Wednesday 21 March 2018

Board row makes Elan vulnerable to takeover bids

Elan Chairman Kyran McLaughlin and Chief Executive Kelly Martin
Elan Chairman Kyran McLaughlin and Chief Executive Kelly Martin

Donal O'Donovan

Some Elan shareholders fear a war of words and legal wrangles between directors is leaving the company vulnerable to a takeover on the cheap, but the company has refused to comment on such speculation.

Shares in Dublin and New York-listed Elan closed up around 2.5pc yesterday at €3.78 per share.

However, analysts said the share price had fallen 29pc over the past year, and that the pace of the fall was increasing, with shares down 14pc in the last three months alone.

Shareholders were commenting ahead of the Elan board meeting today, for the first time since the company gained a legal injunction to stop two of its own directors launching an investigation into corporate governance issues.

Last week, the High Court granted an injunction which blocked Vaughn Bryson and Jack Schuler from acting in a US court without the company's authority. They had tried to launch court proceedings in the US into issues Elan had already hired US lawyers McKenna, Long & Aldridge to investigate.

The findings of the law firm's investigation are due to be presented to the board, including Mr Bryson and Mr Schuler. Today's board meeting is a regular, long-scheduled event, according to a company source, and the report is just one item on a larger agenda.

But as directors prepare to sit down, a number of shareholders say that the latest boardroom spat is weighing on the share price and turning big institutional investors off the business.

Larry Feinberg is the founder and managing partner at Oracle Investment Management, a major Elan shareholder. He said: "The stock is so low now that a buyer -- Biogen for example -- could buy Elan at a ridiculously low price."


Mr Feinberg told the Irish Independent: "There is a lot of bad news in this stock, I'm adding shares but the share price has been dropping in a straight line. I think that reflects big institutions saying 'I invest in companies not in melodramas', rather than reflecting the value of the company."

Biogen has a deep connection with smaller rival Elan. The two jointly control the rights to Tysabri, a multiple sclerosis treatment that is among Elan's main assets.

Analysts say Elan and Biogen each have an effective veto stopping the other selling out of the agreement, making an opportunistic takeover of Elan particularly attractive to US-based Biogen.

Despite acknowledging the potential for a takeover, all of the shareholders who commented said that a takeover now would not reflect the company's real value.

One shareholder was "frustrated and upset by the legal battles and the waste of effort on non-operational activity".

But, he said, he would not like to see a takeover. "Elan is a clear leader in neuroscience technology with great research and development and potential for growth."

Another investor said: "This has got to be the most dysfunctional company I have ever observed at the board level."

While some shareholders are undoubtedly frustrated, industry analysts were slow to blame the latest director-level dispute for the fall in shares.

Analysts said share prices had been falling well ahead of the current issues coming to the fore. Instead, a number of industry analysts said the stock had been badly hit by other factors, most notably potential competition from alternatives to Tysabri.

Analysts reckon Tysabri, which is taken via injection, could lose market share to easier-to-use orally administered alternatives that are proving effective in trials and are close to being launched on to the market.

Irish Independent

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