Reports that Elan Corp is close to selling off a 19.25% stake has led to renewed calls from dissident shareholders for a change at the top of the Irish drugmaker.

The Financial Times says it has been told by Elan’s chairman Kyran McLaughlin that the stake could be sold off within 10 weeks. He added that there were "certainly half a dozen" interested buyers, though none were named.

This move, according to Goodbody analyst Ian Hunter, “is the first indication of progress in the route Elan may be going down” in its review, initiated last month, to secure financial resources to allow the company to develop and commercialise its pipeline and product portfolio. A 19% stake at current prices would equate to $716 million.

However the news has caused consternation among a group of shareholders who have previously expressed concern over how Elan is run. Leading the dissidents is Jack Schuler, a former president of Abbott Laboratories and the co-founder of the investment company Crabtree Partners, which has a 1% stake in Elan.

In December he sent a letter to Mr McLaughlin calling for the head of the Irish company’s chief executive Kelly Martin, and has now fired off a second salvo, criticising the proposed sale and Mr Martin’s management of the firm. In the letter, Mr Schuler says that “now is NOT the time to put all or part of Elan up for sale [as] your investors fear that, in acting from a position of weakness, your CEO will destroy even greater value”.

He added that “the sale of any Elan shares to a pharmaceutical company would not only dilute shareholders at a time when the stock is depressed, but would also greatly reduce the likelihood that other pharmaceutical companies may express interest in Elan in the future”. Mr Schuler went on to say that “not only does the company not have an immediate need to raise cash in the near-term”, and claimed that the firm has other options.

Biogen accused of not promoting Tysabri enough
For example, he claimed that Elan’s $1.15 billion debt, due at the end of 2011, “could be easily managed by reducing wasteful spending and insisting that partner Biogen Idec fulfill its obligation’ to promote the multiple sclerosis drug Tysabri (natalizumab) with the same level of emphasis put on its own older MS drug, Avonex (interferon beta-1a). Mr Schuler also noted that Elan’s general and administration expenses are running in excess of $300 million per year and “for a biotech company, that today is essentially a research-based company, these expenses should be less than $100 million”. He added that the sale of Elan’s EDT drug-technology division “should be revisited, starting now, in anticipation of a recovering credit market”.

Last month, seven of Elan’s largest stockholders, who represent 37% of the company’s outstanding shares met with two directors, Bill Rohn and Gary Kennedy. The former is an ex-chief operating officer at Idec and “we felt that our concerns were heard and taken into consideration”, Mr Schuler says. The minority shareholders also requested that Mr Rohn consider becoming chairman of the Elan board.

However Mr McLaughlin told the FT that he has no plans to step down as chairman, nor replace Mr Martin. He said that Elan needs an Irish chairman or chief executive for tax and regulatory purposes, adding that “if there was a remote whisper around the board for me to go, I’d be gone.” Mr McLaughlin concluded by saying that “the people who are unhappy are a small minority”.