Elan probe as shares crash

DRUGS group Elan crashed on a profit warning that follows worries over its accounting practices. Elan, one of Ireland's largest companies, said delays in product launches and higher costs would lead to a massive shortfall in 2002 earnings.

'This is an unmitigated disaster,' said David Maris, of broker CSFB in New York. The shares slumped 847 1/2p to 1223 1/4p.

Elan faced a two-hour quizzing by analysts after claims that off-balance sheet deals were distorting earnings. A source said: 'We are not hiding anything. We are tackling everything head on.'

Elan disclosed it had subsidiaries - 'qualified special purpose entities' - that could have affected its results, but were not included in the figures reported. This meets US accounting rules - but underscores recent concerns.

Elan reported record revenues of $1.9bn, up 22%, for last year, but dropped a bombshell by warning that 2002 would experience 'slower-than-anticipated growth'.

It blamed $225m of costs, covering clinical trials and increases in its US and European sales forces. Revenue this year would be between $2bn and $2.1bn. The group suffered several recent blows before concerns about accounting policies were set off afresh by the Enron collapse.

The shares had already fallen sharply after it halted trials of an Alzheimer's vaccine when four patients fell ill. It is investigating.