Elan slides after news of epilepsy settlement

SHARES in Irish pharmaceutical company Elan fell more than 2% yesterday on the news that the company looks set to have to pay more than $200 million (€155m) to settle an outstanding investigation into the marketing of an epilepsy treatment it disposed of six years ago.

The company – via its US subsidiary Elan Pharmaceuticals – has reached provisional agreement with the US Attorney’s Office for the District of Massachusetts to pay a $203.5m fine as part of what it called “a comprehensive settlement for all US federal and related State Medicaid claims”.

Elan has established a reserve fund of $206.3m for the anticipated settlement, which still has to be formally agreed. The investigation had been into alleged violations regarding Elan’s sales and marketing activities surrounding the Zonegran treatment for epilepsy sufferers, which had generated revenue of $219m over five years for Elan.

Elan has cash reserves of $863m which can absorb such a fine, but analysts were taken aback by the size of the settlement, with Ian Hunter of Goodbody Stockbrokers saying it was “well above expectations”.

Elan’s share price, which has already fallen 11% this year, dipped another 9c to €3.85 yesterday on the news that another three cases of brain disease PML have been discovered in users of multiple sclerosis drug Tysabri, which it co-owns with Biogen Idec. That brings to 58 the cases of PML in Tysabri users.