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Elan sues King Pharma over drug sales

Published on 29/10/03 at 04:14pm

Elan is taking legal action to force King Pharmaceuticals to buy two drugs it urgently needs to divest to help tackle debts of $1.3 billion.

The companies agreed the $850 million sale of muscle relaxant Skelaxin and insomnia treatment Sonata in January but a US Federal Trade Commission inquiry into Elan alleged anti-competitive sales practices of Skelaxin has led King to express doubts about the deal.

The FTC inquiry may lead to damages in consumer lawsuits that could be passed on to King if the sale goes ahead. Although King said it was too early to say whether the deal would be called off, it will not complete the purchase until the inquiry had been completed.

The proposed deal would not only give King the US and Puerto Rican marketing rights for the drugs, but also include the transfer of Elan's entire primary care salesforce of over 400 sales reps. Sales of Skelaxin were $145 million last year while Sonata sales were $93 million.

Elan's President and Chief Executive Kelly Martin said any refusal by King to complete the deal had "no basis" and was "unjustified." He added that the transaction was a critical component of Elan's recovery plan, and said legal action was needed to protect the interests of shareholders and the company.

Elan says the sale must be finalised within four weeks otherwise it will demand damages of $890 million.

The company is disposing of several products to pay off debts of $1.3 billion by the end of year and has already sold antifungal agent Abelcet and pain management product Actiq for over $400 million.

Shares in the company have fallen by 90% in the last year following concern over off-balance transactions and an investigation by the Securities and Exchange Commission. Profits have also been hit by generic competition to muscle relaxant Zanaflex, one of its major products.



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