Embattled Drugmaker Says San Diego Campus Will Become His Home Base
Jan 08, 2003 (The San Diego Union-Tribune - Knight Ridder/Tribune Business News
via COMTEX) -- Troubled Elan Corp. named a Wall Street veteran as its new chief
executive yesterday and announced that its San Diego research campus will become
the new helm for its operations.
G. Kelly Martin, a 43-year-old former Merrill Lynch executive, will take on the
task of rebuilding the debt-ridden Irish pharmaceutical company, whose stock
fell 96 percent last year in the wake of an accounting scandal and setbacks in
its experimental drug to treat Alzheimer's disease.
Martin comes to the job with no experience as a CEO or in running a
pharmaceutical company. But some analysts said he may have what Elan most needs
now experience in digging a company out of financial trouble.
"If you look at what Elan has got to do, you don't necessarily need someone with
a pharmaceutical background," said Ian Hunter, a Goodbody Stockbrokers analyst.
"You need someone with the ability to oversee the turnaround, do the
cost-cutting and have the credibility. He's a pretty well-known Wall Street
name."
Martin said he will operate out of New York for several months, meeting with
investors and Elan employees, but will relocate later this year to San Diego and
guide Elan operations from the company's Sorrento Mesa research campus.
San Diego will have a much heightened role in Elan's corporate operations,
Martin and Elan chairman Garo Armen said in a joint interview. Though Elan's
formal headquarters will remain in Dublin for the "foreseeable future," some
operations will move from Europe to San Diego, they said.
"It's a global company in a global marketplace so there will be some things that
remain in Ireland because it makes sense, and there will be some things that
move out here because it also makes sense," said Martin, who declined to
elaborate.
In 2001, Elan designated its four-building San Diego campus, acquired in 2000
when Elan bought the former Dura Pharmaceuticals for $1.8 billion, as the North
American headquarters for its pharmaceuticals division.
But last year Elan was forced to scale back operations as part of its worldwide
restructuring, trimming its San Diego work force of about 550 to its current
370.
Joseph Panetta, chief executive of BioCom, the trade association for the local
biotechnology industry, was enthusiastic about Elan's renewed commitment to the
San Diego region.
"Maybe he (Martin) has a vision that is in line with what we'd like to see begin
to happen here that San Diego become a focus, not just as a nice place to do
research but for the establishment of major pharmaceutical headquarters," said
Panetta.
"I think Elan is going to get through its financial problems, and they've
already taken steps to shore themselves up financially," Panetta said. "If they
get through this, they'll have a new level of presence in San Diego."
Yet getting through Elan's financial morass and lingering accounting scandal
remains a tall order for the new chief executive. Elan, once a Wall Street
favorite, fell from grace last year over concerns about how the company
accounted for joint ventures with numerous biotechnology company partners,
including several in San Diego.
Elan created separate firms that were funded jointly with its partners, which
allowed Elan to record product development expenses as assets on its balance
sheet. Critics claimed that and other practices artificially inflated Elan's
earnings, and the company is now the subject of an investigation by the
Securities and Exchange Commission.
In the wake of the accounting probe, Elan's shares plunged, taking its market
capitalization from $21 billion to $1 billion. Shares of Elan closed yesterday
at $2.99, up 10 cents.
Elan is now about $2.4 billion in debt. The company has pledged to repay $1.5
billion of that by the end of 2003. To raise the money, Elan implemented a tough
restructuring plan, laying off 20 percent of its work force and selling various
operations and products.
So far Elan has raised $690 million through asset sales, including $120 million
from a revised licensing agreement with Ligand Pharmaceuticals on a pain drug
the companies jointly developed.
Martin said Elan is ahead of schedule in raising the cash to repay its debts and
will continue to move its drug research plans forward.
"The execution of the recovery plan, which we'll continue to push forward on,
will give the company the financial wherewithal to realize its future," said
Martin. "Elan has world-class science and great people, and what we need is to
make sure that we also have a world-class business foundation that allows the
science to be successful."
Analysts note that Martin comes to Elan with a reputation on Wall Street as a
fix-it guy who is also cool under fire.
The executive worked at Merrill Lynch for 21 years, heading its brokerage
operations outside the United States and helping to turn around some of the
firm's businesses, including making its Japanese unit profitable.
Martin resigned from Merrill in December after it merged its international
brokerage unit with its domestic brokerage business and appointed the head of
the domestic unit to run the combined division.
In July, Martin testified on behalf of Merrill Lynch in a congressional hearing
about the collapse of Enron Corp. Martin had been a senior manager of Merrill's
investment banking operation when the firm arranged some transactions for Enron
that were deemed unusual.
Merrill also has close ties with Elan. It has been the main underwriter of Elan
stock and bonds in the United States, raising about $1.7 billion from investors
for Elan since 1986, according to Thomson Financial data.
--Bloomberg News contributed to this story. |
