(For other news from the Reuters Health Summit, click on
http://www.reuters.com/summit/Health08?pid=500)
(Adds details on current cash position)
By Toni Clarke
NEW YORK, Nov 18 (Reuters) - Elan Corp Plc aims to cut
costs, close locations and raise up to $500 million through
licensing deals as it seeks to strengthen its balance sheet and
offset slower growth of its multiple sclerosis drug Tysabri.
Elan, which expects to generate revenue of about $1 billion
in 2008, is based in Ireland, but also has facilities in San
Francisco, New York, Boston, Pennsylvania, Georgia and Tokyo.
Chief Executive Officer Kelly Martin said on Tuesday at the
Reuters Health Summit in New York, that Elan is considering
closing two of those locations or reducing its presence there,
though the company has 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."
In the nine months ended September 2008, 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 of cash a year. It has $1.7 billion in debt
that comes due over the next five years.
Elan's U.S. stock has fallen over 80 percent since early
July to close at $6.07 on Tuesday, hurt by safety concerns over
Tysabri and disappointing results from a mid-stage trial of its
experimental Alzheimer's disease vaccine.
"We have just shy of $500 million of cash. Under normal
markets, $500 million of cash is ample," Martin said, adding
that if the company does nothing and Tysabri sales growth does
not pick up, it could run out of cash in two years. So Elan
"would like to do something."
Martin wants to raise between $300 million and $500 million
within the next six to eight months as an additional cushion,
and he expects to do that by selling the rights to some of its
experimental products.
"In the next six to eight months, if we could put, say $400
million of cash on our balance sheet, we would like to do
that," Martin said.
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, 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."
Kelly said the business is profitable but is not central to
its portfolio of neurology drugs, and the company still hopes
to sell it once the market improves.
For now, the company will focus on raising money by selling
rights to experimental drugs in areas such as cancer and
rheumatoid arthritis, products that are in early stages of
development.
"By the middle of 2009 you can expect us to do something
with our pipeline," he said.
Martin said the company is determined to keep its pipeline
of drugs for neurological disorders, including experimental
products to treat Alzheimer's disease and Parkinson's disease.
TYSABRI
Elan and its U.S. partner Biogen Idec Inc have said they
expect 100,000 patients to be taking Tysabri by the end of
2010, a figure Kelly said would represent around 20 percent of
the market, but some analysts consider that over-optimistic.
Martin said it will begin to become clear over the next few
quarters whether the companies can reach that figure, as they
will reflect physician responses to the latest cases of PML, a
potentially deadly brain infection that caused the drug to be
temporarily withdrawn in 2005.
In the third quarter, Biogen said sales of Tysabri had
slowed, though it maintained it can still meet the patient
target of 100,000. For that to happen, growth will have to
accelerate.
Tysabri was reintroduced in 2006, with stricter warnings,
and physicians had started to become more comfortable with the
drug. Then, at the end of July, two more cases of PML were
reported. And another was reported in October.
That has once again cast doubt on the ultimate sales
potential for the drug, but Martin sounded optimistic.
"We are hoping the emotion and rumoring around PML is
beginning to fade away a little bit," he said. "I think a 20
percent market share for the drug is a very achievable number
over time."
(For summit blog: http://summitnotebook.reuters.com/))
(Reporting by Toni Clarke, Ben Hirschler; Editing by Richard
Chang)
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