Elan sells anti-fungal drug at "good price"
Wednesday October 2, 6:37 am ET
By Michael Roddy
DUBLIN, Oct 2 (Reuters) - Troubled Irish pharmaceutical maker Elan (Irish:ELN.I - News) took the first step on Wednesday in a disposal of assets to pay its huge debt by selling an anti-fungal drug at what analysts said was a good price.
In what is seen as the beginning of efforts to ensure the survival of the once high-flying company, Elan said Bridgewater, N.J.-based Enzon Inc. (NasdaqNM:ENZN - News) agreed to pay $370 million for Elan's antifungal treatment, Abelcet.
"This transaction represents an important step in Elan's recovery plan and enhances our overall cash position," Elan chairman Garo Armen said.
The sale was part of an overall plan for asset sales to raise $1.5 billion by the end of 2003 as a company which once had a market capitalisation of $22 billion but is now worth less than 470 million euros ($462 million) scrapes up cash.
A source close to the company said that Elan was weighing an exit from the pain treatment business in a possible sale of its four main pain treatment medications, Sonata, Skelaxin, Zanaflex and Naprelan.
"They are still determining if it is a core activity," the source said.
Elan fell victim to the global accounting jitters after it was revealed it used special off-balance sheet entities for some of its operations. Elan has denied any accounting malpractice, but remains the subject of an investigation by the watchdog U.S. Securities and Exchange Commission.
Analysts generally applauded the sale of Elan's hospital-use anti-fungal treatment to Enzon. They saw the announcement as timely after Elan's share price fell 34 percent on Tuesday in Dublin, to hit an all-time low of 1.34 euros.
The plunge came on the back of a trading statement which said Elan's third quarter revenues were expected to be down 46 percent from the second quarter, and raised questions about the company's cash burn, which some analysts have said could take the company through its remaining $600 million in four quarters.
Elan shares were down almost three percent at 1.30 euros in thin early trade in Dublin on Wednesday.
SALE WELCOMED
"We'd say they did get a good price on it, it's a reasonable price," said analyst Ian Hunter at Goodbody's Stockbrokers in Dublin. He said he had estimated a commercial value for Abelcet of $320 to $330 million, but without a manufacturing plant in Indianapolis for which Enzon paid $30 million.
NCB Stockbrokers in a research note by analyst David Marshall said the price paid by Enzon was 5.3 times historic sales and "is well ahead of our expectation".
Under the deal for Abelcet, Elan will also transfer the manufacturing plant and salesforce to Enzon, changing it from a drug technology firm into a fully-fledged pharmaceutical maker.
Enzon will pay Elan (Irish:ELN.I - News) $370 million in cash once the deal closes during the 2002 calendar fourth quarter. The price includes about $30 million for an Indianapolis, Indiana, manufacturing plant.
A 60-person salesforce from Canada and the United States is also part of the agreed deal. Enzon claimed to have the cash or cash equivalents to carry out the purchase.
"(The deal) significantly enhances our infrastructure moving Enzon to a fully integrated pharmaceutical company... and adds a product with at least 12 years of patent protection to our current portfolio," Arthur Higgins, Enzon's chairman and chief executive officer, said in a prepared statement.
For the fiscal year ending June 30, 2003, Enzon predicted that Abelcet could add about $50 million in product sales, $20 million in earnings before income tax, depreciation and amortisation, and 5 cents a share in earnings after taxes.
On average, Wall Street analysts' had expected the company to earn $1.27 in fiscal 2003.
Emphasis mine. This is the first time I see a reference to the possible sale of Pain Management products.
Ice |
