Elan may sell up to 25% stake to raise capital

Pharmaceutical firm Elan is likely to sell up to a quarter of the company as part of its plan to raise around $1.5 billion to reduce debt and strengthen cash reserves for product development.

Elan chairman Kyran McLaughlin said a sale of between 19 to 25 per cent of the firm was now likely and that there were "certainly half a dozen" interested buyers" interested in buying such a stake, in comments reported by The Financial Timestoday.

Elan is due to report fourth quarter results tomorrow. Mr McLaughlin's comments come as minority investor Jack Schuler, the former president of US pharmaceutical company Abbott, published a letter calling for sale plans to be scrapped and the appointment of more experienced directors.

"Now is not the time to put all or part of Elan up for sale," Mr Schuler said, adding that acting from a position of weakness and would dilute shareholders at a time when the stock is depressed.

Mr Schuler also criticised what he describes as a lack of commercial pharmaceutical experience at senior levels in the company and the ongoing use of corporate jets. He was also critical of the temporary shift of Elan's headquarters to New York, where chief executive Kelly Martin lives.

Mr Schuler's letter, published on his website, said: "Elan is a great company that has terrific lifesaving drugs but a management entrenched in arrogance".

"They are trying to defend the indefensible. They should have appointed commercial people two years ago" for sales of Tysabri, Elan's multiple sclerosis [MS] treatment, Mr Schuler said.

Promotion of Tysabri had been left almost entirely to Elan's partner in the Tysabri programme, Biogen, "despite an inherent conflict with their drug Avonex, the current market leader in MS", Mr Schuler claimed.

Elan has hired Citibank to conduct a "strategic review" of its fundraising options in January and Mr McLaughlin said the report should be completed by the end of April.

Mr Schuler's comments come three weeks after a meeting between two Elan directors and seven shareholders holding a combined 37 per cent stake. Mr  Schuler today called for Mr McLaughlin to be replaced.

Mr McLaughlin has no plans to step down as chairman, telling the FT that Elan needs an Irish chairman or chief executive for tax and regulatory purposes.

A number of shareholders are concerned at the potential impact of the $68bn (£46bn) takeover by Pfizer of Wyeth. Elan has a partnership with Wyeth for the development of four drugs in early clinical trials.

Separately today, Elan this morning released data for MS patients treated with Tysabri over the past 2 years. The tests showed that 37 per cent of patients remained free of disease activity, compared to 7 per cent of placebo-treated patients.

The analysis also suggests that the efficacy of Tysabri may increase over time. The data were published in the latest issue of Lancet Neurology.

Last week Biogen scaled back its growth projections for Tysabri and said another patient has developed the potentially deadly brain infection known as PML. This is the fifth such case and the patient is currently in hospital.

Biogen reported higher fourth-quarter earnings but sales of Tsyabri fell short of expectations.

Biogen chief executive Jim Mullen said it will be "difficult" to achieve the company's previous forecast that 100,000 patients will be taking Tysabri by the end of 2010.

Tysabri was temporarily withdrawn from the market in 2005 after it was linked with PML but reintroduced in July 2006 with revised safety warnings. Steven Galetta, professor of neurology at University of Pennsylvania and co-author of the research has served as a consultant for Biogen and has received research support from the company.

At 3pm in Dublin Elan shares were marginally lower at €6.12 giving the company a market capitalisation of €2.9 billion.

Additional reporting Reuters