Elan Reports Third
Quarter 2004 Financial Results
Elan Corporation, plc today announced its
third quarter 2004 results and provided a business update.
Commenting on Elan's business, Kelly Martin, Elan's president and chief
executive officer, said, "All of our energies are focused on delivering
our science to patients with unmet medical needs. Today, our emphasis on
preparing for a successful launch of Antegren in multiple sclerosis exemplifies
our commitment to bringing innovative therapies from the lab to patients around
the world."
Commenting on Elan's third quarter results, Shane Cooke, executive vice
president and chief financial officer, said, "We continued to report net
losses this quarter as we resolve outstanding legacy issues, streamline the
balance sheet and, most importantly, invest for a successful launch of Antegren
and Prialt. We are optimistic that the dedication, commitment and financial resources
we have invested in these products will be reflected in a return to
profitability in the 2006 timeframe."
Unaudited Consolidated U.S. GAAP Income Statement Data
Three Months Nine Months
Ended Ended
September 30 September 30
2003 2004 2003 2004
US$m US$m US$m US$m
--------------- -------------------------------------- ---------------
Revenue (See page 6)
115.0 85.7 Product revenue 460.5 302.0
16.2 15.4 Contract revenue 86.9 55.8
------- ------- ------- -------
131.2 101.1 Total revenue 547.4 357.8
------- ------- ------- -------
Operating Expenses (See page 8)
59.1 39.8 Cost of goods sold 195.0 122.3
66.9 55.5 Research and development 218.4 185.9
81.3 77.8 Selling, general and administrative 309.0 232.8
Net loss/(gain) on divestment of
5.7 (5.6) businesses (245.0) (40.6)
Recovery plan and other significant
21.2 55.5 charges 246.6 61.5
------- ------- ------- -------
234.2 223.0 Total operating expenses 724.0 561.9
------- ------- ------- -------
(103.0) (121.9) Operating loss (176.6) (204.1)
------- ------- ------- -------
Net Interest and Investment Gains and
(Losses) (See page 11)
(22.7) (24.0) Net interest expense (72.4) (72.3)
58.4 2.8 Investment gains 132.1 61.2
(15.4) (1.5) Investment losses and other (71.3) (95.3)
------- ------- ------- -------
Net interest and investment gains and
20.3 (22.7) (losses) (11.6) (106.4)
------- ------- ------- -------
Net loss from continuing operations
(82.7) (144.6) before tax (188.2) (310.5)
(6.4) 6.9 Provision for tax (14.4) 5.1
------- ------- ------- -------
Net loss before discontinued
(89.1) (137.7) operations (202.6) (305.4)
Net income/(loss) from discontinued
(1.9) 29.9 operations (See page 15) 1.4 17.8
------- ------- ------- -------
(91.0) (107.8) Net loss (201.2) (287.6)
======= ======= ======= =======
Basic and diluted net loss per
(0.26) (0.28) ordinary share (0.57) (0.74)
Weighted average number of basic and
diluted ordinary shares outstanding
350.2 391.1 (in millions) 350.0 389.1
Unaudited Non-GAAP Financial Information - EBITDA
Three Months Non-GAAP Financial Information Nine Months
Ended Reconciliation Schedule Ended
September 30 September 30
2003 2004 2003 2004
US$m US$m US$m US$m
--------------- -------------------------------------- ---------------
EBITDA
(103.0) (121.9) Operating loss (176.6) (204.1)
30.7 29.8 Depreciation and amortisation 102.9 93.3
(14.7) (13.5) Amortised fees (72.4) (37.0)
-- -- Milestones received and deferred -- 7.0
------- ------- ------- -------
(87.0) (105.6) EBITDA (146.1) (140.8)
======= ======= ======= =======
Three Months Non-GAAP Financial Information Nine Months
Ended Reconciliation Schedule Ended
September 30 September 30
2003 2004 2003 2004
US$m US$m US$m US$m
--------------- -------------------------------------- ---------------
EBITDA before net gains on divestment
of businesses, recovery plan and
other significant charges
(103.0) (121.9) Operating loss (176.6) (204.1)
30.7 29.8 Depreciation and amortisation 102.9 93.3
(14.7) (13.5) Amortised fees (72.4) (37.0)
-- -- Milestones received and deferred -- 7.0
Net (gain)/loss on divestment of
5.7 (5.6) businesses (245.0) (40.6)
Recovery plan and other significant
21.2 55.5 charges 246.6 61.5
------- ------- ------- -------
EBITDA before net gains on divestment
of businesses, recovery plan and
other significant charges (See page
(60.1) (55.7) 9) (144.5) (119.9)
======= ======= ======= =======
To supplement our consolidated financial statements presented on a
U.S. GAAP basis, Elan provides readers with EBITDA (Earnings Before
Interest, Taxes, Depreciation and Amortisation), a non-GAAP measure of
operating results. Elan has also provided EBITDA guidance for 2004,
which has been calculated on a consistent basis. EBITDA is defined as
operating income (loss) plus or minus depreciation and amortisation of
costs and revenues, and milestones received and deferred. EBITDA is
not presented as an alternative measure of operating results or cash
flow from operations, as determined in accordance with U.S. GAAP.
Elan's management uses EBITDA to evaluate the operating performance of
Elan and its business and is among the factors considered as a basis
for Elan's planning and forecasting for future periods. Elan believes
EBITDA is a measure of performance used by some investors, equity
analysts and others to make informed investment decisions. EBITDA is
used as an analytical indicator of income generated to service debt
and to fund capital expenditures. 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. EBITDA, as presented in this
press release, may not be comparable to similarly titled measures
reported by other companies. A reconciliation of EBITDA to operating
income (loss) is set out in the tables above titled "Non-GAAP
Financial Information Reconciliation Schedule".
Unaudited Consolidated U.S. GAAP Balance Sheet Data
December June 30 September
31 2003 2004 30 2004
US$m US$m US$m
------------------------------------------ ---------------------------
Assets
Current assets
Cash and cash equivalents 807.5 677.0 680.3
Marketable investment securities 349.4 238.8 193.3
Held for sale assets (1) 236.7 24.2 --
Other current assets 198.0 164.8 160.5
-------- -------- ---------
1,591.6 1,104.8 1,034.1
Intangible assets, net 857.5 837.1 815.1
Property, plant and equipment, net 369.0 319.1 324.9
Investments and marketable investment
securities 192.9 93.3 83.4
-------- -------- ---------
Total assets 3,011.0 2,354.3 2,257.5
======== ======== =========
Liabilities and Shareholders' Equity
Accounts payable and accrued liabilities 384.7 320.2 338.2
Held for sale liabilities 27.9 -- --
Deferred income 154.8 131.1 116.5
Guarantee provision due June 2004 - EPIL
II 344.5 -- --
EPIL III Notes due March 2005 390.0 390.0 390.0
6.5% convertible guaranteed notes due 2008 460.0 460.0 460.0
7.25% senior notes due 2008 650.0 650.0 650.0
Shareholders' equity 599.1 403.0 302.8
-------- -------- ---------
Total Liabilities and Shareholders' Equity 3,011.0 2,354.3 2,257.5
======== ======== =========
Reconciliation of Movement in
Shareholders' Equity
Opening 599.1 403.0
Net loss for the period (179.8) (107.8)
Changes in unrealised gains and losses on
investment securities (38.3) 6.3
Issuance of share capital 23.0 10.6
Other (1.0) (9.3)
-------- ---------
Closing 403.0 302.8
======== =========
(1) In accordance with Statement of Financial Accounting Standards
("SFAS") No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," at June 30, 2004, Elan recorded the assets and
liabilities related to Frova and Myobloc as held for sale, both of
which have now been sold. At December 31, 2003, Elan recorded as
held for sale the assets and liabilities related to its former
European sales and marketing business and Elan Phama S.A., a
manufacturing and research and development business based in
Mezzovia, Switzerland. Each of these divestments closed during the
first quarter of 2004.
Unaudited Consolidated U.S. GAAP Cash Flow Data
Three Months Nine Months
Ended Ended
September 30 September 30
2003 2004 2003 2004
US$m US$m US$m US$m
--------------- ------------------------------------- ----------------
(59.3) (41.3) Cash flows from operating activities (177.0) (132.2)
(27.9) (24.6) Movement on debt interest and tax (112.7) (79.3)
(3.3) (23.5) Working capital movement (53.0) (36.0)
Net purchases of tangible and
(39.3) (13.1) intangible assets (137.6) (23.7)
65.3 42.5 Net proceeds from sale of investments 313.6 239.7
Net proceeds from business
41.1 52.7 divestments 369.6 270.4
(3.3) 10.6 Cash flows from financing activities (270.5) 25.7
-- -- Cash payment under EPIL II guarantee -- (391.8)
------- ------- -------- -------
(26.7) 3.3 Net cash movement (67.6) (127.2)
Cash and cash equivalents at
973.0 677.0 beginning of period 1,013.9 807.5
------- ------- -------- -------
Cash and cash equivalents at end of
946.3 680.3 period 946.3 680.3
======= ======= ======== =======
The analysis below is based on the revenues and costs from continuing
operations presented in accordance with U.S. GAAP.
Revenue
Total revenue decreased 23% to $101.1 million in the third quarter of 2004
from $131.2 million in the same quarter of 2003 and is analysed below between
revenue generated from currently retained products and revenue arising from
products that have been divested.
Three Months Nine Months
Ended Ended
September 30 September 30
2003 2004 2003 2004
US$m US$m US$m US$m
--------------- ---------------------------------------- -------------
Revenue from Retained Products
35.2 33.0 Maxipime(TM) 77.5 87.7
8.8 12.5 Azactam(TM) 34.4 35.3
------- ------- ------ ------
44.0 45.5 111.9 123.0
25.8 27.7 Contract Manufacturing and Royalties 85.1 85.6
------- ------- ------ ------
69.8 73.2 Total Revenue from Retained Products 197.0 208.6
------- ------- ------ ------
8.5 8.5 Amortised Revenue - Adalat/Avinza(TM) 25.5 25.5
Revenue from Divested Products
-- -- Skelaxin(TM) 60.2 --
-- -- Sonata(TM) 48.2 --
19.6 -- European business 64.9 10.5
22.2 -- Zonegran(TM) 61.2 41.2
(5.1) 4.0 Other 3.5 16.2
------- ------- ------ ------
36.7 4.0 Total Revenue from Divested Products 238.0 67.9
------- ------- ------ ------
------- ------- ------ ------
115.0 85.7 Total Product Revenue 460.5 302.0
------- ------- ------ ------
Contract Revenue
6.2 5.0 Amortisation of fees 46.9 11.5
10.0 10.4 Research revenue and milestones 40.0 44.3
------- ------- ------ ------
16.2 15.4 Total Contract Revenue 86.9 55.8
------- ------- ------ ------
------- ------- ------ ------
131.2 101.1 Total Revenue 547.4 357.8
======= ======= ====== ======
(a) Product Revenue
Total product revenue for the third quarter of 2004 was $85.7 million
compared to $115.0 million in the same quarter of 2003, a decrease of 25%. The
decline in product revenue is primarily due to the divestment of a number of
products in the first half of 2004, principally the European business and
Zonegran.
Revenue from retained products
Revenue from retained products and contract manufacturing and royalties was
$73.2 million in the third quarter of 2004 compared to $69.8 million in the
same quarter of 2003, an increase of 5%. This increase primarily reflects the
growth in prescriptions and demand for those retained products and increasing
contract manufacturing activity.
Sales of Maxipime and Azactam in the third quarter of 2004 were $45.5
million, an increase of 3% over the same period of 2003, reflecting stronger
demand in 2004. Maxipime prescription demand for July and August 2004 increased
by 8% compared to the same period in 2003 while revenues for the quarter
decreased from $35.2 million to $33.0 million, or 6%, due to changing
wholesaler inventory levels. Azactam prescription demand for July and August
2004 increased by 8% compared to the same period in 2003 while revenues for the
quarter increased from $8.8 million to $12.5 million, or 42%, due to changing
wholesaler inventory levels.
Amortised Product Revenue
The third quarter of 2004 and 2003 includes $8.5 million of amortised
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 (Ligand). The remaining unamortised revenue on these
products of $77.7 million will be recognised as revenue over the next three
years reflecting Elan's ongoing involvement in the manufacturing of these
products.
Revenue from divested products
Revenue from products Elan has sold amounted to $4.0 million during the
third quarter of 2004, compared to $36.7 million in the third quarter of 2003.
The fluctuation is due to the timing of the divestments.
(b) Contract Revenue
Contract revenue in the third quarter of 2004 was $15.4 million compared to
$16.2 million in the same period of 2003, a decrease of 5%. The amortisation of
fees amounted to $5.0 million in the third quarter of 2004 compared to $6.2
million in the same period of 2003.
Research revenue and milestones amounted to $10.4 million in the third
quarter of 2004 compared to $10.0 million in the third quarter of 2003.
Gross Profit
The gross profit margin on product revenue was 54% in the third quarter of
2004 compared to 49% in the same period of 2003. During the third quarter of
2003, royalties of $10.9 million were paid to Pharma Marketing Ltd. (Pharma
Marketing) and included in cost of sales. These royalties amounted to 9% of total
product revenue. No royalties were paid to Pharma Marketing in 2004 following
the termination of all remaining agreements with Pharma Marketing in the fourth
quarter of 2003. Offsetting this, the gross margin has been negatively affected
in 2004 by the change in the mix of product revenue and particularly the
disposal of higher gross margin products during 2003 and 2004.
Operating Expenses
Research and development (R&D) expenses were $55.5 million in the third
quarter of 2004 compared to $66.9 million in the same period of 2003 and $65.0
million in the second quarter of 2004. The reduction in R&D expenses over
the second quarter of 2004 reflects the divestment of Zonegran, the timing of
the spend on the clinical development of Antegren(TM), and the impact on costs
associated with filing Antegren for multiple sclerosis (MS) in the U.S. and
Europe in the second quarter of 2004. Selling, general and administrative
(SG&A) expenses decreased by 4% to $77.8 million in the third quarter of
2004 from $81.3 million in the same quarter of 2003, reflecting the successful
implementation of the recovery plan and related cost reduction initiatives. The
third quarter 2004 SG&A expenses increased by 3% over the $75.3 million
incurred in the second quarter of 2004, reflecting increased investment in
pre-launch costs of Antegren and Prialt(TM), offset by reductions in costs
related to the disposal of Frova(TM) and Zonegran.
Net Gain/(Loss) on Divestment of Businesses
The net gain/(loss) on divestment of businesses for the third quarter and
nine months ended September 30, 2004 and 2003 are as follows:
Three Nine
Months Months
Ended Ended
September 30 September 30
2003 2004 2003 2004
US$m US$m US$m US$m
--------------- ------------------------------------- ----------------
-- 2.6 Zonegran -- 40.6
(3.6) -- Primary care franchise 250.0 --
(2.1) 3.0 Other (5.0) --
------- ------- ---------- -----
(5.7) 5.6 245.0 40.6
======= ======= ========== =====
Recovery Plan and Other Significant Charges
Recovery plan and other significant charges for the third quarters of 2004
and 2003 and for the nine months ended September 30, 2004 and 2003 are as
follows:
Three Nine
Months Months
Ended Ended
September 30 September 30
2003 2004 2003 2004
US$m US$m US$m US$m
--------------- ------------------------------------ ----------------
Severance costs, relocation and exit
5.3 -- costs 19.8 1.1
Reserve related to settlement of
shareholder litigation and SEC
-- 55.0 investigation -- 55.0
Costs related to shareholder
3.8 0.5 litigation and SEC investigation 6.1 5.4
Purchase of Pharma Operating Ltd.
-- -- Royalty rights 196.4 --
12.1 -- Other 24.3 --
------- ------- ---------- -----
21.2 55.5 246.6 61.5
======= ======= ========== =====
On October 25, the Company announced that it had reached an agreement to
settle the previously disclosed consolidated class action pending in the U.S.
District Court for the Southern District of New York. The class action, which
consolidated several class actions filed in early 2002, names the Company and
certain of its former and current officers and directors as defendants. Elan
expects that the Court, which reserved decision on the settlement, will issue
an order granting preliminary approval of the settlement in the next few weeks.
Under the class action settlement, all claims against the Company and the
other named defendants will be dismissed with no admission or finding of
wrongdoing on the part of any defendant. The principal terms of the settlement
provide for an aggregate cash payment to class members of $75.0 million, out of
which the Court will be asked to award attorneys' fees to plaintiffs' counsel,
and $35.0 million of which will be paid by the Company's insurance carrier. The
terms of the settlement are subject to preliminary and final Court approval and
notice to class members.
The Company also announced on the same day that it and the Staff of the
Securities and Exchange Commission (the SEC) have reached a provisional
agreement to settle the investigation by the SEC's Division of Enforcement that
commenced in February 2002.
Under the agreement provisionally reached with the SEC Staff, the Company
will neither admit nor deny the allegations contained in the SEC's civil
complaint, which will include allegations of violations of certain provisions
of the federal securities laws, including Section 10(b) of the Securities
Exchange Act of 1934 and Rule 10b-5 thereunder. The settlement will contain a
final judgment restraining and enjoining the Company from future violations of
these provisions. In addition, under the final judgment, the Company will agree
to pay a civil penalty of $15.0 million. In connection with the settlement, the
Company will not be required to restate or adjust any of its historical
financial results or information. The terms of the settlement are provisional
and are subject to the final approval of the Commissioners of the SEC. If
approved, the settlement will conclude all aspects of the investigation with
respect to Elan.
On October 4, 2004, the Company announced that it had included in its
financial statements a reserve of $55.0 million, net of insurance coverage, to
cover the Company's estimated liability related to the shareholder class action
and the SEC investigation.
EBITDA
Negative EBITDA, excluding net charges of $49.9 million related to gains on
divestment of businesses and other significant charges for the third quarter of
2004, amounted to $55.7 million compared to a negative EBITDA of $60.1 million
in the same period of 2003, excluding net gains on divestment of businesses,
recovery plan and other significant charges of $26.9 million, (See
"Unaudited Non-GAAP Financial Information - EBITDA" on page 3). The
decrease in negative EBITDA primarily results from the reduction in revenues
and related costs associated with products and businesses divested during 2003
and 2004.
Net Interest and Investment Gains and Losses
Net interest and investment gains and losses amounted to a loss of $22.7
million in the third quarter of 2004, compared to a gain of $20.3 million in
the same period of 2003.
In the third quarter of 2004, net interest expense amounted to $24.0 million
compared to $22.7 million in the same period of 2003, reflecting the interest
costs associated with the $460.0 million convertible notes issued in the fourth
quarter of 2003, offset by lower interest expense due to the Liquid Yield
Option Notes (LYONs) repurchases in December 2003.
Investments gains in the third quarter of 2004 of $2.8 million included realised
gains on investment disposals of $6.1 million, offset by $3.3 million losses in
relation to the mark-to-market of certain investments.
In addition, as a result of the sale of certain publicly quoted investments
and the mark-to-market of others, there was a net increase during the quarter
in unrealised gains recorded as a component of shareholders' equity of $6.3
million from $62.8 million at June 30, 2004 to $69.1 million at September 30,
2004.
On October 13, 2004, Elan Pharmaceutical Investments III, Ltd. (EPIL III)
sold its entire holding in Warner Chilcott PLC for $101.8 million. This
investment was included in marketable investment securities at September 30,
2004 at a book value of $98.9 million, which included unrealised gains of $40.7
million. Elan will record an investment gain of $43.6 million in the fourth
quarter of 2004 as a result of this divestment.
Liquidity
At September 30, 2004, Elan had $680.3 million in cash and cash equivalents
compared with $677.0 million at June 30, 2004 and $807.5 million at December
31, 2003.
At September 30, 2004, Elan's major contracted and non-operating cash
payments are as follows:
Less 1-3 4 Years September December
Than Years and 30, 2004 31, 2003
One US$m After Total US$m
Year US$m US$m
US$m
------------------------- --------------------------------------------
7.25% senior notes - - 650.0 650.0 650.0
6.5% convertible notes - - 460.0 460.0 460.0
Fixed product payments 1.9 - - 1.9 19.4
EPIL II (1) - - - - 450.0
EPIL III 390.0 - - 390.0 390.0
3.25% LYONs - - 0.9 0.9 0.9
Capital lease obligations 9.6 19.9 49.4 78.9 85.4
------- ------ --------- --------- ---------
401.5 19.9 1,160.3 1,581.7 2,055.7
Operating lease
obligations 16.9 30.0 94.8 141.7 157.6
------- ------ --------- --------- ---------
$418.4 $49.9 $1,255.1 $1,723.4 $2,213.3
======= ====== ========= ========= =========
(1) In accordance with U.S. GAAP, at December 31, 2003, $344.5 million
of this amount was provided on the balance sheet.
Recent Research and Development Highlights
Antegren (Natalizumab)
In September, Elan and Biogen Idec announced that they have submitted an
application to the European Medicines Agency for the approval of Antegren
(natalizumab) as a treatment for the induction and maintenance of Crohn's
disease. Data from the Phase III maintenance trial, ENACT-2 (Evaluation of
Natalizumab as Continuous Therapy- 2), which showed a sustained response
throughout 12 months of extended natalizumab infusion therapy, was presented by
the companies at the United European Gastroenterology Week in Prague, Czech
Republic.
Following discussions with the U.S. Food and Drug Administration (FDA), the
ongoing Phase III induction study to evaluate Antegren in patients with Crohn's
disease is required for any potential filing with the FDA. The data from this
study will be available in the first half of 2005.
In August 2004, Elan and Biogen Idec submitted an application for approval
of Antegren as a treatment for MS in Canada.
Alzheimer's Disease
In September 2004, Elan and Wyeth announced that the U.S. Patent and
Trademark Office recently issued to Neuralab Limited, a subsidiary of Elan,
seven patents for the companies' joint research on immunotherapeutic approaches
to the prevention and treatment of Alzheimer's disease.
About Elan
Elan is a neuroscience-based biotechnology company that is focused on
discovering, developing, manufacturing, selling and marketing advanced
therapies in neurodegenerative diseases, autoimmune diseases and severe pain.
Elan's (NYSE: ELN) shares trade on the New York, London and Dublin Stock
Exchanges.
Forward-Looking Statements
This document and the Appendix contain forward-looking statements about
Elan's financial condition, results of operations and estimates, business
prospects and the 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",
"envisage", "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: the potential of Antegren as a treatment for MS and
Crohn's disease; the potential of Prialt as an intrathecal treatment for severe
pain; whether the Court grants approval of the class action settlement on the
terms described herein, or at all; whether the provisional SEC settlement is
approved by the Commissioners of the SEC on the terms described herein, or at
all; Elan's ability to maintain sufficient cash, liquid resources, and
investments and other assets capable of being monetised to meet its liquidity
requirements; the outcome of the ongoing SEC investigation and the shareholder
and other pending litigation; the success of research and development
activities and the speed with which regulatory authorisations and product
launches may be achieved; competitive developments affecting Elan's current
products; the ability to successfully market both new and existing products;
difficulties or delays in manufacturing; trade buying patterns; the ability to
meet generic and branded competition after the expiration of Elan's patents;
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; exposure to product liability and other types of lawsuits;
Elan's ability to protect its patents and other intellectual property; 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. and Irish generally accepted accounting
principles; growth in costs and expenses; changes in product mix; the impact of
acquisitions, divestitures, restructurings, product withdrawals and other
unusual items. A further list and description of these risks, uncertainties and
other matters can be found in Elan's Annual Report on Form 20-F for the fiscal
year ended December 31, 2003, 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.
Appendix 1
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, and two
products which were marketed in the United Kingdom and Ireland, within
discontinued operations in the income statement. In the third quarter of 2004,
the results of Frova and Myobloc, including the net gains on disposal of these
businesses are also included as discontinued operations. Consequently, the
revenues and costs of the third quarter in 2003 have been adjusted to reflect
this treatment. 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.
Three Months Discontinued Operations (unaudited) Nine Months
Ended Ended
September 30 September 30
2003 2004 2003 2004
US$m US$m US$m US$m
----------------------------------------------------------------------
Revenue
42.8 0.4 Product revenue 144.1 23.7
0.8 -- Contract revenue 1.3 5.0
------- ------- ------ ------
43.6 0.4 Total revenue 145.4 28.7
------- ------- ------ ------
Operating Expenses
19.4 0.3 Cost of goods sold 71.1 13.4
3.7 (0.6) Research and development 20.2 5.0
10.7 (2.6) Selling, general and administrative 32.2 4.2
Net (gain)/loss on divestment of
5.5 (26.5) businesses 6.5 (11.2)
Recovery plan and other significant
6.0 -- charges 11.5 --
------- ------- ------ ------
45.3 (29.4) Total operating expenses 141.5 11.4
------- ------- ------ ------
(1.7) 29.8 Operating profit/(loss) 3.9 17.3
(0.2) 0.1 Net interest and investment losses (2.2) 0.5
------- ------- ------ ------
Net income/(loss) from discontinued
(1.9) 29.9 operations before tax 1.7 17.8
-- -- Provision for tax (0.3) --
------- ------- ------ ------
Net income/(loss) from discontinued
(1.9) 29.9 operations 1.4 17.8
======= ======= ====== ======
Non-GAAP Financial Information
EBITDA
(1.7) 29.8 Operating profit/(loss) 3.9 17.3
Depreciation and amortisation included
7.5 -- in operating profit/(loss) 22.7 1.0
Amortised revenue included in total
-- -- revenue (10.5) --
------- ------- ------ ------
5.8 29.8 EBITDA 16.1 18.3
------- ------- ------ ------
Net (gain)/loss on divestment of
5.5 (26.5) businesses 6.5 (11.2)
Recovery plan and other significant
6.0 -- charges 11.5 --
------- ------- ------ ------
EBITDA before net losses on divestment
of businesses, recovery plan and other
17.3 3.3 significant charges 34.1 7.1
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