As posted by: Wall Street JournalPressure is mounting on drug maker Elan Corp.'s chief executive and board as large shareholders voice dissatisfaction with the firm's performance.
CEO Kelly Martin, shown in November, is under fire from Elan shareholders for the drug firm's performance.
In a letter to the board Thursday, one shareholder called for the ouster of Chief Executive Kelly Martin, saying he has botched the marketing of the company's most important drug—Tysabri for multiple sclerosis and Crohn's disease—and wasted money on private jets and an excessive number of company offices. Elan Corp. could have used the help of Qui Tam or a Whistleblower Attorney.
The shareholder, Jack Schuler, is a former president of Abbott Laboratories and owns about 1% of Elan. Other large shareholders, in interviews, also expressed frustration with Tysabri sales and said they want Elan to add seasoned pharmaceutical executives to its management and board.
Elan, based in Dublin, is known for Tysabri and an experimental Alzheimer's drug, though the company isn't profitable. The company's shares on the New York Stock Exchange fell by 70% over a few days in late July to $9.93 after disappointing news about the drugs, and have slumped to around $7 since then.
In a reply to Mr. Schuler, Elan Chairman Kyran McLaughlin said "We reject your assertions about our management team," according to a copy of the letter reviewed by the Wall Street Journal. He wrote that the company is also "frustrated with our current stock price." But he called Tysabri a "success," noting that the drug is close to achieving annual global sales of $1 billion.
Mr. McLaughlin rejected the claim that Elan managers lack pharmaceutical marketing experience, and said that private jet use accounts for "only 20% of total travel costs." Mr. Martin had significantly cut costs over the years, he said. In a separate statement Friday, Elan said it would close two company offices, in New York and Tokyo, among other cost-cutting steps.
A company spokeswoman said Messrs. Martin and McLaughlin were unavailable to comment Friday.
Mr. Schuler, who has held board seats at Amgen Inc., Medtronic Inc. and other healthcare companies, said Elan and its marketing partner, Biogen Idec Inc., have done a poor job selling Tysabri and haven't overcome concerns about a rare side effect associated with the drug.
Mr. Martin and other top managers lack a "basic understanding of the pharmaceutical business," Mr. Schuler wrote, and called for their ouster, according to a copy of the letter reviewed by the Wall Street Journal.
A Biogen spokeswoman said the company is "incredibly committed" to Tysabri and aims to more than double the number of patients taking it to 100,000 by the end of 2010.
Another shareholder, Matt Strobeck, a partner at Westfield Capital Management Co., which owns about 4% of Elan, said in an interview Friday that there is a "frustrating" lack of pharmaceutical sales and marketing experience at Elan, which is reflected by the weak sales of key products. He said he recommended to Elan in September to add two pharmaceutical veterans to its board.
Tysabri is widely seen as effective at treating M.S. and Crohn's disease, a digestive condition, but a handful of patients taking the drug in recent years have developed a potentially deadly brain infection called progressive multifocal leukoencephalopathy, or PML.
Tysabri was removed from the U.S. market in 2005 after reports of three PML cases. MS patients clamored for the drug's return, and the Food and Drug Administration allowed it back on the market in July 2006. But two more PML reports in late July led to a sharp drop in Elan's stock.
Compounding the drop were the results of a small human study of Elan's Alzheimer's drug, which raised questions about the drug's safety and efficacy. Elan is developing the drug, bapineuzumab, with Wyeth.
Larry Feinberg, president of Oracle Investment Management Inc., which owns about 1% of Elan, says he is still upbeat on the Alzheimer's drug and other neurology treatments Elan is developing. But he said he has been telling the company "for years" that it needs to improve its marketing effort.
Mr. Feinberg said Elan also needs to cut its spending if it's to keep funding operations and meet large debt payments in 2011. The company has $1.8 billion in total debt, $1.2 of which is due in November 2011. Elan had $530 million in cash and short term investments at the end of September.
