Tysabri Recovery Plan
"As Elan finds stability, CEO Kelly Martin is "unequivocally" confident that focusing on Tysabri was the right thing to do, writes Donal Griffin.
In an interview with this magazine last year, the late Donal Geaney wouldn't comment on Elan except to say how proud he was of what it had achieved. Having just settled an unfair dismissal case with his former employers, raking up old roots didn't interest him.
Geaney had stood down from Elan three years previously, following a crash in the company's share price. The Wall Street Journal ran a front-page story in January 2002 on some of its joint venture accounting practices. With Enron and WorldCom still fresh in Wall Street minds, Elan's share price plummeted as the US Securities and Exchange Commission (SEC) began an investigation. By July, the price had fallen by 96% and Geaney and CFO Tom Lynch had resigned.
Staring at short-terms debts of $Ibn (Eur 782m), the new management hadn't much choice but to start selling off assets. It ultimately sold off about $2.56n (Eur 1.95on) worth, with the majority going to similarly-sized pharmaceutical companies. While this gave the young Irish biotech industry its start through the exodus of talent and technologies, Geaney wasn't convinced of the restructuring that took place in his absence, believing it to be panicked and a billion-dollar destruction of value.
It's been a long time coming for Elan, as it crawls its way back towards a position of profitability.
Elan is today built on Tysabri. The vast majority of its share price hinges on it, "and rightfully so," says Gorman. Meeting the press to discuss its latest results - which saw the company shave 37% of its net losses - Martin is "unequivocally" confident that they've taken the right route in concentrating on Tysabri and Alzheimer's.
"The size of opportunity from those two areas is gigantic and the competition is fierce. Part of our recovery plan was that we needed to take assets that we were not going to focus on and move them off of our plate so that we can focus on were we think, over time, we will be best in the world.
"Getting Tysabri back to where it is for MS and getting it to where it will be for Crohn's is going to have a very significant impact from a shareholder point of view over time.
"The same will be true for Alzheimer's. So, in our focus around key programmes, the recovery plan was in two parts: it was a financial necessity and it was strategic repositioning of the company. We're now positioned around neuro-degenerative and autoimmune focus. That's where all of our focus is."
The industry doesn't question the manner in which Elan flung off its extra layers. "The strategy has worked," says Ian Hunter in Goodbody. "What they've done in the restructuring is really concentrated on the autoimmune diseases and that side of things because that's all they can afford to put research into."
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