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Datum nieuwsfeit: 31-01-2006
( BW)(ELAN)(ELN) Elan Reports Fourth Quarter and Full-Year 2005
Financial Results
Business Editors/Health/Fitness Writers
DUBLIN, Ireland--(BUSINESS WIRE)--Jan. 31, 2006--Elan Corporation,
plc today announced its fourth quarter and full-year 2005 financial
results and provided guidance for its financial outlook for 2006.
Commenting on Elan's business, Kelly Martin, Elan's president and
chief executive officer, said, "2005 was a year of unexpected
challenges, business opportunity and scientific progress. Operating
and financial discipline combined with selective investments in our
science and technology allowed us to make advancements in all areas of
the company. Progress towards the potential re-marketing of Tysabri,
further developments in the immunotherapeutic program for Alzheimer's
and growth within our Drug Technology business further demonstrate our
commitment to delivering tangible results through a relentless focus
on the execution of our plans."
Mr. Martin added, "For 2006, we will continue to focus on making
measurable progress in our science, technology and commercial
activities. Such focus, discipline and alignment will enable us to
deliver benefits to patients, shareholders and our employees."
Commenting on Elan's fourth quarter and year-end 2005 financial
results, Shane Cooke, executive vice president and chief financial
officer, said, "Back in February 2005, when we voluntarily suspended
the marketing of Tysabri, we set a target of getting the rest of the
business to breakeven on an EBITDA basis by the end of 2005 while not
compromising revenue growth or the progress of our pipeline through
the clinic. We are pleased to report that we achieved this target, an
important step in our return to profitability. Product revenue in the
fourth quarter of 2005 grew by 30% over last year and reduced costs
have led to improved operating margins and a reduction in net losses
of 46% to $58.3 million while retaining cash balances in excess of $1
billion."
Mr. Cooke added, "We are well positioned to re-market Tysabri and
the progress we have made in improving our operating leverage will
accelerate our return to profitability."
-0-
*T
Unaudited Consolidated U.S. GAAP Income Statement Data
Three Months Twelve Months
Ended December 31 Ended December 31
2004 2005 2004 2005
US$m US$m US$m US$m
--------------- -------------------------------------- ---------------
Revenue (See page 7)
102.3 132.7 Product revenue 404.4 458.1
21.5 7.7 Contract revenue 77.3 32.2
------- ------- ------- -------
123.8 140.4 Total revenue 481.7 490.3
------- ------- ------- -------
Operating Expenses (See page 11)
48.0 44.7 Cost of goods sold 170.4 191.6
71.4 52.8 Research and development 257.3 233.3
107.7 86.5 Selling, general and administrative 340.5 362.9
(1.7) (15.0) Net gain on divestment of businesses (44.2) (103.4)
(3.7) 2.1 Other significant net (gains)/charges 59.8 4.4
------- ------- ------- -------
221.7 171.1 Total operating expenses 783.8 688.8
------- ------- ------- -------
(97.9) (30.7) Operating loss (302.1) (198.5)
------- ------- ------- -------
Net Interest and Investment Gains and
Losses (See page 14)
37.5 28.2 Net interest expense 107.8 127.6
(55.6) (1.4) Net investment gains (114.6) (16.3)
23.8 2.7 Impairment of investments 71.8 23.5
-- -- Loss on EPIL II guarantee 47.1 --
-- (0.4) Net charge on debt retirement -- 51.8
------- ------- ------- -------
Net interest and investment gains and
5.7 29.1 losses 112.1 186.6
------- ------- ------- -------
Net loss from continuing operations
(103.6) (59.8) before tax (414.2) (385.1)
Provision for/(benefit from) income
4.6 (1.5) taxes (0.5) (0.9)
------- ------- ------- -------
(108.2) (58.3) Net loss from continuing operations (413.7) (384.2)
Net income from discontinued
1.1 -- operations (see Appendix I) 19.0 0.6
------- ------- ------- -------
(107.1) (58.3) Net loss (394.7) (383.6)
======= ======= ======= =======
Basic and diluted net loss per
(0.27) (0.14) ordinary share (1.01) (0.93)
Weighted average number of ordinary
393.1 427.0 shares outstanding (in millions) 390.1 413.5
Number of ordinary shares outstanding
395.1 428.8 at December 31 (in millions) 395.1 428.8
*T
-0-
*T
Unaudited Non-GAAP Financial Information - EBITDA
Three Months Non-GAAP Financial Information Twelve Months
Ended Reconciliation Schedule Ended
December 31 December 31
2004 2005 2004 2005
US$m US$m US$m US$m
--------------- -------------------------------------- ---------------
(108.2) (58.3) Net loss from continuing operations (413.7) (384.2)
37.5 28.2 Net interest expense 107.8 127.6
Provision for/(benefit from) income
4.6 (1.5) taxes (0.5) (0.9)
29.2 35.0 Depreciation and amortization 122.5 130.8
(15.7) (15.0) Amortized fees (55.6) (57.8)
9.4 3.4 Revenue received and deferred 16.4 7.6
------- ------- ------- -------
(43.2) (8.2) EBITDA (223.1) (176.9)
======= ======= ======= =======
*T
-0-
*T
Three Months Non-GAAP Financial Information Twelve Months
Ended Reconciliation Schedule Ended
December 31 December 31
2004 2005 2004 2005
US$m US$m US$m US$m
--------------- -------------------------------------- ---------------
(43.2) (8.2) EBITDA (223.1) (176.9)
(1.7) (15.0) Net gain on divestment of businesses (44.2) (103.4)
(3.7) 2.1 Other significant net (gains)/charges 59.8 4.4
-- -- Loss on EPIL II guarantee 47.1 --
(31.8) 1.3 Net investment gains and losses (42.8) 7.2
-- (0.4) Net charge on debt retirement -- 51.8
------- ------- ------- -------
(80.4) (20.2) Adjusted EBITDA (203.2) (216.9)
======= ======= ======= =======
*T
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
from continuing operations 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 net gains
or losses on divestment of businesses, other significant net charges,
loss on EPIL II guarantee, net investment gains and losses and net
charge on debt retirement. Neither EBITDA nor Adjusted EBITDA are
presented as alternative measures of operating results, cash flow from
operations or net loss from continuing 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."
-0-
*T
Unaudited Consolidated U.S. GAAP Balance Sheet Data
December September December
31 30 31
2004 2005 2005
US$m US$m US$m
---------------------------------------- -----------------------------
Assets
Current Assets
Cash and cash equivalents 1,347.6 1,130.7 1,080.7
Restricted cash 164.3 20.2 20.4
Marketable investment securities 65.5 14.2 9.3
Prepaid and other current assets 152.5 118.5 131.0
--------- ---------- --------
Total current assets 1,729.9 1,283.6 1,241.4
Non-Current Assets
Property, plant and equipment, net 346.2 355.6 353.6
Intangible assets, net 764.0 698.9 675.8
Marketable investment securities 39.0 18.6 13.8
Restricted cash 28.4 4.5 4.5
Other assets 68.4 54.4 51.8
--------- ---------- --------
Total Assets 2,975.9 2,415.6 2,340.9
========= ========== ========
Liabilities and Shareholders' Equity
Accounts payable and accrued liabilities 361.5 244.8 246.7
Deferred income 110.4 71.6 60.1
EPIL III notes due March 2005 39.0 -- --
6.5% convertible guaranteed notes due
2008 460.0 254.0 254.0
7.25% senior notes due 2008 650.0 613.2 613.2
7.75% senior notes due 2011 850.0 850.0 850.0
Senior floating rate notes due 2011 300.0 300.0 300.0
Shareholders' equity 205.0 82.0 16.9
--------- ---------- --------
Total Liabilities and Shareholders'
Equity 2,975.9 2,415.6 2,340.9
========= ========== ========
Movement in Shareholders' Equity
Opening balance 147.8 82.0
Net loss for the period (67.1) (58.3)
Other 1.3 (6.8)
---------- --------
Closing balance 82.0 16.9
========== ========
*T
-0-
*T
Unaudited Consolidated U.S. GAAP Cash Flow Data
Three Months Twelve Months
Ended Ended
December 31 December 31
2004 2005 2004 2005
US$m US$m US$m US$m
----------------- ---------------------------------- -----------------
Cash flows from operating
(63.1) (9.4) activities (322.9) (178.0)
(31.4) (47.7) Movement on debt interest and tax (110.7) (159.4)
144.3 (9.5) Working capital movement(1) 245.5 (114.1)
(180.1) -- Restricted cash movement (159.8) 168.0
Net purchases of tangible and
(30.8) (8.0) intangible assets (54.5) (50.2)
Net proceeds from sale of
24.3 3.3 investments 254.1 62.3
Net proceeds from business
4.2 15.0 divestments 274.6 108.8
Cash flows from financing
809.1 6.3 activities 834.9 (65.3)
-- -- Repayment of EPIL III notes -- (39.0)
Cash payment under EPIL II
-- -- guarantee (391.8) --
-------- -------- -------- --------
676.5 (50.0) Net cash movement 569.4 (266.9)
671.1 1,130.7 Beginning cash balance 778.2 1,347.6
-------- -------- -------- --------
Cash and cash equivalents at end
1,347.6 1,080.7 of period 1,347.6 1,080.7
======== ======== ======== ========
(1) For the twelve months ended December 31, 2005, working capital
movement includes $40.0 million cash payment for the settlement of
the 2002 class action.
*T
The analysis below is based on the revenues and costs from
continuing operations presented in accordance with U.S. GAAP.
Net Loss
The net loss for the fourth quarter of 2005 amounted to $58.3
million, a decrease of 46% over the $107.1 million reported in the
same quarter of 2004. The decrease in net loss is principally due to
strong growth in product revenue and operating margins in the core
business. These improvements in operating results were offset by
reduced contract revenue and reduced aggregate gains on the disposal
of businesses and investments.
For the full-year 2005, the net loss decreased by 3% to $383.6
million from $394.7 million for the full-year 2004 (as set out on page
2). Product revenue from the core businesses grew by 34%, more than
compensating for the loss of revenue from products divested in 2004
and reduced contract revenue. Research and development and selling and
general administration expenses taken together were flat in 2005 over
2004, despite increased investments in Tysabri(TM) and the Alzheimer's
programs, reflecting ongoing cost containment initiatives and the
re-allocation of resources.
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. A
further analysis of Adjusted EBITDA between Tysabri and the rest of
the business is included in Appendix II.
Negative Adjusted EBITDA was $20.2 million in the fourth quarter
of 2005, compared to $80.4 million in the fourth quarter of 2004, an
improvement of 75%, and included negative Adjusted EBITDA of $28.9
million related to Tysabri (2004: $49.3 million). The improvement in
negative Adjusted EBITDA related to Tysabri reflects the initial
launch of Tysabri during the fourth quarter of 2004, the subsequent
voluntary suspension of Tysabri in the first quarter of 2005, and
reduced spending on both research and development and commercial
activities following the completion of a number of clinical trials
during 2005. Adjusted EBITDA for the rest of the business, excluding
costs related to Tysabri, was positive $8.7 million in the fourth
quarter of 2005 (2004: negative $31.1 million). The improvement in
Adjusted EBITDA from the rest of the business reflects the strong
growth in product revenues and operating margins, partially offset by
reduced contract revenues.
For the full-year 2005, negative Adjusted EBITDA was $216.9
million, an increase of 7% from $203.2 million in 2004 and included
negative Adjusted EBITDA of $163.9 million related to Tysabri (2004:
$119.5 million). Adjusted EBITDA for the rest of the business,
excluding Tysabri, was negative $53.0 million in the full-year 2005,
an improvement of 32% from the $83.7 million recorded in the full-year
2004. This improvement reflects the growth of product revenues and
improved operating margins from the core business, more than
offsetting the loss of revenue and profits from products divested
during 2004 and reduced contract revenue.
Negative Adjusted EBITDA related to Tysabri increased to $163.9
million for the full-year 2005 from $119.5 million for the full-year
2004. This reflects the costs of the initial launch of Tysabri in the
fourth quarter of 2004, the voluntary suspension of Tysabri in
February 2005 and the subsequent safety evaluation, together with the
costs of keeping the commercial infrastructure in place in
anticipation of the potential re-marketing of Tysabri in 2006.
Revenue
Total revenue increased 13% to $140.4 million in the fourth
quarter of 2005 from $123.8 million in the fourth quarter of 2004. For
the full-year, total revenue increased by 2% to $490.3 million for
2005 from $481.7 million for 2004. Revenue is analyzed below between
product revenue generated from the core business, revenue arising from
products that have been divested and contract revenue.
-0-
*T
Three Months Twelve Months
Ended Ended
December 31 December 31
2004 2005 2004 2005
US$m US$m US$m US$m
-------------- --------------------------------------- ---------------
Revenue from Marketed Products
29.9 46.8 Maxipime(TM) 117.5 140.3
15.3 17.5 Azactam(TM) 50.6 57.7
6.4 (0.4) Tysabri 6.4 11.0
-- 2.0 Prialt(TM) -- 6.3
------- ------ ------- -------
51.6 65.9 Total Revenue from Marketed Products 174.5 215.3
Manufacturing Revenue and Royalties
40.2 58.3 (see page 10) 130.9 207.1
Amortized Revenue -
8.5 8.5 Adalat(TM)/Avinza(TM) 34.0 34.0
------- ------ ------- -------
Total Product Revenue from Core
100.3 132.7 Business 339.4 456.4
Revenue from Divested Products
-- -- European business 10.5 --
-- -- Zonegran(TM) 41.2 --
2.0 -- Other 13.3 1.7
------- ------ ------- -------
2.0 -- Total Revenue from Divested Products 65.0 1.7
------- ------ ------- -------
------- ------ ------- -------
102.3 132.7 Total Product Revenue 404.4 458.1
------- ------ ------- -------
Contract Revenue
6.2 2.9 Amortized fees 17.6 16.4
15.3 4.8 Research revenue and milestones 59.7 15.8
------- ------ ------- -------
21.5 7.7 Total Contract Revenue 77.3 32.2
------- ------ ------- -------
------- ------ ------- -------
123.8 140.4 Total Revenue 481.7 490.3
======= ====== ======= =======
*T
Product Revenue
Total product revenue for the fourth quarter of 2005 of $132.7
million increased 30% from $102.3 million recorded in the same quarter
of 2004. The increase is primarily due to higher revenue from marketed
products and higher manufacturing revenue and royalties. Total product
revenue for the full-year 2005 was $458.1 million, compared to $404.4
million for the same period of 2004, an increase of 13%. The increase
in product revenue from the core business of 34% for the full-year
2005 significantly exceeded the loss of revenues from products
divested during 2004.
Revenue from marketed products
Revenue from marketed products was $65.9 million in the fourth
quarter of 2005, compared to $51.6 million recorded in the same period
of 2004. The increase of 28% is principally due to higher sales of
Maxipime and Azactam and revenue from Prialt, which was launched in
2005, offset by a decrease in the sales of Tysabri, which was
voluntarily suspended from the market in February 2005. For the
full-year, revenue from marketed products increased by 23% to $215.3
million for 2005 from $174.5 million for 2004 principally due to
increased sales of Maxipime and Azactam.
Revenue from Maxipime increased by 57% in the fourth quarter of
2005 to $46.8 million from $29.9 million in the fourth quarter of
2004. For the full-year, Maxipime revenues were $140.3 million in
2005, an increase of 19% over $117.5 million recorded in 2004. These
increases reflect increased demand, a price increase of 8% taken at
the end of 2004 and improved supply conditions.
Azactam prescription volume demand for October and November of
2005 increased by 10%, compared to the same period in 2004, while
revenue for the quarter increased to $17.5 million from $15.3 million,
or 14%. Azactam prescription demand for the first eleven months of
2005 increased by 10% over the same period in 2004, while revenues for
the full-year 2005 increased by 14% to $57.7 million from $50.6
million in the same period of 2004. Changing wholesaler inventory
levels and price increases explains the difference between Azactam
prescription growth rate and revenue growth. Azactam lost patent
exclusivity in October 2005. To date no generic Azactam product has
been approved.
Prialt, a new treatment for severe chronic pain, was approved in
the U.S. in December 2004. Revenue from Prialt for the fourth quarter
of 2005 was $2.0 million. Total Prialt revenue for the full-year 2005
was $6.3 million (2004: $nil).
Manufacturing revenue and royalties
Manufacturing revenue and royalties from Elan's Drug Technology
business comprises revenue earned from products manufactured for third
parties and royalties earned principally on sales by third parties of
products that incorporate Elan's technologies.
Manufacturing revenue and royalties was $58.3 million in the
fourth quarter of 2005, an increase of 45% over $40.2 million recorded
in the fourth quarter of 2004. For the full-year 2005, manufacturing
revenue and royalties was $207.1 million, an increase of 58% over
$130.9 million recorded in the full-year 2004. The increase in
manufacturing revenue and royalties is principally due to increased
sales by third parties of products that incorporate Elan's
technologies, principally Tricor(TM), and increased manufacturing
activity for third parties.
Manufacturing revenue and royalties can be further analyzed as
follows:
-0-
*T
Three Months Twelve Months
Ended Ended
December 31 December 31
2004 2005 2004 2005
US$m US$m US$m US$m
------- ------ ----------------------------------------- ------ ------
4.5 15.3 Tricor 4.5 45.4
8.7 7.8 Verelan(TM) 27.8 34.7
2.7 3.2 Skelaxin(TM) 12.2 17.9
3.5 2.7 Ritalin(TM) 11.8 13.8
4.9 4.3 Avinza(TM) 15.8 13.4
4.1 5.8 Diltiazem(TM) 19.3 18.6
- 4.0 Zanaflex(TM) - 11.1
11.8 15.2 Other 39.5 52.2
------- ------ ------ ------
40.2 58.3 Total 130.9 207.1
------- ------ ------ ------
*T
Except as noted above, no other product accounted for more than
10% of total manufacturing revenue and royalties in the fourth quarter
of 2005 or 2004. Of the total of $58.3 million in manufacturing
revenue and royalties in the fourth quarter of 2005, 35% consisted of
royalties received on products that are not manufactured by Elan,
compared to 26% in the same period of 2004. For the full-year 2005,
34% consisted of royalties received on products that are not
manufactured by Elan, compared to 19% in the same period of 2004.
Amortized revenue
The results for the fourth quarter and full-year of 2005 and 2004
include $8.5 million and $34.0 million, respectively, of amortized
revenue related to the licensing of rights to Elan's generic form of
Adalat CC and the restructuring of Elan's Avinza license agreement
with Ligand Pharmaceuticals, Inc, which occurred in 2002. The
remaining unamortized revenue on these products of $35.2 million,
which is included in deferred income, will be recognized as revenue
through June 2007 (generic Adalat CC), and November 2006 (Avinza),
reflecting Elan's ongoing involvement in the manufacturing of these
products.
Contract Revenue
Contract revenue in the fourth quarter of 2005 was $7.7 million, a
decrease of 64% from the $21.5 million recorded in the fourth quarter
of 2004. For the full-year, contract revenue decreased by 58% in 2005
to $32.2 million, compared to $77.3 million in 2004. These decreases
are principally due to a reduction in research revenue and milestones
arising from research and development activities performed by Elan on
behalf of third parties. The reduction resulted from, among other
things, the timing of milestone receipts, the completion of
transitional research and development activities related to certain
divested products and the suspension of activity related to
Sonata(TM).
Gross Profit
The gross profit margin on product revenue was 66% in the fourth
quarter of 2005, compared to 53% in the same period of 2004. The
increase is due principally to the change in the mix of product
revenues.
The full-year gross profit margin on product revenue was 58% for
both 2005 and 2004. The gross margin remained consistent with 2004
because of compensating changes in the mix of product revenues, the
impact of the Tysabri voluntary suspension and the divestment of
products in 2004.
Operating Expenses
Research and development (R&D) expenses were $52.8 million in the
fourth quarter of 2005, compared to $71.4 million in the same period
of 2004. The decrease in the fourth quarter of 2005 from the same
quarter of 2004 is due to reduced expenses related to Tysabri, cost
containment and the refocusing of research and development efforts on
key Alzheimer's programs. Included in R&D expenses is $10.6 million
related to Tysabri (2004: $23.9 million), the decrease reflecting
principally the completion of clinical trials.
Full-year R&D expenses were $233.3 million in 2005 compared to
$257.3 million in 2004, a decrease of 9% and includes $66.9 million
related to Tysabri (2004 : $84.2 million). The reduction in full-year
expenses reflects cost containment initiatives, the refocusing of
research and development efforts on key Alzheimer's programs, and
reduced spending on Tysabri as a result of the completion of clinical
trials offset by the cost of the extensive Tysabri safety evaluation.
Selling, general and administrative (SG&A) expenses decreased 20%
to $86.5 million in the fourth quarter of 2005 from $107.7 million in
the same quarter of 2004 and can be analyzed as follows:
-0-
*T
Three Months Twelve Months
Ended Ended
December 31 December 31
2004 2005 2004 2005
US$m US$m US$m US$m
-------------- ----------------------------------------- -------------
57.4 49.5 Rest of business 221.6 202.0
35.0 17.8 Tysabri 52.3 82.7
Depreciation and amortization
15.3 19.2 (principally Maxipime and Azactam) 66.6 78.2
------- ------ ------ ------
107.7 86.5 Total 340.5 362.9
*T
SG&A expenses, excluding amortization, related to the rest of the
business decreased by 14% to $49.5 million in the fourth quarter of
2005 from $57.4 million in the fourth quarter of 2004, principally due
to continued active cost management. The SG&A expenses related to
Tysabri, excluding amortization, were $17.8 million in the fourth
quarter of 2005, compared to $35.0 million in the fourth quarter of
2004 when Tysabri was launched.
Full-year SG&A expenses were $362.9 million in 2005 compared to
$340.5 million in 2004, an increase of 7%. This reflects the costs of
maintaining the Tysabri commercial infrastructure in place for the
full year 2005 in anticipation of its potential return to market,
increased amortization and the cost of launching Prialt during 2005,
offset by reduced costs in the rest of the business.
Net Gain on Divestment of Businesses
The net gain on divestment of businesses for the three and twelve
months ended December 31, 2005 and 2004 were as follows:
-0-
*T
Three Months Twelve Months
Ended Ended
December 31 December 31
2004 2005 2004 2005
US$m US$m US$m US$m
-------------- ---------------------------------------- --------------
1.5 -- Zonegran 42.9 85.6
0.9 15.0 European business (2.9) 17.1
(0.7) -- Other 4.2 0.7
------- ------ ------- ------
1.7 15.0 Total 44.2 103.4
======= ====== ======= ======
*T
The net gain in the fourth quarter of 2005 consists of $15.0
million of contingent consideration related to the divestment of the
European business to Zeneus Pharma Ltd., which was completed in 2004.
Included in the net gain for the full-year 2005 of $103.4 million
(2004: $44.2 million) is $85.6 million (2004: $42.9 million) related
to the divestment of Zonegran (zonisamide) to Eisai Co. Ltd ("Eisai").
In April 2004, we sold our interests in Zonegran in North America and
Europe to Eisai for net consideration of $113.5 million at closing. We
were also entitled to receive additional consideration of up to $110.0
million from Eisai through January 1, 2006, primarily contingent on
the date of generic Zonegran approval. We had received $85.0 million
of this contingent consideration prior to the approval of generic
Zonegran in December 2005. Consequently, the total net proceeds
received from the divestment of Zonegran amounted to $198.5 million
and resulted in a cumulative net gain on divestment of $128.5 million.
Elan has recently received a subpoena from the US Department of
Justice and the Department of Health and Human Services, Office of
Inspector General asking for documents and materials primarily related
to our marketing practices for Zonegran. We intend to cooperate with
the government in its investigation.
Other Significant Net Charges
Other significant net charges for the three and twelve months
ended December 31, 2005 and 2004 were as follows:
-0-
*T
Three Months Twelve Months
Ended Ended
December 31 December 31
2004 2005 2004 2005
US$m US$m US$m US$m
-------------- ---------------------------------------- --------------
-- 9.7 Severance and restructuring charges 3.0 14.4
SEC investigation, shareholder class
(3.7) (7.6) action lawsuit settlements and other 56.8 (10.0)
------- ------ ------ -------
(3.7) 2.1 Total 59.8 4.4
======= ====== ====== =======
*T
The $2.1 million charge in the fourth quarter of 2005 principally
consists of $9.7 million for severance and restructuring charges,
offset by a credit of $7.0 million associated with a litigation
settlement.
Net Interest and Investment Gains and Losses
Net interest and investment gains and losses amounted to a net
charge of $29.1 million for the fourth quarter of 2005, compared to a
net charge of $5.7 million for the same period of 2004. The net charge
of $29.1 million in the fourth quarter of 2005 primarily consists of
net interest expense of $28.2 million, compared to $37.5 million in
the fourth quarter of 2004. The decrease in net interest expense is
primarily a result of the repayment of the EPIL III notes in the
fourth quarter of 2004, the retirement of $242.8 million of
convertible and senior debts in the second quarter of 2005, and by
interest income earned on higher average cash balances, partially
offset by the interest on $1.15 billion in senior fixed and floating
notes issued in November 2004. In addition, the net charge of $5.7
million in the fourth quarter of 2004 included a net investment gain
of $55.6 million (principally related to the disposal of our
investment in Warner Chilcott) and investment impairments of $23.8
million.
Full-year net interest and investment gains and losses amounted to
a net charge of $186.6 million for 2005, compared to a net charge of
$112.1 million for 2004. The net charge for the full-year 2005
includes a net interest expense of $127.6 million, compared to $107.8
million for the full-year 2004. The increased charge for the full-year
reflects the interest costs associated with the issuance of $1.15
billion in senior fixed and floating rate notes in November 2004,
partially offset by impact of the repayment of the EPIL III notes in
November 2004, the early retirement of $242.8 million of convertible
and senior debts in the second quarter of 2005, and increased interest
income associated with higher cash balances and interest rates. The
net charge for the full-year 2005 also includes a net charge of $51.8
million associated with the early retirement of $36.8 million of the
7.25% senior notes due 2008 (Athena Notes) and the early conversion of
$206.0 million in aggregate principal amount of 6.5% Convertible
Guaranteed Notes due 2008. This reduced our debt by $242.8 million and
our annualized interest expenses by approximately $16 million.
2006 Outlook
Financial
Elan is providing guidance as to the potential financial outcome
for 2006, excluding potential revenues from Tysabri and the impact of
share-based compensation. Elan is optimistic about the return of
Tysabri and plans to spend $150 million to $170 million on R&D and
SG&A expenses related to Tysabri in 2006, based on the potential
re-marketing of Tysabri in the U.S. in the second quarter of 2006 and
the potential launch of Tysabri in Europe in the second half of 2006.
In relation to the remaining business, Elan expects total revenues
in 2006 to exceed $500 million, with product revenue expected to
account for in excess of 90% of the total. The gross profit on product
revenue, excluding revenue and related cost of sales for Tysabri and
share-based compensation, is expected to be in the range of 60% to
65%.
Elan's investment in R&D and SG&A expenses for 2006 is anticipated
to be in the range of $575 million to $625 million, including the R&D
and SG&A costs related to Tysabri in the range of $150 million to $170
million referred to above.
Negative EBITDA for 2006, excluding revenues related to Tysabri,
is expected to be between $150 million and $175 million, and includes
negative EBITDA for the rest of the business which is expected to be
less than $25 million.
Research & Development
Tysabri (Natalizumab)
As previously announced, the supplemental Biologics License
Application (sBLA) for Tysabri for the treatment of MS has been
accepted and designated for priority review by the U.S. Food and Drug
Administration (FDA). The FDA grants Priority Review status to
products that are considered to be potentially significant therapeutic
advancements over existing therapies that address an unmet medical
need.
Tysabri Expected Key Milestones 2006
MS
-- Advisory Committee Panel Meeting, March 7, 2006
-- FDA action on Tysabri sBLA
-- Clinical re-dosing in the U.S. and International
-- European regulatory action regarding potential approval of
Tysabri
-- Potential re-marketing of Tysabri in the U.S. and Europe
Crohn's Disease
-- European regulatory action regarding the potential approval of
Tysabri; dependent upon the regulatory action for Tysabri in
MS
-- Filing of U.S. BLA for Tysabri as a treatment for Crohn's
disease; dependent upon the regulatory action for Tysabri in
MS
Alzheimer's and other Neurodegenerative Diseases
Elan is focused on building upon its breakthrough research and
extensive experience in Alzheimer's disease (AD) and is also studying
other neurodegenerative diseases, such as Parkinson's disease.
Two of our compounds from the Alzheimer's disease immunotherapy
program, in collaboration with Wyeth, are currently progressing
through clinical trials.
AD Expected Key Milestones 2006
-- Interim analyses of Phase II data from AAB-001 (an
experimental monoclonal antibody) to determine the time point
at which this program can move into the next phase of clinical
trials
-- Interim analyses of Phase I data from ACC-001 (active Abeta
immunotherapeutic conjugate) to determine the time point at
which this program can move into Phase II
-- Potential filing of IND for AAB-002
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 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",
"believe" 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:
whether and when Elan will be able to resume marketing and developing
Tysabri; even if Elan can resume marketing and developing Tysabri, the
potential of Tysabri and the potential for the successful development
and commercialization of additional products, including those
utilizing Tysabri; the potential of Elan's current 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 and
the speed with which regulatory authorizations and product launches
may be achieved; competitive developments affecting Elan's products;
the ability to successfully market both new and existing products;
difficulties or delays in manufacturing and supply of Elan's products
(including, in particular Maxipime); trade buying patterns; the impact
of generic and branded competition after the expiration of Elan's
patents, including the impact of any generic competition following the
loss of patent exclusivity for Azactam in October 2005; 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 Modernisation 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 practice related to the
marketing of Zonegran; failure to comply with its payment obligations
under Medicaid and other governmental programmes; 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 U.S.,
International and Irish 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 Form 20-F for
the fiscal year ended December 31, 2004, as amended by Amendment No. 1
on Form 20-F/A, and in its Reports of Foreign Issuer on Form 6-K filed
with the SEC. Elan assumes no obligation to update any forward-looking
statements, whether as a result of new information, future events or
otherwise.
Elan continually evaluates its liquidity requirements, capital
needs and availability of resources in view of, among other things,
alternative uses of capital, debt service requirements, the cost of
debt and equity capital and estimated future operating cash flow. Elan
may raise additional capital, restructure or refinance outstanding
debt, repurchase material amounts of outstanding debt, consider the
sale of products, interests in subsidiaries, marketable investment
securities or other assets, or take a combination of such actions or
other steps to increase or manage its liquidity and capital resources.
Any such actions or steps, including any sale of assets or repurchase
of outstanding debt, could be material. In the normal course of
business, Elan may investigate, evaluate, discuss and engage in future
company or product acquisitions, capital expenditures, investment and
other business opportunities. In the event of any future acquisitions,
capital expenditures, investment or other business opportunities, Elan
may consider using available cash or raising additional capital,
including the issuance of additional debt.
Elan Fourth Quarter and Full-Year 2005 Financial Results
Appendix I
In previous quarters and in accordance with SFAS No. 144, Elan
recorded the results and gains or losses on the divestment of its
discontinued operations including Elan Transdermal Technologies,
Athena Diagnostics, Elan Diagnostics, a manufacturing business in
Italy, the pain portfolio of products, Actiq(TM), the dermatology
portfolio of products, Abelcet(TM) U.S. and Canada, Frova(TM),
Myobloc(TM) and two products that were marketed in the United Kingdom
and Ireland, within discontinued operations in the consolidated income
statement. An analysis of the results of the discontinued operations
is set out below.
Elan has also sold a number of other assets and businesses
(principally the primary care franchise, the European sales and
marketing business and Zonegran), which in accordance with SFAS No.
144, are not included in discontinued operations. Elan believes that
it has a significant continuing involvement in the operations of these
businesses, for example, through ongoing supply arrangements or
formulation activities.
-0-
*T
Three Months Discontinued Operations (unaudited) Twelve Months
Ended Ended
December 31 December 31
2004 2005 2004 2005
US$m US$m US$m US$m
----------------------------------------------------------------------
Revenue
(0.1) -- Product revenue 23.6 --
-- -- Contract revenue 5.1 --
------- ------- ------ ------
(0.1) -- Total revenue 28.7 --
------- ------- ------ ------
Operating Expenses
(0.1) -- Cost of goods sold 13.3 --
(1.6) -- Research and development 3.3 (0.4)
0.2 -- Selling, general and administrative 4.5 0.3
(0.3) -- Net gain on divestment of businesses (11.5) (0.5)
------- ------- ------ ------
(1.8) -- Total operating expenses 9.6 (0.6)
------- ------- ------ ------
1.7 -- Operating profit 19.1 0.6
0.4 -- Net interest expense 0.1 --
0.2 -- Net investment losses -- --
------- ------- ------ ------
Net income from discontinued operations
1.1 -- before tax 19.0 0.6
-- -- Provision for tax -- --
------- ------- ------ ------
1.1 -- Net income from discontinued operations 19.0 0.6
======= ======= ====== ======
Non-GAAP Financial Information
EBITDA
1.1 -- Net income from discontinued operations 19.0 0.6
0.4 -- Net interest expense 0.1 --
Depreciation and amortization included
-- -- in operating profit 1.0 --
Amortized revenue included in total
-- -- revenue (4.6) --
------- ------- ------ ------
1.5 -- EBITDA 15.5 0.6
------- ------- ------ ------
(0.3) -- Net gain on divestment of businesses (11.5) (0.5)
0.2 -- Net investment losses -- --
------- ------- ------ ------
1.4 -- Adjusted EBITDA 4.0 0.1
======= ======= ====== ======
*T
Appendix II
-0-
*T
Three Months Ended Twelve Months Ended
December 31, 2005 December 31, 2005
Tysabri Rest of Total Tysabri Rest of Total
Business Business
US$m US$m US$m US$m US$m US$m
------------------------- ------------------ -------------------------
Revenue
(0.4) 133.1 132.7 Product revenue(1) 11.0 447.1 458.1
1.5 6.2 7.7 Contract revenue 10.8 21.4 32.2
-------- --------- ------ ------- --------- -------
1.1 139.3 140.4 Total revenue 21.8 468.5 490.3
-------- --------- ------ ------- --------- -------
Operating Expenses
Cost of goods
0.2 44.5 44.7 sold(2) 25.4 166.2 191.6
Selling, general
and
18.3 68.2 86.5 administrative(3) 84.7 278.2 362.9
Research and
10.6 42.2 52.8 development 66.9 166.4 233.3
Net gain on
divestment of
-- (15.0) (15.0) businesses -- (103.4) (103.4)
Other significant
2.0 0.1 2.1 net charges 2.3 2.1 4.4
-------- --------- ------ ------- --------- -------
Total operating
31.1 140.0 171.1 expenses 179.3 509.5 688.8
-------- --------- ------ ------- --------- -------
(30.0) (0.7) (30.7) Operating loss (157.5) (41.0) (198.5)
Depreciation and
0.5 34.5 35.0 amortization 2.0 128.8 130.8
(1.4) (13.6) (15.0) Amortized fees (10.7) (47.1) (57.8)
Net gain on
divestment of
-- (15.0) (15.0) businesses -- (103.4) (103.4)
Revenue received
-- 3.4 3.4 and deferred -- 7.6 7.6
Other significant
2.0 0.1 2.1 net charges 2.3 2.1 4.4
-------- --------- ------ ------- --------- -------
(28.9) 8.7 (20.2) Adjusted EBITDA (163.9) (53.0) (216.9)
======== ========= ====== ======= ========= =======
(1) Revenue from sales of Tysabri in the twelve months ended December
31, 2005, is net of $15.4 million for sales returns related to the
product recall.
(2) Cost of sales for Tysabri in the twelve months ended December 31,
2005, includes $14.0 million of inventory write-off related to the
voluntary suspension of the marketing of Tysabri.
(3) General and corporate costs have not been allocated to Tysabri.
*T
--30--DB/ny*
CONTACT: Elan Corporation, plc
Investor Relations
Emer Reynolds, 353-1-709-4000
or
Chris Burns, 800-252-3526
or
Media Relations
Davia Temin, 212-407-5740
or
Elizabeth Headon, 353-1-498-0300