Axis-Shield catches cold as sales of flu test slump

A SCOTTISH drugs firm was the biggest faller on the stock market yesterday after sales of its flu testing kit fell due to lower-than-expected cases of the virus.

Shares in Axis-Shield fell 95p or 22.9 per cent to close at 320p after the Dundee-based company issued a profits warning.

Although revenues for the 18 weeks to 30 April were higher than in the same period last year, the firm warned that the 2009-10 flu season had been "relatively mild", affecting sales of NycoCard, a point-of-care testing kit that is the company's single biggest revenue generator.

Sales were also hit after governments in several countries advised patients to stay away from doctors' surgeries for fear of spreading swine flu.

The board warned that if sales continued to fall below its expectations throughout 2010, there would be a "material shortfall" in revenues and profitability for the year.

Axis-Shield also warned there was now "increasing evidence" that the continuing economic uncertainty was contributing to a global reduction in discretionary healthcare spending, with lower third-party product sales by its distributors.

But the firm said its balance sheet "remains strong" and added that there have been no significant changes in the financial position of the company. Chief executive Ian Gilham told The Scotsman it had been a "miserable" day for the company.

He said: "We had a tough first quarter and if that continues unbated, then we're going to have a tough year. But we're not going to sit back and let that happen. We're expanding our sales and marketing and will triple the size of our team in the United States this year.

"I don't think this is down to a fundamental failure of our business model – it's to do with a market adjustment, and so we're going to work to get the most out of the business growth that we can and minimise the effect the market has."

Brokers said yesterday's weakness in Axis-Shield's shares was a good time to invest, with Terra reiterating its "buy" recommendation and Brewin Dolphin downgrading its rating from "buy" to "add".

Analysts at house broker Piper Jaffray said that, although profit growth had been delayed by 12 months, the company's fundamentals "remain strong".

They added: "Following the fall in share price at the open, we view this as an opportunity to acquire a stake cheaply.

"Given the growing incidence of diabetes and growth in the diagnostics industry, long-term market trends remain solid."

Axis-Shield was created through the merger in 1999 of Norway-based Axis Biochemicals and Shield Diagnostics.