Vectura, the Chippenham firm pioneering new ways of treating asthma and lung diseases, is to merge with a smaller rival as it continues to develop into one of the UK’s leading specialist pharmaceutical firms.
Vectura’s £440m recommended tie-up with London-based Skyepharma will create a £1bn company which will generate sales of more than £150m a year. 
The firms, both listed on the London Stock Exchange, said their areas of expertise, including dry powder inhalers, pressurised metered dose inhalers and nebulisers for people with asthma and other airways-related illnesses, were complementary.
“Bringing together the two groups will create a stronger scaled business which has the ability to accelerate the delivery of both companies' strategic objectives and deliver greater revenues,” they said in a joint statement.
Vectura, which was part formed from a spin-out from the University of Bath, develops inhalable dry-powder drugs that treat lung conditions such as asthma, emphysema and chronic bronchitis. Skyepharma has a similar product range.
Vectura has grown rapidly in recent years through development collaborations and licence agreements with global pharmaceutical and biotechnology companies such as Novartis, Sandoz and GlaxoSmithKline.
It has eight innovative products marketed by partners with growing global royalty streams and a portfolio of drugs in clinical development, a number of which have been licensed to major pharmaceutical companies.
Vectura chairman Bruno Angelici, who will chair the merged group, described the deal as “a key milestone in the execution of our strategy to become a leading specialty pharmaceutical company, focusing on airways-related disease”.
Skyepharma chairman Frank Condella, who becomes vice-chairman, added: “The merger of Skyepharma and Vectura is a highly synergistic, value-enhancing transaction that will establish an industry leader in the development of inhalation products.
“The Skyepharma board believes this transaction offers our shareholders the opportunity to participate in a larger business with greater growth potential, diversified risk and a competitive market position.”
The merged firm expects £10m of annual savings by 2018 as it takes out duplication.
Under the agreement Skyepharma shareholders will receive 2.7977 Vectura shares for each of their current shares. There will be a partial cash alternative of up to £70m
Under the proposed deal, Skyepharma shareholders would own around 41.75% of the enlarged group, reducing to 37.62% if the £70m is paid out in full.
The merger is the latest in a series of deals in the sector over past two years. It was announced as Skyepharma reported record revenues of £95.9m in 2015, up by nearly a third on 2014. That pushed operating profits up 46% to £31.5m, boosted by the first royalty payments from Skyepharma’s flutiform asthma inhaler.
Analysts welcomed the deal with Samir Devani of Rx Securities telling the PMLive website that the merger offered a “strong rationale, with complimentary respiratory technologies [providing] a true one-stop shop for respiratory development, a strong combined pipeline, a more diversified revenue composition and stronger balance sheet”.
