Elan remains defiantly up to speed on 'recovery plan'

Despite falling short of market expectations for the last quarter of 2002, Elan remains defiantly up to speed on its much-vaunted "recovery plan".

Over the past few months, the company's balance sheet, while hardly the least complicated in the corporate world, has been significantly "simplified" as operations have been slimmed and debt reduced ahead of schedule. Shares have begun to claw back some of the 94 per cent loss they sustained last year, allowing the company to once again feature on the radar of major investors.

As a direct result, Elan's new-look management team has succeeded in achieving a crucial goal: they have managed to shift the focus of observers from past difficulties to future potential.

Analysts are now treating the stock as a risky "buy", encouraging investors to get into the stock if they are prepared to take their chances on Elan's product pipeline and how it will shape the new-look company.

Elan chairman Dr Garo Armen and its newly appointed chief executive, Mr Kelly Martin, were more than keen to discuss the prospects for their new drugs yesterday, saying they were particularly "encouraged" by Antegren and Prialt.

"It's clear that this business will not be profitable. The key thing with Elan is the pipeline," said Mr Peter Frawley of Merrion Stockbrokers, who sees Elan as a "speculative stock. That's what you're buying into: whether you think Antegren and Prialt will come through on time and deliver their promise," he said.

Mr Ian Hunter of Goodbody Stockbrokers said the best that could be expected of Elan was that it would come back to profit in 2005, driven mainly by Antegren, which is currently in trial.

"The longer there are no negative results, the more positive it will be," Mr Hunter said.

The other possibility, he believes, is that Elan will pique the interest of a buyer before its recovery is complete.

Mr Hunter sees Elan's takeover appeal improving as 2003 progresses and the company moves further towards its new identity. Possible buyers could include Wyeth and Biotrin, with the latter currently a 50/50 partner in the Antegren venture, Mr Hunter said.

Acquisition has been mooted in the past but sale prospects have always been clouded by an ongoing Securities & Exchange Commission (SEC) into Elan's accounting practices.

Dr Armen and Mr Martin said yesterday that they continued to co-operate with the SEC but were unable to pencil in a date for closure. Mr Hunter acknowledged that the investigation remained an "overhang" but sees it becoming less of a deterrent as time progresses.