rose Tuesday, following the Irish drugmaker's announcement that it had reached a tentative settlement with the
Securities and Exchange Commission
concerning disputes over accounting matters that have been under investigation for several years.
After markets closed Monday, Elan also said that it had reached an agreement to settle a class-action suit pending in a New York federal court that consolidated several shareholder suits filed in early 2002 against the company, as well as against several former and current officers and directors.
If both settlements are approved, they will "dissipate a large cloud that has been hanging over the shares for a period of years," Albert L. Rauch, a drug industry analyst at A.G. Edwards, said in a Tuesday research note.
"We view the news as positive for the shares," said Rauch, who has a hold rating on the stock. (He doesn't own shares. His firm doesn't have an investment banking relationship, although his research report notes that the firm "and/or officer(s) own a long position.")
On Tuesday, Elan's stock gained 23 cents, or 1%, to $25.13.
Elan and the SEC's staff reached what the company calls "a provisional agreement," which, if approved by the commission, will close the books on an investigation that started in February 2002.
"This is an important step forward for Elan, its shareholders and patients," Kelly Martin, Elan's president and CEO, said in a statement. "Taking this step will enable us to focus all of our energies on bringing innovative science to patients."
The tentative agreement with the SEC enables the company to neither admit nor deny the allegations contained in the SEC's civil complaint, which will include alleged violations of federal securities laws. The settlement contains "a final judgment restraining and enjoining" Elan from future violations of these provisions, the company said.
Elan will pay a civil penalty of $15 million. The agreement also says that Elan won't be required to restate or adjust any of its historical financial results or information.
As for the class-action lawsuit settlement, Elan said all claims against the company and other defendants will be dismissed with "no admission or finding of wrongdoing on the part of any defendant."
Elan agrees to pay members covered by the class-action suit $75 million, off which $35 million will be paid by Elan's insurance carrier. The terms must be approved by the federal court.
"The announcement of a resolution was expected, yet it is a positive to see no further SEC restatements," Rauch said.
Last year, Elan restated its 2001 and 2002 GAAP results. Earlier this month, Elan set aside a $55 million reserve to cover its estimated liability for the SEC investigation and class-action lawsuit.
The class-action suit consolidates a number of complaints in which Elan was charged with failing to produce financial statements in accordance with generally accepted accounting principles and with issuing "materially false and misleading information concerning the company's business and financial results." The SEC investigation covered many of the issues alleged in the various class-action suits against Elan over the years.
Elan will unveil its third-quarter financial results Thursday. Late next month, the company and its partner
expect to hear from the Food and Drug Administration on their marketing request for Antegren, a treatment for multiple sclerosis.