Clarity Elan Style

The announcement that Elan has sold its Tysabri part-ownership to Biogen-Idec raises some interesting questions about Elan’s direction.  What better way to assess their strategy than by their own words?

June 3, 2010 (Elan PR, from their Chairman)
“Mr. Martin has committed to remain in his current roles as Chief Executive Officer and Director of the company through May 1, 2012. It is envisioned that upon the completion of this fixed term Mr. Martin will then serve the Board as Executive Adviser through January 31, 2013. At that time and after a decade of service to the company, he will have completed his commitment to the company.This agreement and announcement are intended to provide employees, patients, business collaborators and investors with clarity and continuity on the executive leadership of the company.”

March 1, 2012 (Elan PR from their Chairman)                                                                          “After much thought and consideration, the full Board and I believe that Elan and our shareholders will be best served by having Kelly continue his leadership through this critical period and strategic inflection point in the company’s progression. To that end and after a number of discussions between me and the full Board of Directors, I have requested that Kelly extend his tenure as the Elan CEO until the Bapineuzumab data has been shared publicly, evaluated and assessed. This continuity will create an opportunity to achieve further clarity for Elan’s strategic and financial path forward.”

During the ensuing eleven months:
1) Elan sold its EDT business to Alkermes, and has sold all Alkermes stock received in that deal.
2) Elan sold its 50% ownership of Tysabri to Biogen-Idec, receiving $3.25 billion and future tiered royalties that, if Tysabri sales were to remain stable, would generate about $192 million per year.
3) Elan spun off (‘demergered’) its Neotope discovery programs into Prothena, sending along $125 million and best wishes.
4) Bapineuzumab failed completely during the summer of 2012.

February 6, 2013 (Elan PR announcement of Tysabri sale)
Mr. Martin added, “The restructuring of this business collaboration provides Elan with significant strategic flexibility. Future actions will be guided by our consistent and multi-year approach of dynamic risk/reward assessment of business opportunities. We are enthusiastic about the market opportunities around the globe and remain flexible and creative about the manner in which we would participate in those opportunities.””

One can only imagine how murky this would be Elan had not displayed so much continuity in its clarity. The CEO whom the BOD, back in 2010, had sought to extrude from the CEO post by May 2012, and from the Company by January 2013, has now assembled a war chest of roughly $4 billion with which to do…what?  The stated plan is heavy on boilerplated platitudes (“multi-year approach of dynamic risk/reward assessment”), but very short on anything within shouting distance of ‘clarity.’ With a portfolio that now been reduced to near zero, one would have thought that all this monetization was in the service of self-dissolution. The alternative is that the CEO who was being prepared for an exit in 2010, is now going to completely re-invent Elan, almost from scratch. If the BOD felt that Martin had seen his best days prior to 2010, why would he be asked to reinvent Elan? What, if anything, are they thinking?

One might wonder if a private equity group might consider acquiring Elan’s cash and scraps, content to clip their annual Tysabri coupons. The Market did speak quite clearly and expeditiously about its opinion of Elan’s plans for the future under Martin’s extended-run stewardship: The stock price dropped over 10% on February 6.

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