Acorda and CSRO/ASRO

[paulsask]

Greetings

Dr. Young, I see Acorda is a sponsor for the Canadian Spinal Research Organization (www.csro.com (http://www.csro.com))
They, as well as ASRO (with Mark Tusynski) do alot of research with 4-AP and L1.
Why would Acorda sponsor another organization using their own product ?
Does Acorda not do their own research work or is Acorda more a venture capital/marketing company that contracts other companies to develope their products.

Paul

[Wise Young]

Paulsask, all companies fund research to some degree. For example, Geron funds Gearhart and James Thompson. Neotherapeutics funded Tuszynski to do studies on AIT-082. CSRO gets money from Acorda because it funds research on 4-AP and other treatments that are of interest to Acorda. In addition, Acorda wants to support organizations that fund good spinal cord injury research.

Acorda has its own laboratories now of course but, for several years during its early period, it contracted much of its laboratory work because such research contracts save a lot of money.

Wise.

[antiquity]

Elan plunges after accounting methods questioned

By Alex Richardson and Ransdell Pierson


DUBLIN/NEW YORK, Jan 30 (Reuters) - Shares in Irish drugmaker Elan Corp. Plc plunged 30 percent on Wednesday as its accounting practices came sharply into focus in the wake of the Enron affair, but a rebuttal from the company stemmed the sell-off.

Elan shares hit a 2-year low of $22.50, after a report in the Wall Street Journal on Wednesday questioned how Elan accounts for revenues from scores of joint venture research partnerships with biotech firms. It highlighted the company's practice of investing money in such joint ventures and then taking back a large chunk as licensing fees. The fees are then booked as revenues.

Elan issued a paragraph-by-paragraph rebuttal, saying the report contained factual errors, was "one-sided and ignores the growth in our pharmaceutical business."

"Any correlation between Elan and Enron is without foundation. Elan is highly solvent with $2 billion in cash, and all its debt is disclosed on its balance sheet," Elan said in a statement.

U.S. energy giant Enron Corp. recently fell from being the seventh-largest U.S. company to bankruptcy after admitting it grossly overstated earnings dating back to 1997.

Elan, a specialty pharmaceutical firm that sells niche products, said its methods of accounting for transactions with its joint venture partners were "old news," and had been comprehensively discussed and studied by U.S. regulators over two years ago.

Elan is evolving into a more conventional biotech, attempting to develop drugs for major diseases through cutting-edge technology of its own and of biotech partners such as Biogen Inc. <BGEN.O>. Earlier this month, however, it suffered a setback in clinical trials of its promising vaccine for Alzheimer's disease.

S&P BOLSTERS ELAN, BUT ANALYSTS WARY

Standard & Poor's, the credit rating firm, said increased investor concern over Elan's accounting practices would not change its favorable "investment grade rating" on the company.

S&P said specialty pharmaceuticals firms in the past had often used such "off-balance sheet" accounting techniques, which allowed Elan to record research contract revenue from joint venture partners, but such practices have become less common in recent years.

"Elan continues to maintain prudent financial policies and on-hand cash and investments exceed debt by more than $1 billion," S&P said.

Ian Sanderson, a drug analyst for SG Cowen Securities, said investors previously overlooked the quality of Elan's earnings, but that was prior to the Enron scandal and the setback for Elan's Alzheimer drug.

"Now that equation has changed somewhat ... I can see if it were done in a few cases, but they've got a total of almost 70 joint ventures on the books and it was used by their own admission as a way to manage the earnings."

Thomas DesChamps, an analyst for New York-based research firm Mehta Partners, said he has been worried for the past 18 months over Elan's accounting methods, which he called more "creative" than those of any of the other hundreds of small pharmaceutical and biotech firms he follows.

"I'm not sure Elan is trying to mislead investors, but when the accounting methods of the company are called into question as they are now, it makes you wonder whether the current valuation of the company is accurate," DesChamps said.

Charity Hunter-DeLuca, an analyst for the Murphy New World Biotech Fund, said she does not believe accounting concerns about Elan should cast suspicion on practices of many, if any, biotechs.

"Most biotech firms don't have products on the market and are very forthcoming about how they do their accounting. They'll break it down for you," Hunter-DeLuca said.

Elan stock recovered half its intraday losses to close down $4.83, or 14 percent, at $29.25 on the New York Stock Exchange, where the bulk of its shares are traded. In Dublin, the stock closed down 21 percent at 32.42 euros.

The American Stock Exchange Biotech Index <.BTK>, meanwhile, closed barely lower at 500.54.

Elan had third-quarter revenues of $484 million from growing sales of drugs for central nervous system problems, pain and infections. It has predicted annual revenues of $5 billion by 2005, assuming approvals of new medicines.

Its top sellers include Zanaflex for treating spasticity related to multiple sclerosis and pain treatment Skelaxin. It also sells products for hospital use, including injectable antibiotics.

17:56 01-30-02

[Wise Young]

Elan is a very well-run company and definitely not an Enron. They do use partnerships and joint ventures to develop therapies but these are legitimate partnerships. I hope that the Enron crash does not lead to a reduction of partnerships and ventures by pharmaceutical companies. This is one of the few mechanisms by which large and small companies can work together. Although I am not an expert on this subject, let me try to explain.

At the present, there are few mechanisms by which large companies can invest in promising therapies. One is for them to buy up a smaller company. This is not always a good option because small companies may not want to be controlled by a larger company and the corporate culture of large companies frequently douses the flames of entrepreneurism in small companies. Most of the time, after a large company buys a small company, the original founders leave within a year or two. Founders and the original investors in a small biotech company are also reluctant to sell their company before the company gets a lucrative product on the market. Valuation of the company is a problem in such a situation.

A second option is for a large company to buy a non-controlling chunk of a smaller company. This provides an infusion of capital for the smaller company while allowing the original founders of the companies to continue. This is what Bristol-Myers Squibb did by buying 20% of Imclone for $2 billion. Unfortunately, a portion of the investment often goes to enrich the founders of the company rather than go completely into research and development because the founders may sell their stock to the buyer.

A third approach is a joint partnership or venture. A large company and a small company sets up a partnership (usually a small company) which will hold the investment made by the larger company and a license to a treatment by the smaller company. The funds in the partnership is used to develop the license and the partnership includes specific agreements concerning how the profit from the therapy will be divided when it goes to market.

Elan and many other pharmaceutical companies use the latter approach to fund drug development. In many ways, it is cleaner and a higher percentage of the investment goes to the intended purpose of research and development than stock swapping or buyouts.

I don't know how Elan handles their accounts but I respect the people that I have met in their company. They have a strong management team and could potentially become a big player in spinal cord injury therapy development.

Wise.