Elan’s woes continue

By Stephen McKinley

Elan sacked a fifth of its staff on Wednesday, in an effort to restore investor confidence. The Irish pharmaceutical giant has failed to restore investor confidence, despite a series of reforms at the company designed to restore its once gilded reputation.

Analysts say that when Elan posts second quarter results on Wednesday, they will be of marginal importance to the continued questions being asked about the company’s accounting practices and mounting debts.

Elan’s share price collapsed since a January Wall Street Journal article asked questions about how it kept its books, and comparisons were quickly drawn between the company and the collapsed energy giant Enron.

Earlier this month, Elan’s chairman and chief executive, Donal Geaney, and his deputy, Tom Lynch, quit after the group revealed it had sold royalty rights on some of its products and had potential debts of $4.5 billion.

Under pressure about its ability to pay down its debts, Elan’s new chairman, Garo Armen, said the group would raise at least $1 billion by selling unspecified financial assets and non-core businesses over the next six to nine months.

Armen has said Elan has $1.38 billion in cash and could meet more than $500 million of debt repayments due by September.

“What is of critical importance, however, is an update on operating cash flow, the cash to be raised from asset sales and future cash and debt commitments,” said Peter Frawley, an analyst with Merrion Stockbrokers in Dublin.

“We will be looking for further details on how the action plan will be implemented, the timelines involved and the possible assets and investments that might be up for disposal as part of the plan,” said Jack Gorman of Davy Stockbrokers.

Elan is now worth around euro 700 million after slumping 95 percent since the start of the year. A year ago it was worth euro 22 billion.

Two U.S. class-action lawsuits were filed by investors in February against Elan.

In the same month, the U.S. Securities and Exchange Commission launched an inquiry into Elan’s accounting methods for the second time in three years.