SykePharma shares surge on hopes for bonds deal

(Adds company comments, analyst comments, updates shares)

LONDON, Aug 28 (Reuters) - Britain's SkyePharma Plc , a specialist in drug delivery technology, said on Thursday it was close to a deal on renegotiating its convertible bonds, sending the company's shares 20 percent higher.

The company also announced a first-half pretax loss of 6.4 million pounds ($11.76 million) against 14.1 million a year earlier, on sales of 28.4 million versus 19.7 million.

"We are making good progress with proposals for renegotiating the convertible bonds, which we expect to announce shortly," Chairman Jeremy Scudamore said in a statement.

Outgoing Chief Executive Frank Condella told Reuters that the company planned to have the bonds renegotiated well before a self-imposed deadline of the end of this year.

"We've been working to get this done in a reasonable way as soon as possible and we certainly expect to have something done way before the end of this year," he said. "I remain confident (that an agreement will be reached)."

The company has a put option for 69 million pounds convertible bonds due at the earliest in May 2009, and another put option for 20 million pounds due in June 2010 at the earliest. Without renegotiation, exercising these options could bankrupt the company.

In July, SkyePharma said that due to current capital market conditions, discussions on a specific proposal to refinance the bonds was not being pursued, and that discussions were taking place with a small number of stakeholders to consider an alternative plan. Thursday's earnings statement updated the market on this alternative plan to renegotiate the bonds.

Flutiform is SkyePharma's most important new product. The asthma treatment has recently produced promising results in clinical trials and the drug is expected to be submitted for regulatory approval next year.

The company said Flutiform was on target to be launched in the United States and Europe in 2010.

Analyst Shawn Manning at Landsbanki has a 'buy' stance on Skyepharma and believes the bond renegotiation should help drive the share price.

"The company is well aware that it needs to make the stock more attractive to equity holders so therefore you assume that ... they've done a sensible renegotiation.

"The news, when the renegotiation is announced, should help drive the share price, therefore we're buyers. I still think fundamentally on an operational basis the stock is worth 31 pence per share."

SykePharma shares were 19.5 percent higher at 3.8 pence by 0735 GMT. (Reporting by Ben Hirschler and Ben Deighton; Editing by Rory Channing and Quentin Bryar)