Elan meeting approves sale

Elan shareholders have approved the controversial sale of two drugs to US pharmaceutical firm King, despite speculation that a regulatory investigation into one of the products could prompt King to exit the deal.

Elan chairman, Dr Garo Armen, said the shareholder approval, delivered at an extraordinary general meeting (e.g.m.) in Dublin, meant all the requirements of the transaction had been satisfied.

"It is that confidence that has prompted us to file the lawsuit to seek the timely closure of this," Dr Armen said.

Elan is attempting to legally force Tennessee-based King to complete the $850 million (€800 million) transaction which Dr Armen has described as "a key element" to the company's recovery plan.

The sale price attached to the two drugs, Skelaxin and Sonata, accounts for more than half of the $1.5 billion Elan has undertaken to raise to meet debt obligations.

Shares in Elan fell heavily last Friday after news of the Federal Trade Commission (FTC) investigation into Skelaxin raised doubts over King's willingness to proceed with the deal on existing terms.

Dr Armen said yesterday it was "very likely" that the issue would proceed to court, indicating that Elan would not be open to a renegotiation of the current deal.

"We intend pursuing an avenue which will result in the closure of this transaction on the said terms in the agreement," Dr Armen said.

King did not provide a spokesman for comment last night, but analysts have suggested that the company could seek to classify the FTC investigation as a "material adverse event" which could dissolve the sale agreement as it stands.

"We believe it does not constitute an issue for our ability to close the transaction," Dr Armen said.

He indicated, however, that if King elected to pull out of the deal, alternative buyers for both drugs could be found.

"Before King entered into the transaction, there were a number of interested parties," he said.

Analysts have questioned Elan's ability to attract a new purchaser willing to match the price offered by King. "The pressure is back on," said one commentator.

Dr Armen characterised the events of recent days as "a temporary setback" and said Elan was currently working on "many other transactions".

He expressed confidence that the patent on Skelaxin was "valid" and said the company would "vigorously defend" it.

Elan's shares shed 16 cents to close at €2.34 in Dublin last night, cancelling out almost all of Monday's gains. In New York, where the stock is mainly traded, it closed 10 cents higher at $2.43.

Shareholders also gave their consent at the e.g.m. for Elan to generate cash by issuing up to 120 million new shares, or about one- third of existing share capital.

Dr Armen said the board had no plans to use the facility "at these prices" but was keen to gain the flexibility to issue shares when necessary.

"When it's appropriate, we will be allowed to use the share capital to satisfy certain obligations," he said.