By Bill Berkrot
New York, Aug 11 (Reuters) - An activist Elan Corp Plc investor is raising new questions over a potentially serious conflict of interest involving the sale of an Elan pain drug for a bargain basement price.
Ib Sonderby is outraged over the surprisingly low price paid by privately-held Azur Pharma International Ltd for U.S. rights to the pain medicine, Prialt, which was not disclosed at the time of the March deal.
And he is asking just how much a stake in Azur is owned by Elan board members after the Irish drugmaker confirmed that three of its directors hold Azur shares.
Elan finally disclosed in a filing this week that Azur got the Prialt rights for about $14.6 million, 'which is way below what an FDA approved product would go for on the market,' Sonderby told Reuters in a telephone interview.
Sonderby, who controls more than 2 million Elan shares between his own holdings and those of Danish companies for which he is a board member, plans to post his concerns in the form of a letter to fellow shareholders on the website SaveElan.com later on Wednesday.
The drug, which the company once touted as a future $150 million to $250 million a year seller, has been a big disappointment, with U.S. sales of only $20 million last year.
But with its high profit margin and few promotional costs, selling the rights for less than one year's revenue clearly raises some red flags.
'Elan sold EU rights for Prialt to Eisai for $100 million. Couldn't they have received at least an equal amount for the more valuable U.S. rights,' Sonderby wrote in his letter to shareholders.
Sonderby found it curious Elan chose not to disclose the terms of the Prialt deal until this week's filing, or the connection between its board and Azur.
'They didn't think it was necessary to disclose it, which was really odd. Compared to U.S. standards, this is like the stone age,' Sonderby told Reuters.
In addition, Sonderby found Elan Chairman Kyran McLaughlin is vice chairman of Davycrest Nominees Ltd, which owns 44 percent of Azur Pharma.
McLaughlin is expected to retire as Elan chairman in September of October, following opposition to his reelection by a significant number of shareholders. Chief Executive Kelly Martin plans to leave in 2012.
Now that Elan has confirmed three of its board members held a stake in Azur at the time of the Prialt deal, Sonderby wants more questions answered.
'They haven't confirmed who they are and how much they own,' Sonderby said. 'Why can't they just answer these straightforward questions? It's rather suspicious.'
The letter also asks if there are any Elan executives who own a stake in Azur in addition to the board members.
Sonderby sent an open letter to the Elan board in July complaining of ineptitude and mismanagement.
'They have done some things that just benefits themselves at the cost of shareholders and that is what pissed me off, so I had to make this open letter to the board,' Sonderby said.
He has not been satisfied by the company's response, leading to his latest action.
'We've raised some questions that we are now following up on,' he said.
Elan did not immediately return a call seeking comment on Sonderby's assertions.
(Reporting by Bill Berkrot; additional reporting by Toni Clarke; editing by Andre Grenon) Keywords: ELAN/SHAREHOLDER (bill.berkrot@thomsonreuters.com +1 646 223 6030; Reuters Messaging: bill.berkrot.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
New York, Aug 11 (Reuters) - An activist Elan Corp Plc investor is raising new questions over a potentially serious conflict of interest involving the sale of an Elan pain drug for a bargain basement price.
Ib Sonderby is outraged over the surprisingly low price paid by privately-held Azur Pharma International Ltd for U.S. rights to the pain medicine, Prialt, which was not disclosed at the time of the March deal.
And he is asking just how much a stake in Azur is owned by Elan board members after the Irish drugmaker confirmed that three of its directors hold Azur shares.
Elan finally disclosed in a filing this week that Azur got the Prialt rights for about $14.6 million, 'which is way below what an FDA approved product would go for on the market,' Sonderby told Reuters in a telephone interview.
Sonderby, who controls more than 2 million Elan shares between his own holdings and those of Danish companies for which he is a board member, plans to post his concerns in the form of a letter to fellow shareholders on the website SaveElan.com later on Wednesday.
The drug, which the company once touted as a future $150 million to $250 million a year seller, has been a big disappointment, with U.S. sales of only $20 million last year.
But with its high profit margin and few promotional costs, selling the rights for less than one year's revenue clearly raises some red flags.
'Elan sold EU rights for Prialt to Eisai for $100 million. Couldn't they have received at least an equal amount for the more valuable U.S. rights,' Sonderby wrote in his letter to shareholders.
Sonderby found it curious Elan chose not to disclose the terms of the Prialt deal until this week's filing, or the connection between its board and Azur.
'They didn't think it was necessary to disclose it, which was really odd. Compared to U.S. standards, this is like the stone age,' Sonderby told Reuters.
In addition, Sonderby found Elan Chairman Kyran McLaughlin is vice chairman of Davycrest Nominees Ltd, which owns 44 percent of Azur Pharma.
McLaughlin is expected to retire as Elan chairman in September of October, following opposition to his reelection by a significant number of shareholders. Chief Executive Kelly Martin plans to leave in 2012.
Now that Elan has confirmed three of its board members held a stake in Azur at the time of the Prialt deal, Sonderby wants more questions answered.
'They haven't confirmed who they are and how much they own,' Sonderby said. 'Why can't they just answer these straightforward questions? It's rather suspicious.'
The letter also asks if there are any Elan executives who own a stake in Azur in addition to the board members.
Sonderby sent an open letter to the Elan board in July complaining of ineptitude and mismanagement.
'They have done some things that just benefits themselves at the cost of shareholders and that is what pissed me off, so I had to make this open letter to the board,' Sonderby said.
He has not been satisfied by the company's response, leading to his latest action.
'We've raised some questions that we are now following up on,' he said.
Elan did not immediately return a call seeking comment on Sonderby's assertions.
(Reporting by Bill Berkrot; additional reporting by Toni Clarke; editing by Andre Grenon) Keywords: ELAN/SHAREHOLDER (bill.berkrot@thomsonreuters.com +1 646 223 6030; Reuters Messaging: bill.berkrot.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.