Elan = Survivor?

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No, we're not going to do it. We have been fooled so many times by Elan (NYSE: ELN), the Irish pharmaceutical company that offered investors so much promise from a product and revenue perspective, yet so much heartache since its now-former management used aggressive and unscrupulous accounting techniques to make its performance seem even better than it should have.

That management team is out, but I still can't bring myself to say that the company is out of the woods. Thrice bitten, twice shy. Every time we've thought the company could not sink any lower, it managed to do just that.

But I can't shake the fact that the market is valuing Elan's common stock at more than $2 billion at this moment, a 400% gain from its lows. This is a company that has yet to receive a clean bill of health from the SEC, even failing to file its annual report on time with the commission in June of this year. A prolonged failure to do so could have put Elan at risk of being out of compliance with some of its debt covenants, making as much as $350 million come due, most likely bankrupting the company.

Elan has unloaded more than $1.5 billion in assets this year, including the $700 million it yielded from its sale of its primary-care franchise to King Pharmaceutical (NYSE: KG). But these funds were already allocated, and some suggest that the company will need to raise additional funds on the stock market in order to meet its half-billion in loans due in 2005. Elan has nearly exhausted the assets it could sell to garner cash, with a 60,000-plus facility in Georgia on the blocks more than likely being the end of the road for that strategy.

Fortunately, the stock market seems to be giving Elan the chance to go to the public markets and sell stock right now. The company's new management has done a yeoman's job cleaning up what should be viewed as a tragic mess left by folks short on scruples and common sense. But in order to finish first, Elan must first finish. And that means diluting existing shareholders with a capital raise -- a big one. The shareholders may squawk, the share price may plunge, but in the end Elan would survive to fight another day.

Until this happens, we'll just continue to marvel at the company's staying power.