Elan back on acquisitions trail

Elan has marked its return to financial stability by beginning to search for acquisitions, chief executive Mr Kelly Martin yesterday.

"We're looking offensively at the marketplace," said Mr Martin after the release of Elan's results for the three months to September 30th.

The pharmaceutical firm said it had cut its third-quarter losses to $91 million (€78 million) from almost $1 billion a year ago and met most analysts' expectations by posting revenues of $174.7 million, down from $331.7 million in 2002.

Mr Martin said Elan's recent $630 million refinancing programme, when coupled with an aggressive asset-disposal strategy, had ensured the company's "financial flexibility" until the end of 2005, as well as successfully restoring its "credibility" in the market.

"The market is recognising that when we say something, that's what we mean," he added.

Elan has at this stage raised a total of $1.9 billion under the recovery plan it launched last year. Mr Martin predicted yesterday that the original $1.5 billion target would be surpassed by a further $200 or $300 million over coming months, as further divestments are agreed.

He said these disposals would cover both "product and location", indicating that peripheral operations in both the US and mainland Europe would be up for sale as the plan draws to a close.

Looking to acquisitions, Mr Martin hinted that targets in the neurology area were of particular interest, but said products or companies concerned with auto-immune drugs and severe pain treatments were also of interest.

He declined to speculate on how much the company could spend on such deals, saying the process still had some months to run.

In a move seen as positive for future operating margins, the company said yesterday that it had spent $100 million on the repurchase of royalty rights from Pharma Marketing.

Elan's shares strengthened on the back of the results announcement, gaining 15 cents to close at €4.60 in Dublin and climbing 4.1 per cent to $5.33 in New York, where they are mainly traded.

Analysts said the company's value would now, for the first time in more than a year, be led by its product pipeline rather than uncertainty over its survival.

"Elan can now be evaluated as a pure-play biotech company," said Mr Ian Hunter of Goodbody Stockbrokers.

Yesterday's release provided little in the way of product news, with updates on key treatments for severe pain, Crohn's disease and multiple sclerosis unlikely to emerge until next year.

Until then, the biggest potential influence over the stock will remain the US Securities and Exchange Commission's ongoing investigation into Elan's accounting practices.