SkyePharma Results Announcement for Year Ended December 31, 2000

Apr 02, 2001, 01:00 ET from SkyePharma PLC

    LONDON, April 2 /PRNewswire/ -- SkyePharma PLC (Nasdaq:   SKYE; LSE: SKP)
 announced today its interim results for the period ended December 31, 2000.
 Details of the results are summarized below.
 
     Operating Highlights
     Key Products:
     *  DepoCyt(R): oncology/injectable
                 * clearance from the FDA to return DepoCyt to the market
                 * European approval recommended for DepoCyt
 
     * DepoMorphine(TM): pain management/injectable
                 * progression into Phase III trials
 
     * Solaraze(R): pre-cancerous skin condition/topical
                 * gained FDA approval for US during 2000 and now approved in
                   five European countries
                 * licensed to Bioglan for Europe and US in 2000
                 * expected to launch in both Europe and the US in the first
                   half of 2001
 
     * Foradil(R): respiratory/inhalation
                 * entered Phase III European trials in December 2000 & US
                   Phase III trials recently commenced
                 * US and European launch anticipated for 2003
 
     * Xatral OD(R): benign prostatic hypertrophy/oral
                 * second raft of European approvals received
                 * launched in several key European countries during 2000
                   filed with US FDA in December 2000
 
     * Paxil(R) CR: depression/oral
                 * encouraging news from GSK regarding launch
 
     Main board strengthened with appointment of two new high profile
 non-executive directors
 
     Financial Highlights
     * Turnover for year up 37% to 24.3 million pounds (1999: 17.7 million
       pounds)
     * Group operating loss reduced 8% to 18.0 million pounds (1999:
       19.6 million pounds)
     * $30 million agreement to fund future development of DepoMorphine
     * Loss per share 3.9 pence reduced 7% (1999: 4.2 pence)
     * Net cash as at 31 December 2000 of 40.0 million pounds
     * Cash use in operations before financing 26.8 million pounds (1999
       29.7 million pounds)
     * Issue of 5 year Fixed Rate Convertible Bonds raised 57.4 million pounds
     * On track for profitability by end of 2001
 
     Ian Gowrie-Smith, Executive Chairman said, "During 2000 SkyePharma has
 emerged as the leading global provider of drug delivery technologies and
 services. This is due to a combination of strategic acquisitions,
 technological, product and business development, together with carefully
 selected manufacturing, marketing and distribution partnerships.  The
 attractiveness of being a key player in the market became increasingly
 apparent as SkyePharma moved into a new, forceful phase in its development --
 this is set to continue in 2001 and beyond. I am confident that the Company is
 now the most sought-after drug delivery partner world-wide."
 
 
     Chairman's Statement
 
     2000 was a year in which SkyePharma's position as the world's leading drug
 delivery company was endorsed internationally by the pharmaceutical industry.
 The attractiveness of being a key player in the market became increasingly
 apparent as the Company moved into a new, forceful phase in its development.
     Our dual strategy -- to provide value-added service to our pharmaceutical
 clients in exchange for high returns and to pursue selective internal projects
 to a later stage of development thereby providing a platform of future high
 value licensing partnerships, has started to set us apart from our
 competitors.
     Having widened our technology base to a formidable portfolio of five
 proven drug delivery systems, three of which are FDA approved, SkyePharma
 became poised to offer the most comprehensive range of drug delivery solutions
 worldwide. Consequently, the Company is gaining an increasing number of
 multiple technology deals with the same clients.  The transition to this
 important vantage point resulted from our decision to adopt an aggressive
 expansion of the Company, adding value, at comparatively low risk, to our
 activities. I am happy to report that it also put us firmly on track to
 profitability by the end of 2001.
     During 2000 we successfully completed a Convertible Bond Issue raising
 approximately 60 million pounds. The rationale was to retain leadership and
 realize maximum value by investing heavily in our technologies. Additionally,
 an important agreement with Paul Capital Royalty Acquisition Fund to
 contribute $30 million over two years to fund DepoMorphine through clinical
 trials and regulatory submission -- in return for a share of potential future
 royalties and revenues from four Skyepharma products -- strengthened our
 commitment to continued investment without delaying our move into
 profitability.  Both transactions should enable us to increase dramatically
 our share of future profits.
     The year was marked particularly by our success in driving products to
 launch or near-launch stage. Among key examples are our injectable proprietary
 products: DepoMorphine for pain management, DepoCyt for lymphomatous
 meningitis and the new topical formulation Solaraze for actinic keratosis.
 Deals and partnerships in late stage or near-launch development have borne
 fruit in the non-proprietary sector as well: highlights include Novartis'
 Foradil (asthma) and Sanofi Synthelabo's Xatral OD (benign prostatic
 hypertrophy). There have also been clearer indications of the intentions of
 GlaxoSmithKline (GSK) regarding Paxil CR (depression).
     Key to our strategy is to gain high margins by taking our own proprietary
 products through to late stage development prior to out-licensing. We
 demonstrated during the year how financially beneficial that strategy should
 prove, with DepoCyt and Solaraze having the potential to generate growing
 revenues from 2001. Our aim is to clinch more high value marketing and
 distribution deals by increasing our share of profits with marketing partners,
 such as those established with Chiron in the US (DepoCyt) and Bioglan
 (Solaraze) and Novartis (Foradil) in North America and Europe.
     Never has there been such demand for drug delivery.  SkyePharma's unique
 service offer has attracted a surge of interest and new deals for the business
 at a time when the global drug delivery market continues to have a healthy
 annual growth rate of 15-20%. Our strength in this field is built on solid
 foundations, namely an unrivalled range of stand-alone yet complementary
 technologies in the injectable, inhalation, oral, topical and improved drug
 solubility fields. These enable us to cover over 95% of the drug delivery
 spectrum.
     We have also demonstrated our capacity to take on rewarding support
 functions, from feasibility and development, clinical trial management and
 regulatory submission to manufacturing. With GSK's anti-Parkinson's drug
 Requip, for example, we have undertaken a full service role through to
 regulatory filing.
     Expertise in each of our technologies has been recognized and endorsed by
 numerous large clients: with Amgen, Pfizer and Kirin of Japan in the
 injectables sector, Novartis in inhalation, Sanofi Synthelabo, GSK and Pfizer
 in oral technology and with Bioglan in the field of dermatology. In addition
 we have undertaken carefully selected partnerships, such as with Merck KGaA in
 the development of an important undisclosed oral product, Meditech for the
 commercialization of Solaraze in Australia and the Pacific, Bioglan with three
 proprietary topical technologies and Kowa of Japan in the development of
 Statin NK-104 for the treatment of high cholesterol. We are now poised to
 capitalize on the increased level of business by tapping into the highest
 echelons of the value chain.
     Turning to the composition of the Board, I would like to thank former
 Non-executive Directors Nigel Wray and Dr. Thomas Rinderknecht -- who have
 served on the Board since 1995 and 1996 respectively -- for their unstinting
 work on behalf of SkyePharma. Both announced their intentions to step down in
 2000. May I also warmly welcome our two new non-executive appointees, Tamar
 Howson, former senior vice president and director of worldwide business
 development at SmithKline Beecham, and Dr. Jerry Karabelas, formerly chief
 executive officer of Novartis Pharma AG. I am confident that their expertise
 and experience in the industry will have important implications for
 SkyePharma's future.
     Dr. Jacques Gonella has also decided not to seek re-election at the
 upcoming Annual General Meeting.  Dr. Gonella was responsible for starting and
 building Jago, subsequently taken public as SkyePharma.  Although he has not
 had an executive role with the Company since then, we wish to formally convey
 our thanks for his assistance in the sensitive transition from a private Swiss
 company.
     Significant activity in the pipeline will continue in 2001 and beyond. We
 should see Solaraze launched in North America and Europe and Xatral OD --
 already on the market in 6 European countries -- in the US. Following the
 recent return of DepoCyt to the US market we are delighted to be able to
 announce its approval in Europe today and now look forward to its launch in
 Europe and Japan.  Foradil and Requip will move into Phase III clinical trials
 and we expect to announce critical licensing deals for DepoMorphine worldwide
 and DepoCyt in Europe. We also expect additional news on Paxil CR. The short
 and long term prospects for SkyePharma are extremely bright.
     My thanks go to all our staff for the many achievements of 2000 and to our
 shareholders for their continued support.
 
     Ian Gowrie-Smith
     Executive Chairman
 
 
     Review of Operations
     Since 1998 SkyePharma's strategy has been to become the world's foremost
 professional provider of drug delivery technologies. Our mission remains to be
 the drug delivery company of choice to the pharmaceutical and
 biopharmaceutical industry.
     I am pleased to report that during 2000 -- due to a combination of
 strategic acquisitions in 1999, technological, product and business
 development, together with carefully selected manufacturing, marketing and
 distribution partnerships -- SkyePharma has emerged as the leading global
 provider of drug delivery technologies and services. I am confident that the
 Company is now becoming the most sought-after drug delivery partner worldwide.
     Encouragingly, this comes at a time of unparalleled increase in the demand
 from international pharmaceutical and biopharmaceutical companies for
 outsourced drug delivery. We now boast among our expanding pharmaceutical
 client list such names as Novartis, Sanofi-Synthelabo, GlaxoSmithKline (GSK),
 Abbott, Sepracor, Pfizer, Roche, Bioglan, Amgen, Chiron and Kirin.
     Our strategy is two-pronged: to act as a one-stop shop of drug delivery
 for the pharmaceutical industry in return for royalties and milestone
 payments; and to develop a proprietary pipeline using our own resources,
 subsequently to be partnered for marketing at a higher level of royalty
 payment. The progression of this strategy is relatively low risk. All
 molecules currently in advanced development are already approved in some
 format and their efficacy is proven. Indeed, some of the largest
 pharmaceutical companies with whom we work are partners who have publicly
 endorsed SkyePharma's technology with up-front equity investments, Novartis
 and GSK among them.
     Of particular significance has been the considerable progress made within
 our pipeline during 2000, across the range of our technologies. The combined
 estimated market for drugs now using SkyePharma delivery technology, either
 launched or at a late pre-launch stage, now amounts to some $8 billion.
 
     Among the highlights are:
 
     * DepoCyt (oncology/injectable)
     * DepoMorphine (pain management/injectable)
     * Foradil (respiratory/inhalation)
     * Xatral OD (benign prostatic hypertrophy/oral)
     * Paxil CR (depression/oral)
     * Solaraze (pre-cancerous skin disorder/topical)
 
     SkyePharma's strategy is to develop and expand its range of delivery
 technologies and to maintain a technology leadership position in its key
 fields.  This allows the Company to leverage established relationships and to
 gain and nurture new ones, based on a proven track record. Often we do
 business with pharmaceutical companies who are interested in one of our
 technologies to find that they have need for others. Additionally, the
 technology mix enables us to exploit synergies between the delivery platforms
 and intellectual property we own, thus presenting the potential for
 multi-faceted drug delivery and added value for our clients.
     Our platform technologies encompass five key areas. Following the
 acquisition of DepoTech's (now SkyePharma Inc.) injectable technology, the
 former Canadian group Hyal's topical technology business and Medac GmbH's
 nano-particulate solubilisation technology in 1999, we now cover more than 95%
 of the drug delivery market and our technologies constitute the broadest range
 available from a single drug delivery supplier. The technologies are:
 Injectable -- DepoFoam; Inhalation -- metered dose inhaler (MDIs), dry powder
 inhalers (DPIs) and, recently developed, breath actuated inhalers; Oral --
 GEOMATRIX(TM); Topical -- Hyaluronan Induced Targeting (HIT); Nano-particulate
 -- enhanced solubility.
     Having achieved this technological breadth and scope, the main focus of
 2000 was largely product driven. Described in detail within this review is the
 steady stream of product development deals, approvals and launches that came
 to fruition throughout the year. These are set to progress the fortunes of
 SkyePharma in the coming years, as milestone and royalty payments begin to
 make a meaningful impact on our financial performance.
 
     Research and development
     SkyePharma operates from corporate headquarters in central London. The
 main research and development activity for inhalation, oral, solubilisation
 and topical technologies are located in Basel, Switzerland and Lyon, France.
 Our DepoFoam injectable technology is developed and manufactured at our San
 Diego facility in California. The Company's 150 research scientists, clinical
 affairs and regulatory personnel, of whom approximately half hold advanced
 degrees, are recognized as world class.  The top 10 scientists from Basel,
 Lyon and San Diego meet regularly to optimize co-ordination and synergy,
 sharing ideas and innovations to ensure we maintain technological and
 scientific leadership and exploit new ideas.
     A major goal we have set for ourselves is to become a 'one-stop shop' for
 clients and partners wishing to outsource their drug delivery needs, not only
 as a provider of the widest range of drug delivery technologies available but
 also as an expert in providing the clinical, regulatory and manufacturing
 expertise to minimize time to market.
     During the year we successfully achieved our aim to offer a full range of
 support from feasibility and development through to clinical trial management,
 regulatory submission and manufacturing. Our newly formed global clinical and
 regulatory group in San Diego has worked in tandem with the Basel-based
 research and regulatory team to drive the gamut of development activities on a
 number of collaborative ventures including the FDA approval of Solaraze and
 the drug development and clinical trial monitoring for GSK's anti-Parkinson's
 drug Requip(R) (ropinirole). This infrastructure is the foundation upon which
 we now have the capacity to progress internally developed products to late
 stage development.
     This and other innovative transactions are part of a strategic process
 designed to enable SkyePharma to capture the top end of the value chain in
 drug delivery partnering deals. It is a strategy that proved highly
 significant for the Company during the year and one that has helped pave the
 way for projected profitability from the second half of 2001.
 
     Injectable technology
     SkyePharma became a major presence in the new area of controlled release
 injectable technology with the acquisition of DepoTech, renamed SkyePharma
 Inc, in March 1999. Some 15% of the drug delivery market is for injectables.
 SkyePharma Inc is the developer of DepoFoam, a unique lipid based technology
 using a single injection to deliver a sustained drug release for up to weeks
 at a time. DepoFoam technology is approved by the US Food and Drug
 Administration (FDA) via our launched drug DepoCyt.
     DepoCyt is an injectable sustained release chemotherapeutic agent for the
 treatment of lymphomatous meningitis, a serious and potentially fatal
 complication of certain haematological malignancies.  This injectable
 sustained-release formulation of cytarabine is the only FDA approved treatment
 for patients with this disease. It gradually releases cytarabine into the
 cerebral spinal fluid and extends dosing intervals to once every two weeks
 compared to the standard intrathecal dosing of twice or three times a week.
 Chiron Corporation markets the product in the US.  SkyePharma and Chiron share
 profits on a 50/50 basis. In July 2000 SkyePharma granted exclusive Canadian
 marketing and distribution rights for DepoCyt to Paladin Labs Inc. The terms
 of the deal included a US$1 million up-front payment, together with additional
 milestone payments tied to future events and a significant share of future
 revenues.
     In early March 2001 SkyePharma and Chiron Corporation received clearance
 from the FDA to return DepoCyt(R) to the market. Chiron and SkyePharma
 voluntarily withdrew DepoCyt from the market in October 1999.  Upon routine
 stability testing, it was discovered that certain batches of DepoCyt,
 incorporating a raw material that had been developed using a different
 process, did not meet all regulatory specifications.  There were no adverse
 events attributed to the recalled batches and the product was made available
 to patients on a compassionate basis during the year. Today's announcement
 that we have obtained approval for DepoCyt in Europe paves the way for its
 launch in Europe this year and Japan in the future.
     A second key development for our injectable technology was the progression
 of DepoMorphine to Phase III trials and an agreement with Paul Capital Royalty
 Acquisition Fund. The deal provides SkyePharma with $30 million over the next
 two years to fund clinical development and regulatory submission.  This
 transaction enables us to fund and invest in the clinical development of
 DepoMorphine without the research and development cost affecting our timescale
 to profitability.
     DepoMorphine has a unique profile in the management of moderate-to-severe
 post-operative pain, offering 48 hours of pain relief with a single
 pre-operative injection. In clinical trials the drug scored 'excellent
 ratings' compared with standard morphine and intravenous fentanyl.  The market
 in the US for injectable hospital pain management products is estimated at
 $530 million: With fully funded clinical trials, we have greater flexibility
 in our licensing strategy and expect to license the product to a partner on
 very favorable terms.
     We announced in early 2000 that the Company was in feasibility studies or
 scaling up for pre-clinical studies of seven new products with DepoFoam.
 During the year two important deals -- for yet undisclosed compounds -- were
 unveiled with Amgen Inc. and Kirin of Japan. Both these deals mark significant
 development milestones for DepoFoam and spearhead an accelerating deal flow
 for this promising platform technology.
 
     Inhalation technologies
     Inhaled pharmaceuticals are almost exclusively used for the treatment of
 asthma and bronchitis, attracting more than 50 million patients in the
 industrialised world. Annual sales of these products are about $5.8 billion
 and are growing at the rate of 10% per annum. The pulmonary drug market is on
 track to nearly double in size to approximately $10 billion by 2005.
     SkyePharma is active in environmentally-friendly non-CFC propelled metered
 dose inhalers, dry powder inhalers, under the brand name 'SkyeHaler' and -- as
 a result of collaboration with PA Consulting -- a breath-activated inhaler
 device designed to deliver asthma drugs more efficiently. In this latter
 venture PA Consulting have provided their expertise in device development and
 SkyePharma has provided its expertise in non-CFC metered dose formulation.
     Among the major partners to have adopted SkyePharma's inhaler technologies
 are Novartis for Foradil, Sepracor and Boehringer Ingelheim. Significantly,
 Foradil moved into Phase III European trials in late 2000 and US Phase III
 trials have just commenced. We expect a US and a European launch in 2003.
     Under the terms of the deal with Novartis, SkyePharma has produced a new
 formulation of Foradil within the Company's multi-dose SkyeHaler. Small and
 easy to use, SkyeHaler has unique interactive safety and monitoring functions
 and will be produced on a fully automated line from SkyePharma's Lyon factory
 at a comparable cost to other inhalers on the market. The worldwide sales
 potential for Foradil based on internal forecasts is estimated at up to
 $600 million. SkyePharma expects royalties and manufacturing revenues of over
 10%.
     International research underlines the potential of the SkyeHaler.  Of four
 dry powder inhalers evaluated by patients in independent research, SkyeHaler
 was the most frequent first choice in all countries and in all age groups (up
 to 65 years old), among both males and females and both mild-to-moderate and
 severe asthma sufferers.
     SkyePharma is at the forefront of the delivery of products to the lung for
 asthma, and anticipates that it will be able to expand its client base to make
 this a major contributor to our growth.
 
     Oral technology
     SkyePharma's oral capabilities are provided by the sophisticated tablet
 system within the GEOMATRIX family of technologies, which control the amount,
 timing and location of the release of drug compounds through the digestive
 tract. The combination of different chemical components in the core and
 barrier layers of a tablet, each with different rates of swelling, gelling and
 erosion, allows the production of tablets with a wide range of predictable and
 reproducible drug release profiles. Oral drug delivery accounts for 50% of the
 growing $45 billion global drug delivery market.
     Currently six GEOMATRIX products have received regulatory and marketing
 approvals, two in the US and four in Europe. There are eight technologies
 within the GEOMATRIX family, enabling delivery of a wide range of
 difficult-to-formulate drugs. Protected by comprehensive, long-life patents,
 GEOMATRIX formulations can be manufactured at low cost and high volume, using
 standard raw materials and equipment. New coatings and polymers are being
 investigated continually to enable SkyePharma to respond precisely to changes
 in gastrointestinal tract conditions, such as pH and food effects. At the same
 time the Company is researching potential for a dual-technology approach to
 some applications by combining, for example, its oral and solubilisation
 technologies.
     During 2000 a second raft of European approvals for Sanofi-Synthelabo's
 once-daily formulation of alfuzosin, Xatral OD, was announced, closely
 followed by the drug's filing for marketing approval in the US where it is due
 to be introduced for the first time. Xatral is used for the treatment of
 functional symptoms of benign prostatic hypertrophy (BPH), a common disorder
 in men over the age of 50. It is available in more than 80 countries as a two
 or three-times daily formulation.  In 2000, European sales were in the region
 of Euros 120 million. Estimated global sales potential is $400 million. The
 once-a-day alternative, using SkyePharma's proprietary GEOMATRIX technology,
 is now launched in the UK, Denmark, France, Sweden, Switzerland and The
 Netherlands.
     GSK's once-daily anti-Parkinson's drug Requip (ropinirole) entered Phase
 II trials during the year. SkyePharma is handling all development activities
 up to regulatory filing. The deal, concluded in September 1999, included an
 $8 million equity investment in SkyePharma by GSK and further cemented a
 fruitful, long-term relationship between the two companies.
     GSK's GEOMATRIX-delivered Paxil CR -- approved in 1999 in 12.5 mg and 25
 mg strengths for depression -- remains a significant potential revenue earner
 for SkyePharma. During 2001 GSK announced that it had received an approvable
 letter from the FDA for a second CR indication, panic disorder, and gave
 notification it was working on a third CR indication, pre-menstrual dysphoric
 disorder (PMDD), a severe form of pre-menstrual syndrome. Paxil in its current
 form is the seventh largest pharmaceutical product in the world with revenues
 of some 1.6 billion pounds in 2000, and growing at the rate of 17% year on
 year. We anticipate that Paxil CR will be a significant contributor to GSK's
 anti-depressant therapy franchise.
     GEOMATRIX technology attracted two further development agreements during
 2000. In March we signed a feasibility contract with Pfizer to formulate an
 undisclosed compound using our advanced oral delivery technology. A
 development with Merck KGaA, Darmstadt, has also commenced. Results of several
 prototype formulations demonstrated proof of concept, leading to agreement for
 SkyePharma to take responsibility for scaling up the process, providing
 materials for clinical trials and assisting Merck in the compilation of a
 regulatory dossier. The product will be manufactured on behalf of Merck from
 SkyePharma's FDA-approvable Lyon factory.  Both projects are progressing to
 plan.
 
     Topical technology
     The most recent addition to our platform portfolio was the acquisition of
 a superior topical technology in late 1999 -- aimed at the topical delivery of
 drugs through or into the skin. The delivery technique's main constituent,
 hyaluronan (HA) has fundamental benefits for the localisation of drugs applied
 to the skin via Hyaluronan Induced Targeting (HIT). Drugs formulated in HA
 achieve prolonged dermal retention, a specific characteristic of the
 formulation. HA offers unique potential for the treatment of a variety of skin
 conditions such as psoriasis, eczema and acne. The technology is appropriate
 for dermal use of many drugs including corticosteroids, antibiotics,
 antifungals, antivirals and retinoids.
     Solaraze, the first in SkyePharma's pipeline of proprietary topical
 formulations, gained approval in the US during 2000 and is approved in five
 European countries, with more pending. It is also approved in Canada. Solaraze
 is indicated for the treatment of actinic keratosis (AK), a pre-cancerous skin
 condition.  Solaraze is expected to be launched in both Europe and the US in
 the first half of 2001. Age, sun exposure and fair skin are risk factors for
 the development of AK.  Current treatment includes cryosurgery, the freezing
 off with liquid Nitrogen, which can result in scarring. However, most patients
 with AK do not currently seek treatment.  Increased awareness of skin cancer
 is likely to lead to real growth in the numbers who do in the future.
     An agreement was signed in March with Bioglan Pharma PLC to undertake the
 European manufacture, marketing and distribution of Solaraze.  They paid an
 up-front licensing fee and we will receive royalties on sales. We have also
 recently announced the licensing of Solaraze for the US, Canada and Mexico to
 Bioglan.  The North American market is conservatively valued at some
 $250 million.
     Having one dedicated company as our marketing partner for both the US and
 Europe will provide a unity of strength and commercial focus for this
 important new product. As a result of the US deal, SkyePharma received
 $14 million as an up-front payment. There will be future milestone payments
 with Solaraze's commercial launch and additional milestones if the product
 reaches certain sales targets, plus royalties on net sales. It is our belief
 that total milestone payments could reach $29 million over the next five years
 for the US alone.
     Meanwhile, Solaraze is set to profit in the Asia Pacific market -- where
 in Australia, for example, incidence of AK is reported in 40%-50% of people
 aged over 40 -- following the grant of a license to Meditech Research Limited
 to commercialize the product in Australia, New Zealand, Malaysia and Singapore
 through its licensee. SkyePharma will receive a 15% share of all revenues
 earned by Meditech in these territories with Solaraze and associated products.
 We are working closely with Meditech and its licensing partner to expedite
 Australian regulatory approval.
     Our deal with Meditech also allowed us to commercialize a further part of
 the HA portfolio.  We granted Meditech a non-exclusive license over the HIT
 Technology to enable it to exploit its anti-cancer HyACT(TM) project
 worldwide.  SkyePharma will receive 10% of all net revenue from the HyACT
 project.
     Our leadership in this topical delivery sector was further cemented at the
 turn of 2000/01 when SkyePharma gained certain licensing rights to three of
 Bioglan's topical drug delivery technologies -- Crystalip, DermaStick and two
 products utilizing the ES-Gel system -- for $9 million.  Crystalip enhances
 stability of drugs by embedding them in lipid crystals. DermaStick presents
 the active ingredient in a wax stick, enabling controlled application to
 affected skin. ES Gel is a semi-solid formulation producing enhanced
 solubility of drugs. We are entitled to retain the first $9 million of all new
 income generated by SkyePharma from the three technologies and, thereafter,
 all other income will be split 50:50 between Bioglan and SkyePharma.
 
     Nano-particulate technology
     Nano-particulate technology or enhanced solubilisation -- is an exciting
 fifth dimension to SkyePharma's technology portfolio. Solubility problems lead
 to an estimated 40% of newly synthesized compounds being abandoned at the
 research and development stage.
     Solubility is an essential factor for effectiveness in all drugs,
 independent of the administration route. SkyePharma has two patented
 approaches: nano-suspensions and solid lipid nano-particles. Crucial to
 SkyePharma's service offer is that, using nano-particulate technology, we are
 now able to produce drugs that would not otherwise be suitable for formulation
 in conventional formats. Our double technology approach is providing drug
 delivery solutions for many compounds to be delivered via the inhaled, oral,
 injectable and topical routes.
     SkyePharma's ability to make drug particles nano-sized for improved
 solubility has enormous implications for both stand-alone and dual technology
 applications across our platform technologies. We saw the start of this in
 2000 when we signed two early stage feasibility studies for this technology
 and started work on improvements to several internal compounds prior to
 partnering.
 
     Business development and partnership
     SkyePharma's eight-strong business development team was expanded both in
 number and geographic coverage during 2000 with particular emphasis on new
 opportunities in the US, from which some 80% of the Company's business
 emanates. The team's first success of the year was the signing of a
 development agreement with Amgen to use DepoFoam for an undisclosed drug,
 followed by a tranche of further deals, a number of which we have been able to
 announce.
     The scientific calibre and potential market value of drugs using our
 technologies has enthused the team to pursue and gain new business at levels
 of return in keeping with our aspirations to tap the top end of the market's
 value chain. Proof of our success in this strategy has been the steady flow of
 new partnerships -- Pfizer, Merck KGaA, Amgen, Kirin, Bioglan and PA
 Consulting to name a few.
     Just prior to reporting, a further deal was struck with Kowa Ltd of Japan
 for development of their Statin NK-104, a new lipid-lowering agent for the
 treatment of high cholesterol. NK-104 is a potent new statin under development
 by Kowa and already submitted for marketing authorization in Japan. Phase II
 trials have been completed in Europe and are expected to start in the US
 shortly. We are delighted that Kowa has selected SkyePharma as the partner for
 its first important product aimed at the European and US markets. The deal
 will give us responsibility for providing materials for clinical trials at our
 Lyon factory and highlights the expertise we can offer partners in product
 development and manufacturing.
     The year was also one in which significant enhancements to our
 manufacturing and R&D sites were unveiled. In Basel construction work was
 completed for the new R&D building, largely prompted by imminent large-scale
 development activities in our inhalation business and to accommodate our
 expanding nano-particulate activities. The new building adds new technical
 installations, galenical facilities for the oral drug delivery department and
 analytical and galenical laboratories for the aerosols and inhalation
 department. Providing space for approximately 45 people, the building is
 designed to allow for further expansion at a later date. The new building will
 help R&D staff handle more projects to tighter deadlines and work in closer
 co-operation with regulatory and clinical affairs colleagues.
     We are delighted that in early 2001 the FDA approved the re-introduction
 of DepoCyt into the US market.  We have been manufacturing stable product from
 our San Diego facility since December 1999.  In addition a separate 85,000 sq.
 ft. factory has gained Drug Enforcement Agency approval and is poised to
 produce DepoMorphine and other products to a capacity of 12 million vials a
 year.
     In Lyon we continue to manufacture GEOMATRIX tablets and inhaled metered
 dry powder formulations from our 183,000 sq. ft. production facility, deemed
 approvable by the FDA in 1998.  A key achievement in 2000 was the manufacture
 of 35,000 dry powder inhalers for the start of Phase III clinical trials for
 Foradil in Europe and the US. To ensure on-time production and delivery, new
 machinery -- such as an automated and integrated line for granulation and
 drying -- has been installed during the year.
     The quantity and quality of our traditional business, combined with our
 decision to develop selectively a number of projects to a later stage of
 development prior to licensing, has begun to provide return. We are therefore
 increasingly being rewarded in the 13% to 15% royalty rate band, rather than
 the 3% to 5% that was the norm when SkyePharma floated in 1996. Additionally,
 by funding products through the clinical trial process we can share up to 50%
 of the profits, as illustrated in our agreement with Chiron for DepoCyt.
     We will continue along this path to profit, combining unrivalled
 technological infrastructure, a highly skilled workforce and flexible
 manufacturing, marketing and distribution models to further establish
 SkyePharma as the world's number one choice for drug delivery.
 
     Michael Ashton
     Chief Executive Officer
     FINANCIAL REVIEW
 
     Turnover - Turnover in the year ended 31 December 2000 increased by 37% to
 24.3 million pounds compared to 17.7 million pounds in 1999.  This represents
 a cumulative annual growth rate of 28% since 1996.
     Contract research and development including milestone payments increased
 by 86% to 16.8 million pounds in 2000. Milestone payments in 2000 include 8.9
 million pounds ($14 million) received from Bioglan on the licensing of
 Solaraze in the US, Canada and Mexico. Manufacturing and distribution revenues
 decreased to 3.5 million pounds in 2000 compared to 4.6 million pounds in
 1999, mainly as a result of the absence of revenues from the manufacture and
 sale of DepoCyt.  Royalty income was earned primarily from the licensing of
 part of the Group's portfolio of generic products and from Dilacor XR and
 amounted to 4.0 million pounds in 2000 compared to 4.1 million pounds in 1999.
 The first royalty income from Xatral was also received in the year.  The
 Company also received #2.9 million during 2000 under its agreement to finance
 the development of DepoMorphine shown below as "Other Operating Income".
     Cost of Sales - Cost of sales consists of research and development
 expenditures, including the costs of certain clinical trials incurred on
 behalf of our collaborative partners; the direct costs of contract
 manufacturing; direct costs of licensing arrangements; and royalties payable.
 Cost of sales were 15.6 million pounds in 2000 compared to 14.9 million pounds
 in 1999. Gross profit trebled to 8.7 million pounds in 2000 compared to
 2.9 million pounds in 1999 as a result of the increase in milestone payments
 received.
     Expenses - Selling, marketing and distribution expenses were 3.8 million
 pounds in 2000 compared to 3.2 million pounds in 1999, primarily due to a full
 year's expenses for SkyePharma's business development presence in North
 America.  Research and development expenses increased by 95% to 13.1 million
 pounds compared to 6.7 million pounds in 1999, due primarily to increased
 expenditure on DepoCyt and DepoMorphine. Administrative expenses were 12.6
 million pounds in 2000, the same as in 1999.
     Other Operating Income - In December 2000 the Group received 2.9 million
 pounds ($4.4 million) under an agreement with Paul Capital Royalty Acquisition
 Fund, L.P. by which it will receive a total of $30 million over the next two
 years to fund the clinical development and regulatory submission of
 DepoMorphine in return for the sale of a proportion of potential future
 royalty and revenue streams from DepoMorphine and certain SkyePharma products.
 Research and Development costs for DepoMorphine were 4.3 million pounds in
 2000.  This is explained more fully in note 3.
     Operating Results - Operating loss fell by 8% from 19.6 million pounds in
 1999 to 18.0 million pounds in the year. This was achieved at a time when R&D
 expenses were almost doubled.  The absence of DepoCyt from the market place in
 2000 also adversely impacted SkyePharma's operating result by some 5.8 million
 pounds.  DepoCyt was re-introduced to the market in March 2001.  The cost of
 amortizing goodwill and recent intellectual property acquisitions more than
 doubled to 3.3 million pounds during the year.
     The Group's loss on ordinary activities before tax was 19.7 million pounds
 in 2000, after a net interest payable increase of 1.7 million pounds, compared
 to 19.3 million pounds in 1999.  The loss per share for the year fell by 7% to
 3.9 pence compared to 4.2 pence in 1999.
     Foreign currency exchange movements did not have a material impact on the
 results of operations in 2000 compared with 1999.
     Cash Balances and Cash Flow - On 16 June 2000 the Company issued five
 year, 6% Convertible Bonds raising approximately 57.4 million pounds net of
 expenses.  The Bonds have an initial conversion price of 132 pence,
 representing a premium of 27% over the prevailing market price of 104 pence on
 the pricing date of 17 May 2000.  The conversion price may be recalculated
 based upon the average of the 10 dealing days prior to 19 June 2001.  In no
 event can the conversion price fall below 83 pence.
     At 31 December 2000 SkyePharma had cash and short-term deposits of 42.8
 million pounds and bank overdrafts of 2.8 million pounds. The net cash used in
 operating activities fell by 39% during 2000 to 9.3 million pounds.  Purchases
 of intangible fixed assets were 7.2 million pounds and purchases of tangible
 fixed assets were 8.4 million pounds.  The intangible purchases related
 principally to the acquisition of the Crystalip, DermaStick and ES-Gel
 technology rights from Bioglan for 5.9 million pounds and the capitalization
 of certain patent costs.
     The tangible fixed asset purchases in the year relate primarily to the
 extension of the Group's Muttenz administration building to accommodate the
 expansion of the Group's Inhalation business and the new solubility technology
 (1.6 million pounds) and 3.9 million pounds of expenditure in Muttenz and Lyon
 related to DPI manufacturing for Foradil, our DPI product with Novartis. Other
 purchases were 3.0 million pounds, primarily equipment across the Group.  The
 resulting total cash outflow from operations (before financing) for the year
 was 26.8 million pounds, compared to 29.7 million pounds in 1999. In addition
 the Group repaid some 3.8 million pounds (net) of debt.
     Balance Sheet - The Group balance sheet at 31 December 2000 shows
 shareholders' funds of 69.0 million pounds. The balance sheet is significantly
 impacted by goodwill, deferred consideration and shares to be issued.  At 31
 December 2000 the goodwill recorded within the profit and loss account reserve
 amounted to 152.6 million pounds and the deferred consideration and shares to
 be issued amounted to 7.0 million pounds.
     As reported last year a settlement agreement was signed on 31 March 2000
 establishing the full and final settlement of the deferred consideration
 payable on the 1996 acquisition of Jago.  The settlement was approved by
 shareholders at the Company's Annual General Meeting held on 11 July 2000.
 Following approval, some 6 million Ordinary Shares and 24 million Deferred
 Shares were issued. The conversion of Deferred Shares into 24 million Ordinary
 Shares is contingent upon the commercial sale of Paroxetine/Paxil CR (see Note
 8). The issue of the 24 million Deferred Shares has been recorded on the
 balance sheet as non-equity shares and non-equity share premium, based upon a
 share value of 94.25 pence, the price on the date of issue.
     On 4 April 2000 the Company announced that the final contingent payment on
 the acquisition of DepoTech had been triggered following the signing of a
 contract to utilise DepoFoam technology for a macromolecule.  As a result
 12.1 million shares were issued on 25 April 2000 at a value of 13.3 million
 pounds, bringing the total consideration payable on the acquisition to 49.4
 million pounds.
     On 21 July 2000, the Company issued 1,461,455 shares with a market value
 of $2.0 million to Medac GmbH being deferred consideration due upon the
 satisfactory transfer of the nano-particulate technology and know-how to
 SkyePharma.
     Under US GAAP, the Company's loss on ordinary activities would have been
 29.2 million pounds, and shareholders' equity would be positive at 145.9
 million pounds.  The increased loss under US GAAP is due principally to
 increased amortization of intangible assets and to differences in revenue
 recognition.
 
     Forward-Looking Statements - The foregoing discussions contain certain
 forward-looking statements with respect to certain development projects,
 potential collaborative partnerships, results of operations and certain plans
 and objectives of SkyePharma.  By their nature forward-looking statements
 involve risk and uncertainty that could cause actual results and developments
 to differ materially from those expressed or implied.  The significant risks
 related to SkyePharma's business are discussed in SkyePharma's SEC filings
 under the captions, Risk Factors and Certain Investment Considerations.
 
     Donald Nicholson
     Finance Director
 
 
     CONSOLIDATED PROFIT AND LOSS ACCOUNT
 
                                                    Year to      Year to
                                       Notes     31 December   31 December
                                                      2000          1999
                                                '000 pounds   '000 pounds
 
     Turnover                              2          24,292        17,739
     Cost of sales                         2        (15,598)      (14,854)
     Gross profit                                      8,694         2,885
     Selling, marketing and distribution
      expenses                                       (3,844)       (3,161)
     Administration expenses
      Amortization                                   (3,339)       (1,540)
      Other administration expenses                  (9,291)      (11,044)
                                                    (12,630)      (12,584)
     Research and development expenses              (13,104)       (6,728)
     Other operating income                3           2,900            --
     Operating loss                        2        (17,984)      (19,588)
     Share of operating loss in Joint Venture             --          (48)
     Loss on ordinary activities before interest
      and tax                                       (17,984)      (19,636)
     Reversal of provision for loss on disposal of
      fixed asset investment                              --           381
     Interest receivable                               1,806         1,364
     Interest payable                      4         (3,508)       (1,391)
     Loss on Ordinary activities before taxation    (19,686)      (19,282)
     Taxation                                            (4)         (132)
     Retained loss                                  (19,690)      (19,414)
     Basic and diluted loss per Ordinary
      Share                                5          (3.9p)        (4.2p)
 
     There was no material difference between the loss on ordinary activities
 before taxation and the historical cost loss before taxation in 2000 and 1999.
 All results represent continuing activities.
 
     See Notes to the Preliminary Announcement.
 
     CONSOLIDATED BALANCE SHEET
 
 
                                                      31                31
                                       Notes        December   31 December
                                                        2000          1999
                                                  '000 pounds    '000 pounds
     Fixed assets
     Intangible assets                     6          72,086        49,753
     Tangible assets                                  40,288        33,838
                                                     112,374        83,591
     Current assets
     Stocks                                            1,636         1,134
     Debtors                                           6,937         8,335
     Cash and short-term bank deposits                42,878        13,674
                                                      51,451        23,143
     Creditors - amounts falling due within
      one year                                      (20,541)      (16,632)
     Net current assets                               30,910         6,511
     Total assets less current liabilities           143,284        90,102
     Creditors: amounts due after more than one year
     Other creditors                                (14,667)      (15,855)
     Convertible debenture due February 2001              --         (103)
     Convertible bonds due June 2005       7        (57,546)            --
                                                    (72,213)      (15,958)
                                                      71,071        74,144
     Provisions for liabilities and charges
     Deferred consideration                            2,008         1,861
     Other                                               111           226
                                                       2,119         2,087
     Capital and reserves
     Share capital                         8          54,132        49,409
     Share premium                                   261,569       221,091
     Currency translation reserve                    (1,427)       (2,185)
     Shares and warrants to be issued      8           4,985        38,131
     Other reserves                                   11,212        11,058
     Profit and loss account                       (261,519)     (245,447)
     Shareholders' funds
     Attributable to Equity interests                 46,332        72,057
     Attributable to Non-equity interests             22,620            --
                                                      68,952        72,057
                                                      71,071        74,144
 
     See Notes to the Preliminary Announcement.
 
     CONSOLIDATED CASH FLOW STATEMENT
 
 
                                                  Year to 31    Year to 31
                                       Notes        December      December
                                                      2000            1999
                                                 '000 pounds      '000 pounds
 
     Net cash outflow from operating
      activities                         (b)         (9,312)      (15,139)
     Returns on investments and servicing of finance
     Interest received                                 1,297         1,449
     Interest paid                                   (2,941)       (1,337)
     Interest element of finance lease payments        (232)          (92)
                                                     (1,876)            20
     Taxation                                            (8)         (194)
     Capital expenditure and financial investment
     Purchase of intangible fixed assets             (7,180)       (4,029)
     Purchase of tangible fixed assets               (8,470)       (7,820)
     Proceeds from sale of fixed asset investment         --           381
                                                    (15,650)      (11,468)
     Acquisition and disposals
     Purchase of subsidiary undertakings                  --       (2,998)
     Net cash acquired with subsidiary                    --            48
                                                          --       (2,950)
     Cash outflow before use of liquid resources
      and financing                                 (26,846)      (29,731)
     Management of liquid resources
     Net (increase)/decrease in short-term bank
      deposits                                      (21,641)        19,989
     Financing
     Issue of Ordinary Share capital                   2,088         5,038
     Issue of convertible bonds                       59,400            --
     Expenses of convertible bond issue              (2,022)            --
     Debt due within one year:
      Increase in borrowings                           1,187            --
      Repayment of loans                             (2,846)         (460)
     Debt due beyond one year:
     Increase in borrowings                               --         2,998
     Repayment of loans                              (1,226)       (1,357)
     Lease payment received under sale and
     leaseback transaction                                --         2,999
     Repayment of capital element of finance
      lease payments                                   (891)         (944)
                                                      55,690         8,274
     Increase/(decrease) in cash                       7,203       (1,468)
 
 
     NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
 
     (a)   RECONCILIATION OF MOVEMENTS IN NET (DEBT)/FUNDS
 
                                                   Year to 31     Year to 31
                                                     December       December
                                                         2000           1999
                                                  '000 pounds    '000 pounds
 
     Increase/(decrease) in cash in the year            7,203        (1,468)
     Cash outflow/(inflow) from change in debt
      and lease financing                               3,776        (3,236)
     Cash outflow/(inflow) from increase in
      liquid resources                                 21,641       (19,989)
     Issue of convertible bonds                      (57,378)             --
     Change in net debt resulting from cash flows    (24,758)       (24,693)
     Loans and finance leases acquired with
      subsidiary                                           --        (5,187)
     Short-term bank deposits acquired with
      subsidiary                                           --          3,223
     New finance leases                                    --           (34)
     Conversions of debentures                            103          2,337
     Debenture interest                                    --          (116)
     Expenses of convertible bonds                      (167)
     Issue of loan note                               (2,307)        (6,008)
     Translation difference                             (907)            921
     Movement in net debt in the year                (28,036)       (29,557)
     Net (debt)/funds at beginning of the year        (8,254)         21,303
     Net debt at end of the year                     (36,290)        (8,254)
 
     Net (debt)/funds is defined as cash and liquid resources less borrowings.
 
     (b)   RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING
            ACTIVITIES
 
                                                      Year to        Year to
                                                  31 December    31 December
                                                         2000           1999
                                                  '000 pounds    '000 pounds
 
     Operating loss                                  (17,984)       (19,588)
     Depreciation                                       3,945          3,842
     Amortization                                       3,339          1,540
     (Increase)/decrease in stocks                      (426)            325
     Decrease/(increase) in debtors                     3,247        (1,627)
     (Decrease)/increase in creditors                 (1,283)          1,124
     Decrease in provisions                             (150)          (755)
     Net cash outflow from operating activities       (9,312)       (15,139)
 
     STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES
 
                                                      Year to        Year to
                                                  31 December    31 December
                                                         2000           1999
                                                  '000 pounds    '000 pounds
 
     Loss attributable to shareholders               (19,690)       (19,414)
     Net currency translation effect
     Group                                                758        (2,220)
     Share of Joint Venture                                --          (627)
                                                          758        (2,847)
     Total recognised gains and losses for the
      year                                           (18,932)       (22,261)
 
 
     RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
 
                                                      Year to        Year to
                                                  31 December    31 December
                                                         2000           1999
                                                  '000 pounds    '000 pounds
 
     Shareholders' funds at the beginning of
      the year                                         72,057          6,235
     Total recognized gains and losses for
      the year                                       (18,932)       (22,261)
     Reinstatement on dissolution of joint venture
      of goodwill previously written off to reserves       --          5,760
     Goodwill adjustments on deferred consideration     3,618          8,900
     Equity shares issued, net of expenses             22,581         41,573
     Non-equity shares issued, net of expenses         22,620             --
     (Decrease)/ increase in shares and warrants
      to be issued                                   (29,528)         40,750
     Revaluation of shares and warrants to be
      issued                                         (3,618))        (8,900)
     Issue of warrants                                    154             --
     Net movement in the year                         (3,105)         65,822
     Shareholders' funds at the end of the year        68,952         72,057
 
     For the notes to the financial statements, please contact the Company
 directly in the U.S. at (212) 753-5780 or in the U.K. at 44 207 491 1777.
 
     SkyePharma PLC, one of the world's leading drug delivery companies,
 provides innovative services to major pharmaceutical partners from the point
 of drug discovery through the approval process. Its five technologies, oral,
 injectable, inhalation, topical, and nanoparticulate solubilization encompass
 the vast majority of delivery systems in use by the pharmaceutical industry.
 For more information, visit SkyePharma's web site at
 http://www.skyepharma.com.
 
     This press release may contain forward-looking statements regarding
 SkyePharma PLC.  Actual results may differ materially from those described in
 the press release as a result of a number of factors, including but not
 limited to the following: There can be no assurance that any product in the
 SkyePharma product pipeline will be successfully developed or manufactured, or
 that final results of human clinical trials will result in the regulatory
 approvals required to market products, or that final regulatory approval will
 be received in a timely manner, if at all, or that patient and physician
 acceptance of these products will be achieved.  The Company undertakes no
 obligation to revise or update any such forward-looking statement to reflect
 events or circumstances after the date of this release.
 
 

SOURCE SkyePharma PLC
    LONDON, April 2 /PRNewswire/ -- SkyePharma PLC (Nasdaq:   SKYE; LSE: SKP)
 announced today its interim results for the period ended December 31, 2000.
 Details of the results are summarized below.
 
     Operating Highlights
     Key Products:
     *  DepoCyt(R): oncology/injectable
                 * clearance from the FDA to return DepoCyt to the market
                 * European approval recommended for DepoCyt
 
     * DepoMorphine(TM): pain management/injectable
                 * progression into Phase III trials
 
     * Solaraze(R): pre-cancerous skin condition/topical
                 * gained FDA approval for US during 2000 and now approved in
                   five European countries
                 * licensed to Bioglan for Europe and US in 2000
                 * expected to launch in both Europe and the US in the first
                   half of 2001
 
     * Foradil(R): respiratory/inhalation
                 * entered Phase III European trials in December 2000 & US
                   Phase III trials recently commenced
                 * US and European launch anticipated for 2003
 
     * Xatral OD(R): benign prostatic hypertrophy/oral
                 * second raft of European approvals received
                 * launched in several key European countries during 2000
                   filed with US FDA in December 2000
 
     * Paxil(R) CR: depression/oral
                 * encouraging news from GSK regarding launch
 
     Main board strengthened with appointment of two new high profile
 non-executive directors
 
     Financial Highlights
     * Turnover for year up 37% to 24.3 million pounds (1999: 17.7 million
       pounds)
     * Group operating loss reduced 8% to 18.0 million pounds (1999:
       19.6 million pounds)
     * $30 million agreement to fund future development of DepoMorphine
     * Loss per share 3.9 pence reduced 7% (1999: 4.2 pence)
     * Net cash as at 31 December 2000 of 40.0 million pounds
     * Cash use in operations before financing 26.8 million pounds (1999
       29.7 million pounds)
     * Issue of 5 year Fixed Rate Convertible Bonds raised 57.4 million pounds
     * On track for profitability by end of 2001
 
     Ian Gowrie-Smith, Executive Chairman said, "During 2000 SkyePharma has
 emerged as the leading global provider of drug delivery technologies and
 services. This is due to a combination of strategic acquisitions,
 technological, product and business development, together with carefully
 selected manufacturing, marketing and distribution partnerships.  The
 attractiveness of being a key player in the market became increasingly
 apparent as SkyePharma moved into a new, forceful phase in its development --
 this is set to continue in 2001 and beyond. I am confident that the Company is
 now the most sought-after drug delivery partner world-wide."
 
 
     Chairman's Statement
 
     2000 was a year in which SkyePharma's position as the world's leading drug
 delivery company was endorsed internationally by the pharmaceutical industry.
 The attractiveness of being a key player in the market became increasingly
 apparent as the Company moved into a new, forceful phase in its development.
     Our dual strategy -- to provide value-added service to our pharmaceutical
 clients in exchange for high returns and to pursue selective internal projects
 to a later stage of development thereby providing a platform of future high
 value licensing partnerships, has started to set us apart from our
 competitors.
     Having widened our technology base to a formidable portfolio of five
 proven drug delivery systems, three of which are FDA approved, SkyePharma
 became poised to offer the most comprehensive range of drug delivery solutions
 worldwide. Consequently, the Company is gaining an increasing number of
 multiple technology deals with the same clients.  The transition to this
 important vantage point resulted from our decision to adopt an aggressive
 expansion of the Company, adding value, at comparatively low risk, to our
 activities. I am happy to report that it also put us firmly on track to
 profitability by the end of 2001.
     During 2000 we successfully completed a Convertible Bond Issue raising
 approximately 60 million pounds. The rationale was to retain leadership and
 realize maximum value by investing heavily in our technologies. Additionally,
 an important agreement with Paul Capital Royalty Acquisition Fund to
 contribute $30 million over two years to fund DepoMorphine through clinical
 trials and regulatory submission -- in return for a share of potential future
 royalties and revenues from four Skyepharma products -- strengthened our
 commitment to continued investment without delaying our move into
 profitability.  Both transactions should enable us to increase dramatically
 our share of future profits.
     The year was marked particularly by our success in driving products to
 launch or near-launch stage. Among key examples are our injectable proprietary
 products: DepoMorphine for pain management, DepoCyt for lymphomatous
 meningitis and the new topical formulation Solaraze for actinic keratosis.
 Deals and partnerships in late stage or near-launch development have borne
 fruit in the non-proprietary sector as well: highlights include Novartis'
 Foradil (asthma) and Sanofi Synthelabo's Xatral OD (benign prostatic
 hypertrophy). There have also been clearer indications of the intentions of
 GlaxoSmithKline (GSK) regarding Paxil CR (depression).
     Key to our strategy is to gain high margins by taking our own proprietary
 products through to late stage development prior to out-licensing. We
 demonstrated during the year how financially beneficial that strategy should
 prove, with DepoCyt and Solaraze having the potential to generate growing
 revenues from 2001. Our aim is to clinch more high value marketing and
 distribution deals by increasing our share of profits with marketing partners,
 such as those established with Chiron in the US (DepoCyt) and Bioglan
 (Solaraze) and Novartis (Foradil) in North America and Europe.
     Never has there been such demand for drug delivery.  SkyePharma's unique
 service offer has attracted a surge of interest and new deals for the business
 at a time when the global drug delivery market continues to have a healthy
 annual growth rate of 15-20%. Our strength in this field is built on solid
 foundations, namely an unrivalled range of stand-alone yet complementary
 technologies in the injectable, inhalation, oral, topical and improved drug
 solubility fields. These enable us to cover over 95% of the drug delivery
 spectrum.
     We have also demonstrated our capacity to take on rewarding support
 functions, from feasibility and development, clinical trial management and
 regulatory submission to manufacturing. With GSK's anti-Parkinson's drug
 Requip, for example, we have undertaken a full service role through to
 regulatory filing.
     Expertise in each of our technologies has been recognized and endorsed by
 numerous large clients: with Amgen, Pfizer and Kirin of Japan in the
 injectables sector, Novartis in inhalation, Sanofi Synthelabo, GSK and Pfizer
 in oral technology and with Bioglan in the field of dermatology. In addition
 we have undertaken carefully selected partnerships, such as with Merck KGaA in
 the development of an important undisclosed oral product, Meditech for the
 commercialization of Solaraze in Australia and the Pacific, Bioglan with three
 proprietary topical technologies and Kowa of Japan in the development of
 Statin NK-104 for the treatment of high cholesterol. We are now poised to
 capitalize on the increased level of business by tapping into the highest
 echelons of the value chain.
     Turning to the composition of the Board, I would like to thank former
 Non-executive Directors Nigel Wray and Dr. Thomas Rinderknecht -- who have
 served on the Board since 1995 and 1996 respectively -- for their unstinting
 work on behalf of SkyePharma. Both announced their intentions to step down in
 2000. May I also warmly welcome our two new non-executive appointees, Tamar
 Howson, former senior vice president and director of worldwide business
 development at SmithKline Beecham, and Dr. Jerry Karabelas, formerly chief
 executive officer of Novartis Pharma AG. I am confident that their expertise
 and experience in the industry will have important implications for
 SkyePharma's future.
     Dr. Jacques Gonella has also decided not to seek re-election at the
 upcoming Annual General Meeting.  Dr. Gonella was responsible for starting and
 building Jago, subsequently taken public as SkyePharma.  Although he has not
 had an executive role with the Company since then, we wish to formally convey
 our thanks for his assistance in the sensitive transition from a private Swiss
 company.
     Significant activity in the pipeline will continue in 2001 and beyond. We
 should see Solaraze launched in North America and Europe and Xatral OD --
 already on the market in 6 European countries -- in the US. Following the
 recent return of DepoCyt to the US market we are delighted to be able to
 announce its approval in Europe today and now look forward to its launch in
 Europe and Japan.  Foradil and Requip will move into Phase III clinical trials
 and we expect to announce critical licensing deals for DepoMorphine worldwide
 and DepoCyt in Europe. We also expect additional news on Paxil CR. The short
 and long term prospects for SkyePharma are extremely bright.
     My thanks go to all our staff for the many achievements of 2000 and to our
 shareholders for their continued support.
 
     Ian Gowrie-Smith
     Executive Chairman
 
 
     Review of Operations
     Since 1998 SkyePharma's strategy has been to become the world's foremost
 professional provider of drug delivery technologies. Our mission remains to be
 the drug delivery company of choice to the pharmaceutical and
 biopharmaceutical industry.
     I am pleased to report that during 2000 -- due to a combination of
 strategic acquisitions in 1999, technological, product and business
 development, together with carefully selected manufacturing, marketing and
 distribution partnerships -- SkyePharma has emerged as the leading global
 provider of drug delivery technologies and services. I am confident that the
 Company is now becoming the most sought-after drug delivery partner worldwide.
     Encouragingly, this comes at a time of unparalleled increase in the demand
 from international pharmaceutical and biopharmaceutical companies for
 outsourced drug delivery. We now boast among our expanding pharmaceutical
 client list such names as Novartis, Sanofi-Synthelabo, GlaxoSmithKline (GSK),
 Abbott, Sepracor, Pfizer, Roche, Bioglan, Amgen, Chiron and Kirin.
     Our strategy is two-pronged: to act as a one-stop shop of drug delivery
 for the pharmaceutical industry in return for royalties and milestone
 payments; and to develop a proprietary pipeline using our own resources,
 subsequently to be partnered for marketing at a higher level of royalty
 payment. The progression of this strategy is relatively low risk. All
 molecules currently in advanced development are already approved in some
 format and their efficacy is proven. Indeed, some of the largest
 pharmaceutical companies with whom we work are partners who have publicly
 endorsed SkyePharma's technology with up-front equity investments, Novartis
 and GSK among them.
     Of particular significance has been the considerable progress made within
 our pipeline during 2000, across the range of our technologies. The combined
 estimated market for drugs now using SkyePharma delivery technology, either
 launched or at a late pre-launch stage, now amounts to some $8 billion.
 
     Among the highlights are:
 
     * DepoCyt (oncology/injectable)
     * DepoMorphine (pain management/injectable)
     * Foradil (respiratory/inhalation)
     * Xatral OD (benign prostatic hypertrophy/oral)
     * Paxil CR (depression/oral)
     * Solaraze (pre-cancerous skin disorder/topical)
 
     SkyePharma's strategy is to develop and expand its range of delivery
 technologies and to maintain a technology leadership position in its key
 fields.  This allows the Company to leverage established relationships and to
 gain and nurture new ones, based on a proven track record. Often we do
 business with pharmaceutical companies who are interested in one of our
 technologies to find that they have need for others. Additionally, the
 technology mix enables us to exploit synergies between the delivery platforms
 and intellectual property we own, thus presenting the potential for
 multi-faceted drug delivery and added value for our clients.
     Our platform technologies encompass five key areas. Following the
 acquisition of DepoTech's (now SkyePharma Inc.) injectable technology, the
 former Canadian group Hyal's topical technology business and Medac GmbH's
 nano-particulate solubilisation technology in 1999, we now cover more than 95%
 of the drug delivery market and our technologies constitute the broadest range
 available from a single drug delivery supplier. The technologies are:
 Injectable -- DepoFoam; Inhalation -- metered dose inhaler (MDIs), dry powder
 inhalers (DPIs) and, recently developed, breath actuated inhalers; Oral --
 GEOMATRIX(TM); Topical -- Hyaluronan Induced Targeting (HIT); Nano-particulate
 -- enhanced solubility.
     Having achieved this technological breadth and scope, the main focus of
 2000 was largely product driven. Described in detail within this review is the
 steady stream of product development deals, approvals and launches that came
 to fruition throughout the year. These are set to progress the fortunes of
 SkyePharma in the coming years, as milestone and royalty payments begin to
 make a meaningful impact on our financial performance.
 
     Research and development
     SkyePharma operates from corporate headquarters in central London. The
 main research and development activity for inhalation, oral, solubilisation
 and topical technologies are located in Basel, Switzerland and Lyon, France.
 Our DepoFoam injectable technology is developed and manufactured at our San
 Diego facility in California. The Company's 150 research scientists, clinical
 affairs and regulatory personnel, of whom approximately half hold advanced
 degrees, are recognized as world class.  The top 10 scientists from Basel,
 Lyon and San Diego meet regularly to optimize co-ordination and synergy,
 sharing ideas and innovations to ensure we maintain technological and
 scientific leadership and exploit new ideas.
     A major goal we have set for ourselves is to become a 'one-stop shop' for
 clients and partners wishing to outsource their drug delivery needs, not only
 as a provider of the widest range of drug delivery technologies available but
 also as an expert in providing the clinical, regulatory and manufacturing
 expertise to minimize time to market.
     During the year we successfully achieved our aim to offer a full range of
 support from feasibility and development through to clinical trial management,
 regulatory submission and manufacturing. Our newly formed global clinical and
 regulatory group in San Diego has worked in tandem with the Basel-based
 research and regulatory team to drive the gamut of development activities on a
 number of collaborative ventures including the FDA approval of Solaraze and
 the drug development and clinical trial monitoring for GSK's anti-Parkinson's
 drug Requip(R) (ropinirole). This infrastructure is the foundation upon which
 we now have the capacity to progress internally developed products to late
 stage development.
     This and other innovative transactions are part of a strategic process
 designed to enable SkyePharma to capture the top end of the value chain in
 drug delivery partnering deals. It is a strategy that proved highly
 significant for the Company during the year and one that has helped pave the
 way for projected profitability from the second half of 2001.
 
     Injectable technology
     SkyePharma became a major presence in the new area of controlled release
 injectable technology with the acquisition of DepoTech, renamed SkyePharma
 Inc, in March 1999. Some 15% of the drug delivery market is for injectables.
 SkyePharma Inc is the developer of DepoFoam, a unique lipid based technology
 using a single injection to deliver a sustained drug release for up to weeks
 at a time. DepoFoam technology is approved by the US Food and Drug
 Administration (FDA) via our launched drug DepoCyt.
     DepoCyt is an injectable sustained release chemotherapeutic agent for the
 treatment of lymphomatous meningitis, a serious and potentially fatal
 complication of certain haematological malignancies.  This injectable
 sustained-release formulation of cytarabine is the only FDA approved treatment
 for patients with this disease. It gradually releases cytarabine into the
 cerebral spinal fluid and extends dosing intervals to once every two weeks
 compared to the standard intrathecal dosing of twice or three times a week.
 Chiron Corporation markets the product in the US.  SkyePharma and Chiron share
 profits on a 50/50 basis. In July 2000 SkyePharma granted exclusive Canadian
 marketing and distribution rights for DepoCyt to Paladin Labs Inc. The terms
 of the deal included a US$1 million up-front payment, together with additional
 milestone payments tied to future events and a significant share of future
 revenues.
     In early March 2001 SkyePharma and Chiron Corporation received clearance
 from the FDA to return DepoCyt(R) to the market. Chiron and SkyePharma
 voluntarily withdrew DepoCyt from the market in October 1999.  Upon routine
 stability testing, it was discovered that certain batches of DepoCyt,
 incorporating a raw material that had been developed using a different
 process, did not meet all regulatory specifications.  There were no adverse
 events attributed to the recalled batches and the product was made available
 to patients on a compassionate basis during the year. Today's announcement
 that we have obtained approval for DepoCyt in Europe paves the way for its
 launch in Europe this year and Japan in the future.
     A second key development for our injectable technology was the progression
 of DepoMorphine to Phase III trials and an agreement with Paul Capital Royalty
 Acquisition Fund. The deal provides SkyePharma with $30 million over the next
 two years to fund clinical development and regulatory submission.  This
 transaction enables us to fund and invest in the clinical development of
 DepoMorphine without the research and development cost affecting our timescale
 to profitability.
     DepoMorphine has a unique profile in the management of moderate-to-severe
 post-operative pain, offering 48 hours of pain relief with a single
 pre-operative injection. In clinical trials the drug scored 'excellent
 ratings' compared with standard morphine and intravenous fentanyl.  The market
 in the US for injectable hospital pain management products is estimated at
 $530 million: With fully funded clinical trials, we have greater flexibility
 in our licensing strategy and expect to license the product to a partner on
 very favorable terms.
     We announced in early 2000 that the Company was in feasibility studies or
 scaling up for pre-clinical studies of seven new products with DepoFoam.
 During the year two important deals -- for yet undisclosed compounds -- were
 unveiled with Amgen Inc. and Kirin of Japan. Both these deals mark significant
 development milestones for DepoFoam and spearhead an accelerating deal flow
 for this promising platform technology.
 
     Inhalation technologies
     Inhaled pharmaceuticals are almost exclusively used for the treatment of
 asthma and bronchitis, attracting more than 50 million patients in the
 industrialised world. Annual sales of these products are about $5.8 billion
 and are growing at the rate of 10% per annum. The pulmonary drug market is on
 track to nearly double in size to approximately $10 billion by 2005.
     SkyePharma is active in environmentally-friendly non-CFC propelled metered
 dose inhalers, dry powder inhalers, under the brand name 'SkyeHaler' and -- as
 a result of collaboration with PA Consulting -- a breath-activated inhaler
 device designed to deliver asthma drugs more efficiently. In this latter
 venture PA Consulting have provided their expertise in device development and
 SkyePharma has provided its expertise in non-CFC metered dose formulation.
     Among the major partners to have adopted SkyePharma's inhaler technologies
 are Novartis for Foradil, Sepracor and Boehringer Ingelheim. Significantly,
 Foradil moved into Phase III European trials in late 2000 and US Phase III
 trials have just commenced. We expect a US and a European launch in 2003.
     Under the terms of the deal with Novartis, SkyePharma has produced a new
 formulation of Foradil within the Company's multi-dose SkyeHaler. Small and
 easy to use, SkyeHaler has unique interactive safety and monitoring functions
 and will be produced on a fully automated line from SkyePharma's Lyon factory
 at a comparable cost to other inhalers on the market. The worldwide sales
 potential for Foradil based on internal forecasts is estimated at up to
 $600 million. SkyePharma expects royalties and manufacturing revenues of over
 10%.
     International research underlines the potential of the SkyeHaler.  Of four
 dry powder inhalers evaluated by patients in independent research, SkyeHaler
 was the most frequent first choice in all countries and in all age groups (up
 to 65 years old), among both males and females and both mild-to-moderate and
 severe asthma sufferers.
     SkyePharma is at the forefront of the delivery of products to the lung for
 asthma, and anticipates that it will be able to expand its client base to make
 this a major contributor to our growth.
 
     Oral technology
     SkyePharma's oral capabilities are provided by the sophisticated tablet
 system within the GEOMATRIX family of technologies, which control the amount,
 timing and location of the release of drug compounds through the digestive
 tract. The combination of different chemical components in the core and
 barrier layers of a tablet, each with different rates of swelling, gelling and
 erosion, allows the production of tablets with a wide range of predictable and
 reproducible drug release profiles. Oral drug delivery accounts for 50% of the
 growing $45 billion global drug delivery market.
     Currently six GEOMATRIX products have received regulatory and marketing
 approvals, two in the US and four in Europe. There are eight technologies
 within the GEOMATRIX family, enabling delivery of a wide range of
 difficult-to-formulate drugs. Protected by comprehensive, long-life patents,
 GEOMATRIX formulations can be manufactured at low cost and high volume, using
 standard raw materials and equipment. New coatings and polymers are being
 investigated continually to enable SkyePharma to respond precisely to changes
 in gastrointestinal tract conditions, such as pH and food effects. At the same
 time the Company is researching potential for a dual-technology approach to
 some applications by combining, for example, its oral and solubilisation
 technologies.
     During 2000 a second raft of European approvals for Sanofi-Synthelabo's
 once-daily formulation of alfuzosin, Xatral OD, was announced, closely
 followed by the drug's filing for marketing approval in the US where it is due
 to be introduced for the first time. Xatral is used for the treatment of
 functional symptoms of benign prostatic hypertrophy (BPH), a common disorder
 in men over the age of 50. It is available in more than 80 countries as a two
 or three-times daily formulation.  In 2000, European sales were in the region
 of Euros 120 million. Estimated global sales potential is $400 million. The
 once-a-day alternative, using SkyePharma's proprietary GEOMATRIX technology,
 is now launched in the UK, Denmark, France, Sweden, Switzerland and The
 Netherlands.
     GSK's once-daily anti-Parkinson's drug Requip (ropinirole) entered Phase
 II trials during the year. SkyePharma is handling all development activities
 up to regulatory filing. The deal, concluded in September 1999, included an
 $8 million equity investment in SkyePharma by GSK and further cemented a
 fruitful, long-term relationship between the two companies.
     GSK's GEOMATRIX-delivered Paxil CR -- approved in 1999 in 12.5 mg and 25
 mg strengths for depression -- remains a significant potential revenue earner
 for SkyePharma. During 2001 GSK announced that it had received an approvable
 letter from the FDA for a second CR indication, panic disorder, and gave
 notification it was working on a third CR indication, pre-menstrual dysphoric
 disorder (PMDD), a severe form of pre-menstrual syndrome. Paxil in its current
 form is the seventh largest pharmaceutical product in the world with revenues
 of some 1.6 billion pounds in 2000, and growing at the rate of 17% year on
 year. We anticipate that Paxil CR will be a significant contributor to GSK's
 anti-depressant therapy franchise.
     GEOMATRIX technology attracted two further development agreements during
 2000. In March we signed a feasibility contract with Pfizer to formulate an
 undisclosed compound using our advanced oral delivery technology. A
 development with Merck KGaA, Darmstadt, has also commenced. Results of several
 prototype formulations demonstrated proof of concept, leading to agreement for
 SkyePharma to take responsibility for scaling up the process, providing
 materials for clinical trials and assisting Merck in the compilation of a
 regulatory dossier. The product will be manufactured on behalf of Merck from
 SkyePharma's FDA-approvable Lyon factory.  Both projects are progressing to
 plan.
 
     Topical technology
     The most recent addition to our platform portfolio was the acquisition of
 a superior topical technology in late 1999 -- aimed at the topical delivery of
 drugs through or into the skin. The delivery technique's main constituent,
 hyaluronan (HA) has fundamental benefits for the localisation of drugs applied
 to the skin via Hyaluronan Induced Targeting (HIT). Drugs formulated in HA
 achieve prolonged dermal retention, a specific characteristic of the
 formulation. HA offers unique potential for the treatment of a variety of skin
 conditions such as psoriasis, eczema and acne. The technology is appropriate
 for dermal use of many drugs including corticosteroids, antibiotics,
 antifungals, antivirals and retinoids.
     Solaraze, the first in SkyePharma's pipeline of proprietary topical
 formulations, gained approval in the US during 2000 and is approved in five
 European countries, with more pending. It is also approved in Canada. Solaraze
 is indicated for the treatment of actinic keratosis (AK), a pre-cancerous skin
 condition.  Solaraze is expected to be launched in both Europe and the US in
 the first half of 2001. Age, sun exposure and fair skin are risk factors for
 the development of AK.  Current treatment includes cryosurgery, the freezing
 off with liquid Nitrogen, which can result in scarring. However, most patients
 with AK do not currently seek treatment.  Increased awareness of skin cancer
 is likely to lead to real growth in the numbers who do in the future.
     An agreement was signed in March with Bioglan Pharma PLC to undertake the
 European manufacture, marketing and distribution of Solaraze.  They paid an
 up-front licensing fee and we will receive royalties on sales. We have also
 recently announced the licensing of Solaraze for the US, Canada and Mexico to
 Bioglan.  The North American market is conservatively valued at some
 $250 million.
     Having one dedicated company as our marketing partner for both the US and
 Europe will provide a unity of strength and commercial focus for this
 important new product. As a result of the US deal, SkyePharma received
 $14 million as an up-front payment. There will be future milestone payments
 with Solaraze's commercial launch and additional milestones if the product
 reaches certain sales targets, plus royalties on net sales. It is our belief
 that total milestone payments could reach $29 million over the next five years
 for the US alone.
     Meanwhile, Solaraze is set to profit in the Asia Pacific market -- where
 in Australia, for example, incidence of AK is reported in 40%-50% of people
 aged over 40 -- following the grant of a license to Meditech Research Limited
 to commercialize the product in Australia, New Zealand, Malaysia and Singapore
 through its licensee. SkyePharma will receive a 15% share of all revenues
 earned by Meditech in these territories with Solaraze and associated products.
 We are working closely with Meditech and its licensing partner to expedite
 Australian regulatory approval.
     Our deal with Meditech also allowed us to commercialize a further part of
 the HA portfolio.  We granted Meditech a non-exclusive license over the HIT
 Technology to enable it to exploit its anti-cancer HyACT(TM) project
 worldwide.  SkyePharma will receive 10% of all net revenue from the HyACT
 project.
     Our leadership in this topical delivery sector was further cemented at the
 turn of 2000/01 when SkyePharma gained certain licensing rights to three of
 Bioglan's topical drug delivery technologies -- Crystalip, DermaStick and two
 products utilizing the ES-Gel system -- for $9 million.  Crystalip enhances
 stability of drugs by embedding them in lipid crystals. DermaStick presents
 the active ingredient in a wax stick, enabling controlled application to
 affected skin. ES Gel is a semi-solid formulation producing enhanced
 solubility of drugs. We are entitled to retain the first $9 million of all new
 income generated by SkyePharma from the three technologies and, thereafter,
 all other income will be split 50:50 between Bioglan and SkyePharma.
 
     Nano-particulate technology
     Nano-particulate technology or enhanced solubilisation -- is an exciting
 fifth dimension to SkyePharma's technology portfolio. Solubility problems lead
 to an estimated 40% of newly synthesized compounds being abandoned at the
 research and development stage.
     Solubility is an essential factor for effectiveness in all drugs,
 independent of the administration route. SkyePharma has two patented
 approaches: nano-suspensions and solid lipid nano-particles. Crucial to
 SkyePharma's service offer is that, using nano-particulate technology, we are
 now able to produce drugs that would not otherwise be suitable for formulation
 in conventional formats. Our double technology approach is providing drug
 delivery solutions for many compounds to be delivered via the inhaled, oral,
 injectable and topical routes.
     SkyePharma's ability to make drug particles nano-sized for improved
 solubility has enormous implications for both stand-alone and dual technology
 applications across our platform technologies. We saw the start of this in
 2000 when we signed two early stage feasibility studies for this technology
 and started work on improvements to several internal compounds prior to
 partnering.
 
     Business development and partnership
     SkyePharma's eight-strong business development team was expanded both in
 number and geographic coverage during 2000 with particular emphasis on new
 opportunities in the US, from which some 80% of the Company's business
 emanates. The team's first success of the year was the signing of a
 development agreement with Amgen to use DepoFoam for an undisclosed drug,
 followed by a tranche of further deals, a number of which we have been able to
 announce.
     The scientific calibre and potential market value of drugs using our
 technologies has enthused the team to pursue and gain new business at levels
 of return in keeping with our aspirations to tap the top end of the market's
 value chain. Proof of our success in this strategy has been the steady flow of
 new partnerships -- Pfizer, Merck KGaA, Amgen, Kirin, Bioglan and PA
 Consulting to name a few.
     Just prior to reporting, a further deal was struck with Kowa Ltd of Japan
 for development of their Statin NK-104, a new lipid-lowering agent for the
 treatment of high cholesterol. NK-104 is a potent new statin under development
 by Kowa and already submitted for marketing authorization in Japan. Phase II
 trials have been completed in Europe and are expected to start in the US
 shortly. We are delighted that Kowa has selected SkyePharma as the partner for
 its first important product aimed at the European and US markets. The deal
 will give us responsibility for providing materials for clinical trials at our
 Lyon factory and highlights the expertise we can offer partners in product
 development and manufacturing.
     The year was also one in which significant enhancements to our
 manufacturing and R&D sites were unveiled. In Basel construction work was
 completed for the new R&D building, largely prompted by imminent large-scale
 development activities in our inhalation business and to accommodate our
 expanding nano-particulate activities. The new building adds new technical
 installations, galenical facilities for the oral drug delivery department and
 analytical and galenical laboratories for the aerosols and inhalation
 department. Providing space for approximately 45 people, the building is
 designed to allow for further expansion at a later date. The new building will
 help R&D staff handle more projects to tighter deadlines and work in closer
 co-operation with regulatory and clinical affairs colleagues.
     We are delighted that in early 2001 the FDA approved the re-introduction
 of DepoCyt into the US market.  We have been manufacturing stable product from
 our San Diego facility since December 1999.  In addition a separate 85,000 sq.
 ft. factory has gained Drug Enforcement Agency approval and is poised to
 produce DepoMorphine and other products to a capacity of 12 million vials a
 year.
     In Lyon we continue to manufacture GEOMATRIX tablets and inhaled metered
 dry powder formulations from our 183,000 sq. ft. production facility, deemed
 approvable by the FDA in 1998.  A key achievement in 2000 was the manufacture
 of 35,000 dry powder inhalers for the start of Phase III clinical trials for
 Foradil in Europe and the US. To ensure on-time production and delivery, new
 machinery -- such as an automated and integrated line for granulation and
 drying -- has been installed during the year.
     The quantity and quality of our traditional business, combined with our
 decision to develop selectively a number of projects to a later stage of
 development prior to licensing, has begun to provide return. We are therefore
 increasingly being rewarded in the 13% to 15% royalty rate band, rather than
 the 3% to 5% that was the norm when SkyePharma floated in 1996. Additionally,
 by funding products through the clinical trial process we can share up to 50%
 of the profits, as illustrated in our agreement with Chiron for DepoCyt.
     We will continue along this path to profit, combining unrivalled
 technological infrastructure, a highly skilled workforce and flexible
 manufacturing, marketing and distribution models to further establish
 SkyePharma as the world's number one choice for drug delivery.
 
     Michael Ashton
     Chief Executive Officer
     FINANCIAL REVIEW
 
     Turnover - Turnover in the year ended 31 December 2000 increased by 37% to
 24.3 million pounds compared to 17.7 million pounds in 1999.  This represents
 a cumulative annual growth rate of 28% since 1996.
     Contract research and development including milestone payments increased
 by 86% to 16.8 million pounds in 2000. Milestone payments in 2000 include 8.9
 million pounds ($14 million) received from Bioglan on the licensing of
 Solaraze in the US, Canada and Mexico. Manufacturing and distribution revenues
 decreased to 3.5 million pounds in 2000 compared to 4.6 million pounds in
 1999, mainly as a result of the absence of revenues from the manufacture and
 sale of DepoCyt.  Royalty income was earned primarily from the licensing of
 part of the Group's portfolio of generic products and from Dilacor XR and
 amounted to 4.0 million pounds in 2000 compared to 4.1 million pounds in 1999.
 The first royalty income from Xatral was also received in the year.  The
 Company also received #2.9 million during 2000 under its agreement to finance
 the development of DepoMorphine shown below as "Other Operating Income".
     Cost of Sales - Cost of sales consists of research and development
 expenditures, including the costs of certain clinical trials incurred on
 behalf of our collaborative partners; the direct costs of contract
 manufacturing; direct costs of licensing arrangements; and royalties payable.
 Cost of sales were 15.6 million pounds in 2000 compared to 14.9 million pounds
 in 1999. Gross profit trebled to 8.7 million pounds in 2000 compared to
 2.9 million pounds in 1999 as a result of the increase in milestone payments
 received.
     Expenses - Selling, marketing and distribution expenses were 3.8 million
 pounds in 2000 compared to 3.2 million pounds in 1999, primarily due to a full
 year's expenses for SkyePharma's business development presence in North
 America.  Research and development expenses increased by 95% to 13.1 million
 pounds compared to 6.7 million pounds in 1999, due primarily to increased
 expenditure on DepoCyt and DepoMorphine. Administrative expenses were 12.6
 million pounds in 2000, the same as in 1999.
     Other Operating Income - In December 2000 the Group received 2.9 million
 pounds ($4.4 million) under an agreement with Paul Capital Royalty Acquisition
 Fund, L.P. by which it will receive a total of $30 million over the next two
 years to fund the clinical development and regulatory submission of
 DepoMorphine in return for the sale of a proportion of potential future
 royalty and revenue streams from DepoMorphine and certain SkyePharma products.
 Research and Development costs for DepoMorphine were 4.3 million pounds in
 2000.  This is explained more fully in note 3.
     Operating Results - Operating loss fell by 8% from 19.6 million pounds in
 1999 to 18.0 million pounds in the year. This was achieved at a time when R&D
 expenses were almost doubled.  The absence of DepoCyt from the market place in
 2000 also adversely impacted SkyePharma's operating result by some 5.8 million
 pounds.  DepoCyt was re-introduced to the market in March 2001.  The cost of
 amortizing goodwill and recent intellectual property acquisitions more than
 doubled to 3.3 million pounds during the year.
     The Group's loss on ordinary activities before tax was 19.7 million pounds
 in 2000, after a net interest payable increase of 1.7 million pounds, compared
 to 19.3 million pounds in 1999.  The loss per share for the year fell by 7% to
 3.9 pence compared to 4.2 pence in 1999.
     Foreign currency exchange movements did not have a material impact on the
 results of operations in 2000 compared with 1999.
     Cash Balances and Cash Flow - On 16 June 2000 the Company issued five
 year, 6% Convertible Bonds raising approximately 57.4 million pounds net of
 expenses.  The Bonds have an initial conversion price of 132 pence,
 representing a premium of 27% over the prevailing market price of 104 pence on
 the pricing date of 17 May 2000.  The conversion price may be recalculated
 based upon the average of the 10 dealing days prior to 19 June 2001.  In no
 event can the conversion price fall below 83 pence.
     At 31 December 2000 SkyePharma had cash and short-term deposits of 42.8
 million pounds and bank overdrafts of 2.8 million pounds. The net cash used in
 operating activities fell by 39% during 2000 to 9.3 million pounds.  Purchases
 of intangible fixed assets were 7.2 million pounds and purchases of tangible
 fixed assets were 8.4 million pounds.  The intangible purchases related
 principally to the acquisition of the Crystalip, DermaStick and ES-Gel
 technology rights from Bioglan for 5.9 million pounds and the capitalization
 of certain patent costs.
     The tangible fixed asset purchases in the year relate primarily to the
 extension of the Group's Muttenz administration building to accommodate the
 expansion of the Group's Inhalation business and the new solubility technology
 (1.6 million pounds) and 3.9 million pounds of expenditure in Muttenz and Lyon
 related to DPI manufacturing for Foradil, our DPI product with Novartis. Other
 purchases were 3.0 million pounds, primarily equipment across the Group.  The
 resulting total cash outflow from operations (before financing) for the year
 was 26.8 million pounds, compared to 29.7 million pounds in 1999. In addition
 the Group repaid some 3.8 million pounds (net) of debt.
     Balance Sheet - The Group balance sheet at 31 December 2000 shows
 shareholders' funds of 69.0 million pounds. The balance sheet is significantly
 impacted by goodwill, deferred consideration and shares to be issued.  At 31
 December 2000 the goodwill recorded within the profit and loss account reserve
 amounted to 152.6 million pounds and the deferred consideration and shares to
 be issued amounted to 7.0 million pounds.
     As reported last year a settlement agreement was signed on 31 March 2000
 establishing the full and final settlement of the deferred consideration
 payable on the 1996 acquisition of Jago.  The settlement was approved by
 shareholders at the Company's Annual General Meeting held on 11 July 2000.
 Following approval, some 6 million Ordinary Shares and 24 million Deferred
 Shares were issued. The conversion of Deferred Shares into 24 million Ordinary
 Shares is contingent upon the commercial sale of Paroxetine/Paxil CR (see Note
 8). The issue of the 24 million Deferred Shares has been recorded on the
 balance sheet as non-equity shares and non-equity share premium, based upon a
 share value of 94.25 pence, the price on the date of issue.
     On 4 April 2000 the Company announced that the final contingent payment on
 the acquisition of DepoTech had been triggered following the signing of a
 contract to utilise DepoFoam technology for a macromolecule.  As a result
 12.1 million shares were issued on 25 April 2000 at a value of 13.3 million
 pounds, bringing the total consideration payable on the acquisition to 49.4
 million pounds.
     On 21 July 2000, the Company issued 1,461,455 shares with a market value
 of $2.0 million to Medac GmbH being deferred consideration due upon the
 satisfactory transfer of the nano-particulate technology and know-how to
 SkyePharma.
     Under US GAAP, the Company's loss on ordinary activities would have been
 29.2 million pounds, and shareholders' equity would be positive at 145.9
 million pounds.  The increased loss under US GAAP is due principally to
 increased amortization of intangible assets and to differences in revenue
 recognition.
 
     Forward-Looking Statements - The foregoing discussions contain certain
 forward-looking statements with respect to certain development projects,
 potential collaborative partnerships, results of operations and certain plans
 and objectives of SkyePharma.  By their nature forward-looking statements
 involve risk and uncertainty that could cause actual results and developments
 to differ materially from those expressed or implied.  The significant risks
 related to SkyePharma's business are discussed in SkyePharma's SEC filings
 under the captions, Risk Factors and Certain Investment Considerations.
 
     Donald Nicholson
     Finance Director
 
 
     CONSOLIDATED PROFIT AND LOSS ACCOUNT
 
                                                    Year to      Year to
                                       Notes     31 December   31 December
                                                      2000          1999
                                                '000 pounds   '000 pounds
 
     Turnover                              2          24,292        17,739
     Cost of sales                         2        (15,598)      (14,854)
     Gross profit                                      8,694         2,885
     Selling, marketing and distribution
      expenses                                       (3,844)       (3,161)
     Administration expenses
      Amortization                                   (3,339)       (1,540)
      Other administration expenses                  (9,291)      (11,044)
                                                    (12,630)      (12,584)
     Research and development expenses              (13,104)       (6,728)
     Other operating income                3           2,900            --
     Operating loss                        2        (17,984)      (19,588)
     Share of operating loss in Joint Venture             --          (48)
     Loss on ordinary activities before interest
      and tax                                       (17,984)      (19,636)
     Reversal of provision for loss on disposal of
      fixed asset investment                              --           381
     Interest receivable                               1,806         1,364
     Interest payable                      4         (3,508)       (1,391)
     Loss on Ordinary activities before taxation    (19,686)      (19,282)
     Taxation                                            (4)         (132)
     Retained loss                                  (19,690)      (19,414)
     Basic and diluted loss per Ordinary
      Share                                5          (3.9p)        (4.2p)
 
     There was no material difference between the loss on ordinary activities
 before taxation and the historical cost loss before taxation in 2000 and 1999.
 All results represent continuing activities.
 
     See Notes to the Preliminary Announcement.
 
     CONSOLIDATED BALANCE SHEET
 
 
                                                      31                31
                                       Notes        December   31 December
                                                        2000          1999
                                                  '000 pounds    '000 pounds
     Fixed assets
     Intangible assets                     6          72,086        49,753
     Tangible assets                                  40,288        33,838
                                                     112,374        83,591
     Current assets
     Stocks                                            1,636         1,134
     Debtors                                           6,937         8,335
     Cash and short-term bank deposits                42,878        13,674
                                                      51,451        23,143
     Creditors - amounts falling due within
      one year                                      (20,541)      (16,632)
     Net current assets                               30,910         6,511
     Total assets less current liabilities           143,284        90,102
     Creditors: amounts due after more than one year
     Other creditors                                (14,667)      (15,855)
     Convertible debenture due February 2001              --         (103)
     Convertible bonds due June 2005       7        (57,546)            --
                                                    (72,213)      (15,958)
                                                      71,071        74,144
     Provisions for liabilities and charges
     Deferred consideration                            2,008         1,861
     Other                                               111           226
                                                       2,119         2,087
     Capital and reserves
     Share capital                         8          54,132        49,409
     Share premium                                   261,569       221,091
     Currency translation reserve                    (1,427)       (2,185)
     Shares and warrants to be issued      8           4,985        38,131
     Other reserves                                   11,212        11,058
     Profit and loss account                       (261,519)     (245,447)
     Shareholders' funds
     Attributable to Equity interests                 46,332        72,057
     Attributable to Non-equity interests             22,620            --
                                                      68,952        72,057
                                                      71,071        74,144
 
     See Notes to the Preliminary Announcement.
 
     CONSOLIDATED CASH FLOW STATEMENT
 
 
                                                  Year to 31    Year to 31
                                       Notes        December      December
                                                      2000            1999
                                                 '000 pounds      '000 pounds
 
     Net cash outflow from operating
      activities                         (b)         (9,312)      (15,139)
     Returns on investments and servicing of finance
     Interest received                                 1,297         1,449
     Interest paid                                   (2,941)       (1,337)
     Interest element of finance lease payments        (232)          (92)
                                                     (1,876)            20
     Taxation                                            (8)         (194)
     Capital expenditure and financial investment
     Purchase of intangible fixed assets             (7,180)       (4,029)
     Purchase of tangible fixed assets               (8,470)       (7,820)
     Proceeds from sale of fixed asset investment         --           381
                                                    (15,650)      (11,468)
     Acquisition and disposals
     Purchase of subsidiary undertakings                  --       (2,998)
     Net cash acquired with subsidiary                    --            48
                                                          --       (2,950)
     Cash outflow before use of liquid resources
      and financing                                 (26,846)      (29,731)
     Management of liquid resources
     Net (increase)/decrease in short-term bank
      deposits                                      (21,641)        19,989
     Financing
     Issue of Ordinary Share capital                   2,088         5,038
     Issue of convertible bonds                       59,400            --
     Expenses of convertible bond issue              (2,022)            --
     Debt due within one year:
      Increase in borrowings                           1,187            --
      Repayment of loans                             (2,846)         (460)
     Debt due beyond one year:
     Increase in borrowings                               --         2,998
     Repayment of loans                              (1,226)       (1,357)
     Lease payment received under sale and
     leaseback transaction                                --         2,999
     Repayment of capital element of finance
      lease payments                                   (891)         (944)
                                                      55,690         8,274
     Increase/(decrease) in cash                       7,203       (1,468)
 
 
     NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
 
     (a)   RECONCILIATION OF MOVEMENTS IN NET (DEBT)/FUNDS
 
                                                   Year to 31     Year to 31
                                                     December       December
                                                         2000           1999
                                                  '000 pounds    '000 pounds
 
     Increase/(decrease) in cash in the year            7,203        (1,468)
     Cash outflow/(inflow) from change in debt
      and lease financing                               3,776        (3,236)
     Cash outflow/(inflow) from increase in
      liquid resources                                 21,641       (19,989)
     Issue of convertible bonds                      (57,378)             --
     Change in net debt resulting from cash flows    (24,758)       (24,693)
     Loans and finance leases acquired with
      subsidiary                                           --        (5,187)
     Short-term bank deposits acquired with
      subsidiary                                           --          3,223
     New finance leases                                    --           (34)
     Conversions of debentures                            103          2,337
     Debenture interest                                    --          (116)
     Expenses of convertible bonds                      (167)
     Issue of loan note                               (2,307)        (6,008)
     Translation difference                             (907)            921
     Movement in net debt in the year                (28,036)       (29,557)
     Net (debt)/funds at beginning of the year        (8,254)         21,303
     Net debt at end of the year                     (36,290)        (8,254)
 
     Net (debt)/funds is defined as cash and liquid resources less borrowings.
 
     (b)   RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING
            ACTIVITIES
 
                                                      Year to        Year to
                                                  31 December    31 December
                                                         2000           1999
                                                  '000 pounds    '000 pounds
 
     Operating loss                                  (17,984)       (19,588)
     Depreciation                                       3,945          3,842
     Amortization                                       3,339          1,540
     (Increase)/decrease in stocks                      (426)            325
     Decrease/(increase) in debtors                     3,247        (1,627)
     (Decrease)/increase in creditors                 (1,283)          1,124
     Decrease in provisions                             (150)          (755)
     Net cash outflow from operating activities       (9,312)       (15,139)
 
     STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES
 
                                                      Year to        Year to
                                                  31 December    31 December
                                                         2000           1999
                                                  '000 pounds    '000 pounds
 
     Loss attributable to shareholders               (19,690)       (19,414)
     Net currency translation effect
     Group                                                758        (2,220)
     Share of Joint Venture                                --          (627)
                                                          758        (2,847)
     Total recognised gains and losses for the
      year                                           (18,932)       (22,261)
 
 
     RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
 
                                                      Year to        Year to
                                                  31 December    31 December
                                                         2000           1999
                                                  '000 pounds    '000 pounds
 
     Shareholders' funds at the beginning of
      the year                                         72,057          6,235
     Total recognized gains and losses for
      the year                                       (18,932)       (22,261)
     Reinstatement on dissolution of joint venture
      of goodwill previously written off to reserves       --          5,760
     Goodwill adjustments on deferred consideration     3,618          8,900
     Equity shares issued, net of expenses             22,581         41,573
     Non-equity shares issued, net of expenses         22,620             --
     (Decrease)/ increase in shares and warrants
      to be issued                                   (29,528)         40,750
     Revaluation of shares and warrants to be
      issued                                         (3,618))        (8,900)
     Issue of warrants                                    154             --
     Net movement in the year                         (3,105)         65,822
     Shareholders' funds at the end of the year        68,952         72,057
 
     For the notes to the financial statements, please contact the Company
 directly in the U.S. at (212) 753-5780 or in the U.K. at 44 207 491 1777.
 
     SkyePharma PLC, one of the world's leading drug delivery companies,
 provides innovative services to major pharmaceutical partners from the point
 of drug discovery through the approval process. Its five technologies, oral,
 injectable, inhalation, topical, and nanoparticulate solubilization encompass
 the vast majority of delivery systems in use by the pharmaceutical industry.
 For more information, visit SkyePharma's web site at
 http://www.skyepharma.com.
 
     This press release may contain forward-looking statements regarding
 SkyePharma PLC.  Actual results may differ materially from those described in
 the press release as a result of a number of factors, including but not
 limited to the following: There can be no assurance that any product in the
 SkyePharma product pipeline will be successfully developed or manufactured, or
 that final results of human clinical trials will result in the regulatory
 approvals required to market products, or that final regulatory approval will
 be received in a timely manner, if at all, or that patient and physician
 acceptance of these products will be achieved.  The Company undertakes no
 obligation to revise or update any such forward-looking statement to reflect
 events or circumstances after the date of this release.
 
 SOURCE  SkyePharma PLC