Elan chief extends contract

ELAN shares surged 11% yesterday as investors gained confidence from news that the pharmaceutical company had agreed a contract extension with its chief executive.

The company told the Securities and Exchange Commission (SEC), America’s top watchdog for public companies, that Kelly Martin had signed a new, open-ended contract, replacing the three-year deal due to expire at the end of the year.

Investors treated the news as a vote of confidence in the company’s future and a sign that Tysabri, Elan’s controversial treatment for multiple sclerosis (MS), would soon be back on the market.

The drug was withdrawn earlier this year when it emerged that two patients being treated with the drug had died of a brain infection.

Davy Stockbrokers analyst Jack Gorman said Mr Martin’s new contract provided a “strong incentive to realise full potential from the Elan pipeline”.

Yesterday’s news brought Elan shares back through the psychologically-important €10 barrier. The share price has rebounded from the €2.40 floor hit when Tysabri was withdrawn and already received a boost last month when US drug authorities agreed to fast-track a safety review of the drug.

But it continues to languish far below the peak of over €50 hit in 2001, just before the price collapsed amid investor concerns over Elan’s accounting policies and cash position.

Tysabri is seen as key in Elan’s recovery. The company off-loaded all of its major drug businesses to stave off a cash crunch with its banks and was left with few viable businesses as a result.

Analysts had been upbeat about Elan prospects when the drug first appeared to be successful in treating MS.

But most warn that Elan remains a high-risk stock whose value will be determined by the flow of news in relation to Tysabri.