Elan Corporation, plc today announced its first quarter 2008
financial results and provided a business update. Commenting on Elan’s
business, Kelly Martin, Elan’s president and chief executive officer,
said, “We continued to demonstrate successful execution and delivery
of tangible results in the first quarter. We remain highly focused on
advancing our mid to late stage clinical pipeline as well as
supporting physicians and their patients in choosing Tysabri in MS and
also now in Crohn’s. Our disciplined management and the repeatability
of our scientific process combined with risk minimization enable Elan
to pursue a unique pathway forward in what remains a challenging and
changing global industry environment.”
Commenting on Elan’s first quarter financial results, Shane Cooke,
Elan’s executive vice president and chief financial officer, said, “We
are very pleased with the strong start to the year, highlights of
which include: a 22% increase in revenues; the approval and launch of
Tysabri in Crohn’s disease; the continued advancement of our
development pipeline; and strong cost control reflected in an 18%
reduction in SG&A costs, which more than offset increased R&D costs.”
Mr. Cooke added, “We are particularly pleased to see the acceleration
in the number of new patients who are benefiting from Tysabri, with
over 26,000 on therapy at the end of March 2008. This increase
underscores our confidence that Elan’s total revenues for this year
will approach the $1 billion mark and that we will achieve our target
of having 100,000 patients on Tysabri therapy by the end of 2010.”
Unaudited Consolidated Income Statement Data
Three Months Ended
March 31
2007 2008
U.S.$m U.S.$m
———————————————————————-
Revenue (see page 7)
Product revenue 167.5 207.3
Contract revenue 8.5 7.4
——— ———
Total revenue 176.0 214.7
Cost of goods sold 72.9 110.8
——— ———
Gross margin (see page 11) 103.1 103.9
Operating Expenses (see page 12)
Selling, general and administrative 89.1 73.0
Research and development 61.3 73.5
Other net charges — 3.0
——— ———
Total operating expenses 150.4 149.5
——— ———
Operating loss (47.3) (45.6)
Net Interest and Investment Gains and Losses (see
page 13)
Net interest expense 26.6 34.5
Net investment (gains)/losses (0.7) 3.3
Net charge on debt retirement 18.8 –
——— ———
Net interest and investment gains and losses 44.7 37.8
Net loss from continuing operations before tax (92.0) (83.4)
Provision for income taxes 1.0 2.1
——— ———
Net loss (93.0) (85.5)
========= =========
Basic and diluted net loss per ordinary share (0.20) (0.18)
Basic and diluted weighted average number of
ordinary shares outstanding (in millions) 466.8 471.6 Unaudited Non-GAAP Financial Information - EBITDA
Non-GAAP Financial Information Three Months Ended
Reconciliation Schedule March 31
2007 2008
U.S.$m U.S.$m
———————————————————————-
Net loss (93.0) (85.5)
Net interest expense 26.6 34.5
Provision for income taxes 1.0 2.1
Depreciation and amortization 31.1 17.0
Amortized fees (4.0) (1.2)
——— ———
EBITDA (38.3) (33.1)
========= ========= Non-GAAP Financial Information Three Months Ended
Reconciliation Schedule March 31
2007 2008
U.S.$m U.S.$m
———————————————————————-
EBITDA (38.3) (33.1)
Share-based compensation 13.8 12.2
Other net charges — 3.0
Net investment (gains)/losses (0.7) 3.3
Net charge on debt retirement 18.8 –
——— ———
Adjusted EBITDA (6.4) (14.6)
========= =========
To supplement its consolidated financial statements presented on a
U.S. GAAP basis, Elan provides readers with EBITDA (Earnings Before
Interest, Taxes, Depreciation and Amortization) and Adjusted EBITDA,
non-GAAP measures of operating results. EBITDA is defined as net loss
plus or minus depreciation and amortization of costs and revenues,
provisions for income tax and net interest expense. Adjusted EBITDA is
defined as EBITDA plus or minus share-based compensation, other net
charges, net investment gains or losses and net charge on debt
retirement. EBITDA and Adjusted EBITDA are not presented as, and
should not be considered alternative measures of, operating results or
cash flow from operations, as determined in accordance with U.S. GAAP.
Elan’s management uses EBITDA and Adjusted EBITDA to evaluate the
operating performance of Elan and its business and these measures are
among the factors considered as a basis for Elan’s planning and
forecasting for future periods. Elan believes EBITDA and Adjusted
EBITDA are measures of performance used by some investors, equity
analysts and others to make informed investment decisions. EBITDA and
Adjusted EBITDA are used as analytical indicators of income generated
to service debt and to fund capital expenditures. EBITDA and Adjusted
EBITDA do not give effect to cash used for interest payments related
to debt service requirements and do not reflect funds available for
investment in the business of Elan or for other discretionary
purposes. EBITDA and Adjusted EBITDA, as defined by Elan and presented
in this press release, may not be comparable to similarly titled
measures reported by other companies. Reconciliations of EBITDA and
Adjusted EBITDA to net loss from continuing operations are set out in
the tables above titled, “Non-GAAP Financial Information
Reconciliation Schedule.”
Unaudited Consolidated U.S. GAAP Balance Sheet Data
December 31 March 31
2007 2008
U.S.$m U.S.$m
———————————————————————-
Assets
Current Assets
Cash and cash equivalents 423.5 548.9
Restricted cash — current 20.1 20.8
Investment securities — current 276.9 94.3
Prepaid and other current assets 195.9 211.3
———– ——–
Total current assets 916.4 875.3
Non-Current Assets
Intangible assets, net 457.6 450.8
Property, plant and equipment, net 328.9 326.6
Investment securities — non-current 22.5 14.5
Restricted cash — non-current 9.5 9.6
Other assets 46.5 45.9
———– ——–
Total Assets 1,781.4 1,722.7
=========== ========
Liabilities and Shareholders’ Deficit
Accounts payable and accrued liabilities 246.4 248.1
Deferred income 4.7 3.5
Long-term debt (due November 2011 & November
2013) 1,765.0 1,765.0
Shareholders’ deficit(1) (see page 13) (234.7) (293.9)
———– ——–
Total Liabilities and Shareholders’ Deficit 1,781.4 1,722.7
=========== ========
(1) Elan’s debt covenants do not require it to maintain or adhere
to any specific financial ratios. Consequently, the shareholders’
deficit has no impact on Elan’s ability to comply with its debt
covenants.
Unaudited Consolidated U.S. GAAP Cash Flow Data
Three Months Ended
March 31
2007 2008
U.S.$m U.S.$m
———————————————————————-
Cash flows from operating activities 8.4 (10.2)
Movement on debt interest and tax (30.1) (10.9)
Working capital movement 48.3 (45.4)
Net purchases of tangible and intangible assets (7.5) (8.4)
Net proceeds from sale of investments 2.3 184.4
Net proceeds from product divestment — 2.0
Cash flows from financing activities (624.4) 14.7
Restricted cash movement — (0.8)
———- ———-
Net cash movement (603.0) 125.4
Beginning cash balance 1,510.6 423.5
———- ———-
Cash and cash equivalents at end of period 907.6 548.9
========== ==========
Summary
Total revenue increased by 22% in the first quarter of 2008,
compared to the same period in 2007. The increase was driven by a
strong performance from Tysabri, which achieved in-market sales of
$159.7 million during the first quarter of 2008 and more than
compensated for reduced sales of Maxipime.
The gross margin was $103.9 million for the first quarter of 2008,
compared to $103.1 million for the same quarter of 2007, with
increased gross margin earned from higher sales of Tysabri replacing
lost gross margin following the introduction of generic Maxipime.
Selling, general and administrative (SG&A) expenses declined by
18%, reflecting reduced sales and marketing costs and amortization
expense following the restructuring of Elan’s commercial
infrastructure in response to the introduction of generic Maxipime in
June 2007. The restructuring was completed with a target of reducing
related annual SG&A costs by $100 million. This target was achieved
and, as a result, SG&A costs related to Maxipime and Azactam were
$24.4 million lower in the first quarter of 2008 than in the same
period of 2007. The reduction in SG&A expenses was partially offset by
increased investment in research and development (R&D), primarily
related to the advancement of Elan’s Alzheimer’s disease programs in
the clinic.
The net loss for the first quarter of 2008 decreased by 8% to
$85.5 million from $93.0 million in the first quarter of 2007,
primarily due to the inclusion of a net charge on debt retirement of
$18.8 million in the first quarter of 2007, partially offset by an
increase in net interest expense due to lower cash balances and
reduced interest rates.
Adjusted EBITDA
A reconciliation of negative Adjusted EBITDA to net loss from
continuing operations, is presented in the table titled, “Unaudited
Non-GAAP Financial Information - EBITDA,” included on page 3. Included
at Appendix I is a further analysis of the results and Adjusted EBITDA
between the Biopharmaceuticals business and the Elan Drug Technologies
(EDT) business.
Adjusted EBITDA losses for the first quarter of 2008 were $14.6
million, compared to $6.4 million in the same period of 2007. The
increase principally reflects higher R&D expenditures mainly related
to Elan’s Alzheimer’s disease programs.
Total Revenue
Total revenue for the first quarter of 2008 increased 22% to
$214.7 million from $176.0 million in the same period of 2007, driven
by the strong growth of Tysabri. Revenue from the Biopharmaceuticals
business grew by 33%, while revenue from the EDT business grew by 4%.
Revenue is analyzed below between revenue from the Biopharmaceuticals
and EDT business units.
Three Months Ended
March 31
2007 2008
U.S.$m U.S.$m
———————————————————————-
Revenue from the Biopharmaceuticals business 109.2 145.3
Revenue from the EDT business 66.8 69.4
——– ———
Total revenue 176.0 214.7
======== =========
Revenue from the Biopharmaceuticals business
For the first quarter of 2008, revenue from the Biopharmaceuticals
business unit increased by 33% to $145.3 million from $109.2 million
in the first quarter of 2007. The increase was driven by strong growth
in Tysabri, which more than compensated for reduced sales of Maxipime
that was impacted by generic competition.
Three Months Ended
March 31
2007 2008
U.S.$m U.S.$m
———————————————————————-
Product revenue
Tysabri - U.S. 35.7 86.3
Tysabri - Rest of world (ROW) (5.0) 20.7
———————
Total Tysabri 30.7 107.0
Azactam 21.3 24.2
Maxipime 51.9 10.1
Prialt 1.9 3.8
Royalties 0.5 0.2
———- ———-
Total product revenue 106.3 145.3
Contract revenue
Amortized fees 0.4 –
Research revenue and milestones 2.5 –
———- ———-
Total contract revenue 2.9 –
———- ———-
Total revenue from the Biopharmaceuticals
business 109.2 145.3
========== ==========Tysabri
Global in-market net sales of Tysabri can be analyzed as follows:
Three Months Ended
March 31
2007 2008
U.S.$m U.S.$m
———————————————————————-
United States 35.7 86.3
ROW 12.7 73.4
———- ———-
Total Tysabri in-market net sales 48.4 159.7
========== ==========
For the first quarter of 2008, Tysabri in-market net sales
increased by more than three fold to $159.7 million from $48.4 million
in same period of 2007, reflecting strong patient demand. At the end
of March 2008, approximately 26,100 patients were on therapy
worldwide, comprising approximately 25,500 on commercial therapy and
approximately 600 in the MS clinical trials, representing an increase
of 24% over the 21,100 patients who were on therapy at the end of
2007.
Given the strong growth in Tysabri revenues, we expect to pay a
$75.0 million milestone to Biogen Idec later this year, in order to
maintain our percentage share of Tysabri at approximately 50% for
annual global in-market net sales of Tysabri that are in excess of
$700 million.
Tysabri was developed and is being marketed in collaboration with
Biogen Idec Inc. (Biogen Idec). In general, subject to certain
limitations imposed by the parties, Elan shares with Biogen Idec most
of the development and commercialization costs for Tysabri. Biogen
Idec is responsible for manufacturing the product. In the United
States, Elan purchases Tysabri from Biogen Idec and is responsible for
distribution. Consequently, Elan records as revenue the net sales of
Tysabri in the U.S. market. Elan purchases product from Biogen Idec at
a price that includes the cost of manufacturing, plus Biogen Idec’s
gross margin on Tysabri, and this cost, together with royalties
payable to other third parties, is included in cost of sales.
Outside of the United States, Biogen Idec is responsible for
distribution and Elan records as revenue its share of the profit or
loss on these sales of Tysabri, plus Elan’s directly-incurred expenses
on these sales.
Tysabri - U.S.
On January 14, 2008, the U.S. Food and Drug Administration (FDA)
approved the supplemental Biologics License Application for Tysabri,
for the treatment of patients with Crohn’s disease. Following the
launch in March 2008, this new indication is expected to contribute to
revenue from the second quarter of 2008 onwards.
In the U.S. market, Elan recorded net sales of $86.3 million in
the first quarter of 2008, an increase of 142% over $35.7 million in
the same period of 2007.
As of the end of March 2008, over 2,750 doctors had enrolled
patients and approximately 15,300 patients were on commercial therapy,
an increase of 19% over the 12,900 who were on therapy at the end of
December 2007.
Tysabri - ROW
As previously mentioned, in the ROW market, Biogen Idec is
responsible for distribution and Elan records as revenue its share of
the profit or loss on ROW sales of Tysabri, plus Elan’s
directly-incurred expenses on these sales. As a result, in the ROW
market, Elan recorded net revenue of $20.7 million for the first
quarter of 2008, compared to negative revenue of $5.0 million for the
same period of 2007. Elan’s net Tysabri ROW revenue is calculated as
follows:
Three Months Ended
March 31
2007 2008
U.S.$m U.S.$m
———————————————————————-
ROW in-market sales by Biogen Idec 12.7 73.4
ROW operating expenses incurred by Elan and
Biogen Idec (27.0) (54.4)
———- ———-
ROW operating profit/(loss) incurred by Elan and
Biogen Idec (14.3) 19.0
———- ———-
Elan’s 50% share of Tysabri ROW collaboration
operating
profit/(loss) (7.1) 9.5
Elan’s directly incurred costs 2.1 11.2
———- ———-
Net Tysabri ROW revenue (5.0) 20.7
========== ==========
As of the end of March 2008, approximately 10,200 patients,
principally in the European Union (EU), were on commercial therapy, an
increase of 36% over the 7,500 who were on therapy at the end of
December 2007.
Other Biopharmaceuticals products
Revenue from Azactam was $24.2 million in the first quarter of
2008, compared to $21.3 million in the same period of 2007, an
increase of 14%. Azactam lost its patent exclusivity in October 2005
and its future sales are expected to be negatively impacted by generic
competition. However, to date no generic form of Azactam has been
approved.
Revenue from Maxipime decreased 81% to $10.1 million in the first
quarter of 2008 from $51.9 million in the first quarter of 2007. The
decrease was principally due to the introduction of generic
competition. On June 18, 2007, the first generic formulation of
cefepime hydrochloride was approved by the FDA. The first generic
cefepime hydrochloride was launched shortly thereafter, and additional
generic forms of Maxipime have subsequently been launched. Elan
expects that the generic competition will continue to materially and
adversely affect Elan’s revenues from, and gross margin for, Maxipime.
Revenue from Prialt was $3.8 million in the first quarter of 2008,
compared to $1.9 million in the same period of 2007. The increase is
primarily due to higher demand for the product.
Revenue from the EDT business
Revenue from the EDT business unit increased by 4% to $69.4
million in the first quarter of 2008 from $66.8 million in the first
quarter of 2007.
Three Months Ended
March 31
2007 2008
U.S.$m U.S.$m
———————————————————————-
Product revenue
Manufacturing revenue and royalties
Tricor(R) 10.8 13.0
Focalin(R) XR / RitalinLA(R) 7.0 8.3
Skelaxin(R) 6.2 6.5
Verelan(R) 9.2 5.8
Diltiazem(R) 4.9 4.6
Other 20.8 23.8
——– ———
Total manufacturing revenue and royalties 58.9 62.0
Amortized revenue - Adalat(R)/Avinza(R) 2.3 –
——– ———
Total product revenue 61.2 62.0
Contract revenue
Amortized fees 1.1 1.1
Research revenue and milestones 4.5 6.3
——– ———
Total contract revenue 5.6 7.4
——– ———
Total revenue from the EDT business 66.8 69.4
======== =========
Manufacturing revenue and royalties comprise revenue earned from
products manufactured for clients and royalties earned principally on
sales by clients of products that incorporate Elan’s technologies.
For the first quarter of 2008, total manufacturing revenue and
royalties was $62.0 million, an increase of 5% over $58.9 million in
the first quarter of 2007. The increase reflects continued growth
across a number of products in the EDT business portfolio, partially
offset by the introduction of generic competition to Verelan PM during
the third quarter of 2007.
Except as noted above, no other product accounted for more than
10% of total manufacturing revenue and royalties in the first quarter
of 2008 or 2007. Of the total of $62.0 million (2007: $58.9 million)
in manufacturing revenue and royalties, 42% (2007: 43%) consisted of
royalties received on products that were not manufactured by Elan.
Potential generic competitors have challenged the existing patent
protection for several of the products from which Elan earns
manufacturing revenue and royalties. Elan and its clients defend the
parties’ intellectual property rights vigorously. However, if these
challenges are successful, Elan’s manufacturing revenue and royalties
will be materially and adversely affected.
Contract revenue consists of research revenue and milestones
arising from R&D activities Elan performs on behalf of third parties
or technology licensing. The increase between quarters in contract
revenue was primarily due to the timing of milestone receipts. In
particular, during the first quarter of 2008, Elan received milestones
related to the FDA approval of Luvox(R) CR (a once-a-day formulation
of fluvoxamine incorporating Elan’s proprietary SODAS(R) (Spheroidal
Oral Drug Absorption System) technology that was recently launched by
Jazz Pharmaceuticals Inc.), and the commencement of Phase 3 studies by
MAP Pharmaceuticals, Inc. of a nebulized formulation of budesonide,
which incorporates Elan’s proprietary NanoCrystal technology.
Gross Margin
The gross margin was $103.9 million for the first quarter of 2008,
compared to $103.1 million for the same quarter of 2007, with
increased gross margin earned from higher sales of Tysabri replacing
lost gross margin following the introduction of generic Maxipime. The
Tysabri gross margin was $40.8 million in the first quarter of 2008,
compared to $6.2 million in the same quarter of 2007.
The total gross margin as a percentage of revenue was 48% in the
first quarter of 2008, compared to 59% in the same period of 2007. The
decrease was due principally to the change in the mix of product
sales, including the impact of Tysabri and Maxipime as described
above. The Tysabri gross margin was 38% in the first quarter of 2008,
compared to 20% in the same period of 2007. The gross margin is
impacted by the profit sharing and operational arrangements in place
with Biogen Idec, and reflects Elan’s gross margin on sales of Tysabri
in the United States of approximately 36% in the first quarter of 2008
and 2007, partially offset by the inclusion in cost of sales of the
royalties payable by Elan on sales of Tysabri outside of the United
States. These royalties are payable by Elan but reimbursed by the
collaboration (see page 9).
Operating Expenses
Selling, general and administrative
For the first quarter of 2008, SG&A expenses decreased 18% to
$73.0 million from $89.1 million in the same period of 2007 and can be
analyzed as follows:
Three Months Ended
March 31
2007 2008
U.S.$m U.S.$m
———————————————————————-
Biopharmaceuticals 55.3 51.1
EDT 9.3 11.1
Depreciation and amortization 17.6 3.9
Share-based compensation 6.9 6.9
——– ———
Total 89.1 73.0
======== =========
Following the approval of a generic form of Maxipime in June 2007
and the anticipated approval of a generic form of Azactam, Elan took
steps during the third quarter of 2007 to restructure its commercial
infrastructure with a target of reducing related selling and
administrative costs by $100 million on an annualized basis. This
target was achieved and, as a result, SG&A costs related to Maxipime
and Azactam have decreased by $24.4 million in the first quarter of
2008, compared to the same period in 2007, comprising of cash savings
of $10.0 million, reduced amortization expense of $13.6 million and
lower stock compensation expense of $0.8 million. These decreased SG&A
expenses were offset by increased investment in Tysabri in preparation
for the Crohn’s disease launch, which resulted in an increase in total
Tysabri SG&A costs from $18.2 million in the first quarter of 2007 to
$22.9 million in the first quarter of 2008.
The SG&A expenses related to the Tysabri ROW sales are reflected
in the Tysabri ROW revenue as previously described on page 9.
Research and development
For the first quarter of 2008, R&D expenses increased 20% to $73.5
million from $61.3 million in the same period of 2007. The increase
was primarily due to increased expenses associated with the
progression of Elan’s Alzheimer’s disease programs, particularly the
advance of AAB-001 into Phase 3 clinical trials and the advance of
ELND-005 into Phase 2 clinical trials during the second half of 2007.
For the first quarter of 2008, included within total R&D expenses was
$12.6 million related to Tysabri (2007: $9.8 million).
Other charges
For the first quarter of 2008, other charges of $3.0 million
(2007: $Nil) were primarily related to site consolidation and
comprised of severance and office relocation costs.
Net interest and investment gains and losses
For the first quarter of 2008, net interest and investment gains
and losses decreased to $37.8 million from the $44.7 million recorded
for the first quarter of 2007. This decrease was primarily due to a
net charge of $18.8 million, which resulted from the early retirement
of debt in the first quarter of 2007. Net interest expense for the
first quarter of 2008 was $34.5 million, compared to $26.6 million in
the first quarter of 2007, principally reflecting decreased interest
income as a result of lower cash balances and reduced interest rates.
Movement in Shareholders’ Deficit
U.S.$m
———————————————————————-
Opening balance (234.7)
Net loss for the period (85.5)
Share-based compensation 12.4
Issuance of share capital 14.1
Other (0.2)
——-
Balance at March 31, 2008 (293.9)
=======
Elan’s debt covenants do not require it to maintain or adhere to
any specific financial ratios. Consequently, the shareholders’ deficit
has no impact on Elan’s ability to comply with its debt covenants.
Research and Development Update
During the course of 2008, Elan’s goal is to continue its progress
throughout its R&D programs, including Alzheimer’s disease,
Parkinson’s disease, MS and other autoimmune areas.
Tysabri MS
At the end of March 2008, approximately 26,100 patients were on
commercial and clinical Tysabri therapy worldwide. Cumulatively, in
the combined clinical trial and post-marketing settings more than
36,700 patients have been treated with Tysabri; and of those patients,
over 9,900 have received at least one year of Tysabri therapy and more
than 3,600 patients have been on therapy for 18 months or longer. To
date, Elan believes the safety data continue to support a favorable
benefit-risk profile for Tysabri.
Tysabri Crohn’s Disease
In the United States, on January 14, 2008, the FDA approved the
supplemental Biologics License Application for Tysabri, for inducing
and maintaining clinical response and remission in adult patients with
moderately to severely active Crohn’s disease, with evidence of
inflammation who have had an inadequate response to, or are unable to
tolerate conventional Crohn’s disease therapies and inhibitors of
TNF-alpha. Tysabri was launched in the United States in March 2008.
The launch targets over 1,400 physicians.
Alzheimer’s Disease and Other Neurodegenerative Diseases
Elan is focused on building upon its breakthrough research and
extensive experience in Alzheimer’s disease, and other
neurodegenerative diseases such as Parkinson’s disease. With
Bapineuzumab, (AAB-001, a humanized monoclonal antibody targeted
against beta amyloid peptide) Elan and Wyeth continue to activate
investigational sites and enroll patients into four Phase 3 clinical
studies located throughout North America and the ROW. The full Phase 2
data for AAB-001 is expected to be presented at the International
Congress of Alzheimer’s Disease (ICAD) in late July 2008.
About Elan
Elan Corporation, plc (NYSE: ELN) is a neuroscience-based
biotechnology company committed to making a difference in the lives of
patients and their families by dedicating itself to bringing
innovations in science to fill significant unmet medical needs that
continue to exist around the world. Elan shares trade on the New York,
London and Dublin Stock Exchanges. For additional information about
the company, please visit http://www.elan.com.
Forward-Looking Statements
This document contains forward-looking statements about Elan’s
financial condition, results of operations, business prospects and
products in research and development that involve substantial risks
and uncertainties. You can identify these statements by the fact that
they use words such as “anticipate”, “estimate”, “project”, “target”,
“intend”, “plan”, “will”, “believe”, “expect” and other words and
terms of similar meaning in connection with any discussion of future
operating or financial performance or events. Among the factors that
could cause actual results to differ materially from those described
or projected herein are the following: the potential of Tysabri, the
incidence of serious adverse events associated with Tysabri (including
cases of progressive multifocal leukoencephalopathy), and the
potential for the successful development and commercialization of
additional products, including those utilizing Tysabri; the potential
of Elan’s other marketed products; Elan’s ability to maintain
sufficient cash, liquid resources, and investments and other assets
capable of being monetized to meet its liquidity requirements; the
success of research and development activities including, in
particular, whether the Phases 2 and 3 clinical trials for AAB-001 are
successful and the speed with which regulatory authorizations and
product launches may be achieved; competitive developments affecting
Elan’s products (including, in particular, when Azactam will face
generic competition); the ability to successfully market both new and
existing products; difficulties or delays in manufacturing and supply
of Elan’s products; trade buying patterns; the impact of generic and
branded competition, whether restrictive covenants in Elan’s debt
obligations will adversely affect Elan; the trend towards managed care
and health care cost containment, including Medicare and Medicaid; the
potential impact of the Medicare Prescription Drug, Improvement and
Modernization Act 2003; possible legislation affecting pharmaceutical
pricing and reimbursement, both domestically and internationally;
failure to comply with kickback and false claims laws including in
respect to past practices related to the marketing of Zonegran(R)
which are being investigated by the U.S. Department of Justice and the
U.S. Department of Health and Human Services (the resolution of this
Zonegran matter could require Elan to pay substantial fines and to
take other actions that could have a material adverse effect on Elan);
failure to comply with Elan’s payment obligations under Medicaid and
other governmental programs; exposure to product liability and other
types of lawsuits and legal defense costs and the risks of adverse
decisions or settlements related to product liability, patent
protection, governmental investigations and other legal proceedings;
Elan’s ability to protect its patents and other intellectual property;
claims and concerns that may arise regarding the safety or efficacy of
Elan’s products or product candidates; interest rate and foreign
currency exchange rate fluctuations; governmental laws and regulations
affecting domestic and foreign operations, including tax obligations;
general changes in United States and International generally accepted
accounting principles; growth in costs and expenses; changes in
product mix; and the impact of acquisitions, divestitures,
restructurings, product withdrawals and other unusual items. A further
list and description of these risks, uncertainties and other matters
can be found in Elan’s Annual Report on Form 20-F for the fiscal year
ended December 31, 2007, and in its Reports of Foreign Issuer on Form
6-K filed with the U.S. Securities and Exchange Commission. Elan
assumes no obligation to update any forward-looking statements,
whether as a result of new information, future events or otherwise.
Appendix I
Three Months Ended Three Months Ended
March 31, 2007 March 31, 2008
Biopharma- Biopharma-
ceuticals EDT Total ceuticals EDT Total
U.S.$m U.S.$m U.S.$m U.S.$m U.S.$m U.S.$m
———————————————————————-
Revenue
106.3 61.2 167.5 Product revenue 145.3 62.0 207.3
2.9 5.6 8.5 Contract revenue — 7.4 7.4
———— —— —— ———- —— ——
109.2 66.8 176.0 Total revenue 145.3 69.4 214.7
44.2 28.7 72.9 Cost of goods sold 78.7 32.1 110.8
———— —— —— ———- —— ——
65.0 38.1 103.1 Gross margin 66.6 37.3 103.9
Operating Expenses
Selling, general
and
78.5 10.6 89.1 administrative(1) 61.1 11.9 73.0
Research and
49.8 11.5 61.3 development 61.6 11.9 73.5
(0.1) 0.1 — Other net charges 3.0 — 3.0
———— —— —— ———- —— ——
Total operating
128.2 22.2 150.4 expenses 125.7 23.8 149.5
———— —— —— ———- —— ——
Operating
(63.2) 15.9 (47.3) (loss)/income (59.1) 13.5 (45.6)
Depreciation and
22.3 8.8 31.1 amortization 7.3 9.7 17.0
(0.6) (3.4) (4.0) Amortized fees — (1.2) (1.2)
Share-based
11.3 2.5 13.8 compensation 9.4 2.8 12.2
(0.1) 0.1 — Other net charges 3.0 — 3.0
———— —— —— ———- —— ——
(30.3) 23.9 (6.4) Adjusted EBITDA (39.4) 24.8 (14.6)
============ ====== ====== ========== ====== ======
(1) General and corporate costs have been allocated between the two
segments.
*T