Paul Capital banks on Skyepharma

The capital will be used to fund clinical trials of SkyePharma’s new drug. So long as the drug succeeds in these trials and is passed by regulators, the private equity company will take a share of future sales.

The Financial Times reports this morning that US private equity firm Paul Capital Partners is investing $30m (E31.9m) in SkyePharma, the UK drugs company.

The drugs company will use the capital to pay for clinical trials of its new drug without raising extra funds from shareholders or tapping into its research budget, helping it meet its target of moving into profit in the second half of this year. In return Paul Capital Partners will receive a share of future sales.

Under the arrangement, due to be announced today, SkyePharma will receive $30m over the next two years to fund the last stage of clinical trials for DepoMorphine, a painkiller for patients who undergo surgery. If the clinical trials are successful, DepoMorphine, a slow-release morphine that uses SkyePharma drug delivery technology, will be launched within three years. If however regulators do not clear the drug, the private equity company will not be compensated for its investment. The agreement is believed to be the first of its kind in the UK.

The newspaper says that SkyePharma, which has funds worth about $100m, could have paid for DepoMorphine's development without outside help. This however might have delayed its move into profit. Analysts predict annual sales peak for the drug of more than $200m.

SkyePharma’s founder, Dr. Jacques Gonella, first began developing a controlled release tablet technology in the early 1980's in Switzerland. This early work formed the basis of an oral drug delivery technology known today as the GEOMATRIX® family of technologies. In 1988 the company expanded its technology base to include advanced inhalation technologies. In May, 1996 the company listed on the Main Board of the London Stock Exchange and in 1998 achieved a U.S. NASDAQ listing.