RHONE-POULENC RORER's $2.6 BIL. BID FOR FISONS IS GRAB FOR BROADER ASTHMA LINE; BRITISH COMPANY REJECTS BID, STANDING BY INDEPENDENT MARKETING STRATEGY

Rhone-Poulenc Rorer is offering $2.6 bil. for Fisons in an effort to expand its asthma/respiratory products presence worldwide.

The offer of 240 pence ($3.70) per share was announced Aug. 18. The bid is a 24% premium to Fisons' Aug. 17 closing price of 193 pence ($2.97) on the London Stock Exchange. Fisons has rejected the offer.

The combination of Rhone-Poulenc Rorer and Fisons would "create the fourth largest company worldwide in asthma/allergy medicine," RPR said.

Fisons' leading asthma products are Intal (cromolyn sodium) and Tilade (nedocromil sodium). The products are differentiated by mechanism of action as the only mast-cell stabilizers available for asthma. Fisons also has proprietary delivery technology, including the Ultrahaler multi-dose dry powder delivery device.

RPR had a share of Tilade sales under a 1993 co-promotion agreement. In exchange for co-promotion rights to Tilade, RPR granted Fisons co-promotion rights to its inhaled steroid Azmacort (triamcinolone). That agreement was terminated in December 1994 based on differences in future marketing plans.

Other Rhone-Poulenc Rorer asthma products include the nasal steroid Nasacort (triamcinolone) and the extended-release theophylline product Slo-Bid. The two companies also have a joint venture in Europe which involves sharing rights to Fisons nonsedating antihistamine Ebastel and RPR's corticosteroids Azmacort HFA-134a Forte and Nasacort AQ.

Two major Fisons products, Imferon injectable iron and Opticrom anti-allergy eye drops, have been unavailable in the U.S. since 1991 due to manufacturing difficulties at Fisons' Holmes Chapel, U.K. facility. Fisons had predicted returning to market in the second half of 1992. Currently, Fisons hopes to reintroduce Opticrom (cromolyn sodium) in the U.S. in 1995; it will be manufactured by Allergan in Puerto Rico. The company has not disclosed plans to reintroduce Imferon.

RPR is pitching its bid to Fisons shareholders as an opportunity to escape the "uncertain future" of Fisons. In particular, the French company is focusing on Fisons' decision to sell its non-respiratory research programs earlier this year.

RPR maintained that "the offer represents a significant opportunity for Fisons shareholders to realize full value today for their investment in a company with a very uncertain future." RPR asserted that "Fisons' strategy as an independent marketing entity with no research capability will not product sustainable growth." Fisons sold its non-respiratory research programs to Astra in March for $321 mil. ("The Pink Sheet" March 20, T&G-1).

While the agreement focused on non-respiratory products, Astra and Fisons share development rights and plan a co-marketing arrangement for three early-stage asthma products and non-chlorofluorocarbon delivery technology. Fisons also exited the OTC business in North America in 1993 with a sale to Ciba.

Fisons declared Aug. 18 that RPR's offer "seriously undervalues" the company. Fisons "strongly advises shareholders to take no action at this time." RPR directly approached Fisons prior to the bid but could not win board endorsement. RPR pledged to "continue to seek a recommendation from their board."

Fisons acknowledged that it was aware that "a bid for Fisons could be made at any time" as the company is "in the period between completing the restructuring program and being able to demonstrate exactly how the business will be grown in the future." Fisons disclosed merger negotiations with Medeva, but those discussions ended in July. Zeneca was rumored to be working on a bid for Fisons prior to the Fisons/Medeva discussions.

Fisons stock leapt above RPR's 240 pence per share valuation following announcement of the bid amidst speculation that a higher offer might be proffered. RPR's 24% premium to Fisons stock does not match the premiums offered in other pharmaceutical industry acquisitions. The Roche/Syntex, American Home Products/Cyanamid and Glaxo/Wellcome deals all featured premiums of 50% or more to market prices.

Fisons could become the third British pharmaceutical company acquired in the past year. In addition to Glaxo's purchase of Wellcome, BASF acquired Boots in November.

The bid by RPR reflects the continuing pressure on mid-size firms to grow larger to survive. The company is attempting a multi-billion dollar acquisition just five years after being formed from the merger of Rhone-Poulenc and Rorer.

RPR plans to finance the bid through debt, the company said. Following the bid announcement, Standard & Poor-ADEF said it would likely downgrade both RPR's and Fisons' ratings; S&P-ADEF placed both companies on "CreditWatch" with negative implications.