Elan has taken the latest step in its asset disposal programme with the announcement that it will receive $89.5 million (€82.1 million) in cash from its investment in Xcel Pharmaceuticals.
Elan purchased three million preferred shares in the privately owned Xcel in 2001, while Xcel also issued a total of $109 million of loan notes to Elan.
Xcel is buying back all of Elan's shareholding while the loan notes have been redeemed in full at a discount.
The value of the shares and loan notes at the end of March had been written down as $91.6 million in Elan's accounts. Elan will record a pre-tax loss of $2.1 million in the first quarter of 2003 as a result of this transaction.
Elan said the proceeds of the Xcel transaction would bring the amount raised from its asset disposal programme to more than $825 million to date.
This does not include the proposed sale of the rights to two drugs to King Pharmaceuticals for $850 million, which is currently the subject of controversy.
Elan is suing King in the New York Supreme Court to force the Tennessee-based group to complete the purchase of muscle relaxant Skelaxin and sleep drug Sonata.
The deal ran into trouble after the US Federal Trade Commission announced an inquiry into whether Elan unfairly blocked generic competition for Skelaxin, prompting King to review the transaction.
On Monday, Manhattan State Supreme Court Justice Charles Ramos set a trial date of May 15th after the parties failed to resolve their differences.
"We're not going to close under these circumstances," Mr Rory Millson, a lawyer for King, said. "We think they're in breach of contract."
But Elan says it has met all of the conditions required under the purchase agreement.
"We strongly believe all conditions have been met in terms of closing this transaction," an Elan spokesman said yesterday, adding the company believed King's refusal to close the deal was "unjustified".
Analysts said the uncertainty over the King sale, the largest in Elan's asset disposal programme and a key part of its recovery plan, was a serious setback and was likely to hang over Elan's shares until it was resolved.
"We still believe the company has other assets aside from the primary healthcare franchise that can be sold to generate the cash necessary to meet debt obligations at the end of 2003," said Goodbody analyst Mr Ian Hunter. "However, the company is under pressure to complete one of these deals in the near future to return any momentum to the recovery programme."
Meanwhile, Elan has unwound another arrangement with Canadian group Draxis Health. In exchange for a cash payment of $6.5 million, Draxis will return the Canadian rights to several of Elan's neurology products, including Frova, Myobloc, Prialt, Zonegran and Zelapar.
