Elan Reports Fourth Quarter and Full-Year 2012 Financial Results

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Elan Reports Fourth Quarter and Full-Year 2012 Financial Results

  • Full Year 2012 guidance met; Pro-forma Revenues up 13%; Adjusted EBITDA up 31%
  • Capital structure strengthened through debt refinancing and Alkermes shares sale
  • Tysabri transaction creates greater financial flexibility to grow shareholder value - $3.25 billion upfront plus double-digit future royalties

DUBLIN--(BUSINESS WIRE)-- Elan Corporation, plc today reported its fourth quarter and full-year 2012 financial results.

Mr Kelly Martin, CEO said "2012 was a year in which we continued to make significant progress and adjustments in our business. We achieved top line revenue growth of 13%; advanced ELND005 into two Phase 2 programs for neuropsychiatry; strengthened our balance sheet through refinancing and sale of our Alkermes shares; we remained disciplined with our cost structure and investment decisions. In addition, we demerged our pathology-based drug discovery platform into a new listed company, Prothena Corporation plc, enabling shareholders investment choice."


Mr Martin added "The Tysabri business restructuring announced earlier today with our collaborator Biogen Idec provides for a meaningful de-risking of the business. With $3.25 billion in upfront cash and double digit tiered royalties, we have created the opportunity to diversify our business across all areas of the industry value chain with tax efficient capital and cash flow. As we move through 2013 and beyond, the close of the Tysabri transaction gives us strategic flexibility to add to the shareholder value proposition and investment thesis by enabling continued prudent and risk justified investment in our pipeline, selectively adding commercial and clinical assets, and exploring the return of capital to shareholders at the appropriate time and in the right manner."

Mr. Nigel Clerkin, chief financial officer, said, "We were pleased to have delivered on all of our financial guidance for 2012. The number of patients taking Tysabri grew by 12% in 2012, and this strong growth drove our recorded Tysabri revenues to $1.2 billion for the year. Including Tysabri, our Adjusted EBITDA increased by over 30% in 2012 to $220 million, well ahead of our goal of $200 million. We successfully refinanced our debt, extending the maturity and lowering the annual interest expense by one-third. We also recently sold our remaining shareholding in Alkermes, bringing the total EDT sale proceeds to $1.05 billion."

Mr. Clerkin added, "The Tysabri transaction will provide us with greatly increased strategic flexibility, while maintaining a substantial participation in the future growth potential of this tremendous product. We expect Tysabri in-market sales to show further strong growth in 2013, and to increase by approximately 15% over the $1.6 billion achieved in 2012. Additionally, we expect our operating expenses, excluding Tysabri, to be substantially lower than in 2012, and to be in the range of $170-190 million for the year."

Unaudited Consolidated U.S. GAAP Income Statement Data

Three Months Ended
December 31

  

Twelve Months Ended
December 31

2011
US$m

 

2012
US$m

   

2011
US$m

 

2012
US$m

 Continuing Operations 
0.40.2Revenue (see page 8)4.00.2
Cost of goods sold0.80.2
0.40.2Gross margin3.2
 
Operating Expenses (see page 12)
30.926.8Selling, general and administrative107.2113.6
25.521.5Research and development106.895.0
21.459.3Other net charges (see page 13)24.3168.9
77.8107.6Total operating expenses238.3377.5
(77.4)(107.4)Operating loss(235.1)(377.5)
 
Net Interest and Investment Gains and Losses
16.712.4Net interest expense104.956.6
17.225.8Net loss on equity method investments81.1221.8
1.2Impairment of investments1.2
47.076.1Net charge on debt retirement47.076.1
(0.1)Net investment gains(2.6)
80.8115.5Net interest and investment gains and losses230.4355.7
 
(158.2)(222.9)Net loss from continuing operations before tax(465.5)(733.2)
31.7(314.2)Provision for/(benefit from) income taxes(12.0)(360.5)
(189.9)91.3Net income/(loss) from continuing operations(453.5)(372.7)
 
Discontinued Operations
55.261.5Net income from discontinued operations, net of tax (see page 17)1,014.0235.3
(134.7)152.8Net income/(loss)560.5(137.4)
 
(0.32)0.15Basic net income/(loss) per ordinary share - continuing operations(0.77)(0.63)
0.090.10Basic net income/(loss) per ordinary share - discontinued operations1.730.40
589.2594.3Basic weighted average number of ordinary shares outstanding (in millions) - continuing and discontinued operations587.6592.4
(0.32)0.15Diluted net income/(loss) per ordinary share - continuing operations(0.77)(0.63)
0.090.10Diluted net income/(loss) per ordinary share - discontinued operations1.730.40
589.2599.8Diluted weighted average number of ordinary shares outstanding (in millions) - continuing and discontinued operations587.6592.4
 
Unaudited Non-GAAP Financial Information - Adjusted EBITDA
    

Three Months Ended
December 31

Non-GAAP Financial Information
Reconciliation Schedule

Twelve Months Ended
December 31

2011
US$m

 

2012
US$m

   

2011
US$m

 

2012
US$m

 
(134.7)152.8Net income/(loss)560.5(137.4)
Net income/(loss) from discontinued operations:
(67.7)(81.2)Net income from Tysabri(270.4)(302.0)
7.619.5Net loss from Prothena22.846.2
4.90.2Net (income)/loss from EDT(766.4)20.5
(189.9)91.3Net income/(loss) from continuing operations(453.5)(372.7)
16.712.4Net interest expense104.956.6
31.7(314.2)Provision for/(benefit from) income taxes(12.0)(360.5)
3.32.1Depreciation and amortization14.811.5
(0.1)Amortized fees(0.5)(0.3)
(138.3)(208.4)EBITDA from continuing operations(346.3)(665.4)
5.44.5Share-based compensation21.629.3
21.459.3Other net charges24.3168.9
17.225.8Net loss on equity method investments81.1221.8
1.2Impairment of investments1.2
47.076.1Net charge on debt retirement47.076.1
(0.1)Net investment gains(2.6)
(47.4)(41.5)Adjusted EBITDA from continuing operations(1)(174.9)(168.1)
 

(1)A reconciliation of Adjusted EBITDA to net income/(loss) on a pro forma basis, including the results of the Tysabri business for the three and twelve months ended December 31, 2011 and 2012, is set out in Appendix I and Appendix II. A reconciliation of Adjusted EBITDA from discontinued operations to net income/(loss) from discontinued operations for the three and twelve months ended December 31, 2011 and 2012is set out in Appendix III and IV.

To supplement its consolidated financial statements presented on a U.S. GAAP basis, Elan provides readers with Adjusted EBITDA, a non-GAAP measure of operating results. Adjusted EBITDA is defined as net income/(loss) from continuing operations plus or minus net income or loss from discontinued operations, net interest expense, provision for or benefit from income taxes, depreciation and amortization of costs and revenue, share-based compensation, other net charges, net loss on equity method investment, impairment of investments, net charge on debt retirement and net investment gains. Adjusted EBITDA is not presented as, and should not be considered an alternative measure of operating results or cash flows from operations, as determined in accordance with U.S. GAAP. Elan's management uses Adjusted EBITDA to evaluate the operating performance of Elan and its business and this measure is among the factors considered as a basis for Elan's planning and forecasting for future periods. Elan believes Adjusted EBITDA is a measure of performance used by some investors, equity analysts and others to make informed investment decisions. Adjusted EBITDA is used as an analytical indicator of income generated to service debt and to fund capital expenditures. Adjusted EBITDA does not give effect to cash used for interest payments related to debt service requirements and does not reflect funds available for investment in the business of Elan or for other discretionary purposes. Adjusted EBITDA, as defined by Elan and presented in this press release, may not be comparable to similarly titled measures reported by other companies. A reconciliation of Adjusted EBITDA to net income/(loss) is set out in the table above titled, "Non-GAAP Financial Information Reconciliation Schedule".

Unaudited Consolidated U.S. GAAP Balance Sheet Data

   
  

December 31
2011
US$m

  

December 31
2012
US$m

Assets
Current Assets
Cash and cash equivalents271.7431.3
Restricted cash and cash equivalents — current2.62.6
Investment securities — current0.3167.9
Held for sale assets220.1
Deferred tax assets — current26.2380.9
Other current assets217.2206.7
Total current assets518.01,409.5
 
Non-Current Assets
Intangible assets, net309.999.0
Property, plant and equipment, net83.212.7
Equity method investments675.814.0
Investment securities — non-current9.88.6
Deferred tax assets — non-current118.964.6
Restricted cash and cash equivalents — non-current13.713.7
Other assets24.518.1
Total Assets1,753.81,640.2
 
Liabilities and Shareholders' Equity
Accounts payable, accrued and other liabilities337.0422.0
Long-term debt615.0600.0
Shareholders' equity801.8618.2
Total Liabilities and Shareholders' Equity1,753.81,640.2
 

Movement in Shareholders' Equity

  

Three Months
ended
December 31,
2012
US$m

   

Twelve Months
ended
December 31,
2012
US$m

601.6Opening shareholders' equity801.8
152.8Net income/(loss) for the period(137.4)
(105.7)Prothena distribution(105.7)
6.3Share-based compensation45.9
(24.7)Unrealized movements on defined benefit pension(24.7)
4.0Issuance of share capital20.8
(16.1)Increase/(decrease) in net unrealized gain on investment securities17.5
618.2Closing shareholders' equity618.2
 
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Unaudited Consolidated U.S. GAAP Cash Flow Data

Three Months Ended
December 31

  

Twelve Months Ended
December 31

2011
US$m

 

2012
US$m

   

2011
US$m

  

2012
US$m

  
(47.4)(41.5)Adjusted EBITDA from continuing operations(174.9)(168.1)
77.192.3Adjusted EBITDA from discontinued operations(1)387.9361.7
(9.1)(8.6)Net interest and tax(98.1)(52.6)
(17.8)(62.7)Other net charges(153.0)(2)(105.8)
(27.1)EDT divestment transaction costs(34.1)
(11.8)46.8Working capital decrease/(increase)(48.0)20.1
(36.1)26.3Cash flows provided by/(used in) operating activities(120.2)55.3
(7.4)(2.7)Net purchases of tangible and intangible assets(28.5)(12.3)
0.2(0.2)Net proceeds from sale/(purchase) of investments2.2(0.7)
(28.1)Funding provided to equity method investment (Janssen AI)(76.9)
Purchase of equity method investment (Proteostasis)(20.0)
Net proceeds from sale of equity method investment (Alkermes plc)381.1
Net proceeds from sale of EDT business500.0
5.0Receipt of deferred consideration (Prialt)12.0
(125.0)Prothena distribution(125.0)
(695.5)(90.6)Cash used in financing activities(691.1)(73.9)
1.3