RPR/Fisons tender offer succeeds; RPR sees "irreversible" decline in Intal franchise.

FISONS TILADE 1994 SALES "ONLY [pound]41 MIL.," or $64 mil., "after eight years on the market," Rhone-Poulenc Rorer declares in its final offer document for its hostile takeover of Fisons. Tilade (nedocromil sodium) "was forecast in 1991 to be a [pound]200 mil. sales product," RPR wrote to Fisons shareholders. RPR contends that Fisons' Intal/Tilade mast-cell stabilizer franchise "is falling substantially behind the growth in the asthma market."

The offer document asserts that Intal (cromolyn sodium) "is in irreversible decline," which "the use of Fisons' new delivery technology will not offset." RPR maintains that "whilst growing, Tilade is still unable to compensate for Intal's decline." Fisons projects combined sales of the two products of [pound]210 mil. in 1998, down from [pound]245 mil. in 1994.

RPR "has bought or received acceptances for a total of 67.2% of the issued ordinary shares of Fisons," the company announced Oct. 20, the initial closing date of the tender offer.

RPR announced its takeover bid Aug. 18 with a 240 pence per share ($2.7 bil.) offer. On Oct. 5, RPR increased its bid to $2.9 bil., or 265 pence per share and won a belated endorsement from the Fisons board ("The Pink Sheet" Oct. 9, T&G-9). RPR has declared that the acquisition "would create the fourth largest company worldwide in asthma/allergy medicine" ("The Pink Sheet" Aug. 21, p. 5).

RPR's final offer asserts that "Fisons' existing products cannot deliver sustainable growth." In addition to the flagging sales of Fisons' core Intal/Tilade franchise, RPR points to declines in sales of Opticrom anti-allergy eyedrops and the European product Tilavist.

The anti-allergy products "represented only 14% of first half 1995 sales, despite an unusually strong pollen season," the document states. "Fisons has not been able to relaunch Opticrom in the U.S.," it adds. Opticrom was withdrawn due to manufacturing difficulties in 1991; Fisons has predicted a return to the U.S. market in 1995. "A competing branded generic," Bausch & Lomb's Crolom n1, "is already taking its place," RPR observes.

Fisons' multi-dose dry powder delivery device Ultrahaler is "good," RPR writes, but "every major brand name asthma drug manufacturer is aiming to put its inhaled products through a DPI." Glaxo Wellcome's Accuhaler and Diskhaler, Astra's Turbuhaler and Orion's Easyhaler are already on the European market, and a Diskhaler formulation was recommended for approval in the U.S. by an FDA advisory committee in September ("The Pink Sheet" Oct. 2, p. 8). Fisons predicts filing for approval in the U.S. in "1997 at the earliest" for the first Ultrahaler product, the RPR document states.

Good devices with generic products deliver poor results," RPR contends in criticizing Fisons' strategy of applying its delivery technology to a wide range of existing asthma drugs.

"Fisons plans to develop generic [albuterol] and beclomethasone in the Ultrahaler," RPR notes, "but many companies, both brand name and generic, will reach the market before Fisons." The offer document points to similar development efforts by Glaxo Wellcome, Astra and Schering-Plough. Fisons' non-chlorofluorocarbon multi-dose inhaler technology "is far from unique," RPR maintains, noting 3M's European launch of Airomir. "Virtually every major inhalation product manufacturer has access to such technology."

RPR criticizes Fisons' strategy of in-licensing products for sale through its existing sales network because "Fisons must begin from scratch a pipeline-building process." Fisons has "no experience in taking under-managed products and growing them," RPR writes. "At twice the size" of marketing companies like Roberts Pharmaceutical, Forest Labs and Medeva, "Fisons must produce profit before tax of [pound]278 mil. in 1999 to match the forecast growth rate of the other companies." Current 1999 estimates are [pound]201 mil., RPR said.

Fisons announced deals with Ciba, 3M and Magainin Sept. 29 ("The Pink Sheet" Oct. 9, T&G-9). RPR asserts that none of the deals are "likely to generate meaningful earnings this century" while the Ciba and Magainin deals "will increase development expenses but produce no revenue for many years."

RPR maintains that its final offer provides a premium to "the UK pharmaceutical sector," and "most recent pharmaceutical transactions." Deep staffing cuts appear likely following the merger: the previous transactions to which RPR makes comparison include Roche/Syntex, AHP/ Cyanamid and Glaxo/Wellcome, all of which involved heavy cost-cutting moves. RPR has predicted the takeover of Fisons will be additive to earnings in 1997.