Fillip for Elan on SEC settlement

ELAN is finally emerging from the confidence crisis that hit the company in 2002, resulting in a massive fall in its share price, with the announcement of a settlement with the US Securities and Exchange Commission.

Elan will pay $75 million (€58.6m) to settle a shareholder lawsuit $35 million of the cost will be covered by insurance and a $15 million (€11.72m) fine to resolve a SEC complaint into the company's accounting.

The settlements have been reached on the basis of "no admission or finding of wrongdoing on the part of any defendant." Initially yesterday the shares rose 74 cent to €20.41 as of 8.07am in Dublin but closed down 8c at the official close. The shares have almost quadrupled since the beginning of the year.

In June 2001, Elan was the most valuable company traded on the Irish Stock Exchange, with a market capitalisation of more that €23 billion.

Disaster struck when a Wall Street Journal article in January, 2002 questioned Elan's accounting procedures, in particular the treatment of proceeds from product divestures, and the treatment of joint ventures, heralded a significant fall in an already weakened share price. Elan refuted the allegations but the share price plummeted. The value of the company fell to well below €1 billion.

Morgan Stanley analysts wrote yesterday in a note to investors: "This is great news and in line with expectations with respect to both timing and the amount. This removes a black cloud from the stock, putting behind the last remnants of the old Elan, in our view."

Meanwhile, Reuters said Elan Corp is likely to have slipped further into the red during the third quarter, but analysts say their focus is on the prospects for new treatments needed to secure the Irish company's future. "In terms of the actual numbers, it's really just a question of how existing revenues are being maintained because they've cut their business to the bone," said Bloxham analyst Peter Jackson.

Elan is seen posting revenues of $110.3 million, according to Reuters Estimates a fall of 37% from the number reported a year ago after the firm sold off assets in order to pay down debt.

The disposals of products such as epilepsy treatment Zonegran and migraine drug Frova are seen reducing operating costs, but that could be offset as Elan prepares to bring its crucial Antegren drug on to the market early next year. "There isn't going to be much interest in the profit numbers," said Goodbody analyst Ian Hunter.

"What the market's looking for is newsflow on Antegren."

Merrion analyst Robert Brisbourne said: "a settlement of this nature was widely expected but resolution should still be a mild positive for the stock. According to the company, there are a number of potentially interested investors who were either prevented from or didn't want to invest in the company whilst the investigation was ongoing. In monetary terms, the net cost to Elan of $55m (€43m) of this settlement is in line with expectations."

Additional reporting Reuters and Bloomberg.