Elan, Dissident Directors Reach Detente

| About: Elan Corporation, (ELN)

After an especially nasty boardroom spat spilled into public view this month, Elan has reached a deal with a pair of dissident board members, who wanted to conduct their own corporate governance audit and threatened a lawsuit that the beleaguered biotech had to race to court to block (back story here).

At issue were several transactions that raised questions about undisclosed financial conflicts of interest among Kelly Martin, the embattled Elan ceo, and still other board members. The revelations were not a secret - they were publicized by a dissident shareholder who went so far as to create a web site this year for agitators called Save Elan (read more here). In response to these developments, Martin earlier this month issued an extraordinary, 18-page letter touting his accomplishments and denying the accusations as ‘falsehoods and insinuations’ (see this).

Now, though, Elan has issued a statement saying the board has accepted a report by the McKenna Long & Aldridge law firm that absolves Martin and his supporters on the board of any legal breaches or wrongdoing. And the board also will consider “the feasibility” of voluntarily complying with US domestic reporting requirements and adopting a US “best practices” conflicts policy. As for Martin, for those who may not recall, last year Elan announced he would exit within two years.

At the same time, the dissident directors - Vaughn Bryson, a former Eli Lilly ceo, and Jack Schuler, a former president at Abbott Laboratories - agreed to suspend their lawsuit and will resign from the board sometime within the next 90 days. They joined the Elan board last year after roundly criticizing Martin for what they considered excessive spending and lax oversight. The most recent dispute was sparked by the controversial deal last year in which Elan agreed to transfer various Alzheimer’s assets to Johnson & Johnson, a deal that wound up in court because it violated an arrangement with Biogen over the Tysabri multiple sclerosis drug.