Tue Nov 18, 2008 6:11pm EST
NEW YORK (Reuters) - Elan Corp Plc (ELN.N: Quote, Profile, Research, Stock Buzz)(ELN.I: Quote, Profile, Research, Stock Buzz) aims to cut costs, close locations and raise up to $500 million as it seeks to strengthen its balance sheet and offset slower growth of its multiple sclerosis drug Tysabri.
Elan, which expects to generate revenue of about $1 billion in 2008, is based in Ireland, but also has facilities in San Francisco, New York, Boston, Pennsylvania, Georgia and Tokyo.
Chief Executive Officer Kelly Martin said on Tuesday at the Reuters Health Summit in New York, that Elan is considering closing two of those locations or reducing its presence there, though the company has not yet decided which ones.
"We are currently going through a process where we are evaluating where we can take costs down and reallocate and reduce," he said. "There are a couple of locations we can potentially exit entirely."
In the nine months ended September 2008, Elan posted a net loss of $240.5 million. It is burning cash at a rate of more than $300 million a year, and it has $1.7 billion in debt that comes due over the next five years.
Elan's U.S. stock has fallen over 80 percent since early July to $6.06 late Tuesday afternoon, hurt by safety concerns over Tysabri and disappointing results from a mid-stage trial of its experimental Alzheimer's disease vaccine.
The company is on track to run out of money in less than two years if it doesn't take firm action.
To that end, Martin said he wants to raise between $300 million and $500 million within the next six to eight months, and he expects to do that by selling the rights to some of its experimental products.
Elan recently tried to sell its drug technology business, worth about $1 billion, but the credit crisis killed off a hoped-for sale to private equity and a sale is now unlikely for at least a year, Martin said.
"I'm not optimistic the markets will get back to normalcy any time soon," he said. "Our plans are not to wait around for a transaction but to run the business."
Kelly said the business is profitable but is not central to its portfolio of neurology drugs, and the company still hopes to sell it once the market improves.
For now, the company will focus on raising money by selling rights to experimental drugs in areas such as cancer and rheumatoid arthritis, products that are in early stages of development.
"By the middle of 2009 you can expect us to do something with our pipeline," he said.
Martin said the company is determined to keep its pipeline of drugs for neurological disorders, including experimental products to treat Alzheimer's disease, Parkinson's disease and Parkinson's disease.
Elan and its U.S. partner Biogen Idec Inc (BIIB.O: Quote, Profile, Research, Stock Buzz) have said they expect 100,000 patients to be taking Tysabri by the end of 2010, a figure Kelly said would represent around 20 percent of the market, but some analysts consider that over-optimistic.
Martin said it will begin to become clear over the next few quarters whether the companies can reach that figure, as they will reflect physician responses to the latest cases of PML, a potentially deadly brain infection that caused the drug to be temporarily withdrawn in 2005.
In the third quarter, Biogen said sales of Tysabri had slowed, though it maintained it can still meet the patient target of 100,000. For that to happen, growth will have to accelerate.
Tysabri was reintroduced in 2006, with stricter warnings, and physicians had started to become more comfortable with the drug. Then, at the end of July, two more cases of PML were reported. And another was reported in October.
That has once again cast doubt on the ultimate sales potential for the drug, but Martin sounded optimistic.
"We are hoping the emotion and rumoring around PML is beginning to fade away a little bit," he said. "I think a 20 percent market share for the drug is a very achievable number over time."
(For summit blog: summitnotebook.reuters.com/))
(Reporting by Toni Clarke, Ben Hirschler; Editing by Richard Chang)
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