By Mary Welch

Staff Writer

The future of Hyal Pharmaceutical Corp. finally was settled as SkyePharma plc agreed to pay US$9.5 million for the Canadian company.

London-based SkyePharma will pay Hyal's secured and unsecured debt, including interest, of $7.86 million, and $1.63 million in cash.

"We acquired the assets pursuant to a court order of the Ontario Superior Court of Justice," said Tim Ryan, director of SkyePharma's corporate communications. "We acquired the assets in a competitive bid. We know the value of those assets. Did we probably pay more than we had offered before? Yes. But are we comfortable with the final price? Absolutely!"

As part of its dowry, Hyal brings its tangible assets as well as intellectual property of its drug delivery systems, 54 patents and products using its Hyaluronan Induced Targeting (HIT) technology. Included in the deal are the patents and rights to Solarase, Hyal's lead product.

"When we were trying to acquire Hyal previously, we were trying to buy the company - the business of Hyal," Ryan said. "Now we are acquiring the assets. It's an 'as-is' deal."

The purchase was a strategic move designed to move SkyePharma into a niche drug delivery market, he said.

"It's a logical extension of our drug delivery platform," Ryan said. "We have a strong presence in oral drug delivery, as well as the inhale market, as well as intravenous. All companies have a presence in one of these drug delivery systems. They make up 85 percent of the world's drug delivery pie. With the acquisition of Hyal, we're in the niche market of topical drug delivery."

The unsecured debt relates principally to the 12 percent subordinated debentures of Hyal in the principal amount of $5 million, which SkyePharma acquired in August 1999 in exchange for 5.4 million SkyePharma new ordinary shares. They were valued at $3.28 based on the closing middle market price of SkyePharma shares on Aug. 11.

In addition, SkyePharma has indemnified the receiver of Hyal to the extent that $7.47 million exceeds the amount that SkyePharma is ultimately entitled to receive as a creditor of Hyal. This indemnity was secured with an irrevocable letter of credit open for up to one year in the amount of $680,000.

SkyePharma said it would integrate the Canadian operations with those of SkyePharma Inc. (formerly DepoTech Corp.) in San Diego.

"We will continue development of Hyal's pipeline at SkyePharma Inc.," Ryan said. "Only about a handful of Hyal people will be offered positions."

SkyePharma purchased DepoTech in a package worth up to $56 million. Initially, the deal was valued at $30.6 million, but if DepoTech's lead product, DepoCyt, is launched in the U.S. by March 31, 2000, the company will increase the price by $14 million, and by another $11 million if a development agreement is signed by March 2000 for another product. (See BioWorld Today, Oct. 20, 1998, p. 1.)

The campaign to acquire Hyal has been a soap opera of two suitors alternatively proposing marriage and then backing off.

In May, SkyePharma said it would acquire Hyal by covering the company's debt of $5 million and offering shareholders 5 cents per share if the lead product, Solarase, is approved by the FDA before 2000. If that approval came on time, it would have cost SkyePharma $1.6 million. (See BioWorld Today, May 20, 1999, p. 1.)

But in August, Cangene Corp., of Winnipeg, Manitoba, offered to buy all of Hyal's 31.8 million shares at 5 cents per share if Solarase was approved by Dec. 31, 2000. In addition, the company agreed to pay Hyal's debt. A Hyal spokeswoman said that Cangene's offer was unsolicited and a better deal for the beleaguered firm since it was "straight cash." (See BioWorld Today, Aug. 5, 1999, p. 4.)

Then Cangene got cold feet and shortly afterward said it would not proceed with its offer because certain conditions of the transaction could not be satisfied.

Solarase is a topical gel used to treat actinic keratosis, a pre-cancerous skin condition caused by overexposure to the sun. Approved in six countries, the drug was accepted for review by the FDA last December. A SkyePharma official had estimated that Solarase could generate $48 million in total European and U.S. sales.

Hyal's technology includes HIT, which is a topical drug delivery technology based on hyaluronic acid that is designed to maintain efficacy and improve patient tolerability. It has two other compounds in clinical trials: HYAL AT-2101, a topical treatment for pain, and HYAL-2201, an intravenous formulation for moderate to severe pain.

SkyePharma's stock (NASDAQ:SKYE) closed Thursday at $7.75, up 12.5 cents.