Irish-based drug-maker Elan has reported weaker-than-expected earnings in the first quarter of 2002, with investment losses and exceptional charges depressing the troubled group's performance.
Pre-tax profits slumped to $61.9 million (€68.5 million) in the first three months of 2002 from $147.7 million in the same period last year.
The company incurred charges of $10.9 million and investment losses of $17 million during the quarter but reported growth in revenues. Excluding this charge, pre-tax profits fell to $50 million from $76.4 million and earnings per share to 17 US cents compared with 41 US cents in 2001.
The disappointing performance further weakened Elan shares in Dublin and New York. The shares closed at €12.76 in Dublin, down 56 cents.
The US Securities and Exchange Commission (SEC) is currently investigating the company's accounting practices. Elan also had warned of weaker revenues this year.
Announcing the figures yesterday, Elan chairman and chief executive, Mr Donal Geaney, suggested the SEC investigation could extend into the third quarter and beyond. "I can't comment on the rate of progress. We are fully co-operating with the investigation and are looking forward to a successful outcome."
The investigation has led to a downgrading of Elan's credit rating to the equivalent of junk-bond status. The rating agency Moody's said that, until that inquiry was concluded, Elan's ability to access new funds for business development activities or debt refinancing could be limited.
According to the results, total revenues were stronger at $443.6 million, up from $429 million in the same period last year. Revenue from sales of its top 10 product lines in the US rose by 70 per cent to $203.6 million. Revenues were also stronger in Europe with analysts finding some consolation in the improved underlying trend.
Elan was forced to abandon trials of an experimental vaccine on 360 patients suffering from Alzheimer's disease in March after 15 people suffered serious side effects. Elan is committed to working with Wyeth on developing a fresh vaccine to treat and prevent Alzheimer's disease.
Elan has also recently completed the second phase of studies of its Antegren drug used to treat multiple sclerosis and Crohn's disease. The results of these studies are being reviewed for future scientific publication.
Mr Geaney said the company was very focused on the recovery of shareholder value.
In February, Elan forecast earnings per share for the year of $1.55-$1.65 on revenues of $2-$2.1 billion. Yesterday he said the group expected to make product acquisitions during the year and expected this would contribute around 25 US cents of the earnings per share guidance it previously gave to investors.
The firm said it was looking at a number of product opportunities and would give more information on these negotiations to investors at the end of the current quarter.
