Elan plans to raise $400m by mid-2009

PHARMACEUTICALS group Elan plans to raise about $400 million (€319 million) by the middle of next year.

Chief executive Kelly Martin said the exercise could see the group "monetising" some drugs currently at an early stage in its pipeline, possibly through licensing deals. It could also involve the closure of a number of the seven locations in which the Irish firm currently operates.

Elan, which expects to generate revenue of about $1 billion in 2008, has facilities in Dublin, Athlone, San Francisco, New York, Boston, Pennsylvania, Georgia and Tokyo.

Speaking at a Reuters health summit in New York, Mr Martin said Elan was considering closing two of those locations or reducing its presence there, though the company had not yet decided which ones. "We are currently going through a process where we are evaluating where we can take costs down and reallocate and reduce," he said. "There are a couple of locations we can potentially exit entirely."

However, Mr Martin added that Dublin was the group's headquarters and would remain so. He said: "Athlone is a very successful and highly profitable business."

Elan is also continuing to source a site in or around Dublin for a new biologics plant.

In the nine months to the end of September, Elan posted a net loss of $240.5 million. While it has $450 million of cash on hand and its pipeline is fully funded, Elan is burning more than $300 million a year. It has $1.7 billion in debt that comes due over the next five years.

Mr Martin noted that the company had three years before it would have to service its debt.

"We have just shy of $500 million of cash. Under normal markets, $500 million of cash is ample," Mr Martin said. However, in the current environment, he said: "We would like to put some more cash on our balance sheet in the next six to eight months."

Elan recently tried to sell its drug technology business, worth about $1 billion, but the credit crisis killed off a hoped-for sale to private equity and a sale is now unlikely for at least a year, Mr Martin said.

"I'm not optimistic the markets will get back to normalcy any time soon," he said. "Our plans are not to wait around for a transaction but to run the business."

For now, Elan will focus on raising money by selling rights to experimental drugs in areas such as cancer that are in early stages of development and where it does not have in-house expertise. "By the middle of 2009, you can expect us to do something with our pipeline," he said.

Mr Martin said the company was determined to keep its pipeline of drugs for neurological disorders, including experimental products to treat Alzheimer's disease and Parkinson's disease.

"We then hope to have consistent improvement in [sales of multiple sclerosis drug] Tysabri and consistent improvement in the cash burn. So at some point, perhaps the year after, we could pay off some of the debt and roll some of the debt out in a normal credit market." - (Additional reporting, Reuters)