Elan Reports Fourth Quarter and Full-Year 2005 Financial Results.DUBLIN Dublin, city, Republic of Ireland Dublin, Irish Baile Átha Cliath, county borough (1991 pop. 915,516), Leinster, capital of the Republic of Ireland, on Dublin Bay at the mouth of the Liffey River. , Ireland Ireland, Irish Eire (âr`ə) [to it are related the poetic Erin and perhaps the Latin Hibernia], island, 32,598 sq mi (84,429 sq km), second largest of the British Isles. -- Elan (Emulated LAN) A virtual LAN in the ATM world. See LANE and virtual LAN. Elan - ["Top-down Programming with Elan", C.H.A. Koster, Ellis Horwood 1987]. 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 Kel·ly , Ellsworth Born 1923. American abstract painter and sculptor whose works are characterized by flat color areas with sharply defined edges. Kelly, Emmett 1898-1979. 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 im·mu·no·ther·a·py n. pl. im·mu·no·ther·a·pies Treatment of disease by inducing, enhancing, or suppressing an immune response. im program for Alzheimer's Noun 1. Alzheimer's - a progressive form of presenile dementia that is similar to senile dementia except that it usually starts in the 40s or 50s; first symptoms are impaired memory which is followed by impaired thought and speech and finally complete helplessness 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 Alignment is the adjustment of an object in relation with other objects, or a static orientation of some object or set of objects in relation to others.
Commenting on Elan's fourth quarter and year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2005 financial results, Shane Cooke Shane Cooke is a Dublin born Gaelic football player who played for Laois under the parentage rule. At club level, Shane usually lines out in attack with St Marys (Saggart). , executive vice president and chief financial officer, said, "Back in February February: see month. 2005, when we voluntarily suspended sus·pend v. sus·pend·ed, sus·pend·ing, sus·pends v.tr. 1. To bar for a period from a privilege, office, or position, usually as a punishment: suspend a student from school. the marketing of Tysabri, we set a target of getting the rest of the business to breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations on an EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become 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 Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: and a reduction in net losses of 46% to $58.3 million while retaining cash balances in excess of $1 billion." Mr. Cooke added, "We are well positioned to re-market Tysabri and the progress we have made in improving our operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. will accelerate our return to profitability."
Unaudited Consolidated U.S. GAAP Income Statement Data
Three Months Twelve Months
Ended December 31 Ended December 31
2004 2005 2004 2005
US$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 Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge presented on a U.S. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). basis, Elan provides readers with EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the 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 divestment to strip one's investment from an entity. of businesses, other significant net charges, loss on EPIL EPIL Electron and Photon Impact Laboratory 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 Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses or net loss from continuing operations, as determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. 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 analytical, analytic pertaining to or emanating from analysis. analytical control control of confounding by analysis of the results of a trial or test. 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 cost containment, n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. 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 $481.7 million for 2004. Revenue is analyzed an·a·lyze tr.v. an·a·lyzed, an·a·lyz·ing, an·a·lyz·es 1. To examine methodically by separating into parts and studying their interrelations. 2. Chemistry To make a chemical analysis of. 3. below between product revenue generated from the core business, revenue arising from products that have been divested and contract revenue.
Three Months Twelve Months
Ended Ended
December 31 December 31
2004 2005 2004 2005
US$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 Max·i·pime A trademark for the drug cefepime hydrochloride. cefepime hydrochloride Maxipime Pharmacologic class: Fourth-generation cephalosporin Therapeutic class: and Azactam A·zac·tam A trademark for the drug aztreonam. aztreonam Azactam Pharmacologic class: Monobactam Therapeutic class: Anti-infective Pregnancy risk category B 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 October: see month. and November November: see month. 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 December: see month. 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 $130.9 million recorded in the full-year 2004. The increase in manufacturing revenue and royalties is principally due to increased sales by third parties of products that incorporate Elan's technologies, principally Tricor TriCor® Fenofibrate Cardiology An adjunct to diet for managing stratospheric serum TG levels in Pts unresponsive to diet or at risk of pancreatitis (TM), and increased manufacturing activity for third parties. Manufacturing revenue and royalties can be further analyzed as follows:
Three Months Twelve Months
Ended Ended
December 31 December 31
2004 2005 2004 2005
US$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 Ad·a·lat A trademark for the drug nifedipine. CC and the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). of Elan's Avinza license agreement with Ligand ligand (lĭg`ənd), charged or uncharged molecule with one or more unshared pairs of electrons that can attach to a central metallic atom or ion to form an aggregate known as a complex ion (see chemical bond). 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 June: see month. 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 “Milemarker” redirects here. For the American indie rock band, see Milemarker (band). A milestone or kilometre sign is one of a series of numbered markers placed along a road at regular intervals, typically at the side of the road or in a median. receipts, the completion of transitional research and development activities related to certain divested products and the suspension of activity related to Sonata sonata (sənä`tə), in music, type of instrumental composition that arose in Italy in the 17th cent. At first the term merely distinguished an instrumental piece from a piece with voice, which was called a cantata. (TM). Gross Profit The gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. 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 Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. 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 Noun 1. refocusing - focusing again focalisation, focalization, focusing - the act of bringing into focus 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 European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. 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 Zonegran® Zonisamide Neurology An agent used to manage partial seizures in adults with epilepsy. See Seizures. (zonisamide zonisamide /zo·nis·am·ide/ (zo-nis´ah-mid?) a sulfonamide that acts as an anticonvulsant, used in the treatment of partial seizures in adults. ) to Eisai Eisai (born 1141—died 1215) Japanese monk who introduced Rinzai Zen Buddhism to Japan. Originally a Tendai (Tiantai) monk, he visited China twice (1168, 1187) and returned to teach a strict meditational system based on the use of koan (riddles). He instructed Dogen. Co. Ltd ("Eisai"). In April 2004, we sold our interests in Zonegran in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). to Eisai for net consideration of $113.5
million at closing. We were also entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: to receive additional consideration of up to $110.0 million from Eisai through January January: see month. 1, 2006, primarily contingent on Adj. 1. contingent on - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent upon, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent 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 Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). received from the divestment of Zonegran amounted to $198.5 million and resulted in a cumulative net gain on divestment of $128.5 million. Elan has recently received a subpoena subpoena (səpē`nə) [Lat.,=under penalty], in law, an order to a witness to appear before a court. A subpoena ad testificandum [Lat. from the US Department of Justice and the Department of Health and Human Services Noun 1. Department of Health and Human Services - the United States federal department that administers all federal programs dealing with health and welfare; created in 1979 Health and Human Services, HHS , Office of Inspector General Noun 1. Office of Inspector General - the investigative arm of the Federal Trade Commission OIG independent agency - an agency of the United States government that is created by an act of Congress and is independent of the executive departments asking for documents and materials primarily related to our marketing practices for Zonegran. We intend to cooperate with the government in its investigation. Other Significant Net Charges Other significant net charges for the three and twelve months ended December 31, 2005 and 2004 were as follows:
Three Months Twelve Months
Ended Ended
December 31 December 31
2004 2005 2004 2005
US$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 The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when and restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , offset by a credit of $7.0 million associated with a litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called 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 Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan 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 Warner Chilcott (formerly Galen) is a Northern Irish pharmaceutical company. It is primarily focused on two core therapeutic areas: women’s healthcare and dermatology. The company has 930 employees in Ireland, the UK, USA and Puerto Rico. ) 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 Athena (əthē`nə), or Pallas Athena (păl`əs), in Greek religion and mythology, one of the most important Olympian deities. 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 annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. interest expenses by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $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 op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op 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 Natalizumab is a prescription drug co-marketed by Biogen Idec and Élan as Tysabri. It was previously named Antegren. Natalizumab is administered by infusion and has proven effective in the treatment of multiple sclerosis and Crohn's disease. ) As previously announced, the supplemental Biologics Biologics include a wide range of medicinal products such as vaccines, blood and blood components, allergenics, somatic cells, gene therapy, tissues, and recombinant therapeutic proteins. 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 FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. ). The FDA grants Priority Review status to products that are considered to be potentially significant therapeutic advancements over existing therapies that address an unmet un·met adj. Not satisfied or fulfilled: unmet demands. 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 reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. action regarding potential approval of Tysabri --Potential re-marketing of Tysabri in the U.S. and Europe Crohn's Disease Crohn's disease: see colitis. --European regulatory action regarding the potential approval of Tysabri; dependent upon the regulatory action for Tysabri in MS --Filing of U.S. BLA BLA abbr. Bachelor of Liberal Arts for Tysabri as a treatment for Crohn's disease; dependent upon the regulatory action for Tysabri in MS Alzheimer's and other Neurodegenerative Diseases neurodegenerative diseases diseases characterized by neurodegeneration. Lesions are microscopic only but in chronic disease with massive involvement there may be grossly visible atrophy of affected nervous tissue. Elan is focused on building upon its breakthrough research and extensive experience in Alzheimer's disease Alzheimer's disease (ăls`hī'mərz, ôls–), degenerative disease of nerve cells in the cerebral cortex that leads to atrophy of the brain and senile dementia. (AD) and is also studying other neurodegenerative diseases, such as Parkinson's disease Parkinson's disease or Parkinsonism, degenerative brain disorder first described by the English surgeon James Parkinson in 1817. When there is no known cause, the disease usually appears after age 40 and is referred to as Parkinson's disease. . Two of our compounds from the Alzheimer's disease immunotherapy Immunotherapy The treatment of cancer by improving the ability of a tumor-bearing individual (the host) to reject the tumor immunologically. There are molecules on the surface of tumor cells, and perhaps in their interior, that are recognized as different from program, in collaboration Working together on a project. See collaborative software. 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 monoclonal antibody, an antibody that is mass produced in the laboratory from a single clone and that recognizes only one antigen. Monoclonal antibodies are typically made by fusing a normally short-lived, antibody-producing B cell (see immunity) to a fast-growing ) 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 conjugate /con·ju·gate/ (kon´jdbobr-gat) 1. paired, or equally coupled; working in unison. 2. a conjugate diameter of the pelvic inlet; used alone usually to denote the true conjugate diameter; see ) 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 NYSE See: New York Stock Exchange : ELN Noun 1. ELN - a Marxist terrorist group formed in 1963 by Colombian intellectuals who were inspired by the Cuban Revolution; responsible for a campaign of mass kidnappings and resistance to the government's efforts to stop the drug trade; "ELN kidnappers target ) 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 New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , London London, city, Canada London, city (1991 pop. 303,165), SE Ont., Canada, on the Thames River. The site was chosen in 1792 by Governor Simcoe to be the capital of Upper Canada, but York was made capital instead. London was settled in 1826. and Dublin Stock Exchanges. For additional information about the company, please visit http://www.elan.com. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. 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 EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created 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 Restrictive covenants Provisions that place constraints on the operations of borrowers, such as restrictions on working capital, fixed assets, future borrowing, and payment of dividends. in Elan's debt obligations will adversely affect Elan; the trend towards managed care and health care cost containment, including Medicare and Medicaid Medicare and Medicaid U.S. government programs in effect since 1966. Medicare covers most people 65 or older and those with long-term disabilities. Part A, a hospital insurance plan, also pays for home health visits and hospice care. ; the potential impact of the Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. Prescription Drug prescription drug Prescription medication Pharmacology An FDA-approved drug which must, by federal law or regulation, be dispensed only pursuant to a prescription–eg, finished dose form and active ingredients subject to the provisos of the Federal Food, Drug, , Improvement and Modernisation Act 2003; possible legislation affecting pharmaceutical pricing and reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. , both domestically and internationally; failure to comply with kickback The seller's return of part of the purchase price of an item to a buyer or buyer's representative for the purpose of inducing a purchase or improperly influencing future purchases. 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 Medicaid, national health insurance program in the United States for low-income persons; established in 1965 with passage of the Social Security Amendments and now run by the Centers for Medicare and Medicaid Services. 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 All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. ; 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 The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ; 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 a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. 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 con·tin·u·al adj. 1. Recurring regularly or frequently: the continual need to pay the mortgage. 2. 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 Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. . Elan may raise additional capital, restructure or refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. outstanding debt, repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. material amounts of outstanding debt, consider the sale of products, interests in subsidiaries, marketable Marketable are securities that can be easily converted into cash. Such securities will generally have highly liquid markets allowing the security to be sold at a reasonable price very quickly. 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 SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 144, Elan recorded the results and gains or losses on the divestment of its discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. including Elan Transdermal transdermal /trans·der·mal/ (-der´m'l) entering through the dermis, or skin, as in administration of a drug via ointment or patch. trans·der·mal adj. Through or by way of the skin. Technologies, Athena Diagnostics (1) Software routines that test hardware components (memory, keyboard, disks, etc.). Diagnostics are often stored in ROM chips and activated on startup. (2) Error messages in a programmer's source code that refer to statements or syntax that the compiler or assembler , Elan Diagnostics, a manufacturing business in Italy Italy (ĭt`əlē), Ital. Italia, officially Italian Republic, republic (2005 est. pop. 58,103,000), 116,303 sq mi (301,225 sq km), S Europe. , the pain portfolio of products, Actiq Actiq® Fentanyl citrate A lollipop delivery system developed to alleviate breakthrough pain in cancer Pts. Cf Breakthrough pain. (TM), the dermatology dermatology (dûrmətŏl`əjē), branch of medicine concerned with diagnosis and treatment of diseases and disorders of the skin. portfolio of products, Abelcet(TM) U.S. and Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of , Frova(TM), Myobloc(TM) and two products that were marketed in the United Kingdom and Ireland, within discontinued operations in the consolidated income statement consolidated income statement An income statement that combines the income statements of two or more organizations. As with other consolidated statements, a consolidated income statement eliminates any funds owed to or due from firms within the same group. . 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 formulation /for·mu·la·tion/ (for?mu-la´shun) the act or product of formulating. American Law Institute Formulation activities.
Three Months Discontinued Operations (unaudited) Twelve Months
Ended Ended
December 31 December 31
2004 2005 2004 2005
US$m US$m US$m US$m
----------------------------------------------------------------------
Revenue
(0.1) -- Product revenue 23.6 --
-- -- Contract revenue 5.1 --
------- ------- ------ ------
(0.1) -- Total revenue 28.7 --
------- ------- ------ ------
Operating Expenses
(0.1) -- Cost of goods sold 13.3 --
(1.6) -- Research and development 3.3 (0.4)
0.2 -- Selling, general and administrative 4.5 0.3
(0.3) -- Net gain on divestment of businesses (11.5) (0.5)
------- ------- ------ ------
(1.8) -- Total operating expenses 9.6 (0.6)
------- ------- ------ ------
1.7 -- Operating profit 19.1 0.6
0.4 -- Net interest expense 0.1 --
0.2 -- Net investment losses -- --
------- ------- ------ ------
Net income from discontinued operations
1.1 -- before tax 19.0 0.6
-- -- Provision for tax -- --
------- ------- ------ ------
1.1 -- Net income from discontinued operations 19.0 0.6
======= ======= ====== ======
Non-GAAP Financial Information
EBITDA
1.1 -- Net income from discontinued operations 19.0 0.6
0.4 -- Net interest expense 0.1 --
Depreciation and amortization included
-- -- in operating profit 1.0 --
Amortized revenue included in total
-- -- revenue (4.6) --
------- ------- ------ ------
1.5 -- EBITDA 15.5 0.6
------- ------- ------ ------
(0.3) -- Net gain on divestment of businesses (11.5) (0.5)
0.2 -- Net investment losses -- --
------- ------- ------ ------
1.4 -- Adjusted EBITDA 4.0 0.1
======= ======= ====== ======
Appendix II
Three Months Ended Twelve Months Ended
December 31, 2005 December 31, 2005
Tysabri Rest of Total Tysabri Rest of Total
Business Business
US$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.
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