Shares in pharmaceutical group Elan fell sharply yesterday after the company warned that next year's earnings would be affected by the delayed launch of a migraine drug for which it has the US rights.
Elan announced record revenues and net income for the third quarter and said it expected a strong finish to the current financial year. But it warned that expected earnings per share for 2000 would be cut by around four cents by the delayed launch of the drug, known as frovatriptan.
British biotechnology company Vanguard Medica said approval for the new drug application would be delayed after the US Food and Drug Administration (FDA) advised that further non-clinical data would be required to support the application.
The estimated date for submission of the additional data is the fourth quarter of 2000.
Elan had been licensed to market the drug in the US and had expected it to be approved in the first quarter and released later next year. This is now likely to be delayed until 2001.
"We are clearly disappointed by the delay to the approval process in the US but both Vanguard and Elan remain optimistic about the prospects for frovatriptan," Vanguard's chief executive, Mr Robert Mansfield, said.
Elan said the two companies planned to use the additional time to further profile the clinical advantage of the drug in the anti-migraine market.
Elan shares fell following the announcement and were down by 16.5 per cent at $27.50 on the New York Stock Exchange by the close of business in Dublin. They later fell further to close down $6.06 1/4 at 26.87 1/2, down 18.4 per cent. In Dublin, the shares closed 10 per cent lower at #26.47 (£20.85).
The actual financial impact on Elan should be relatively small, knocking $12 million off analysts' forecast net income next year, while earnings are expected to fall to $1.51 per share from an originally forecast $1.55. However, dealers said the news had hurt sentiment, particularly as the company had already experienced delays in filing for FDA approval for its ziconotide painkilling drug this year.
"They have had two drug setbacks in a year and people don't like that," one dealer noted.
The news about the impact of the frovatriptan delay took the gloss off good third-quarter results. The company reported a 37 per cent increase in pre-tax profits to $92.5 million (#98.4 million) as basic earnings per share rose to 34 cents from 27 cents a year earlier.
Revenues jumped by 48 per cent to $253 million. Elan said the rise in sales was primarily due to an 84 per cent increase in product sales and a 77 per cent increase in research revenues.
The company's diagnostic businesses recorded a 92 per cent rise in sales while revenue from royalties and fees was up a more modest 4 per cent.
Elan said its gross margin had improved to 60 per cent from 53 per cent in the third quarter of 1998 due to a shift towards directly marketed products.
"We have made significant progress this year in all areas of our business and I am particularly proud of the progress we have made in our research into Alzheimer's disease, where we hope to initiate phase 1 safety studies in Alzheimer's patients this quarter," the chairman and chief executive, Mr Donal Geaney, said.
Elan also announced that it may repurchase additional American Depositary Shares in the open market, subject to market conditions.
