By Cormac Sheridan

BioWorld International Correspondent

DUBLIN, Ireland - Elan Corp. has raised gross proceeds of US$750 million in a zero coupon exchangeable subordinated notes offering to U.S. institutions. Merrill Lynch & Co. Inc., of New York, underwrote the placement, which closed Monday.

The financing will be sufficient to take Dublin-based Elan to its US$1 billion revenue target, said company chairman and CEO Donal Geaney. Elan, which reported US$171 million in revenue for the third quarter, has pursued an aggressive growth strategy since 1996, aiming to become a US$1 billion company by 2001. A raft of company and product acquisitions has accounted for a significant portion of the expansion.

"We actually expended a significant amount of cash in the last year - upwards of US$500 million," Geaney said. "This replenishes the coffers, if you like," he added. About one-third of the net proceeds are available for product acquisitions in one of Elan's core areas of pain management and acute care, or neurology. Geaney did not rule out a company acquisition, if a good strategic fit is found, but "the preference would be for products," he said.

Another third of the cash will cover Elan's increased working capital requirements. Because an increasing proportion of Elan's revenues are now derived from directly marketed products, the company needs to be able to carry inventory for up to six months and offer credit terms to the dominant U.S. drug distributors, Geaney said. The final third will be used to service existing commitments.

The securities were priced at US$526, with a yield to maturity of 3.25 percent per annum over 20 years, and are exchangeable at any time into 6.875 Elan American Depositary Shares per each $1,000 principal amount at maturity, which represents an initial exchange price of US$76.33 per share. This is a 22 percent premium on Elan's share price on the New York Stock Exchange at the close of trading on Dec. 8. The securities will be redeemable for cash at any time on or after Dec. 14, 2003.

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