The City took a deep breath, crossed its fingers and consoled itself that
Fisons’ management had at last come clean on the extent of the problems
with the US regulators. Two weeks later, as the stock markets reopened
from the Christmas break, Fisons’ share price nosedived again as further
revelations about its difficulties with the FDA swept the City.
According to an article published in FDC Reports– an American techni-
cal magazine with close links to the FDA – there were long-standing
leakage problems with Intal inhalers. The cause had been found to be a
fault in the inhalers’ aerosol valves. The company had then switched to an
alternative design of valve without FDA approval. The article claimed that
the regulators had found that the new valve was ‘cheaper’ but ‘not an
improvement on the one it replaced’,^30 and that the company had allegedly
produced deceptive test results on the new equipment. It quoted FDA
sources saying that despite ‘violations’, Intal had been allowed to remain
on the market only because of ‘the medical necessity of the product’ (i.e.
because no alternative product was available).^31 The report went on to
reveal that the FDA inspectors had also uncovered significant deviations
from best practice at the Holmes Chapel manufacturing plant, including
the practice of storing drug solutions in what the inspector identified as
‘beer kegs’. Most damaging of all though, it alleged that supplies of
Imferon and Opticrom were unlikely to return to normal before the end of
1992.
The company’s immediate reaction was to dismiss the allegations as
‘scaremongering’ and ‘nonsense’, adding that ‘the reports the magazine is
talking about are negotiations that took place between 1987 and 1990’.30, 31
The City was unimpressed. Three days later, on 30 December, a detailed
press statement was issued by the company. It stated that ‘At no time did
Fisons use “beer kegs” in the manufacture of Imferon’ and refuted or
explained in detail the background to each of the allegations made by the
FDC Reports. The statement steadied the stock market, but for at least one
institutional investor – the SYPA – this was one mishap too many. On 6
January 1992, in a letter to the Financial Times(Figure 4.2.1), the institution’s
clerk and financial officer expressed his concern over ‘the board’s failure to
manage effectively both its business and its investor relations’. He went on
to question their ability to extricate the company from its current difficul-
ties before the next annual general meeting, and urged every other Fisons
shareholder to do the same. The SYPA was looking for institutional
support for a motion to challenge the board at the forthcoming annual
meeting. Fisons’ shares were widely held, with the six largest shareholders
controlling around 15 per cent of the equity. The following day, an article
in London’s Evening Standardrevealed that the SYPA’s letter had drawn a
‘positive response’. Kerridge’s resignation – with immediate effect – was
announced one week later.^33
280 Relationship Marketing