Drug company does not have immediate plans to replace me as chief executive — Kelly Martin

ELAN chief executive Kelly Martin has denied the company is being readied for a sale after the pharmaceutical group revealed plans to split the firm into new separately-listed entities.

The drug company, valued at €5.6bn, wants to corral its cash-hungry drug development business into a vehicle called Neotope Biosciences, which will be listed on the Nasdaq or the New York Stock Exchange.

Elan will continue to be listed on the Nasdaq and employ between 90 and 110 people.

Its assets will include a 50pc stake in multiple sclerosis treatment Tysabri, a drug in development called ELND005 that could be used to treat bipolar disorders, and an existing equity interest in an already established Alzheimer’s immuno- therapy research programme.

Mr Martin, who said Elan now had no immediate plans to seek a new chief executive to replace him after he delayed his retirement earlier this year, added that the new planned structure would enable Elan to work towards generating $1 in earnings per share by 2015.

Elan will also be able to utilise over $4bn (€3.2bn) in losses it has racked up as an Irish company to help it divert funds to shareholders via a dividend, share buyback or debt buyback.

“Elan won’t be paying any significant tax for quite some time,” said Mr Martin. But he said the losses — which can offset future tax liabilities — are only valuable if a company begins making profits.

The planned separation — which requires shareholder approval — comes just a week after two of Elan’s research partners, Johnson Johnson and Pfizer, revealed hugely disappointing results from a late-stage study of a potential Alzheimer’s treatment in which Elan has a stake. It had been hoped the drug could become a billion-dollar blockbuster.

Drug failure

The drug’s failure raised prospects Elan would be acquired. The most likely candidate being touted is Tysabri’s other co-owner, US-based Biogen Idec. Tysabri is effectively Elan’s only revenue source.

Mr Martin insisted that spinning off of Elan’s research arm wasn’t influenced by last week’s news. He said the split had been under consideration for over a year.

“We’re not setting the company up for a takeout,” he said. “My job . . . is to provide shareholders with returns. We are a public company. MA happens all the time. We don’t wake up every day wondering how we’re going to sell the company. “

Mr Martin said splitting the firm would eliminate a financial burden for Elan.

Elan will commit between $120m and $130m to Neotope, enough to see it through about 30 months until it secures other sources of funding, said Mr Martin. Neotope Biosciences will count three potential new drugs in development among its assets.

“That’s a long-term journey which requires an enormous amount of staying power and capital,” he stressed.

“We just don’t have the engine from a PL point of view that can give shareholders return in the short to medium term while funding that kind of success for the longer-term science.”

Elan intends to retain between 14pc and 18pc stake in Neotope, which will be chaired by Elan’s former head of research, Lars Ekman. Its chief executive will be Dale Schenk. Most of its 80 employees will be based in San Francisco.

Mr Martin said Elan will be a longer term shareholder in Neotope than it has been in Alkermes, the firm that bought Elan’s drug delivery technology business last year for close to $1bn.

Elan got a 25pc stake in Alkermes following that transaction. Earlier this year it sold most of it to institutional investors.

Shares in Elan were up over 5pc in New York by midday and closed up 4.9pc in Dublin at €9.50.

– John Mulligan

Irish Independent