Elan Reports Second Quarter 2006 Financial Results.DUBLIN, Ireland -- 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 second quarter 2006 financial results. Commenting on Elan's business, Kelly Martin, Elan's president and chief executive officer, said, "The second quarter, once again, reflected our continued discipline and focus on delivering tangible business results. We recently received approval in the US and Europe to make Tysabri available to patients suffering from MS. We have been diligently dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d working to have this effective treatment available to patients and their physicians. We believe that Tysabri will play a significant role as a treatment alternative for patients suffering from this chronic and debilitating de·bil·i·tat·ing adj. Causing a loss of strength or energy. Debilitating Weakening, or reducing the strength of. Mentioned in: Stress Reduction disease. We also have made important advances in all areas of our business, recently demonstrated by our alliances with Abbott in nanotechnology nanotechnology: see micromechanics. nanotechnology Manipulation of atoms, molecules, and materials to form structures on the scale of nanometres (billionths of a metre). and Archemix in autoimmune autoimmune /au·to·im·mune/ (-i-mun´) directed against the body's own tissue; see under disease and response. au·to·im·mune adj. . We continue to actively evaluate and pursue both internal and external opportunities that will reinforce our strategic focus, strengthen our capabilities and generate value as we move the enterprise forward." Commenting on Elan's second quarter 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). , Elan's executive vice president and chief financial officer, said, "We are very pleased to report another solid quarter with strong progress across all of our business and development activities and a 37% reduction in net losses. We reported a 15% increase in revenues, improved operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: and, excluding costs and revenues associated with Tysabri, adjusted 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 was positive for the third consecutive quarter. Since the end of the quarter, we have launched Tysabri in Germany, Ireland, UK and Sweden and re-introduced it in the US." Mr. Cooke added, "With the approval of Tysabri and the improvements we have made to the business, we are now entering into a new and exciting phase in the development of Elan. We are confident that revenues from Tysabri will drive our return to profitability."
Unaudited Consolidated Income Statement Data and Reconciliation of US
GAAP Income Statement Data to Adjusted Income Statement Data
Excluding Share-Based Compensation
Three Months Ended June 30
------------------------------------------
2005 2006 2006 2006
US$m US$m US$m US$m
Excluding Share-Based Total
Share-Based Compensation
Compensation
--------------------------- ------- ------------- ------------- ------
Revenue (see page 8)
Product revenue 111.6 130.8 -- 130.8
Contract revenue 7.0 5.6 -- 5.6
------- ------------- ------------- ------
Total revenue 118.6 136.4 -- 136.4
Operating Expenses (see
page 10)
Cost of goods sold 40.7 46.8 1.1 47.9
Selling, general and
administrative 90.4 88.0 8.1 96.1
Research and development 64.3 48.3 4.3 52.6
Net (gain)/loss on
divestment of products
and businesses (21.0) 0.9 -- 0.9
Other net charges (0.9) 3.4 -- 3.4
------- ------------- ------------- ------
Total operating expenses 173.5 187.4 13.5 200.9
------- ------------- ------------- ------
Operating loss (54.9) (51.0) (13.5) (64.5)
------- ------------- ------------- ------
Net Interest and Investment
Gains and Losses (see page
12)
Net interest expense 34.7 27.2 -- 27.2
Net investment losses 1.7 1.2 -- 1.2
Net charge on debt
retirement 52.2 -- -- --
------- ------------- ------------- ------
Net interest and investment
losses 88.6 28.4 -- 28.4
------- ------------- ------------- ------
Net loss from continuing
operations
before tax (143.5) (79.4) (13.5) (92.9)
Benefit from income taxes (0.3) (2.4) -- (2.4)
------- ------------- ------------- ------
Net loss from continuing
operations (143.2) (77.0) (13.5) (90.5)
Net income from
discontinued operations 0.6 -- -- --
------- ------------- ------------- ------
Net loss (142.6) (77.0) (13.5) (90.5)
------- ------------- ------------- ------
Basic and diluted net loss
per ordinary share (0.35) (0.18) (0.03) (0.21)
Basic and diluted weighted
average number of ordinary
shares outstanding (in
millions) 405.8 430.0 430.0 430.0
To supplement its consolidated income statement data presented on a US
GAAP basis for the three months ended June 30, 2006, Elan is providing
its US GAAP income statement data adjusted to exclude the impact of
share-based compensation. Effective January 1, 2006, Elan adopted
Statement of Financial Accounting Standards No. 123R (SFAS 123R)
regarding the expensing of share-based compensation. We believe the
adjusted income statement data allows readers to better compare the
performance of Elan before and after the adoption of SFAS 123R. Elan's
management uses the adjusted income statement data in evaluating
Elan's operating performance and when planning for future periods. The
adjusted income statement data is not being presented as and should
not be considered an alternative measure of Elan's income statement
data as determined in accordance with US GAAP. The reconciliations of
the adjusted income statement data to Elan's US GAAP income statement
data are set out above in the table titled, "Unaudited Consolidated
Income Statement Data and Reconciliation of US GAAP Income Statement
Data to Adjusted Income Statement Data Excluding Share-Based
Compensation."
Unaudited Consolidated Income Statement Data and Reconciliation of US
GAAP Income Statement Data to Adjusted Income Statement Data
Excluding Share-Based Compensation
Six Months Ended June 30
-------------------------------------------
2005 2006 2006 2006
US$m US$m US$m US$m
Excluding Share-Based Total
Share-Based Compensation
Compensation
-------------------------- ------- ------------- ------------- -------
Revenue (see page 8)
Product revenue 207.0 259.0 -- 259.0
Contract revenue 14.3 11.7 -- 11.7
------- ------------- ------------- -------
Total revenue 221.3 270.7 -- 270.7
Operating Expenses (see
page 10)
Cost of goods sold 103.7 94.6 2.2 96.8
Selling, general and
administrative 193.0 166.4 15.4 181.8
Research and development 120.2 94.8 8.6 103.4
Net gain on divestment of
products and
businesses (65.1) (43.3) -- (43.3)
Other net charges (0.9) 3.4 -- 3.4
------- ------------- ------------- -------
Total operating expenses 350.9 315.9 26.2 342.1
------- ------------- ------------- -------
Operating loss (129.6) (45.2) (26.2) (71.4)
------- ------------- ------------- -------
Net Interest and
Investment Gains and
Losses (see page 12)
Net interest expense 70.7 54.6 -- 54.6
Net investment
(gains)/losses 6.2 (1.1) -- (1.1)
Net charge on debt
retirement 52.2 -- -- --
------- ------------- ------------- -------
Net interest and
investment losses 129.1 53.5 -- 53.5
------- ------------- ------------- -------
Net loss from continuing
operations
before tax (258.7) (98.7) (26.2) (124.9)
Benefit from income taxes (0.1) (1.1) -- (1.1)
------- ------------- ------------- -------
Net loss from continuing
operations (258.6) (97.6) (26.2) (123.8)
Net income from
discontinued operations 0.4 -- -- --
------- ------------- ------------- -------
Net loss (258.2) (97.6) (26.2) (123.8)
------- ------------- ------------- -------
Basic and diluted net loss
per ordinary share (0.64) (0.23) (0.06) (0.29)
Basic and diluted weighted
average number of
ordinary shares
outstanding (in millions) 400.7 429.5 429.5 429.5
To supplement its consolidated income statement data presented on a US
GAAP basis for the six months ended June 30, 2006, Elan is providing
its US GAAP income statement data adjusted to exclude the impact of
share-based compensation. Effective January 1, 2006, Elan adopted
Statement of Financial Accounting Standards No. 123R (SFAS 123R)
regarding the expensing of share-based compensation. We believe the
adjusted income statement data allows readers to better compare the
performance of Elan before and after the adoption of SFAS 123R. Elan's
management uses the adjusted income statement data in evaluating
Elan's operating performance and when planning for future periods. The
adjusted income statement data is not being presented as and should
not be considered an alternative measure of Elan's income statement
data as determined in accordance with US GAAP. The reconciliations of
the adjusted income statement data to Elan's US GAAP income statement
data are set out above in the table titled, "Unaudited Consolidated
Income Statement Data and Reconciliation of US GAAP Income Statement
Data to Adjusted Income Statement Data Excluding Share-Based
Compensation."
Unaudited Non-GAAP Financial Information - EBITDA
Three Months Non-GAAP Financial Information Six Months
Ended June 30 Reconciliation Schedule Ended June 30
2005 2006 2005 2006
US$m US$m US$m US$m
---------- ---------- --------------------------- --------- ----------
Net loss from continuing
(143.2) (90.5) operations (258.6) (123.8)
34.7 27.2 Net interest expense 70.7 54.6
(0.3) (2.4) Benefit from income taxes (0.1) (1.1)
Depreciation and
30.7 33.5 amortization 65.2 66.1
(13.3) (9.8) Amortized fees (24.9) (21.2)
Revenue received and
0.7 -- deferred 0.7 --
---------- ---------- --------- ----------
(90.7) (42.0) EBITDA (147.0) (25.4)
========== ========== ========= ==========
Three Months Non-GAAP Financial Information Six Months
Ended June 30 Reconciliation Schedule Ended June 30
2005 2006 2005 2006
US$m US$m US$m US$m
--------------------- --------------------------- --------------------
(90.7) (42.0) EBITDA (147.0) (25.4)
-- 13.5 Share-based compensation -- 26.2
Net (gain)/loss on
divestment of products and
(21.0) 0.9 businesses (65.1) (43.3)
(0.9) 3.4 Other net charges (0.9) 3.4
Net investment
1.7 1.2 (gains)/losses 6.2 (1.1)
Net charge on debt
52.2 -- retirement 52.2 --
---------- ---------- --------- ----------
(58.7) (23.0) Adjusted EBITDA (154.6) (40.2)
========== ========== ========= ==========
To supplement its consolidated financial statements presented on a US
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
share-based compensation, net gains or losses on divestment of
products and businesses, other net gains or charges, net investment
gains or losses and net charge on debt retirement. EBITDA and Adjusted
EBITDA are not presented as and should not be considered alternative
measures of operating results or cash flow from operations, as
determined in accordance with US 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 US GAAP Balance Sheet Data
December 31 March 31 June 30
2005 2006 2006
US$m US$m US$m
------------------------------------------ --------- -------- --------
Assets
Current Assets
Cash and cash equivalents 1,080.7 1,078.9 1,024.8
Restricted cash 20.4 20.6 20.9
Marketable investment securities 10.0 11.3 6.8
Held for sale assets 11.2 - -
Prepaid and other current assets 130.1 126.3 147.8
--------- -------- --------
Total current assets 1,252.4 1,237.1 1,200.3
Non-Current Assets
Intangible assets, net 665.5 643.9 623.1
Property, plant and equipment, net 353.6 351.4 349.3
Marketable investment securities 13.1 10.1 10.1
Restricted cash 4.5 4.4 3.0
Other assets 51.8 55.2 47.8
--------- -------- --------
Total Assets 2,340.9 2,302.1 2,233.6
========= ======== ========
Liabilities and Shareholders' Equity
Accounts payable and accrued liabilities 246.7 233.3 234.1
Deferred income 60.1 48.7 39.0
6.5% convertible guaranteed notes due 2008 254.0 254.0 254.0
7.25% senior notes due 2008 613.2 613.2 613.2
7.75% senior notes due 2011 850.0 850.0 850.0
Senior floating rate notes due 2011 300.0 300.0 300.0
Shareholders' equity/(deficit)(1) 16.9 2.9 (56.7)
--------- -------- --------
Total Liabilities and Shareholders'
Equity 2,340.9 2,302.1 2,233.6
========= ======== ========
Movement in Shareholders' Equity(1)
Opening balance 16.9 2.9
Net loss for the period (33.3) (90.5)
Share-based compensation 12.7 13.5
Issuance of share capital 4.5 17.1
Other 2.1 0.3
-------- --------
Closing balance 2.9 (56.7)
======== ========
(1) None of Elan's debt covenants require us to maintain or adhere to
any specific financial ratios and consequently the shareholders'
deficit has no impact on our ability to comply with our debt
covenants.
Unaudited Consolidated US GAAP Cash Flow Data
Three Months Six Months
Ended June 30 Ended June 30
2005 2006 2005 2006
US$m US$m US$m US$m
--------------------- --------------------------- --------------------
Cash flows from operating
(50.0) (10.4) activities (138.1) (17.2)
Movement on debt interest
(59.3) (48.4) and tax (83.5) (76.6)
Working capital movement
(87.3) (7.6) (1) (92.2) (30.4)
Net purchases of tangible
(12.8) (8.2) and intangible assets (34.8) (15.6)
Net proceeds from sale of
33.3 2.6 investments 54.0 10.9
Net proceeds from product
18.3 -- and business divestments 50.2 50.3
Cash flows from financing
(86.6) 16.6 activities (74.1) 21.3
43.9 1.3 Release of restricted cash 168.0 1.4
-- -- Repayment of EPIL III notes (39.0) -
---------- ---------- ---------- ---------
(200.5) (54.1) Net cash movement (189.5) (55.9)
1,358.6 1,078.9 Beginning cash balance 1,347.6 1,080.7
---------- ---------- ---------- ---------
Cash and cash equivalents
1,158.1 1,024.8 at end of period 1,158.1 1,024.8
========== ========== ========== =========
(1) For three months and six months ended June 30, 2005, working
capital movement includes a $40.0 million cash payment for the
settlement of the 2002 class action.
Net Loss The net loss for the second quarter of 2006 amounted to $90.5 million, a decrease of 37% over the $142.6 million reported in the same quarter of 2005. The decrease in net loss is principally due to strong growth in product revenue, improved operating margins and the inclusion in 2005 of a charge associated with retiring debt early, partially offset by the impact of expensing share-based compensation in the second quarter of 2006 and the inclusion in 2005 of a gain on the divestment divestment to strip one's investment from an entity. of Zonegran Zonegran® Zonisamide Neurology An agent used to manage partial seizures in adults with epilepsy. See Seizures. (TM). Share-Based Compensation Effective January 1, 2006, Elan adopted the provisions of 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 123R, which requires share-based compensation to be measured using a fair value method and expensed over the requisite service period. The adoption of SFAS 123R resulted in a charge for share-based compensation of $13.5 million for the second quarter of 2006, which is comprised of $1.1 million of cost of goods sold Cost of goods sold The total cost of buying raw materials, and paying for all the factors that go into producing finished goods. cost of goods sold , $8.1 million of selling, general and administrative (SG&A) expense, and $4.3 million of research and development (R&D) expense. Adjusted EBITDA A reconciliation of negative Adjusted EBITDA to net loss from continuing operations continuing operations 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 , is presented in the table titled, "Unaudited Non-GAAP Financial Information - EBITDA," included on page 4. A further analysis of Adjusted EBITDA between Tysabri(TM) and the rest of the business is included in Appendix I and II. Negative Adjusted EBITDA was $23.0 million in the second quarter of 2006, compared to $58.7 million in the second quarter of 2005, an improvement of 61%, and includes negative Adjusted EBITDA of $28.0 million related to Tysabri (2005: $38.2 million). The improvement in negative Adjusted EBITDA related to Tysabri reflects the costs associated with the voluntary suspension of Tysabri in 2005, and consequent con·se·quent adj. 1. a. Following as a natural effect, result, or conclusion: tried to prevent an oil spill and the consequent damage to wildlife. b. reduced spending on Tysabri in the second quarter of 2006. Adjusted EBITDA for the rest of the business, excluding costs related to Tysabri, was $5.0 million (2005: negative $20.5 million). The improvement in Adjusted EBITDA from the rest of the business reflects principally the strong growth in product revenues and improved operating margins. Revenue Total revenue increased 15% to $136.4 million in the second quarter of 2006 from $118.6 million recorded in the second quarter of 2005. Revenue is analyzed an·a·lyze tr.v. an·a·lyzed, an·a·lyz·ing, an·a·lyz·es 1. To examine methodically by separating into parts and studying their interrelations. 2. Chemistry To make a chemical analysis of. 3. below between product revenue and contract revenue.
Three Months Six Months
Ended June 30 Ended June 30
2005 2006 2005 2006
US$m US$m US$m US$m
---------- ---------- --------------------------- ---------- ---------
Revenue from Marketed
Products
39.9 42.6 Maxipime(TM) 59.7 87.3
14.8 20.0 Azactam(TM) 23.2 39.9
1.8 3.0 Prialt(TM) 2.8 5.6
(1.3) (0.1) Tysabri 11.6 (0.2)
---------- ---------- ---------- ---------
Total Revenue from Marketed
55.2 65.5 Products 97.3 132.6
Manufacturing Revenue and
47.7 56.8 Royalties (see page 9) 92.4 109.4
Amortized Revenue -
8.5 8.5 Adalat(TM)/Avinza(TM) 17.0 17.0
Revenue from Divested
0.2 -- Products 0.3 --
---------- ---------- ---------- ---------
111.6 130.8 Total Product Revenue 207.0 259.0
---------- ---------- ---------- ---------
Contract Revenue
3.1 2.1 Amortized fees 6.5 4.2
Research revenue and
3.9 3.5 milestones 7.8 7.5
---------- ---------- ---------- ---------
7.0 5.6 Total Contract Revenue 14.3 11.7
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
118.6 136.4 Total Revenue 221.3 270.7
========== ========== ========== =========
Product Revenue Total product revenue increased 17% to $130.8 million in the second quarter of 2006 from $111.6 million recorded in the same quarter of 2005 primarily due to increased revenue from marketed products and manufacturing revenue and royalties, as further analyzed below. Revenue from marketed products Revenue from marketed products was $65.5 million in the second quarter of 2006, compared to $55.2 million recorded in the same period of 2005. The increase of 19% is 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: , Azactam A·zac·tam A trademark for the drug aztreonam. aztreonam Azactam Pharmacologic class: Monobactam Therapeutic class: Anti-infective Pregnancy risk category B and Prialt. Revenue from Maxipime for the quarter increased by 7% to $42.6 million from $39.9 million in the second quarter of 2005. Azactam revenue for the quarter increased to $20.0 million from $14.8 million in the second quarter of 2005, or 35%. These increases reflect increased demand. Azactam lost its patent exclusivity in October 2005 and its sales are expected to be negatively impacted by generic competition. However, to date no generic form of Azactam product has been approved. Revenue from Prialt for the second quarter of 2006 was $3.0 million, compared to $1.8 million recorded in the second quarter of 2005. Prialt was launched in the US market during the first quarter of 2005. Tysabri was 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. from the market in February 2005. Elan and Biogen Idec Biogen Idec, Inc. (NASDAQ: BIIB) is a biotechnology company specializing in drugs for neurological disorders, autoimmune disorders and cancer. The company was formed in 2003 by the merger of Cambridge, Massachusetts-based Biogen and San Diego, California-based Idec , Inc. (Biogen Idec) received approval from the US 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. ) in June 2006 to re-introduce Tysabri for the treatment of relapsing relapsing /re·laps·ing/ (re-lap´sing) (re´lap-sing) recurrent; denoting an illness that is characterized by periods of remission alternating with attacks of symptomatic disease. forms of multiple sclerosis multiple sclerosis (MS), chronic, slowly progressive autoimmune disease in which the body's immune system attacks the protective myelin sheaths that surround the nerve cells of the brain and spinal cord (a process called demyelination), resulting in damaged areas (MS). Approval for the marketing of Tysabri in the EU was also received in June 2006. The distribution of Tysabri in both the US and EU commenced in July 2006. Manufacturing revenue and royalties Manufacturing revenue and royalties from Elan's Drug Technology business comprise 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 were $56.8 million in the second quarter of 2006, an increase of 19% over the $47.7 million recorded in the second quarter of 2005, and can be further analyzed as follows:
Three Months Six Months
Ended June 30 Ended June 30
2005 2006 2005 2006
US$m US$m US$m US$m
---------- ---------- --------------------------- --------- ----------
10.6 12.5 Tricor(TM) 19.0 22.7
4.3 9.6 Skelaxin(TM) 8.2 14.4
7.2 8.5 Verelan(TM) 16.3 20.0
4.1 4.7 Diltiazem(TM) 9.1 9.9
2.8 3.3 Avinza(TM) 4.9 6.3
2.2 2.8 Ritalin(TM) 5.7 5.4
2.9 1.0 Zanaflex(TM) 5.2 1.7
13.6 14.4 Other 24.0 29.0
---------- ---------- --------- ----------
47.7 56.8 Total 92.4 109.4
---------- ---------- --------- ----------
Except as noted above, no other product accounted for more than 10% of total manufacturing revenue and royalties in the second quarter of 2006 or 2005. Of the total of $56.8 million (2005: $47.7 million) in manufacturing revenue and royalties, 42% (2005: 35%) consisted of royalties received on products that were not manufactured by Elan. Amortized product revenue The results for the second quarters of 2006 and 2005 include $8.5 million 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 $18.2 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. Amortized revenue for the full-year 2006 is expected to be $30.7 million for these two products. Contract Revenue Contract revenue in the second quarter of 2006 was $5.6 million, a decrease of 20% from the $7.0 million recorded in the second quarter of 2005. This decrease primarily reflects a reduction in amortized fees. 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 63% in the second quarter of 2006, compared to 63% in the same period of 2005. 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. SG&A expenses increased 6% to $96.1 million in the second quarter of 2006 (including $8.1 million of share-based compensation expense) from $90.4 million in the same quarter of 2005 (including $nil share-based compensation expense) and can be analyzed as follows:
Three Months Six Months
Ended June 30 Ended June 30
2005 2006 2005 2006
US$m US$m US$m US$m
---------- ---------- --------------------------- --------- ----------
54.4 48.4 Rest of business 106.0 92.5
17.9 20.8 Tysabri 48.2 36.2
Depreciation and
amortization (principally
18.1 18.8 Maxipime and Azactam) 38.8 37.7
-- 8.1 Share-based compensation -- 15.4
---------- ---------- --------- ----------
90.4 96.1 Total 193.0 181.8
---------- ---------- --------- ----------
SG&A expenses, excluding depreciation, amortization and share-based compensation, related to the rest of the business decreased by 11% to $48.4 million in the second quarter of 2006 from $54.4 million in the second quarter of 2005, principally due to the inclusion in 2005 of 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. related settlement costs of $8.0 million. The SG&A expenses related to Tysabri, excluding amortization and share-based compensation, were $20.8 million in the second quarter of 2006, compared to $17.9 million in the second quarter of 2005. R&D expenses were $52.6 million in the second quarter of 2006 (including $4.3 million of share-based compensation expense), compared to $64.3 million in the same period of 2005 (including $nil of share-based compensation expense). The decrease of 18% is primarily due to reduced expenses related to Tysabri and Prialt, offset by the impact of expensing of share-based compensation and increased development costs associated with our key Alzheimer's programs, including the AAB-001 Phase 2 trials and ACC-001 Phase 1 trial. Included in R&D expenses for the second quarter of 2006 is $7.1 million related to Tysabri (including $0.6 million of share-based compensation expense), compared to $19.5 million in the same period of 2005. The decrease principally reflects the completion of the Tysabri safety evaluation in 2005. Net Gain/Loss on Divestment of Products and Businesses The net loss on divestment of products and businesses in the second quarter of 2006 was $0.9 million, compared to a net gain of $21.0 million in the same period of 2005. The net gain in the second quarter of 2005 included consideration related to the divestment of Zonegran to Eisai Co. Ltd. in April 2004. Other Net Charges Other net charges for the three and six months ended June 30, 2006 and 2005 were as follows:
Three Months Six Months
Ended June 30 Ended June 30
2005 2006 2005 2006
US$m US$m US$m US$m
---------- ---------- --------------------------- --------- ----------
(0.5) (3.6) Severance and restructuring (0.5) (3.6)
In-process research and
-- 7.0 development -- 7.0
(0.4) -- Other (0.4) --
---------- ---------- --------- ----------
(0.9) 3.4 Total (0.9) 3.4
========== ========== ========= ==========
The $3.4 million charge in the second quarter of 2006 principally consists of a $7.0 million in-process research and development charge arising from an upfront payment under our recent alliance with Archemix (see page 14), offset by a net $3.6 million credit principally related to the reversal of previously provided costs 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 activities. Net Interest and Investment Gains and Losses Net interest and investment losses were $28.4 million for the second quarter of 2006, compared to net interest and investment losses of $88.6 million for the same period of 2005. In the second quarter of 2006, net interest expense amounted to $27.2 million, compared to $34.7 million in the same period of 2005. Net interest expense decreased in the second quarter of 2006 over the corresponding period in 2005 primarily as a result of interest savings due to the early retirement of $242.8 million of debt in June 2005, and higher interest income earned on cash balances due to increased interest rates. During the second quarter of 2005, Elan incurred a net charge of $52.2 million as a result of the early retirement of $242.8 million of 2008 debt. Research & Development Autoimmune Tysabri - US In June 2006, Elan and Biogen Idec received the approval from the FDA to re-introduce Tysabri in the US as a monotherapy monotherapy /mono·ther·a·py/ (-ther´ah-pe) treatment of a condition by means of a single drug. mon·o·ther·a·py n. Treatment of a disorder with a single drug. treatment for relapsing forms of MS to slow the progression of disability and reduce the frequency of clinical relapses. The FDA granted approval for re-introduction based on the review of Tysabri clinical trial data; revised labeling with enhanced safety warnings; and a risk management plan (TOUCH Prescribing Program) designed to inform physicians and patients of the benefits and risks of Tysabri treatment and minimize potential risk of progressive multifocal leukoencephalopathy Progressive Multifocal Leukoencephalopathy Definition Progressive multifocal leukoencephalopathy (PML) is a rapidly progressive neuromuscular disease caused by opportunistic infection of brain cells (oligodendrocytes and astrocytes) by the JC virus (PML PML - Parallel ML. ["Synchronous Operations as First-Class Values", J.H. Reppy <jhr@research.att.com>, Proc SIGPLAN 88 Conf Prog Lang Design and Impl, June 1988, pp. 250-259]. ). Because of the increased risk of PML, Tysabri monotherapy is generally recommended for patients who have had an inadequate response to, or are unable to tolerate tol·er·ate v. 1. To allow without prohibiting or opposing; permit. 2. To put up with; endure. 3. To have tolerance for a substance or pathogen. , alternate MS therapies. Tysabri became commercially available in the US in July 2006. Under the TOUCH Prescribing Program, only prescribers, infusion centers, and pharmacies This article is a list of major pharmacies (also known as chemists and drugstores) by country. Australia Pharmacies in Australia are mostly independently-owned by pharmacists, often operated as franchises of retail brands offered by the three major associated with infusion centers registered in the TOUCH program are able to prescribe pre·scribe v. To give directions, either orally or in writing, for the preparation and administration of a remedy to be used in the treatment of a disease. , infuse in·fuse v. 1. To steep or soak without boiling in order to extract soluble elements or active principles. 2. To introduce a solution into the body through a vein for therapeutic purposes. or distribute Tysabri. Elan has contracted with a single distributor, ICS (1) (Internet Connection Sharing) A Windows feature that enables two or more computers to share one Internet connection. First introduced in Windows 98 Second Edition, sharing is accomplished with network address translation (NAT), which is the common method. , a division of AmerisourceBergen Specialty Group  This article or section is written like an .Please help [ rewrite this article] from a neutral point of view. Mark blatant advertising for , using . , and 12 specialty pharmacies: Caremark, CuraScript, PharmaCare, PrecisionRx Specialty Solutions, Medmark, BioScrip, McKesson Specialty, Option Care, Cigna Tel-Drug Specialty Pharmacy pharmacy, art of compounding and dispensing drugs and medication. The term is also applied to an establishment used for such purposes. Until modern times medication was prepared and dispensed by the physician himself. In the 18th cent. , Aetna Specialty Pharmacy, Prescription Solutions, and Accredo NovaFactor. ICS and the 12 specialty pharmacies have been trained on the TOUCH Prescribing Program and are obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. to follow the requirements of the program in order to purchase and distribute Tysabri to authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: infusion sites and central pharmacies. Tysabri - Europe In June 2006, Elan and Biogen Idec received approval from the European Commission European Commission, branch of the governing body of the European Union (EU) invested with executive and some legislative powers. Located in Brussels, Belgium, it was founded in 1967 when the three treaty organizations comprising what was then the European Community to market Tysabri as a treatment for relapsing remitting MS to delay the progression of disability and reduce the frequency of relapses. Tysabri is indicated as a single disease modifying therapy in highly active relapsing remitting MS for patients with high disease activity despite treatment with a beta-interferon beta-interferon n. A family of glycoproteins that are produced by fibroblasts, have antiviral properties, and are used in the treatment of multiple sclerosis. or in patients with rapidly evolving severe relapsing remitting MS. Tysabri was launched in Germany, Ireland, UK and Sweden in July 2006 and will be launched in other EU countries over the next twelve months. Tysabri - Crohn's Disease Crohn's disease: see colitis. The results from the Phase 3 ENCORE (Encore Real Time Computing, Inc., Melbourne, FL, www.encore.com) A computer company founded as Encore Computer Corporation in 1983 that specialized in real time systems. Encore was known for its unique Reflective Memory channel, a high-speed interconnect for up to 255 systems. (Efficacy of Natalizumab in Crohn's Disease Response and Remission Extinguishment or release of a debt. A remission is conventional when it comes about through an express grant to the debtor by a creditor. It is tacit when the creditor makes a voluntary surrender of the original title to the debtor under private signature constituting the ) trial in Crohn's disease were presented at Digestive Disease All diseases that pertain to the gastrointestinal tract are labelled as digestive diseases. This includes diseases of the esophagus, stomach, first, second and third part of the duodenum, jejunum, ileum, the ileo-cecal complex, large intestine (ascending, transverse and descending Week (DDW DDW Digestive Disease Week DDW Diseases of the Developing World DDW Dimensional Data Warehouse DDW Digital Data Warfare DDW Darkness Does Wonders (bar slang) DDW Data Driven Workflow ) in Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. in May 2006. Data from the trial demonstrated significant induction induction, in electricity and magnetism induction, in electricity and magnetism, common name for three distinct phenomena. Electromagnetic induction of clinical response in patients with moderately to severe active Crohn's disease. The trial met its primary endpoint of induction of clinical response as defined by a 70-point decrease in baseline The horizontal line to which the bottoms of lowercase characters (without descenders) are aligned. See typeface. baseline - released version Crohn's Disease Activity Index The Crohn's Disease Activity Index or CDAI is a research tool used to quantify the symptoms of patients with Crohn's disease. This is of importance in research studies done on medications used to treat Crohn's disease; most major studies on newer medications use the CDAI in (CDAI CDAI Crohn's Disease Activity Index ) score at both weeks 8 and 12. Tysabri also met all secondary endpoints of clinical remission as defined by a CDAI score less than 150 at both weeks 8 and 12, clinical response at week 12 and clinical remission at week 12. In addition, significant response and remission rates were seen with Tysabri treatment by week 4. There were no notable differences in the overall rates of adverse events or serious adverse events between the Tysabri and placebo placebo (pləsē`bō), inert substance given instead of a potent drug. Placebo medications are sometimes prescribed when a drug is not really needed or when one would not be appropriate because they make patients feel well taken care of. treatment groups. The most common adverse events seen in both treatment groups were headache headache Pain in the upper portion of the head. Episodic tension headaches are the most common, usually causing mild to moderate pain on both sides. They result from sustained contraction of face and neck muscles, often due to fatigue, stress, or frustration. , nausea nausea, sensation of discomfort, or queasiness, in the stomach. It may be caused by irritation of the stomach by food or drugs, unpleasant odors, overeating, fright, or psychological stress. It is usually relieved by vomiting. and abdominal pain Abdominal pain can be one of the symptoms associated with transient disorders or serious disease. Making a definitive diagnosis of the cause of abdominal pain can be difficult, because many diseases can result in this symptom. Abdominal pain is a common problem. . Incidence of infections was similar in both groups. No opportunistic infections Opportunistic infections Infections that cause a disease only when the host's immune system is impaired. The classic opportunistic infection never leads to disease in the normal host. were seen in this trial. Elan and Archemix Alliance In July 2006, Elan and Archemix entered into a multi-year, multi-product alliance focused on the discovery, development, and commercialization of first-in-class aptamer therapeutics therapeutics Treatment and care to combat disease or alleviate pain or injury. Its tools include drugs, surgery, radiation therapy, mechanical devices, diet, and psychiatry. to treat autoimmune diseases Autoimmune diseases A group of diseases, like rheumatoid arthritis and systemic lupus erythematosus, in which immune cells turn on the body, attacking various tissues and organs. Mentioned in: Complement Deficiencies, Premature Menopause . The companies will seek to develop aptamer therapeutics to IL- il- 1 pref. Variant of in-1. il- 2 pref. Variant of in-2. 23, a cytokine Cytokine Any of a group of soluble proteins that are released by a cell to send messages which are delivered to the same cell (autocrine), an adjacent cell (paracrine), or a distant cell (endocrine). that has emerged as a mediator mediator n. a person who conducts mediation. A mediator is usually a lawyer, or retired judge, but can be a non-attorney specialist in the subject matter (like child custody) who tries to bring people and their disputes to early resolution through a conference. in the chronic autoimmune inflammatory diseases Noun 1. inflammatory disease - a disease characterized by inflammation disease - an impairment of health or a condition of abnormal functioning NEC, necrotizing enterocolitis - an acute inflammatory disease occurring in the intestines of premature infants; , and additional protein targets. The collaboration combines Archemix's extensive expertise in aptamer therapeutics with Elan's experience and leadership in the development and commercialization of new therapies for autoimmune diseases. 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. . Elan is continuing to progress its own internal Gamma and Beta secretase β-secretase — also called BACE1 (β-site of APP cleaving enzyme) or memapsin-2 — is an aspartic-acid protease important in the pathogenesis of Alzheimer's disease, and in the formation of myelin sheaths in peripheral nerve Alzheimer's programs. Two of our compounds from our 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, AAB-001 and ACC-001, in collaboration with Wyeth, are progressing through clinical trials. AAB-001 The Phase 2 clinical trials phase 2 clinical trial Phase 2 study. See Phase study. for AAB-001, a humanized 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 A-beta, are progressing as planned. Interim analyses of Phase II data from AAB-001 will be made in the second half of this year to determine the time point at which this program can move into the next phase of clinical trials. ACC-001 The Phase 1 trials for ACC-001 (active Abeta 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 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 ) are progressing as planned. Interim analyses of the Phase 1 data will be made in the second half of this year to determine the time point at which this program can move into Phase 2. Elan Drug Technologies On July 6, 2006, Elan announced a License Agreement with Abbott Pharmaceutical PR Ltd in which Abbott has been granted US rights, in a partnership with AstraZeneca Pharmaceuticals, LP, to utilize Elan's proprietary NanoCrystal Technology to develop and commercialize a single fixed-dose combination product containing the active pharmaceutical ingredients in Abbott's TriCor TriCor® Fenofibrate Cardiology An adjunct to diet for managing stratospheric serum TG levels in Pts unresponsive to diet or at risk of pancreatitis 145 (fenofibrate fenofibrate /fen·o·fi·brate/ (fen?o-fi´brat) an antihyperlipidemic agent used to reduce elevated serum lipids. fenofibrate ) and AstraZeneca's Crestor Cres·tor A trademark for the drug rosuvastatin calcium. rosuvastatin calcium Crestor Pharmacologic class: HMG-CoA reductase inhibitor Therapeutic class: Antilipemic (R) (rosuvastatin calcium ro·su·va·stat·in calcium n. A statin drug used to treat hyperlipidemia. rosuvastatin calcium Crestor Pharmacologic class: HMG-CoA reductase inhibitor Therapeutic class: ) products. Under the License Agreement, Elan's NanoCrystal Technology may be utilized in the combination product in order to optimize optimize - optimisation bioavailability bioavailability /bio·avail·a·bil·i·ty/ (bi?o-ah-val?ah-bil´i-te) the degree to which a drug or other substance becomes available to the target tissue after administration. bi·o·a·vail·a·bil·i·ty n. and absorption in patients. TriCor 145 and Crestor are both currently marketed and used to treat adults with high cholesterol Cholesterol, High Definition Cholesterol is a fatty substance found in animal tissue and is an important component to the human body. It is manufactured in the liver and carried throughout the body in the bloodstream. . TriCor, part of a class of medications called fibrates fibrates /fi·brates/ (fi´brats) general term for fibric acid (q.v.) derivatives. , has been shown to predominately reduce triglycerides Triglycerides Fatty compounds synthesized from carbohydrates during the process of digestion and stored in the body's adipose (fat) tissues. High levels of triglycerides in the blood are associated with insulin resistance. , a form of fat or lipid lipid Any of a diverse class of organic compounds, found in all living things, that are greasy and insoluble in water. One of the three large classes of substances in foods and living cells, lipids contain more than twice as much energy (calories) per unit of weight as the obtained through food sources, raise HDL cholesterol HDL cholesterol n. See high-density lipoprotein. HDL Cholesterol About one-third or one-fourth of all cholesterol is high-density lipoprotein cholesterol. and lower LDL cholesterol LDL cholesterol n. See low-density lipoprotein. LDL Cholesterol Low-density lipoprotein cholesterol is the primary cholesterol molecule. High levels of LDL increase the risk of coronary heart disease. . Crestor is part of a class of medications called statins Statins A class of drugs commonly used to lower LDL cholesterol levels. Mentioned in: C-Reactive Protein , which have been shown to reduce LDL cholesterol. The successful combination of the two products into one oral dosage form A dosage form is the physical form of a dose of medication, such as a capsule or injection. The route of administration is dependent on the dosage form of a given drug. could provide patients with a single treatment. About Elan Elan Corporation (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 ), plc 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 un·met adj. Not satisfied or fulfilled: unmet demands. 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 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:, the potential of Tysabri, the incidence of serious adverse events associated with Tysabri (including cases of PML) and the potential for the successful development and commercialization of additional products, including those utilizing Tysabri; the potential of Elan's other marketed 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 including, in particular, whether the Phase 2 clinical trials for AAB-001 and the Phase 1 clinical trials phase 1 clinical trial Phase 1 study. See Phase study. for ACC-001 are successful 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 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. , 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 Elan's payment obligations under Medicaid and other governmental programs; 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 US and International 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 Annual Report on Form 20-F for the fiscal year ended December 31, 2005, 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.
Appendix I
Three Months Ended Three Months Ended
June 30, 2005 June 30, 2006
Tysabri Rest of Total Tysabri Rest of Total
(1) Business (1) (1) Business (1)
US$m (1) US$m US$m (1) US$m
US$m US$m
--------- --------- ------ ------------------ ------- --------- ------
Revenue
(1.3) 112.9 111.6 Product revenue (0.1) 130.9 130.8
1.7 5.3 7.0 Contract revenue 0.7 4.9 5.6
--------- --------- ------ ------- --------- ------
0.4 118.2 118.6 Total revenue 0.6 135.8 136.4
--------- --------- ------ ------- --------- ------
Operating Expenses
(0.5) 41.2 40.7 Cost of goods sold 0.6 46.2 46.8
Selling, general
and
18.4 72.0 90.4 administrative(2) 21.5 66.5 88.0
Research and
19.5 44.8 64.3 development 6.5 41.8 48.3
Net gain on
divestment of
products and
-- (21.0) (21.0) businesses -- 0.9 0.9
-- (0.9) (0.9) Other net charges -- 3.4 3.4
--------- --------- ------ ------- --------- ------
Total operating
37.4 136.1 173.5 expenses 28.6 158.8 187.4
--------- --------- ------ ------- --------- ------
(37.0) (17.9) (54.9) Operating loss (28.0) (23.0) (51.0)
Depreciation and
0.5 30.2 30.7 amortization 0.7 32.8 33.5
(1.7) (11.6) (13.3) Amortized fees (0.7) (9.1) (9.8)
Net gain on
divestment of
products and
-- (21.0) (21.0) businesses -- 0.9 0.9
Revenue received
-- 0.7 0.7 and deferred -- -- --
-- (0.9) (0.9) Other net charges -- 3.4 3.4
--------- --------- ------ ------- --------- ------
(38.2) (20.5) (58.7) Adjusted EBITDA (28.0) 5.0 (23.0)
========= ========= ====== ======= ========= ======
(1) Excludes share-based compensation.
(2) General and corporate costs have not been allocated to Tysabri.
Appendix II
Six Months Ended Six Months Ended
June 30, 2005 June 30, 2006
Tysabri Rest of Total Tysabri Rest of Total
(1) Business (1) (1) Business (1)
US$m (1) US$m US$m (1) US$m
US$m US$m
----------------------------------------------------------------------
Revenue
11.6 195.4 207.0 Product revenue (0.2) 259.2 259.0
3.7 10.6 14.3 Contract revenue 1.4 10.3 11.7
---------- --------- ------- ------- --------- ------
15.3 206.0 221.3 Total revenue 1.2 269.5 270.7
---------- --------- ------- ------- --------- ------
Operating Expenses
Cost of goods
24.8 78.9 103.7 sold(2) 1.3 93.3 94.6
Selling, general
and
49.2 143.8 193.0 administrative(3) 37.6 128.8 166.4
Research and
36.9 83.3 120.2 development 11.7 83.1 94.8
Net gain on
divestment of
products and
-- (65.1) (65.1) businesses -- (43.3) (43.3)
-- (0.9) (0.9)Other net charges -- 3.4 3.4
---------- --------- ------- ------- --------- ------
Total operating
110.9 240.0 350.9 expenses 50.6 265.3 315.9
---------- --------- ------- ------- --------- ------
(95.6) (34.0) (129.6)Operating loss (49.4) 4.2 (45.2)
Depreciation and
1.0 64.2 65.2 amortization 1.4 64.7 66.1
(3.7) (21.2) (24.9)Amortized fees (1.4) (19.8) (21.2)
Net gain on
divestment of
products and
-- (65.1) (65.1) businesses -- (43.3) (43.3)
Revenue received
-- 0.7 0.7 and deferred -- -- --
-- (0.9) (0.9)Other net charges -- 3.4 3.4
---------- --------- ------- ------- --------- ------
(98.3) (56.3) (154.6)Adjusted EBITDA (49.4) 9.2 (40.2)
========== ========= ======= ======= ========= ======
(1) Excludes share-based compensation.
(2) Cost of goods sold for Tysabri for the six months ended June 30,
2005 includes $14.0 million of inventory written-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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