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Monday, 10 June, 2002, 12:23 GMT 13:23 UK
Shake-up for Irish drugs company
Elan's share slide has reversed the fortunes of the once high-flying company
Irish drugs company Elan plans to reorganise its business in an attempt to make it more easy to understand for investors.

During the past few months the company's shares have fallen by 85%, after investors became worried about Elan's accounting practices.


Elan Enterprises will reduce the complexity of Elan's operations over time

Elan statement
The company also suffered setbacks over its much publicised hopes to come up with a treatment for Alzheimer's disease.

Elan said on Monday that it would now focus on three main areas of therapeutic medicine, including neurology, pain management and the treatment of autoimmune diseases, such as multiple sclerosis.

It added that it would divest businesses and assets that were not relevant to these three areas.

On Monday morning, its shares rose 6.3% on news of the reorganisation.

Making life simple

The once high-flying Irish company hopes the reorganisation will simplify its corporate structure and regain "credibility with shareholders".


Elan recognises that it faces a number of significant challenges in the short term

Donal Geaney
Elan
It fell foul of its investors after various Enron-like accounting procedures came to light.

For example, the company has in the past shifted some of its research and development partnerships off its income statement.

At the same time, it has recorded technology licensing fees as contract revenue.

Elan also files its accounts according to US and Irish accountancy rules, resulting in two different sets of figures and yet more confusion.

Share slide

In the past week, the company's shares lost 25%, giving it a market capitalisation of 2.9bn (1.9bn; $2.7bn) euros.

A year ago it was worth almost 22bn euros.

In Monday's announcement, the company also said it would create a new stand-alone business unit to look after its business ventures.

"Elan Enterprises will reduce the complexity of Elan's operations over time," said the company in a statement.

The company, however, failed to give specific details about which parts of the business would be sold off.

Currently, Elan has some 50 business ventures with 30 products in clinical development.

It said there would no be significant lay-offs among its 4,500 employees, and hopes to complete the sell-offs by the end of 2003.

Stronger governance

Chairman and chief executive Donal Geaney will continue to occupy both positions at the company, despite pressure to resign after Elan's share slide.

"Elan recognises that it faces a number of significant challenges in the short term including regaining its credibility with shareholders and other stakeholders," he said.

The company said that it would improve its corporate governance by appointing a non-executive director, Richard Thornburgh, as "lead independent director".

It will also create a separate nominating committee to appoint directors.


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