Skyepharma and Vectura agree merger; Skyepharma swings to profit

(ShareCast News) - Vectura and Skyepharma have reached an agreement on the terms of a recommended merger.Under the terms of the deal, Skyepharma shareholders will get 2.7977 new Vectura shares for each Skyepharma share. Based on Vectura's closing price of 146.60p on Tuesday, this values Skyepharma at 410.15p per share or around £441.13m.There will also be a partial cash alternative of up to £70m pursuant to which Skyepharma shareholders can elect to receive cash instead of some or all of the new Vectura shares to which they would otherwise be entitled under the merger.The combined group's executive directors will comprise James Ward-Lilley, Vectura's chief executive officer, Andrew Derodra, Skyepharma's chief financial officer and Trevor Phillips, Vectura's chief operating officer.Vectura chairman Bruno Angelici will be chairman of the enlarged group.Also on Wednesday, Skyepharma said it swung to a pre-tax profit of £30.5m in the year to the end of December, compared with a loss of £9.9m in 2014, as revenue rose 30% to £95.6m.The company, which specialises in oral and inhalation drug development, said it reached its first sales milestone for Flutiform of €10m (£7.4m) in the year.Chief executive officer Peter Grant said: "2015 has been a year of further substantial progress both operationally and financially. Our proven expertise in developing innovative inhalation and oral products has given us a track record of growth that reinforces our optimism about the future."With a sustained focus on expertise, innovation and growth, we have entered 2016 with a high degree of confidence in our business."Dr Samir Devani, managing director of Rx Securities, said the deal was likely to be significantly earnings-enhancing for Vectura shareholders and will provide stronger long-term growth for Skyepharma shareholders. Devani said that strategically, the deal has strong rationale, with complimentary respiratory technologies, and would provide "a true one-stop shop for respiratory development", a strong combined pipeline, a more diversified revenue composition and a stronger balance sheet. "Significant M&A has been long-overdue in the biotech space and we view this deal as particularly positive due to the strong technology complementarity and the building of a major respiratory powerhouse," he said, as he reiterated his 'buy' rating on Skyepharma.At 1342 GMT, Vectura shares were up 2.3% to 149.90p and Skyepharma was up 3.9% to 409p.