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News : Irish Last Updated: Feb 8, 2011 - 8:54 AM

Elan reports annual operating profits in 2010 for first time since 2001; Annual net loss increased from $176.2m to $324.7m
By Finfacts Team
Feb 8, 2011 - 8:44 AM

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Elan, the Irish drugs company, today reported annual operating profits in 2010, before other charges and gains, for the first time since 2001. The annual net loss increased from $176.2m to $324.7m.

Revenues for the 12 months to the end of December rose by 5% to $1.2bn, headed by an 18% increase in revenues from its multiple sclerosis (MS) drug Tysabri.

CFO Shane Cooke said the revenue increase combined with a 9% decrease in operating expenses, before other charges and gains, led to a significant improvement of 73% in Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) to $166.5m.

As a result Elan recorded operating profits, before other charges and gains, for the first time since 2001. Total debt fell by 17% and Cooke said although the results reflect an improved operating performance, the net loss for the year increased from $176.2m to $324.7m.

The loss mainly related to a settlement agreement on dubious selling practices Elan reached with the US government regarding Zonegran for which it recorded a charge of $206.3m and the inclusion of a net gain in 2009 of $108.7m  associated with a deal with Johnson & Johnson.

Sales of the MS drug rose to $851.5m for the full year from $724.3m in 2009. The number of patients using the drug worldwide increased by 17% to about 56,000.

Results detail

Davy's Jack Gorman commented: "Elan ended the year positively with Q4 revenue growth of 3% to $308.9m; adjusted EBITDA of $45.9m that compared reasonably well with tough comps; and a modest loss per share of -1c on an adjusted basis.

Compared to guidance, the Q4 and FY out-turn was better than expectations – adjusted EBITDA of $166.5m compared to guidance of approximately $150m. It was also modestly ahead of our own forecast of $165m.

The main features of Q4 were:

Revenue growth of 3% was delivered by Tysabri and Ampyra. In aggregate, these grew by 25% year-on-year (yoy) and offset the elimination of Maxipime and Azactam and the genericisation of Skelaxin.

Operating costs were broadly as expected, +12% yoy and all driven by R&D spending.

Gross cash and equivalents totalled $657m ($453.3m excluding the Zonegran settlement). This compares to guidance of approximately $400m and our own forecast of $436m.

For 2011 guidance, Elan has outlined that revenue growth will accelerate beyond the 2010 rate of 5% (Davy: +12%); adjusted EBITDA of approximately $200m (Davy: $225m); operating costs of $470-500m (Davy: $534m). Elan also expects to be cash flow positive this year (we have a net cash inflow of $56m).

More colour on guidance and R&D updates is likely to be provided on the conference call at 13.30 GMT: +1 303 223 0114 [outside US]; 800 747 9564 [in US].

Davy View: These are strong numbers from Elan and highlight Tysabri's operational leverage in the P&L and cash flow model. This leverage will become even more apparent in 2011. We will review our own forecasts in light of guidance, but our first instinct is that we are comfortable to remain somewhat above base guidance."

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