Bad times return for Elan’s investors

OH no, not again was the refrain from Elan shareholders yesterday as the share price plummeted, bringing back painful memories of 2001 and 2002.

Yesterday’s fall knocked €5.4 billion off the value of the company.

Elan has become the enfant terrible of the Irish Stock Exchange and like the little girl with the curl in the middle of her forehead, when Elan is good it is very, very good, but when it is bad it is horrid.

Yesterday’s share debacle pales in comparison with the events of 2001/02, but even so Elan shareholders watched as the value of their investments fell by 68.62%. Yesterday morning the company was worth €7.926bn, well off the company’s peak of €24.5bn but well ahead of its €835m low in 2002.

By close of business Elan was worth €2.53bn

In 2001 it was a story in the Wall Street Journal disclosing the possibility of Enron-like accounting difficulties which led to an investigation by the US Securities and Exchange Commission (SEC) and a class action from shareholders which cost the company close to €70m in settlements. The SEC investigation sent shares into a tailspin and brought the firm close to bankruptcy and default on €1.6bn in debt.

The probe, coupled with a profit warning for 2002 along with serious setbacks in its Alzheimer’s research programme subsequently sent Elan shares into a further downward spiral.

As the bad news continued, with market concerns being raised over the level of its debts, Elan said that it would scale back operations and would engage in a vicious programme of restructuring.

Yesterday, shares in Elan and its partner Biogen Idec fell after the companies suspended sales of their much-heralded new multiple sclerosis drug Tysabri after a patient died from a rare, but often fatal, central nervous system disease.

Many investors believed that Tysabri was the antidote to Elan’s problems.

But once again it proved to be a false dawn for investors in the firm who must now be wondering if they will ever recover the billions of euro which they have lost since 2001.

Athlone politician Denis Naughton issued a statement in what must be an unprecedented response by a TD to the movement of shares on the Stock Exchange.

“The collapse in the Elan share price following the suspension in sales of its multiple sclerosis drug is a huge blow to the town of Athlone and its hinterland,” he said. “The suspension of the sale of the drug Tysabri will again bring into focus the future of the Monksland facility, which currently employs in excess of 400 people.”