Elan shares rallied in New York yesterday after US competition authorities dropped part of an investigation into whether it had blocked generic rivals to its muscle relaxant, Skelaxin, an inquiry that scuppered Elan's planned sale of the drug.
Elan said the US Federal Trade Commission (FTC) had sent it a letter, saying it had discontinued that part of its investigation concerning whether Elan had wrongfully listed its patent for Skelaxin.
Elan had agreed to sell Skelaxin and insomnia treatment Sonata to King Pharmaceuticals in January in a transaction worth $850 million (€748.5 million). But the deal fell through following the announcement of the FTC inquiry in March, prompting Elan to sue Tennessee-based King for breaking the agreement.
The trial is due to begin in the New York Supreme Court next Thursday. The patent issue is believed to be a central part of King's legal argument.
"We believe that the FTC's letter further confirms and validates our previously stated position that all conditions to King Pharmaceuticals' agreement to close its purchase of Elan's primary care franchise have at all times, and continue to be, satisfied," Elan's president and chief executive, Mr Kelly Martin, said.
Analysts agreed that the FTC letter lent support to Elan's case and undermined that of King.
"This is pretty unambiguously positive for Elan," said Mr David Marshall, analyst with NCB Stockbrokers. "It strengthens Elan's position and weakens King's."
However, a King spokesman said last night that the company had decided not to proceed with the acquisition of the Elan business based "on various breaches and misrepresentations".
"We have not changed that position," he said, adding that the company would be defending its position in court next week.
However, King shares slipped back yesterday while shares in Elan jumped by more than 10 per cent in early trading in New York. They later eased back slightly to close 8.62 per cent higher at $4.41. In Dublin, they added 16 cents, or 4.4 per cent, to €3.76.
The proposed disposal of Skelaxin and Sonata to King was a key element of Elan's asset disposal programme which aims to raise $1.5 billion by the end of this year to allow the company to meet its liabilities.
Doubts that the deal would proceed have weighed on Elan's share price and fuelled fears that the company would have to consider some sort of equity issue to meet a debt repayment of close to $800 million due by the end of this year.
However, Elan is not fully out of the woods as regards the FTC inquiry. The company said it continued to work closely with the FTC regarding matters unrelated to the Skelaxin patent.
It is understood that this refers to the portion of the FTC inquiry into whether Elan had potentially employed unfair competitive practices in relation to Skelaxin.
