Inside the world of business
Glass half full for upbeat Elan
THE HEADLINE figures may have read “steady as she goes” but biotech group Elan was keen to present a more upbeat stance at briefings yesterday.
The company and its US partner Biogen came in for some criticism over undershooting Tysabri numbers at a time when competition in the multiple sclerosis segment is growing. Some analysts were also concerned at the continued growth in numbers of patients stopping treatment with the drug.
But executives attributed much of the slowdown in the past three months to one-off issues of inventory control and adverse forex movements.
And they are bullish about a new study that appears to narrow considerably the risk of patients contracting the potential deadly side effect, PML. The threat of the brain disease has been seen as a major factor inhibiting the drug’s blockbuster potential. Both patients and their doctors have been wary of the risk.
Elan says the study shows that just over half of MS patients have anti-JVC antibodies – whose presence has been linked with susceptibility to the brain disease. While some would look at the study as sharply reducing the prospects for Elan’s top drug, the company is adopting a far more “glass half full” approach.
Previously it had been thought that as much as 90 per cent of the MS population had these antibodies. Thus, they argue that close of half of MS patients will be able to take its drug with far greater confidence, giving Elan “huge potential” to grow sales. Furthermore, the company hopes to have a test on the market next year that will allow people check their vulnerability to PML.
Elsewhere, the group’s EDT unit has been going through something of a transition period, with several older drugs being dropped and newer ones yet to deliver fully. Chief financial officer Shane Cooke says it now appears that the second quarter had marked the low point of the transition with revenue growth expected to accelerate next year after just edging upwards in 2010.
The company expects continuing attention to costs and growing drug revenues will see it deliver an operating profit this year and be profitable after tax by the end of 2011. And, on the finance side, Elan has used part of the cash from the Johnson Johnson investment to pay down its debt, extending maturity on the balance. That gives it more wriggle room in pursuing new pipeline.
However, its biggest advantage is the rapid growth in patient numbers in precisely those areas where in concentrates. The downside, of course, is that these are also areas where pipeline development is fraught with risk. Elan investors have seen more than one false dawn before now.
Bank of Ireland's word is their bond
BANK OF Ireland seemed to have taken one for the wider banking system by selling a public bond at a cost that was well over double the margin it paid earlier this year.
The bank wanted to prove to the markets that the lender and indeed a Government-guaranteed bank could sell a public bond but to achieve this it had to pay up. However, at what price does the exercise become pointless?
Clearly, paying investors a rate of 5.9 per cent for €750 million on a public bond wasn’t enough of a deterrent, even though the bank is charging half this rate and even less on many of its mortgages.
This is a sign of how dysfunctional the Irish banking sector has become – banks are paying massive costs for their money on one side and getting very little for it on the other.
The bank is to be applauded for that but €750 million is a drop in the ocean for what is required at Bank of Ireland and across the wider banking system.
The fact that the bank was the first of the Nama participants to not only meet the Financial Regulator’s new capital targets but exceed them by more than €200 million shows the extent of the difficulties facing the sector. The other five institutions – four of which are or will soon be in State control – have not tapped the bond markets with large benchmark bond offers for at least half a year.
More than two years since the introduction of a bank guarantee to keep the funding wheel turning, the banks can still only barely operate – even with Government stabilisers. It is hardly surprising that the Government plans to extend the guarantee beyond December 31st.
Getting the public finances fixed – and satisfying the markets that the Government can repay and reduce its borrowing – is the only way that the banks can return to normal funding conditions.
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TODAY
The Economic and Social Research Institute and Trinity College, Dublin will hold a joint conference on “Turning Globalisation to National Advantage: Economic Policy Lessons from Irelands Experience”.
PODCAST
In this week’s business podcast John Collins talks to Dan O’Brien about cutting €15 billion in four years; Mark Hennessy on British infrastructure spending; and why the founders of Twitter, YouTube and Skype are in Dublin this week. irishtimes.com/business/podcast
