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News : International Last Updated: May 9, 2011 - 3:53 PM


Markets News Monday: Elan sells 75% of its Athlone operation for $960m to US biotech firm Alkermes
By Finfacts Team
May 9, 2011 - 9:26 AM

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The Euro Stoxx 600 since 1986

Elan today announced the sale of its Elan Drug Technology operation in Athlone for $960m to US biotechnology firm Alkermes.

Elan in Athlone employs 450 staff and Ireland will be Alkermes' European headquarters.

Elan was founded in Ireland in 1969 as a drug-delivery business, by American chemist Don Panoz, to facilitate the development of the technology behind the nicotine patch.

Kelly Martin, Elan CEO commented that “upon closing, this transaction aggressively advances a number of long-standing strategic and financial objectives for Elan. Namely, it enables us to reduce the debt on our balance sheet and further improve our capital structure, increases operating leverage, allows for additional focus and continued disciplined investment in a broad array of opportunities within the neurology space from a scientific, clinical and product point of view and lastly, provides Elan shareholders with the opportunity to realize further value - - over time - - from the equity position in Alkermes plc.”

Elan's stake in the new group will be subject to a lockup arrangement and EDT will be merged with Alkermes and the combined group is expected to have revenue in excess of $450m a year from 25 products, including treatments for bipolor disorder and schizophrenia, and adjusted core profit of $80m.

Elan said it expects the deal to be immediately accretive to cash earnings. The transaction is subject to approval by Alkermes' shareholders and US authorities. It is expected to close during the third quarter of this year.

Davy's Jack Gorman commented: "Analysis: The main features of the transaction are as follows:

Elan will receive $500m in cash plus 31.9m shares in Alkermes plc (which will have its headquarters in Dublin). Alkermes Inc., for which the new entity will convert shares on a one-to-one basis, closed on Friday (May 6th) at $14.47 so Elan's stake in the new business is worth just over $460m. This equates to a c.25% shareholding.

The new company will have revenues of $450m and adjusted EBITDA of c $80m (year ending March 2011). Revenue growth is anticipated for fiscal year 2012 and willl accelerate to double-digit rates in fiscal 2013 and beyond.

Adjusted EBITDA margins will be in the 15-20% range in fiscal 2012, rising to 30-35% in the following year as cost savings of $20m are fully realised.

Alkermes Plc will comprise five high-growth products - - Risperdal Consta, Invega Sustenna, Ampyra, Vivitrol and Bydureon. Alkermes currently has a portfolio of CNS products and has a pulmonary drug delivery technology platform.

Upon closing (probably Q3), Shane Cooke will join Alkermes plc as President.

Elan will use the net proceeds to retire debt.

Davy View: Our first thoughts are that this transaction makes sense to us, looks strategically sound and is yielding an attractive financial benefit for Elan. A separation of EDT from Elan's bioneurology business has long been intended as part of Elan's strategic plan; to this end, the cash and investment stake will provide further flexibility to Elan's ongoing business. In its own right, retiring $500m of debt will save c.$40m in annual interest for Elan. For investors, a transaction provides extra focus on the ongoing business (which will be positively perceived) and will reduce financial risk."

Greece Out of the Euro: Silly says economist;

Greek deal may provide an Irish opportunity: Davy's Emer Lang comments  -- "The news that European Union leaders have resolved to renegotiate Greece's €110bn bailout package will be a key focus for markets today. Precise details of any deal have yet to emerge, but there are suggestions that further funds may be negotiated – requiring Greece to provide additional collateral – or that it may be asked to expand its asset disposal programme (currently €50bn is slated to come from this source).

Speculation also includes easier repayment terms and deficit conditions, with debt sustainability being the key issue. Increased borrowing costs – investors have driven yields on Greek government bonds above 25% – and weaker-than-expected tax revenues have more than offset the planned spending cuts agreed under the original terms, undermining the deal. With the Greek bailout deal running aground after barely a year and EU leaders resolved to protect the euro, the Irish authorities will be watching developments closely.

The government has been consistently holding out the prospect of a reduction in the 'punitive' 5.8% rate that Ireland is set to pay for aid; if, as expected, Greece secures easier terms, this should pave the way for Ireland to follow. A 1% reduction in the rate would save around €400m per annum in interest costs. "

European Union Debt Crisis in Focus: Patrick McNutt, visiting fellow at Manchester Business School, UK says the European Union's debt crisis is a problem of solvency than liquidity:

Economic View; Greece is the word…again: Goodbody's chief economist, Dermot O'Leary, comments  - - "One year after the €110bn aid package for Greece was agreed to put the country back on track, EU officials have now admitted that it will not be enough. Friday’s reports that Greece is contemplating exiting the euro were probably wide of the mark, but the secretive meeting of a select group of euro-zone members on Friday evening highlights once again that EU policymakers are still behind the curve and this crisis has more to run.

The concern centres on the assumption that Greece will need to tap the market for funding of €25bn-€30bn in 2012. With short term rates of c.23% and longer-term rates of c.15%, it is highly unlikely that these funding costs will fall to a sustainable level over a short period of time, especially in light of the probability of private sector restructuring if Greece were to tap the proposed permanent ESM facility from 2013 onwards, as is likely.

What happens next? While the reports of Greece exiting the euro are more than likely incorrect at this stage, one would have to be concerned at the effect that it would have in confidence in the Greek banking system. It is, therefore, vital that a further agreement on adjustments to the Greek package is reached soon. The deadline for such an agreement is next week’s meeting of finance ministers. One would expect that Greece, like Ireland and Portugal, will be tapping the EFSF for funds.

While the issue of the interest rate on Ireland’s loans from the EFSF was meant to be on the agenda at next week’s Ecofin meeting, Greece is now likely to dominate that meeting. Nevertheless, given that there is also an assumption within Ireland’s aid programme that the country will be able to tap the market for funding in 2012, the measures discussed in relation to Greece will have important implications for Ireland too."

Asia Markets

The MSCI Asia Pacific Index gained 0.1% Monday.

Japan's Nikkei 225 dipped 0.66%; China's Shanghai composite index gained 0.30%; Australia's S&P/ASX 200 added 0.29% and the Bombay Stock Exchange's Sensex index fell 0.10% in Mumbai.

Asia benchmarks

Finfacts Reports

Germany faces debt tsunami; Economist says Greece should quit Euro; Irish clamour for default
German exports jumped in March to highest monthly value on record; Annual exports/ imports were the highest since 1950
Bruton seeks Irish copyright reforms; European patent applications up record 11% in 2010 -- costs to plunge
Irish construction firms cut jobs and purchasing in April amid falling workloads
Monday Newspaper Review - Irish Business News and International Stories - - May 09, 2011
Irish Jobs Initiative: Proposal to levy private pension savings is short-sighted, arbitrary and unfair
US added 244,000 in April; Unemployment rate edged up to 9.0%; Broad measure of unemployment was 15.9%

In Europe, the Dow Jones Stoxx 600 has dropped 0.34% in early trading Monday.

The ISEQ has risen 0.32% in Dublin.

Elan has climbed 1.34%; CRH has added 1.24%.

European Benchmarks

Irish Share Prices

Irish Stock Market Capitalisation by Company

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies 

The euro is trading at $1.4437 and at £0.8812.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

The BDI closed at 3,005 on Thursday, Dec 31st - - a rise of 289% in 2009. The index averaged 59% lower in 2009 than a year earlier.

On Thursday, July 15, 2010, the index  fell for the 35th straight session, by 9 points, or 0.537%, to 1,700 points, Bloomberg report.

On Friday July16th, the BDI rose 20 points or 1.12% to 1,700 to break the 35-session losing streak.

On Friday this week, the BDI rose 26 points or 1.98% at 1,340.

The Financial Times reported earlier in January, that Australia’s flooding and fears of ship oversupply has pushed down a gauge of the cost of hiring ships to carry coal, iron ore and other dry bulk by nearly half since October to the lowest level since the aftermath of the financial crisis. The Baltic Dry index, the widely watched measure of dry bulk charter rates, fell to 1,453, nearly half the 2,784 peak reached on October 27, 2010.

Crude oil for June 2011 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $99.07 per barrel, up $1.89 from Friday's close. In London, Brent for June delivery is trading on the International Commodities Exchange at $110.70. The North Sea benchmark accounts for two-thirds of the global market.

The margin between the US benchmark WTI (West Texas Intermediate) used on the New York Mercantile Exchange and Brent is over $11.

The FT said in early February that a surge in oil inventories in Cushing, Oklahoma, where WTI is delivered into America’s pipeline system, has depressed the value of the benchmark against other yardsticks. The International Energy Agency said on Thursday that with “few relief valves” to cut the stock overhang in Cushing, the price dislocation “may persist for months [or years] to come”.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,506.20, up $11.60 from Friday's close.

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