Reuters Summit-UPDATE 2-Elan seeks deals to raise cash

(For other news from the Reuters Health Summit, click here) (Adds details on current cash position)

By Toni Clarke

NEW YORK, Nov 18 (Reuters) - Elan Corp Plc (ELN.N) (ELN.I) aims to cut costs, close locations and raise up to $500 million through licensing deals as it seeks to strengthen its balance sheet and offset slower growth of its multiple sclerosis drug Tysabri.

Elan, which expects to generate revenue of about $1 billion in 2008, is based in Ireland, but also has facilities in San Francisco, New York, Boston, Pennsylvania, Georgia and Tokyo.

Chief Executive Officer Kelly Martin said on Tuesday at the Reuters Health Summit in New York, that Elan is considering closing two of those locations or reducing its presence there, though the company has not yet decided which ones.

"We are currently going through a process where we are evaluating where we can take costs down and reallocate and reduce," he said. "There are a couple of locations we can potentially exit entirely."

In the nine months ended September 2008, Elan posted a net loss of $240.5 million. While it has $450 million of cash on hand and its pipeline is fully funded, Elan is burning more than $300 million of cash a year. It has $1.7 billion in debt that comes due over the next five years.

Elan's U.S. stock has fallen over 80 percent since early July to close at $6.07 on Tuesday, hurt by safety concerns over Tysabri and disappointing results from a mid-stage trial of its experimental Alzheimer's disease vaccine.

"We have just shy of $500 million of cash. Under normal markets, $500 million of cash is ample," Martin said, adding that if the company does nothing and Tysabri sales growth does not pick up, it could run out of cash in two years. So Elan "would like to do something."

Martin wants to raise between $300 million and $500 million within the next six to eight months as an additional cushion, and he expects to do that by selling the rights to some of its experimental products.

"In the next six to eight months, if we could put, say $400 million of cash on our balance sheet, we would like to do that," Martin said.

Elan recently tried to sell its drug technology business, worth about $1 billion, but the credit crisis killed off a hoped-for sale to private equity and a sale is now unlikely for at least a year, Martin said.

"I'm not optimistic the markets will get back to normalcy any time soon," he said. "Our plans are not to wait around for a transaction but to run the business."

Kelly said the business is profitable but is not central to its portfolio of neurology drugs, and the company still hopes to sell it once the market improves.

For now, the company will focus on raising money by selling rights to experimental drugs in areas such as cancer and rheumatoid arthritis, products that are in early stages of development.

"By the middle of 2009 you can expect us to do something with our pipeline," he said.