Elan shares suffer amid concern over scope of SEC investigation

Shares in pharmaceutical group Elan took another battering on the Irish stock market yesterday, shedding almost a quarter of their value as investors digested Tuesday's news of dramatic changes at the company.

The falls came amid renewed concerns about the extent of investigations being conducted by US regulator the Securities and Exchange Commission (SEC) into accounting practices at the troubled drugmaker.

Yesterday's Wall Street Journal reported that the SEC had subpoenaed at least two investment banks about their relationship with Elan, prompting speculation that the regulator's investigation, which was set up in February, had become more extensive than some had anticipated.

The two banks specified in the report are Morgan Stanley and Credit Suisse First Boston. An Elan spokesman confirmed last night that both had acted for Elan in the past but was unable to confirm the nature of the relationships.

The SEC is also reported to be collecting analyst reports, notes or other communication relating to Elan.

Market sources estimated in February that the investigation could last nine months but, as yet, it is unclear how accurate that prediction will be.

Elan shares closed at €1.80 in Dublin while in New York, where the company is most heavily traded, shares fell to a low of $1.75 (€1.77) in intra-day trading, which was 10 US cents down on Tuesday's close.

One observer likened the company to "a dead duck floating", predicting that the share price could fluctuate by up to 15 per cent on a day-to-day basis in the short term, but adding that further company news on cashflow was required to provide the stock with any real lead.

Elan is expected to remain tight-lipped until it announces second-quarter results at the end of this month.

In a conference call on Tuesday, acting chairman Dr Garo Armen told investors that guidance on earnings and cost-cuts would be provided at that time.

Mr Ian Hunter, analyst with Goodbody Stockbrokers, said yesterday that analysts would be particularly keen to gain further information on the level of write-down likely to be made on the company's assets in the second quarter. Dr Armen said yesterday that the write-down would probably amount to $600 million, but Mr Hunter believes that this may be a conservative prediction.

In the meantime, attention is turning to Elan's search for a new chief executive to replace Mr Donal Geaney, who left the role on Tuesday after seven years.

The Government will not be asking the chairman of the Pension Reserve Fund, Mr Donal Geaney, who resigned as head of the troubled Elan pharmaceutical group on Tuesday, to step down.

The Minister for Finance, Mr McCreevy, said yesterday that Mr Geaney had done an "excellent job" as chairman of the fund in the past year.