BioWorld International Correspondent

LONDON — SkyePharma plc landed its first deal since completing a restructuring that saw the sell-off of its U.S. subsidiary and delisting from Nasdaq, signing a $35 million development and commercialization agreement for a sleep disorder drug with Somnus Therapeutics.

The agreement for SKP-1041 includes $4 million up front to SkyePharma, with a further $11 million that would be paid mainly on product approval, and $20 million in potential sales-related milestones.

The first milestone would be triggered when the product, which is currently in feasibility studies, completes Phase I. SKP-1041 consists of an approved non-benzodiazepine hypnotic agent formulated with SkyePharma's Geoclock controlled-release oral delivery technology.

Somnus, a privately held company based in New Jersey, will pay for the majority of the development and clinical trials. The deal indicates the turnaround of London-based SkyePharma is close to completion, following the sale of its U.S. injectables business, finalized in May, a refinancing that increased the cash balance by £47 million (US$93.9 million) and last month's delisting from Nasdaq.

The San Diego-based injectables business had an operating loss of $29.7 million last year. Speaking at the Piper Jaffray conference in London last week, Ken Cunningham, chief operating officer at SkyePharma, said divesting had "rid ourselves of an enormous cash drain."

The sale left SkyePharma to concentrate on its oral and inhaled delivery technologies. Currently, the main focus is on another huge cash drain, the Phase III trials of the inhaled combination asthma treatment Flutiform. That is due to be filed with the FDA by the end of 2007 and in Europe by the end of 2008. Cunningham said the company is looking forward to reducing spending on R&D once the expensive development program comes to an end. Flutiform is partnered with Abbott Laboratories in the U.S. and with Mundipharma International Corp. in Europe.

The Somnus deal indicates SkyePharma is now in shape to achieve one of its post-restructuring objectives of signing more traditional drug deals in which the partner finances drug development. The company also has ambitions to finance end-to-end development of products in-house.

With the Flutiform development program behind it, SkyePharma expects to move into operating profit in 2008 and is aiming for sustainable profitability from 2009.