Unrest in drugs industry as troubled SkyePharma ousts Chairman
It has been a difficult six months for SkyePharma. A rights issue in September 2005 which caused a 20% fall in share price pushed the company into a downward spiral that has included a failed takeover, the lead shareholder jumping ship and a rebellion against the once chairman, Ian Gowrie-Smith.
Central to the company's demise has been an inability to finalise a takeover by Innovata, a British rival. This was fuelled partly by the promise of SkyePharma's new drug, Flutiform, which is considered to be a revolutionary new asthma treatment with annual sales reaching $1 billion. However, attempts by the board to provoke an auction for the company failed spectacularly, even with this great potential asset. Subsequently, the lead shareholder Fidelity jettisoned 16 million shares, apparently uneasy with SkyePharma's lame-duck existence. This led to Mr Gowrie-Smith's resignation after calls for vote of no-confidence from disgruntled rebels.
The new chairman, A.N. Karabelas, is now fighting on many fronts. Desperately trying to keep this floundering company's head above the water, he is also warding off rebel shareholders who are demanding explanations for SkyePharma's erratic investments history. Accusations levelled at board directors imply self-profiting motivation were behind some of the insensible investment decisions. If Mr Karabelas is to turn the fortunes of SkyePharma around, however, it is the wishes of the smaller shareholders that he must embrace, for it is with them that the power truly lies.
Yet even the biggest fish in the pond can be caught out. AstraZeneca, the European drugs behemoth, recently ended the troubled life its bloodthinning drug Exanta. There were high hopes for this treatment, developed at the costs of hundreds of millions of dollars and with forecasted annual sales running into the billions of dollars. The writing, however, had been on the wall for some time. In 2004, the US Food and Drug Administration first raised concerns over the drug's safety. The initial consternation within AstraZeneca was soon muted by a trial patient suffering liver damage. The drug was withdrawn on safety grounds.
Despite this apparently massive financial shortfall, shares in AstraZeneca closed down only 16p to £26.16. This robust performance is probably more a testament to the company's massive cash assets than faith in its production line. Furthermore, what new drugs are produced may have to compete with generic drugs in a congested market. However, investors seem to feel that AstraZeneca could buy its way out of trouble if product innovations grind to a halt.
An interesting comparison is with GlaxoSmithKline. Tadakata Yamada, its influential head of research and development, has taken up a coveted post in the Bill and Melinda Gates Foundation. His resignation could be the first of a boardroom sea-change that could eventually displace the aging chief executive, Jean-Pierre Garnier. The loss of Mr Yamada could jeopardise delivery on the impressive portfolio of new drugs GlaxoSmithKline possesses.
Unlike AstraZeneca, GSK can absorb the threat of copycat manufacturers thanks to the sheer volume of new products up its sleeve. However, increased competition for future acquisitions from an AstraZeneca flexing its financial muscles could hint at tougher times ahead for GlaxoSmithKline.
