The Investment Column: Bespak

GOT A headache? So have shareholders in Bespak, which develops nasal sprays for migraine treatments and inhalers for asthma. Indeed, after yesterday's 14 per cent fall in Bespak's shareprice, some may have hyperventilated.

The company accompanied annual results with the news that Glaxo Wellcome, with whom it was developing an environmentally-friendly drug propellant, had switched to one of Bespak's US rivals. The shares fell 150p to 662.5p, well below their high of 1025p last year. Shareholders wanting a quick turnaround should not hold their breath.

Bespak is no ordinary manufacturing concern. It develops its products in conjunction with pharmaceutical companies, and faces the same regulatory hurdles. The flipside is that these partnerships yield stable, high-margin earnings. But Glaxo's behaviour is a reminder that Bespak's partners can be erratic.

Its experience in the US last year tells a similar story. Its Tenax subsidiary saw sales fall nearly 50 per cent to pounds 7.5m, sending it into the red after two of its customers were the subject of takeovers. Overall, US profits were just pounds 700,000.

Bespak has some good products in the pipeline. It has invested pounds 36m in the past two years to exploit the medical profession's obligation to be CFC free. These include a new nasal spray, and another propellant for Glaxo. The new propellant is more advanced and Bespak owns the patent; it is unlikely Glaxo will switch supplier. However, both of these are at least two years away. In the meantime, Bespak will struggle to deal with its thin customer base. Analysts expect pre-tax profits of pounds 13.8m and earnings of 39.7p per share this year. Take a deep breath and sell before Bespak is hit by further delays.