Elan announces good news after Monday's bad news

NEW YORK -- Elan Corportation announced plans to take $400 million in noncash charges in the third quarter also has sold its antifungal drug Abelcet to its US rival Enzon for $370m in cash.<br> <br> The Irish drug maker said in a statement the charges won&#39;t have an impact on its cash balance, which is expected to be more than $600 million as of Sept. 30.<br> <br> Elan shares plunged a further 37 per cent to $1.22 in New York on Tuesday, when the group admitted that revenues had fallen sharply in the third quarter. It also revealed a large drop in its cash position that sharpened fears among investors that it will face a funding crunch over the next year.<br> <br> The Abelcet disposal, which cedes rights to sell the drug in the US, Canada and Japan, along with the sales force, also includes patent rights and Elan&#39;s production site in Indianapolis which also manufactures Myocet. Elan said Enzon had agreed to supply it with Myocet.<br> <br> Elan will take a cash charge of $142 million as a result of a payment Monday that covers its guarantee related to a sale of assets by special-purpose entity Elan Pharmaceutical Investments III Ltd., or EPIL III. About $150 million of the noncash charge is related the remaining guarantees of EPIL II and EPIL III.<br> <br> In July, Elan warned that a drop in the value of its biotechnology investments would result in &#34;significant&#34; charges. Last year, Elan valued the loss in its investment portfolio at $2.1 billion. &#34;The financial markets for emerging biotechnology, drug delivery and pharmaceutical companies continued to decline in the third quarter,&#34; Elan said Monday.<br> <br> Elan has guaranteed the EPIL II and EPIL III notes, which mature in 2004 and 2005, respectively. The principal amount outstanding under these notes as of Sept. 30 is $840 million. After the write-down, the carrying value of the cash and investments held in EPIL II and EPIL III is expected to be about $391 million.<br> <br> Meanwhile, Elan projected third-quarter product revenue of $200 million, compared with $375 in the second quarter. About $60 million of the drop is due to generic versions of its spasticity drug Zanaflex hitting the market, with the termination of arrangements with Autoimmune hitting revenue by another $15 million.<br> <br> The company attributed the remaining revenue reduction to eliminating certain product-rationalization revenue, a change in discounting strategy, short-term manufacturing disruption of third parties and the divestiture of certain assets.<br> <br> The mean estimate of analysts surveyed by Thomson First Call is for third- quarter earnings of three cents a share on total revenue of $433 million. Year- earlier earnings were 50 cents a share, with product revenue of $381 million and overall revenue of $484 million.<br> <br>