Shares in pharmaceutical group Elan managed to regain some ground in uncertain half-day trading on the US markets yesterday, gaining 17 per cent as company observers shifted their focus to a crucial conference call the company is to host on Tuesday.
Elan rode with a US market rally to gain 29 US cents and close at $2 (€2.05), with the increase largely attributable to interest from value-seeking investors.
However, the gains were meagre relative to the 66 per cent wiped off the company's shares on one day alone earlier this week and are barely significant when held up against the company's 52-week high of $62.85.
Analysts agreed yesterday that Elan's valuation was now almost completely dependent on investor concerns over the company's cashflow, rather than taking account of earnings numbers.
"The share price is not reflecting earnings, it's reflecting liquidity concerns," said Mr Peter Frawley of Merrion Capital. "What the markets are looking for is comfort on cash-flow."
Mr Frawley said investors would be particularly keen on Tuesday to hear news on a $1 billion convertible bond issued by Elan in 1999 that is due to be restored to the company at the end of next year.
With Elan's debt having been downgraded by Moody's and Standard & Poor's, the financing of such debt has become increasingly difficult for the company.
Concerns have also been raised about the royalty payments due to be made by the group in coming years.
"There is a lot of uncertainty as to what kind of cash burn we're going to see between now and 2003," said Mr Frawley, drawing attention to the increasingly competitive environment in which the company operates.
Elan received the latest in a series of body blows last Thursday, when it emerged that three companies have won approval to produce generic versions of its top-selling Zanaflex pain drug.
The overall impact of this development could see up to $5 million being wiped off Elan's revenues for this year alone, one broker has predicted.
Mr Ian Hunter of Goodbody Stockbrokers said yesterday that Elan's share price was likely to fluctuate until the company issued second-quarter results in the coming month and gave clear guidance on much-need restructuring.
"Until then, it'll probably be up and down," he said, adding that the Irish market had already priced in a downgrade in earnings but US traders had yet to do so.
In Dublin yesterday, Elan shares lost 10 cents to close at €1.90.
