of drugs. However, on current market estimates the group should move into profits of about 6 million British pounds in 2002 and surge five-fold by 2004 as new products hit drug stores. Group revenues are expected to triple from a reported 46 million in 2001. At 45 pence a share in Britain, or $7.09 for Nasdaq-listed shares, the stock is valued at about 17 times expected earnings for this year -- appealing for the risk tolerant investors looking for a high reward/high risk play. |
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Page created 3rd. March 2003 Edited . March 29th. 2003 |
