Shares surge as Elan set to file accounts

Shares in Elan surged by 25 per cent yesterday after the firm said it was ready to file 2002 accounts with the Securities and Exchange Commission (SEC) after a delay of more than eight weeks.

The filing, which will be made by today, will mean Elan can present audited accounts to its bondholders and thus avoid defaulting on debt worth up to $2 billion.

The development will remove much of the uncertainty that has depressed Elan's valuation, allowing the market to focus on the company's future potential for the first time in months.

Shares in the firm rose by €1.07 to €5.30 in Dublin on the news. In New York, where the company is mainly traded, shares closed up $1 or 20.53 per cent to $5.87.

Elan chief executive, Mr Kelly Martin, said the company appreciated the patience and support of its stakeholders through the filing process, which he described as "acutely stressful".

As expected, the 20-F filing will see Elan restate its 2001 accounts to reflect the consolidation of its EPIL III and Shelly Bay vehicles on to its balance sheet. This will cut earnings per share for 2001 from 95 cents to 75 cents.

Adjustments on accounts for 2002 will reduce the group's diluted loss per share last year from $6.85 to $6.65.

The company has also taken a non-cash charge of $46 million for 2002 in relation to asset write-downs and its divestment programme. This will in turn increase the 2002 loss per share from $6.65 to $6.75.

Elan said the adjustments, which came after lengthy negotiations with the company's auditor, KPMG, would not affect its liquidity or cash position.

Merrion Stockbrokers analyst, Mr Peter Frawley, said he did not expect further "surprises" from the firm to come within the 20-F form.

He pointed out that the restatement would give some ammunition to parties pursuing a class action against Elan in relation to losses incurred on their investment in the firm, but said this effect could have been much worse if the restatement had been more substantial.

Mr Fred Isquith, a partner with New York law firm, Wolf Haldenstein, which is putting together the action, said that any restatement of the firm's accounts would be a boost to the process.

Mr Martin said yesterday that it was too early to predict how the class action would conclude.

Elan will issue second-quarter results on September 17th and will hold its annual general meeting in October 21st in Dublin.

Mr Martin said the company would issue guidance on its flagship drug, Antegren, in late October. The drug failed to meet expectations in a trial earlier this year, but Elan remains hopeful on its potential.

Mr Martin also indicated that the continuing investigation of the SEC into the company's accounting practices was likely to be concluded over coming months.

A positive outcome to this inquiry, which has distracted attention from Elan's product pipeline, would be seen a strong positive for the company's share price.