Elan Reports Third Quarter 2012 Financial Results

Elan Reports Third Quarter 2012 Financial Results

  • Revenues up 10%; Adjusted EBITDA up 38%;

  • 13% increase in patients on Tysabri in last 12 months;

  • Neotope spin-off creating two separate entities on track.

DUBLIN--(BUSINESS WIRE)-- Elan Corporation, plc today reported its third quarter and first nine months 2012 financial results.

"The third quarter was an active one for Elan on a number of fronts." said Mr. Kelly Martin, chief executive officer. "We announced the proposed spin-off of our discovery research activity into Neotope Biosciences with Dr. Dale Schenk as the chief executive officer. Neotope will operate as a separate entity upon completion of the transaction, which is targeted to close by year end 2012. We named Hans Peter Hasler as the chief operating officer of Elan. Hans Peter brings significant industry experience and will be involved with all aspects of Elan, both strategically and operationally. Lastly, we strengthened our income statement and balance sheet by successfully refinancing our bonds in October."


Mr. Martin added "As the business transitions post the intended spin-off of Neotope, we will maintain our resolute focus on the current business by enabling growth of Tysabri in terms of adding net new patients globally, appropriately advancing the ELND005 molecule, and selectively exploring opportunities that would add to our value proposition in a balanced and thoughtful manner."

Mr. Nigel Clerkin, chief financial officer, said, "We saw continued financial momentum in the third quarter. Revenues grew by 10% over the third quarter of last year, and Adjusted EBITDA was 38% higher, driven by a 13% increase in Tysabri patient numbers. Based on this strong performance, we are re-affirming our full-year guidance of Adjusted EBITDA greater than $200 million. This also reflects our expectation that the Tysabri Italy price dispute is unlikely to be resolved this year, as well as the re-classification of Neotope to discontinued operations. We recorded a net loss from continuing operations for the quarter of $216.2 million, which includes charges of $228.6 million primarily related to the business restructuring announced during the quarter and the impairment of our investment in Janssen AI. The recently completed refinancing of our debt, at a lower coupon and with an extended maturity date of 2019, will see our annual interest expense fall by approximately one-third."

Unaudited Consolidated U.S. GAAP Income Statement Data

Three Months Ended

Nine Months Ended

September 30

September 30

2011

2012

2011

2012

US$m

US$m

US$m

US$m

Continuing Operations

279.4

306.6

Revenue (see page 8)

797.1

883.0

149.0

166.5

Cost of goods sold

425.3

482.0

130.4

140.1

Gross margin

371.8

401.0

Operating Expenses (see page 12)

48.9

48.0

Selling, general and administrative

146.2

167.9

44.4

37.0

Research and development

133.0

119.5

(0.7)

111.3

Other net charges/(gains) (see page 13)

3.9

113.2

92.6

196.3

Total operating expenses

283.1

400.6

37.8

(56.2)

Operating income/(loss)

88.7

0.4

Net Interest and Investment Gains and Losses

28.7

15.0

Net interest expense

88.2

44.2

Net loss on disposal of equity method investments

13.1

12.3

145.8

Net loss on equity method investments (see page 15)

63.9

203.2

(0.2)

Net investment gains

(2.5)

40.8

160.8

Net interest and investment gains and losses

149.6

260.5

(3.0)

(217.0)

Net loss from continuing operations before tax

(60.9)

(260.1)

(6.5)

(0.8)

Benefit from income taxes

(0.9)

(0.1)

3.5

(216.2)

Net income/(loss) from continuing operations

(60.0)

(260.0)

Discontinued Operations

670.6

(13.7)

Net income/(loss) from discontinued operations, net of tax (see page 16)

755.2

(30.2)

674.1

(229.9)

Net income/(loss)

695.2

(290.2)

0.01

(0.36)

Basic net income/(loss) per ordinary share - continuing operations

(0.10)

(0.44)

1.14

(0.02)

Basic net income/(loss) per ordinary share - discontinued operations

1.29

(0.05)

588.2

592.9

Basic weighted average number of ordinary shares outstanding (in millions) - continuing and discontinued operations

587.1

591.8

0.01

(0.36)

Diluted net income/(loss) per ordinary share - continuing operations

(0.10)

(0.44)

1.13

(0.02)

Diluted net income/(loss) per ordinary share - discontinued operations

1.27

(0.05)

595.0

592.9

Diluted weighted average number of ordinary shares outstanding (in millions) - continuing operations

587.1

591.8

595.0

592.9

Diluted weighted average number of ordinary shares outstanding (in millions) - discontinued operations

592.7

591.8

Unaudited Non-GAAP Financial Information - Adjusted EBITDA

Three Months Ended

Non-GAAP Financial Information

Nine Months Ended

September 30

Reconciliation Schedule

September 30

2011

2012

2011

2012

US$m

US$m

US$m

US$m

674.1

(229.9)

Net income/(loss)

695.2

(290.2)

(670.6)

13.7

Net (income)/loss from discontinued operations

(755.2)

30.2

28.7

15.0

Net interest expense

88.2

44.2

(6.5)

(0.8)

Benefit from income taxes

(0.9)

(0.1)

6.8

6.1

Depreciation and amortization

21.1

19.0

(0.1)

(0.2)

Amortized fees

(0.4)

(0.3)

32.4

(196.1)

EBITDA

48.0

(197.2)

5.3

6.6

Share-based compensation

17.8

27.7

(0.7)

111.3

Other net charges/(gains)

3.9

113.2

12.3

145.8

Net loss on equity method investments

63.9

203.2

Net loss on disposal of equity method investments

13.1

(0.2)

Net investment gains

(2.5)

49.1

67.6

Adjusted EBITDA

131.1

160.0

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) 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 and gains, net loss on equity method investments, net loss on disposal of equity method investments 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". A reconciliation of Adjusted EBITDA from discontinued operations to net income/(loss) from discontinued operations for the three and nine months ended September 30, 2011 is set out in Appendix III and IV.

Unaudited Consolidated U.S. GAAP Balance Sheet Data

December 31

September 30

2011

2012

US$m

US$m

Assets

Current Assets

Cash and cash equivalents

271.7

646.6

Restricted cash and cash equivalents — current

2.6

2.6

Investment securities — current

0.3

162.2

Held for sale assets

3.4

Deferred tax assets — current

26.2

26.3

Other current assets

217.2

235.2

Total current assets

518.0

1,076.3

Non-Current Assets

Intangible assets, net

309.9

297.9

Property, plant and equipment, net

83.2

13.8

Equity method investments

675.8

14.5

Investment securities — non-current

9.8

8.4

Deferred tax assets — non-current

118.9

122.9

Restricted cash and cash equivalents — non-current

13.7

13.7

Other assets

24.5

22.4

Total Assets

1,753.8

1,569.9

Liabilities and Shareholders' Equity

Accounts payable, accrued and other liabilities

337.0

352.1

Long-term debt

615.0

616.2

Shareholders' equity

801.8

601.6

Total Liabilities and Shareholders' Equity

1,753.8

1,569.9

Movement in Shareholders' Equity

Three Months

Nine Months

ended

ended

September 30,

September 30,

2012

2012

US$m

US$m

781.6

Opening shareholders' equity

801.8

(229.9)

Net loss for the period

(290.2)

13.2

Share-based compensation

39.6

8.2

Issuance of share capital

16.8

28.5

Increase in net unrealized gain on investment securities

33.6

601.6

Closing shareholders' equity

601.6

Unaudited Consolidated U.S. GAAP Cash Flow Data

Three Months Ended

Nine Months Ended

September 30

September 30

2011

2012

2011

2012

US$m

US$m

US$m

US$m

49.1

67.6

Adjusted EBITDA

131.1

160.0

11.2

(6.4)

Adjusted EBITDA from discontinued operations(1)

52.2

(17.2)

(28.6)

(15.6)

Net interest and tax

(89.0)

(44.1)

0.6

(41.6)

Other net charges(2)

(135.2)

(43.1)

70.9

Disposal of EDT working capital

70.9

0.1

11.9

Working capital decrease/(increase)

(36.2)

(26.6)

103.3

15.9

Cash flows provided by/(used in) operating activities

(6.2)

29.0

(10.0)

(3.8)

Net purchases of tangible and intangible assets

(21.1)

(9.8)

(0.1)

(0.1)

Net proceeds from sale/(purchase) of investments

2.0

(0.5)

Purchase of equity method investment

(20.0)

Net proceeds from sale of equity method investment

381.1

422.1

Net proceeds from sale of EDT business(3)

422.1

Funding provided to equity method investment

(48.7)

Receipt of deferred consideration

7.0

2.0

8.2

Cash flows from financing activities

4.4

16.8

Restricted cash and cash equivalents movement(2)

205.5

517.3

20.2

Net cash movement

586.7

374.9

491.9

626.4

Beginning cash balance

422.5

271.7

1,009.2