Troubled Elan to sell a dozen sites

Elan, the beleaguered Irish pharmaceuticals group, yesterday admitted defeat in its efforts to persuade investors it has a sound balance sheet, succumbing to pressure for a widespread restructuring.

Elan, the beleaguered Irish pharmaceuticals group, yesterday admitted defeat in its efforts to persuade investors it has a sound balance sheet, succumbing to pressure for a widespread restructuring.

The company – Ireland's largest until a profit warning and the re-emergence of accounting concerns in January – is to sell about a dozen of its 32 research and manufacturing sites across the world by the end of next year. And it is to concentrate its drug development work on a smaller number of clinical areas.

Donal Geaney, chairman and chief executive, conceded that Elan has "an overly complex geographic and business structure". The changes will make it easier for investors to track the performance of the business, he said. "Elan recognises that it faces a number of significant challenges in the short term, including regaining its credibility with shareholders and other stakeholders."

Elan's shares have lost more than 80 per cent of their value this year. They took another dive late last week when analysts at CSFB put out new research questioning the company's cash generation. The analyst David Maris said he remained concerned over the existence of two special purpose vehicles containing Elan's investments in biotech companies. Elan said earlier this year that if these had been consolidated on the balance sheet, last year's earnings would have been significantly lower.

The company, which insists it is strongly cash generative, said it will bring its 55 joint ventures with biotech partners under a new stand-alone business unit, Elan Enterprises. Their complicated financial structure enabled Elan to recycle its money to inflate revenues, by booking licensing income from joint ventures that were funded by itself.

Many ventures look set to be unwound or sold. More details will be given at Elan's annual meeting next month.

The restructuring will extend the power of independent non-executives to counter charges of poor corporate governance.