THE INVESTMENT COLUMN: Elan tries to put the past behind it

THE STORY of Elan is one of the great corporate sagas of the past decade. At the height of the biotech bubble in 2000, this was Ireland's largest company. But it was in large part a financial construct, built up by the accountants in charge, who recycled the company's own money, via collaborations with small, experimental drug developers, to give the illusion of higher revenues and net assets.

It had essentially mortgaged its biotech investments, and when they collapsed in value, Elan came to the brink of bankruptcy. New management had to ensure a piece-by-piece unpicking of those collaborations, a massive fire-sale of assets, and the $85m (pounds 46m) settlement of investor lawsuits which alleged that Elan misled the market.

Yesterday, a last piece of the jigsaw was in place with the agreement of a $15m settlement with the US regulator, the Securities and Exchange Commission.

So what is Elan now? It has sales from prescription jabs Azactam and Maxipime for pneumonia and other infections, and income from contract manufacturing for other drug companies. But it is three new products which ought to drive growth at the company. Tysabri is a new treatment for multiple sclerosis, developed in collaboration with Biogen Idec of the US, and take-up has been strong since the drug's launch in November. Some analysts expect it to have sales of $3bn a year when it becomes well-established. It could also be extended for use in rheumatoid arthritis.

A second drug, Prialt, for chronic pain, was also launched last year. And then there is work on Elan's potential new Alzheimer's disease drug, which has suffered setbacks but could come to fruition around the end of the decade.

At the company's full-year results yesterday, Elan reiterated its confidence in returning to profit by the end of 2006. There was a warning of higher costs than the market had expected, but generally the results helped in the process of restoring confidence. Hold.

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