Shares in the troubled drug-maker Elan made marginal gains yesterday after the company reached agreement to sell one of its products for $370 million (€376 million).
News of the sale to Enzon of the anti-fungal treatment, Abelcet, followed a poor third quarter trading statement which sent Elan shares down 33 per cent to close at a record low of €1.34 in the Dublin market on Tuesday.
The stock finished yesterday at €1.50, up 16 cents, but nowhere near its year-high of €50.27 in January, before the company's share collapse.
In New York, where the Elan shares mainly trade, it closed 32.38 per cent stronger at $1.39.
The deal is subject to shareholder approval and the consideration may be subject to deductions on closing which are not expected to exceed $10 million.
The sale marks the first major disposal by the struggling drug group, whose market capitalisation has been hammered amid concern about its accounting practice.
It is the subject of a Securities and Exchange Commission inquiry, but has denied malpractice.
While the company needs more disposals as it attempts to generate up to €1 billion in cash by the end of the year to meet credit commitment, analysts said more detail was required on Elan's cash burn rate before a definitive assessment could be made of the latest deal.
The trading statement disclosed write-downs of $542 million, embracing an exceptional charge of $400 million to reflect the declining value of Elan's investment portfolio and $142 million written down in relation to a sale of assets by one of its off-balance sheet vehicles.
The statement said product revenues in the third quarter were likely to come in at $200 million, down $175 million on the previous three months.
Abelcet is one of two products made by the Lipposome Company, which was acquired by Elan for $600 million in May 2000.
The company is disposing of assets outside pain management, neurology and auto-immune diseases, its core therapeutic areas.
"This transaction represents an important step in Elan's recovery plan and enhances our overall cash position," said Elan's chairman, Dr Garo Armen.
NCB Stockbrokers said in a note that the price paid by Enzon was "well ahead" of its expectations. Merrion Capital analyst Mr Peter Frawley said the deal equated to about 4.5 times sales, in line with his expectations for the product, given its long patent expiry of 12 years.
Mr Frawley said: "This news is especially important coming as it does straight after the large depletion of cash reserves."
He added: "Further disposals of this magnitude will buy Elan a significant amount of breathing space: however, until we get greater detail on the cash burn recorded in the third quarter we are unable to be definitive on the matter."
While Elan is understood to be engaged in discussions on further disposals, a spokesman denied a news agency report, attributed to company "sources", that it was planning to exit the pain management business.
