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
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)
======= ======= ======= =======
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)
======= ======= ======= =======
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."
Unaudited Consolidated U.S. GAAP Balance Sheet Data
December September December
31 30 31
2004 2005 2005
US$m US$m US$m
----------------------------------------
-----------------------------
Assets
Current Assets
Cash and cash equivalents 1,347.6
1,130.7 1,080.7
Restricted cash 164.3 20.2 20.4
Marketable investment securities 65.5
14.2 9.3
Prepaid and other current assets 152.5
118.5 131.0
--------- ----------
--------
Total current
assets 1,729.9 1,283.6
1,241.4
Non-Current Assets
Property, plant and equipment, net 346.2
355.6 353.6
Intangible assets, net 764.0
698.9 675.8
Marketable investment securities 39.0
18.6 13.8
Restricted cash 28.4 4.5 4.5
Other assets 68.4 54.4 51.8
--------- ----------
--------
Total Assets 2,975.9 2,415.6
2,340.9
========= ==========
========
Liabilities and Shareholders' Equity
Accounts payable and accrued liabilities 361.5
244.8 246.7
Deferred income 110.4 71.6 60.1
EPIL III notes due March 2005 39.0
-- --
6.5% convertible guaranteed notes due
2008 460.0 254.0 254.0
7.25% senior notes due 2008 650.0
613.2 613.2
7.75% senior notes due 2011 850.0
850.0 850.0
Senior floating rate notes due 2011 300.0 300.0 300.0
Shareholders' equity 205.0
82.0 16.9
--------- ----------
--------
Total Liabilities
and Shareholders'
Equity 2,975.9 2,415.6
2,340.9
========= ==========
========
Movement in Shareholders' Equity
Opening balance 147.8 82.0
Net loss for the period (67.1) (58.3)
Other 1.3 (6.8)
----------
--------
Closing balance 82.0 16.9
==========
========
Unaudited
Consolidated U.S. GAAP Cash Flow Data
Three Months Twelve
Months
Ended
Ended
December 31
December 31
2004 2005 2004 2005
US$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.
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 $481.7
million for 2004. Revenue is analyzed below between product revenue generated
from the core business, revenue arising from products that have been divested
and contract revenue.
Three Months
Twelve Months
Ended
Ended
December 31
December 31
2004 2005 2004 2005
US$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
======= ====== ======= =======
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 $130.9 million recorded
in the full-year 2004. The increase in manufacturing revenue and royalties is
principally due to increased sales by third parties of products that
incorporate Elan's technologies, principally Tricor(TM), and increased manufacturing
activity for third parties.
Manufacturing revenue and royalties can be further analyzed
as follows:
Three Months
Twelve Months
Ended
Ended
December 31
December 31
2004 2005 2004 2005
US$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
------- ------ ------ ------
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 $107.7
million in the same quarter of 2004 and can be analyzed as follows:
Three Months Twelve Months
Ended
Ended
December 31
December 31
2004 2005 2004 2005
US$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
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 $340.5 million in 2004, an increase of 7%. This reflects the costs
of maintaining the Tysabri commercial infrastructure in place for the full year
2005 in anticipation of its potential return to market, increased amortization
and the cost of launching Prialt during 2005, offset by reduced costs in the
rest of the business.
Net Gain on Divestment of Businesses
The net gain on divestment of businesses for the three and
twelve months ended December 31, 2005 and 2004 were as follows:
Three Months
Twelve Months
Ended
Ended
December 31
December 31
2004 2005 2004 2005
US$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
======= ====== ======= ======
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 $128.5 million.
Elan has recently received a subpoena from the US Department
of Justice and the Department of Health and Human Services, Office of Inspector
General asking for documents and materials primarily related to our marketing
practices for Zonegran. We intend to cooperate with the government in its
investigation.
Other Significant Net Charges
Other significant net charges for the three and twelve
months ended December 31, 2005 and 2004 were as follows:
Three Months
Twelve Months
Ended
Ended
December 31
December 31
2004 2005 2004 2005
US$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
======= ====== ======
=======
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