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News : Irish Last Updated: Apr 21, 2011 - 8:16 AM

Elan reports net profit of $68.2m in first quarter boosted by Tysabri sales
By Finfacts Team
Apr 20, 2011 - 7:07 AM

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Elan, the Irish pharmaceutical company, today reported a net profit of $68.2m for the first quarter of this year, boosted by robust sales of its multiple sclerosis drug Tysabri and a 10% cut in its day-to-day costs.

Revenue from Tysabri increased by 23% compared with a year earlier to $245.2m, with 58,400 patients using the treatment at the end of March - - up 16% compared with a year earlier. Elan said Tysabri growth offset the loss of revenue from older products.

Total revenue was $313m, up from $310.5m a year earlier. Revenue from the bioneurology business rose by 6%, but revenue in the EDT business fell 14%.

Elan's net profit was boosted by a once-off gain from a legal settlement, its underlying earnings - -  as measured by adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) -  - also rose to $63.3m from $61.4m a year earlier.

Elan CEO, Kelly Martin, commented, "The first quarter results provide further evidence as to our consistency in generating progress across all aspects of the business. Revenue growth from Tysabri combined with disciplined expense management has created meaningful operating leverage for the Company."

Martin added, "This is a unique time for Elan and we remain focused on driving further operating leverage into our business. At the same time, we will continue to intelligently invest in both science and clinical activities that may differentiate Elan globally as it relates to innovation and focus on neuroscience."

Results detail

Davy's Jack Gorman commented: Analysis: "Tysabri remains the key variable in the Elan numbers as it is the basis of future cash generation in the business. Global revenues grew by 20% to $349.4m compared to $346m in our forecasts. The pace of revenue growth exceeded that of patient growth (+16%); we suspect this is likely to be foreign exchange-related and that unit growth is broadly tracking patient numbers.

Net debt increased by an estimated $117m in the quarter. When we strip out the effect of the Zonegran payment (-$206.3m) and the receipt from the Abraxis settlement (+$78m), underlying free cash flow looks to be circa $11m. Though modest, it is a positive signal that cash flow is now being generated by Elan despite its high R&D burden and its higher-coupon debt.

The main features of Q1 were:

Revenues grew by 1% to $313m (Davy forecast: $309.1m) as Tysabri growth offset the elimination of Prialt, Maxipime and Azactam.

Gross margin was 50.1% compared to 53.1% last year. Last year was helped by higher margin legacy products and the Ampyra launch.

Total operating costs were reduced by 9%, a better-than-expected out-turn. This helped adjusted EBITDA to exceed our forecast, at $63.3m versus $61.3m last year.

Tysabri patients on commercial therapy totalled 57,800 at the end of Q1; 100 ahead of our own forecast.

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: The Tysabri out-turn is as forecast despite a solid Q1 from new competitor Gilenya ($59m). This would suggest the latter's effect has been to either grow the market or take share from products other than Tysabri. Results from the other competing products in coming weeks will reveal this.

Positioning the JCV assay as a tool to define PML risk is a key objective for Elan/BIIB in 2011. Successfully executing on this could accelerate what is currently very strong growth from Tysabri (please see our research note dated April 13th).

Our first instinct is to leave full-year forecasts unchanged; these are modestly ahead of company guidance."

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