Elan in talks over sale of European marketing operation

Elan Pharmaceuticals is in discussions on the sale of its European sales and marketing operation.

The company announced yesterday that talks were under way after news of the negotiations appeared unofficially. In a stock exchange statement, Elan said it was "in negotiations with a third party for the disposal of Elan's European operations, primarily consisting of its sales and marketing business there".

A spokeswoman for Elan last night said the discussions did not include the group's Irish headquarters or its manufacturing plant in Athlone. Its British-based development group is also beyond the scope of the current agreement.

Elan has a small sales and marketing operation in Ireland, but its operations in this area are concentrated in mainland Europe. The division markets about 20 products.

Analysts gave a broad welcome to the announcement. Elan had previously announced its intention to raise a further $250 million to $300 million in asset disposals by early next year as it nears the end of its restructuring. The money raised will add to funds already accrued in a recent €633.25 million share placing and corporate bond issue to see the company through operating losses in the next two years.

By then it hopes to have made progress on further developing some products in its pipeline.

Elan's spokeswoman said the European sales and marketing operations were not core to the group's operations. But she said the company would continue to develop products for the European market regardless of the outcome of the current discussions.

"A sale would simplify and focus our business further and prepare us for the launch of those brands," she said.

If Elan does succeed in offloading the assets, analysts said they could be expected to fetch between $150 and $200 million. Goodbody recently valued Elan's entire European business at in excess of $325 million. Analyst Mr Ian Hunter said: "As non-core to the remaining US-focused business, the sale of the European arm could raise the already flagged $250-$300 million with the least disruption to the remaining business."

NCB's Mr David Marshall said the sale would have a minimal impact on profits. "I would be more worried if they were selling US products," he said.

Mr Jack Gorman, analyst at the company's own broker Davy, said the move to offload the sales and marketing arm was "mildly surprising [as regards timing\] as we believed other assets may have been divested first".

He added that any successful sale would leave Elan having to find a new strategy to launch Prialt, Zonegran and Antegren into Europe in the future.

Drug delivery and hospital products have been areas listed as non-core and analysts believe they are still on the block but may have been unable to attract buyers at the right price.