Elan has confirmed that its broker, Merrill Lynch, was the lead shareholder in the company to which it sold future royalty rights on some of its products.
AutoImmune Research & Development, in which Elan is also a shareholder, was one of two firms Elan set up to buy future royalty rights in return for funding its research. AutoImmune owns the rights to several Elan products including multiple sclerosis treatment Antegren.
Elan admitted recently that Credit Suisse First Boston was a shareholder in the other company, Pharma Marketing, which holds the royalty rights for Elan's spasticity drug Zanaflex and its epilepsy treatment Zonegran. News that Elan had sold the royalty rights caused surprise and consternation among investors when it was revealed in the company's 2001 annual report.
They were particularly concerned at the news that it could cost Elan more than $800 million (€754 million) to buy back all the royalty rights and worried that it had used the funds to inflate revenues.
Merrill Lynch has denied any conflict of interest in its relationship with Elan. The two have close links as Merrill Lynch serves as the group's corporate broker and is one of its principal investment banking advisers.
Mr Daniel Tully, former chairman and chief executive of Merrill Lynch, is also on Elan's board. Recently, he was named on the five-person executive committee that is running the firm following Mr Donal Geaney's decision to step down as chairman and chief executive.
Analysts said Elan's big issue was what it would do about the royalties. "We really need to know whether they are going to pay to buy back the rights," Goodbody analyst Mr Ian Hunter said.
Meanwhile, an Elan spokesman said yesterday the company had laid off 54 temporary contract staff at its Monksland plant in Athlone.
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