SkyePharma PLC announces that it has reached agreement with Merck KGaA ('Merck') to assign an agreement between SkyePharma and Merck signed in August 1998 to a new Swiss company established by certain former executives of Merck and funded by international venture capital organizations. The agreement concerns the development of a novel formulation of a well-established drug using SkyePharma's proprietary Geomatrix oral delivery technology.

The once-daily product, intended to treat patients suffering from chronic inflammatory diseases, has a unique release profile designed to optimize efficacy and minimize side-effects.

The product has already completed the early stages of clinical development and the Swiss company will assume all of the funding obligations of Merck for further development including the Phase III trial of this product, which is currently underway in Europe. Merck will have marketing rights in Germany and Austria. The Swiss company will also seek marketing partners in other markets, including the USA. SkyePharma will receive a royalty on net sales and will also manufacture the product at its Lyon, France, manufacturing plant.

Michael Ashton, SkyePharma's chief executive, said: 'This exciting product is another example of the versatility of our Geomatrix delivery technology, which in this case is designed to overcome certain disadvantages of current formulations. We are confident that this will represent a major commercial opportunity.'