Elan shelves plans to spin-off subsidiary

ELAN has shelved plans to spin-off its Athlone-based drug delivery business EDT due to negative market conditions.

The Irish pharmaceutical company – chiefly known for its Tysabri multiple sclerosis drug – has long-since identified the need to alter EDT’s ownership status,either through selling it off entirely or floating it on one or two stock exchanges. While the latter remains the preferred long-term option, group management hinted recently that a final decision may not be taken for a number of months, perhaps not until next year.

However, in a statement issued yesterday, they clarified the situation, by saying: “Given that market conditions, at this time, are not conducive to an appropriate valuation, Elan has determined that it will not start a process to pursue a separation of the EDT business at this time.”

The original thinking behind the EDT (Elan Drug Technologies) move was to inject necessary capital into Elan as a whole.

The strategy changed towards simply boosting EDT’s own fortunes once US healthcare giant Johnson & Johnson bought into the group last year.

Depending on market conditions, Elan’s board could be significantly different by the time a move on EDT finally makes more sense – with chairman, Kyran McLaughlin due to formally retire as soon as a replacement is found and chief executive Kelly Martin due to leave in two years’ time.

Elan also said yesterday that it intends to eliminate around $500 million in outstanding debt, which is due to mature in November of next year and the same month in 2013.

Part of that will see the repayment – in cash – of some of the company’s overall debt and also a refinancing of remaining debt.

Overall, this activity should lower Elan’s total debt levels by around 20% – or $300m – from $1.54bn to around $1.24bn.

The company has also reiterated its guidance of record full-year revenue growth and EBITDA of more than $150m.

Just last month, Elan posted a $215m net loss for the first half of the year, although this was skewed significantly by a one-off exceptional cost of over $206m, covering a recent settlement over a legal case surrounding marketing violations for one of its previous drugs.

“Our solid balance sheet, revenue growth and ability to generate cash enable us to focus on developing one of the premier neurodegenerative pipelines in the industry,” said Mr Martin.

Despite earlier gains in trading yesterday, Elan’s share price pulled back to pretty much where it started at just over €4.