Some major investors in Irish drug-maker Elan are unhappy at the company's direction and want to see change at the top.
Elan's stock has fallen more than 80 per cent over the past five months amid concern over the safety of its multiple sclerosis drug Tysabri and disappointing results from a trial of its experimental Alzheimer's vaccine.
Elan, which is not generating a profit and has $1.7 billion in debt coming due within the next five years, could face financing challenges if the credit crisis continues. It has $450 million in cash and is burning through it at a rate of $300 million a year.
Interviews with four big Elan shareholders reveal growing scepticism that management can maximize the value of its products, and concern that the board is not exercising sufficient oversight on spending and corporate governance issues.
"I am concerned that the management team, as well as the board of directors, lacks the type of pharmaceuticals experience that a company at this stage of its development should have," said Larry Feinberg, who runs Oracle Investment Management, a $1 billion healthcare hedge fund that owns 5 million Elan shares.
"This company has had some setbacks, the stock is down enormously and shareholders are not happy."
Elan says it is aware of the discontent, but does not believe it is justified. It is looking into ways to cut costs, and may close two locations. It also hopes to raise up to $500 million in cash within the next six to eight months by licensing the rights to some of its products.
"We are aware of concerns over our share price, which we do not believe reflects the fundamental strength of the company," said Mary Stutts, a spokeswoman for Elan. "Our Board and our management team bring together some of the strongest business, commercial and scientific expertise in the industry, and we are constantly attracting new talent at all levels."
Within the past two weeks, the company announced the appointment of a new president, Carlos Paya, who was formerly at Eli Lilly & Co, and there is a new legal senior vice president, who was previously at Amgen.
Still, another big shareholder who declined to be named citing company policy, said more experience and oversight are needed at the board level, and he would like to see a shake-up.
Of Elan's 15 board members, five have a background in science, according to biographies on Elan's website. Chief Executive Kelly Martin is a long-time Wall Street veteran who once headed an international private client group at Merrill Lynch.
Reuters