Elan sales to fall 52% in third quarter

DRUGS company is Elan is set to see third-quarter sales halve when it reports results later this week.

According to brokers, third-quarter sales will fall by 52% to $165m, with $128m of this coming from retained profits.

However, analysts at NCB Stockbrokers are expecting Elan to post a loss per share of 28 cents, an improvement on the loss reported this time last year.

It says the shape of the business should begin to more closely resemble the core business.

“In particular, we will look for the operating expenses to realign with the reduced revenue base. Management has guided that further disposals will occur by year-end and that the restructuring program is now drawing to a close.

"Following the recent fund raisings, an update on the scale of disposals anticipated along with the likely shape of the core business post restructuring maybe given with the results,” the broker said in research report.

The risk to company, it adds, is that it may choose to dispose of products in the final phase of the restructuring plan, which may significantly impact cash flows. With new drugs, like Antegren, unlikely to make a material impact on revenues until 2006, the scale of cash-burn through 2004 and 2005 will be important.

“Whilst management will consider bids for the majority of the company’s assets, excluding the pipeline developments, we believe the most likely asset to be disposed remains the drug delivery business,” NCB said.

It added that assuming the SEC investigation into its accounting can be resolved by early next year, the key issues overhanging the stock in recent times could be resolved and the focus should remain on the drug pipeline.