Tuesday 23 January 2018

Elan will pay almost no tax on €2.4bn windfall sale

'We don't expect to pay meaningful taxes to State for 'many more years'

Nick Webb

Nick Webb

Elan will pay almost zero tax on its €2.4bn windfall from selling blockbuster drug Tysabri to Biogen last week.

The move is likely to intensify the focus on Ireland's low tax regime, which has been attacked by other European countries.

"While we may receive $3.25bn on closing, we do not expect to pay any significant cash taxes on this receipt. There are very few if any companies that could make that statement," Elan chief financial officer Nigel Clerkin told investors last week.

"This demonstrates yet again the enormous structural advantage of our Irish tax domicile and lets us accelerate to the present the benefit of a substantial portion of our tax operating losses."

Elan last week completed its transformation from a debt-laden full service pharmaceutical company to a cash-rich, drug-focused private equity-type vehicle. It sold its 50 per cent stake in wonder-drug Tysabri to its partner, Biogen, for €2.4bn in cash plus a share of upcoming profits. The ISEQ-listed firm sold off its EDT drug delivery unit last year, and last month announced it was to jettison the remains of a 25 per cent stake in drug firm Alkermes. Elan is sitting on a huge cash pile, and management is considering what to do with it.

Mr Clerkin added that Elan has more than €1.1bn in its kitty to put against future tax bills.

"Following the transaction, we still retain over $1.5bn in available tax deductions and we do not expect to pay any meaningful cash taxes for many years to come," he said.

He noted that Ireland's low tax regime would benefit Elan should it seek to make acquisitions, saying: "There is certainly plenty of ability to use the flexibility in the Irish tax code to our advantage in transactions going forward.

During the early 2000s, Elan was the biggest company on the Irish stock market, valued at nearly €20bn, but a series of high-profile hiccups, from a creaking debt mountain to drug trial reverses, saw the share price crumble.

Former Merrill Lynch banker Kelly Martin was brought in to steady the ship, and he put the company back on a solid financial footing.

Elan had been pinning its future growth prospects on the success of its latest wonder drug, Bapineuzab, which was hailed as a potential MS treatment, but trials last summer were massively disappointing, leading Elan to refocus itself.

The company, set up in Athlone to develop nicotine patches in the 1970s, has included Paddy Power boss Patrick Kennedy, former IBRC public interest director Gary Kennedy, former IDA boss Kieran McGowan, Davy Stockbrokers chief Kyran McLaughlin and former Anglo Irish Bank chairman Donal O'Connor as board members.

Irish Independent

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