Elan's shares fall 7% after fine of $200m for 'rogue' marketing of drug announced

SHARES IN biotech group Elan fell over 7 per cent early yesterday after news that it faces a fine of over $200 million relating to rogue marketing of an anti-convulsive drug for epileptics.

The stock later rallied to close over 2 per cent lower in Dublin and was trading 3.2 per cent weaker in New York. Analysts said the fine and other measures accepted by Elan in an “agreement in principle” were more onerous than expected.

Ian Hunter at Goodbody Stockbrokers said with $863 million on its balance sheet after the Johnson Johnson deal last year, it can absorb a fine of this scale.

“It does however undoubtedly reduce flexibility and will see the focus remain on cost saving rather than business development,” he said in a note to investors.

The drug in question, Zonegran, delivered sales of $219 million to Elan in the five years for which it had the rights in the US and Europe. On that basis, the fine amounts to 93 per cent of total sales over the period.

Dr Hunter said two other cases concluded this year relating to similar epilepsy drugs saw Novartis fined $185 million, or 7 per cent of five-year sales and Johnson Johnson fined $81.5 million, or just 0.8 per cent of five-year sales of the drugs in question, Trileptal and Topamax.

Elan sold its rights in Zonegran back in April 2004 to Japanese group Eisai. The US departments of justice and health opened their investigation in early 2006. The agreement with Elan has yet to be finalised and the terms could change before then.

Separately, Elan and its partner Biogen have updated figures for Tysabri patients who have contracted brain condition PML, bringing the total to 58. Incidence is highest in those taking the drug for between two and three years.