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Case Summary

Elan Corporation Turnaround

Case Number: 5-210-262, Year Published: 2010

HBS Number: KEL507

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Authors: James B. Shein; Robert Anstey; Nathan Lang

Key Concepts

Pharmaceutical Industry, Fiduciary Duties, Duty of Care, Turnaround Management, Buyout Offer, Public Company, Governance, International Turnaround, Divestments, Ireland, Italy, Accounting Fraud, Insolvency, Ethics

Abstract

The case begins with newly appointed chairman and interim CEO Garo Armen dwelling on the significant issues that Elan Corporation, an Irish pharmaceutical company, faces. Its share price has plummeted 96% after accusations of accounting fraud and the discontinuation of an important clinical trial due to the drug’s severe side effects. As a result, Elan faces insolvency. About $2 billion in debt that could no longer be satisfied in stock will soon mature, and there are questions regarding the company’s structure and various operating concerns. Armen is also concerned about the ethical consequences of the company’s failing and thus not being able to develop potentially life-saving medicines.

Armen must decide what the nature of Elan should be moving forward and what strategy it should adopt. The operational and financial issues discussed in the case are complicated by Elan’s status as an Irish company with significant international operations. The case closes with Armen reflecting on the decisions he has made—which students should critique and suggest alternatives to—as well as an open decision on choosing a successor CEO.

Learning Objectives

  • Crafting a vision and strategy for a newly streamlined organization and implementation
  • Balancing the complexities of an international corporation in a turnaround situation
  • Quantitatively identifying the probability, advantages, and disadvantages of bankruptcy
  • Succession planning decision making
  • Responding to fraud accusations
  • Managing a distressed workforce and retaining key employees

    • Number of Pages: 11

    Extended Case Information

    Teaching Areas: Accounting, Biotechnology, Entrepreneurship, Finance, Management, Strategy

    Teaching Note Available: Yes

    Geographic: Ireland

    Industry: Biotechnology

    Organization Name: Elan Corporation

    Organization Department: CEO and Board of Directors

    Organization Size: Medium

    Decision Maker Position: Interim CEO

    Decision Maker Gender: Male

    Year of Case: 2003

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