View from City Road: Fisons in the land of giants

FISONS' fall from grace was dramatic and swift. Those who thinks its recovery will take the same shape are deluding themselves. Fisons is on its way back but its regulatory and corporate problems appear to have put paid to its ambitions to be anything more than a niche player in a drugs market dominated by giants.

Fisons' full-year results were disappointing. Profits fell more than 30 per cent to pounds 124m, but these figures included pounds 23.3m of profits from the sales of companies. Earnings per share were 13.9p, though just 10.7p came from continuing businesses. The final dividend was maintained at 5.4p, making an unchanged 8.7p for the year. The end-of- year borrowings surprised many followers - an abnormally high pounds 349m thanks to a pounds 60m increase due to currency fluctuations.

However, there were encouraging trends. Pharmaceutical sales were good, once Fisons recovered from its supply problems; the sales of the consumer health companies brought borrowings down after the year- end, though shareholders might wonder why pounds 166m of disposals cost pounds 8m in professional fees. Once the horticulture side is sold, debts should fall to about pounds 100m.

Fisons has now withdrawn one of the drugs put in detention by the US Food and Drug Adminstration, and is working hard to have the detention order lifted on the other, Opticrom. Its rehabilitation with the FDA was signalled by the approval given at Christmas to Tilade, the asthma treatment. One test of this detente will be whether the FDA nips in the bud an attempt to launch a generic rival to Fisons' other main asthma treatment, Intal, later this year.

In the medium term, Fisons' prospects depend on a recovery in the fortunes of its rather cyclical scientific instruments business, and the successful US launch of Tilade in a joint venture with Rhone-Poulenc Rorer. Further down the line, it has an exciting drug in Tipredane, which should challenge anti-asthma blockbusters such as Glaxo's Zantac.

But Fisons is too small to play in such a big market. It will need strong support from a joint venture if Tipredane is to succeed.

At 221p, down 7p yesterday, Fisons shares trade on 15 times earnings, assuming pounds 135m of profits this year. The only reason for buying is bid speculation.

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