Elan shares blackballed by brokers
News of the drive for cash came just hours after Elan chairman and chief executive Donal Geaney and his deputy Tom Lynch stepped down. And Elan’s problems mean the company is to abandon plans to create between 250 and 300 jobs in the former GSI electronics plant in Macroom, where 670 jobs were lost last year. Merrion analyst Peter Frawley said the company failed to lift concerns over 3 billion in debt due over the next two years.
“We are rating Elan shares ‘avoid’ and we are telling out clients not to buy in,” he said.
Mr Frawley said Elan will have a second chance to win over investors when Elan’s new chairman Garo Armen hosts a second conference call in two weeks’ time when details of the proposed sell-off will be unveiled.
“We have our doubts they can raise this kind of money over the next nine months in a depressed pharmaceutical market,” said Mr Frawley.
Speaking at a conference call with investors and analysts, Mr Armen said: “Previously provided guidance will be re-evaluated and we will do this over the next few weeks.
“By the end of the month, we should be in position to offer guidance for the next year.”
The company had previously forecast earnings per share of $1.55-$1.65 on revenues of $2-$2.1 billion for 2002.
Elan share values have plummeted since questions over the company’s accounting and fears of a cash crunch knocked about 96% off the price since the start of the year.
A select committee of five directors with Mr Armen as chairman will run Elan until a new chief executive is found for what Merrion’s Frawley said was a poison chalice position. “They will need to get a major player in the industry to take over and that is a tall order,” he added. Mr Frawley said it was questionable whether a senior management change at this late stage would be positive for the company, as any new management will need time to get up to speed on Elan. Mr Armen is chairman and chief executive of Antigenics, a $270m market cap company which has seen its share price fall by 50% so far this year.
Mr Armen also said Elan expected a non-cash writedown of about
$600 million for the second quarter of 2002 to reflect losses in its investment
portfolio. The other members of the executive committee are Bank of Ireland chairman Laurence Crowley; JP Morgan funds trustee chief Ann Maynard Gray; retired Davy Stockbroker Kyran McLaughlin, and the chairman emeritus of Merrill Lynch & Co Inc, Daniel P Tully.
