DUBLIN, Ireland–(BUSINESS WIRE)–July 29, 2004–Elan Corporation, plc (NYSE: ELN) today announced its second quarter 2004 results and provided a business update.Commenting on Elan’s business, Kelly Martin, Elan’s president and chief executive officer, said, “We continue to focus and align resources against the commercialisation of Antegren for multiple sclerosis and Crohn’s disease, working with our partner Biogen Idec. Having achieved designation for priority review and accelerated approval for MS in the U.S. further enhances our focus on execution and operating discipline. Overall we continue to strengthen our core therapeutic areas in neurodegenerative diseases, autoimmune, and pain. We continue to evaluate growth opportunities to enhance our presence in these specific areas.”Commenting on Elan’s second quarter results, Shane Cooke, executive vice president and chief financial officer, said, “We are pleased to report continuing positive trends with solid demand for our hospital products and declining operating costs. The income statement, however, continues to be impacted by the execution of our plans to reposition the company, streamline the balance sheet and simplify the capital structure. Of the $118 million net loss this quarter, $24 million is attributed to the sale of businesses, the ongoing divestment of the investment portfolio and the fluctuating value of that portfolio. We maintained a strong liquidity position with $677 million in cash and an investment portfolio valued at $332 million.”
Unaudited Consolidated U.S. GAAP Income Statement Data
Three Months Ended Six Months Ended
June 30 June 30
2003 2004 2003 2004
US$m US$m US$m US$m
—————– ———————————– —————-
Revenue (See page 6)
183.9 96.5 Product revenue 360.9 226.5
27.9 19.7 Contract revenue 70.7 45.2
——– ——– ——– ——-
211.8 116.2 Total revenue 431.6 271.7
——– ——– ——– ——-
Operating Expenses (See page 9)
77.1 44.2 Cost of goods sold 149.4 93.9
71.9 65.0 Research and development 151.5 130.4
114.4 75.3 Selling, general and administrative 232.0 159.9
Net gain on divestment of
(255.9) (38.5) businesses (250.3) (34.8)
Recovery plan and other significant
208.6 15.7 charges 225.1 21.1
——– ——– ——– ——-
216.1 161.7 Total operating expenses 507.7 370.5
——– ——– ——– ——-
(4.3) (45.5) Operating loss (76.1) (98.8)
——– ——– ——– ——-
Net Interest and Investment Gains
and (Losses) (See page 11)
(26.6) (23.9) Net interest expense (49.8) (47.2)
73.8 12.5 Investment gains 73.8 57.3
(16.4) (59.7) Investment losses and other (55.9) (93.8)
——– ——– ——– ——-
Net interest and investment gains
30.8 (71.1) and (losses) (31.9) (83.7)
——– ——– ——– ——-
Net income (loss) from continuing
26.5 (116.6) operations before tax (108.0) (182.5)
(4.6) (0.9) Provision for tax (7.9) (1.8)
——– ——– ——– ——-
Net income (loss) before
21.9 (117.5) discontinued operations (115.9) (184.3)
Net income (loss) from discontinued
(4.6) (0.1) operations (See page 15) 5.7 4.5
——– ——– ——– ——-
17.3 (117.6) Net income (loss) (110.2) (179.8)
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Basic and diluted earnings (loss)
per ordinary share - continuing
$0.06 ($0.30) operations $(0.33) ($0.47)
Basic and diluted earnings (loss)
per ordinary share - discontinued
($0.01) $0.00 operations $0.01 $0.01
Basic and diluted earnings (loss)
per ordinary share - net income
$0.05 ($0.30) (loss) ($0.32) ($0.46)
Weighted average number of ordinary
350.0 389.6 shares outstanding (in millions) 349.9 388.2
Unaudited Non-GAAP Financial Information - EBITDA
Three Months Ended Non-GAAP Financial Information Six Months Ended
30 June Reconciliation Schedule 30 June
2003 2004 2003 2004
US$m US$m US$m US$m
—————– ———————————– —————-
EBITDA
(4.3) (45.5) Operating loss (76.1) (98.8)
Depreciation and amortisation
35.2 31.7 included in operating loss 73.0 64.2
Amortised fees included in total
(17.2) (16.4) revenue (57.2) (28.0)
- 7.0 Milestones received and deferred - 7.0
——– ——– ——- ——–
13.7 (23.2) EBITDA (60.3) (55.6)
======== ======== ======= ========
Three Months Ended Non-GAAP Financial Information Six Months Ended
30 June Reconciliation Schedule 30 June
2003 2004 2003 2004
US$m US$m US$m US$m
—————— ———————————- —————-
EBITDA before net gains on
divestment of businesses,
recovery plan and other
significant charges
(4.3) (45.5) Operating loss (76.1) (98.8)
Depreciation and amortisation
35.2 31.7 included in operating loss 73.0 64.2
Amortised fees included in total
(17.2) (16.4) revenue (57.2) (28.0)
- 7.0 Milestones received and deferred - 7.0
Net gain on divestment of
(255.9) (38.5) businesses (250.3) (34.8)
Recovery plan and other
208.6 15.7 significant charges 225.1 21.1
——– ——— ——- ——–
EBITDA before net gains on
divestment of businesses,
recovery plan and other
(33.6) (46.0) significant charges (See page 10) (85.5) (69.3)
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To supplement our consolidated financial statements presented on a
U.S. GAAP basis, Elan provides readers with EBITDA (Earnings
Before Interest, Taxes, Depreciation and Amortisation), a non-GAAP
measure of operating results. Elan has also provided EBITDA
guidance for 2004, which has been calculated on a consistent
basis. EBITDA is defined as operating income (loss) plus or minus
depreciation and amortisation of costs and revenues, and
milestones received and deferred. EBITDA is not presented as an
alternative measure of operating results or cash flow from
operations, as determined in accordance with U.S. GAAP. Elan’s
management uses EBITDA to evaluate the operating performance of
Elan and its business and is among the factors considered as a
basis for Elan’s planning and forecasting for future periods. Elan
believes EBITDA is a measure of performance used by some
investors, equity analysts and others to make informed investment
decisions. EBITDA is used as an analytical indicator of income
generated to service debt and to fund capital expenditures. EBITDA
does not give effect to cash used for interest payments related to
debt service requirements and does not reflect funds available for
investment in the business of Elan or for other discretionary
purposes. EBITDA, as presented in this press release, may not be
comparable to similarly titled measures reported by other
companies. A reconciliation of EBITDA to operating income (loss)
is set out in the table above titled “Non-GAAP Financial
Information Reconciliation Schedule”.
Unaudited Consolidated U.S. GAAP Balance Sheet Data
December 31 March 31 June 30
2003 2004 2004
US$m US$m US$m
——————————————- ————————–
Assets
Current assets
Cash and cash equivalents 807.5 910.9 677.0
Marketable investment securities 349.4 331.8 238.8
Held for sale assets (1) 236.7 102.0 24.2
Other current assets 198.0 189.7 164.8
——– ——– ——–
1,591.6 1,534.4 1,104.8
Intangible assets, net 857.5 861.6 837.1
Property, plan and equipment, net 369.0 324.5 319.1
Investments and marketable investment
securities 192.9 160.0 93.3
——– ——– ——–
Total assets 3,011.0 2,880.5 2,354.3
======== ======== ========
Liabilities and Shareholders’ Equity
Accounts payable and accrued liabilities 384.7 335.7 320.2
Held for sale liabilities 27.9 7.2 -
Deferred income 154.8 142.9 131.1
Guarantee provision due June 2004 - EPIL II 344.5 358.3 -
EPIL III Notes due March 2005 390.0 390.0 390.0
6.5% convertible guaranteed notes due 2008 460.0 460.0 460.0
7.25% senior notes due 2008 650.0 650.0 650.0
Shareholders’ equity 599.1 536.4 403.0
——– ——– ——–
Total Liabilities and Shareholders’ Equity 3,011.0 2,880.5 2,354.3
======== ======== ========
Reconciliation of Movement in Shareholders’
Equity
Opening 599.1 536.4
Net loss for the period (62.2) (117.6)
Changes in unrealised gains on investment
securities (7.3) (31.0)
Issue of share capital 8.3 14.7
Other (1.5) 0.5
——– ——–
Closing 536.4 403.0
======== ========
(1) In accordance with Statement of Financial Accounting Standards
(”SFAS”) No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets,” at June 30, 2004, Elan has recorded the assets
and liabilities related to Frova and Myobloc as held for sale. At
March 31, 2004, Elan recorded as held for sale the assets and
liabilities related to Zonegran, the divestment of which closed
during the second quarter of 2004. At December 31, 2003, Elan
recorded as held for sale the assets and liabilities related to
its former European sales and marketing business and Elan Phama
S.A., a manufacturing and research and development business based
in Mezzovia, Switzerland. Each of these divestments closed during
the first quarter of 2004.
Unaudited Consolidated U.S. GAAP Cash Flow Data
Three Months Six Months
Ended Ended
June 30 June 30
2003 2004 2003 2004
US$m US$m US$m US$m
—————– ———————————– —————-
Cash flows from operating
(26.9) (64.0) activities (93.4) (90.9)
(60.9) (29.0) Movement on debt interest and tax (84.9) (54.7)
(54.4) 7.1 Working capital movement (56.2) (25.2)
Net purchases of
(25.2) (5.5) tangible/intangible assets (98.3) (10.6)
Net proceeds from sale of
93.5 140.4 investments 247.0 197.3
Net proceeds from business
306.0 96.6 divestments 312.1 230.3
Cash flows from financing
(265.5) 12.3 activities (267.2) 15.1
Cash payment under EPIL II
- (391.8) guarantee - (391.8)
——– ——– ——– ——-
(33.4) (233.9) Net cash movement (40.9) (130.5)
Cash and cash equivalents at
1,006.4 910.9 beginning of period 1,013.9 807.5
——– ——– ——– ——-
Cash and cash equivalents at end of
973.0 677.0 period 973.0 677.0
======== ======== ======== =======
The analysis below is based on the revenues and costs from continuing operations presented in accordance with U.S. GAAP.RevenueTotal revenue decreased 45% to $116.2 million in the second quarter of 2004 from $211.8 million in the second quarter of 2003 and is analysed below between revenue generated from currently retained products and revenue arising from products that have been divested or are subject to divestment agreements.
Three Months Ended Six Months Ended
June 30 June 30
2003 2004 2003 2004
US$m US$m US$m US$m
—————– ———————————– —————-
Revenue from Retained Products
23.9 26.5 Maxipime(TM) 42.3 54.7
10.0 9.1 Azactam(TM) 25.6 22.9
——– ——– ——- ——–
33.9 35.6 67.9 77.6
Contract Manufacturing and
28.5 28.4 Royalties 59.3 56.3
——– ——– ——- ——–
Total Revenue from Retained
62.4 64.0 Products 127.2 133.9
——– ——– ——- ——–
Amortised Revenue -
8.5 8.5 Adalat/Avinza(TM) 17.0 17.0
Revenue from Divested Products (1)
32.9 - Skelaxin(TM) 60.2 -
26.9 - Sonata(TM) 48.2 -
19.7 - European business 45.3 10.5
26.8 11.1 Zonegran(TM) 38.9 41.2
5.9 3.6 Frova(TM) 15.4 10.3
- 4.4 Naprelan(TM) 1.5 5.7
0.2 3.4 Zanaflex(TM) 1.0 3.9
0.6 1.5 Other 6.2 4.0
——– ——– ——- ——–
113.0 24.0 216.7 75.6
——– ——– ——- ——–
——– ——– ——- ——–
183.9 96.5 Total Product Revenue 360.9 226.5
——– ——– ——- ——–
Contract Revenue
8.7 7.9 Amortisation of fees 40.2 11.0
19.2 11.8 Research revenue and milestones 30.5 34.2
——– ——– ——- ——–
27.9 19.7 Total Contract Revenue 70.7 45.2
——– ——– ——- ——–
——– ——– ——- ——–
211.8 116.2 Total Revenue 431.6 271.7
======== ======== ======= ========
(a) Product RevenueTotal product revenue for the second quarter of 2004 was $96.5 million compared to $183.9 million in the second quarter of 2003, a decrease of 48%. The decline in product revenue in 2004 is due mainly to the divestment of a number of products as part of the completed recovery plan.Revenue from retained productsRevenue from retained products was $64.0 million in the second quarter of 2004 compared to $62.4 million in the second quarter of 2003, an increase of 3%. This increase primarily reflects the growth in prescriptions and demand for those retained products offset by a reduction in wholesaler inventories due in part to third party supply constraints.Sales of Maxipime and Azactam in the second quarter of 2004 were $35.6 million, an increase of 5% over the comparable period in 2003, reflecting stronger demand in 2004. Maxipime audited sales for April and May 2004 increased by 16% compared to the same period in 2003 while revenues for the quarter increased from $23.9 million to $26.5 million. Azactam audited sales for April and May 2004 increased by 13% compared to the same period in 2003 while revenues for the quarter decreased from $10.0 million to $9.1 million.Amortised Product RevenueThe second quarter of 2004 and 2003 includes $8.5 million of amortised revenue related to the licensing of rights to Elan’s generic form of Adalat CC and the restructuring of Elan’s Avinza license agreement with Ligand Pharmaceuticals, Inc (Ligand). The remaining unamortised revenue on these products of $86.2 million will be recognised as revenue over the next three years reflecting Elan’s ongoing involvement in the manufacture of these products.Revenue from divested productsRevenue from products Elan has sold or agreed to sell amounted to $24.0 million during the quarter, compared to $113.0 million in the second quarter of 2003.(b) Contract RevenueContract revenue in the second quarter of 2004 was $19.7 million compared to $27.9 million in the same period of 2003, a decrease of 29%. The amortisation of fees amounted to $7.9 million in the second quarter of 2004 compared to $8.7 million in the second quarter of 2003. Included in the second quarter of 2004 is $4.7 million arising from the termination of co-promotion arrangements relating to Frova with UCB Pharma, Inc. (UCB). Of the $8.7 million in amortised fees in the second quarter of 2003, $4.4 million (2004: $nil) related to business ventures.Research revenue and milestones amounted to $11.8 million in the second quarter of 2004 compared to $19.2 million in the second quarter of 2003, reflecting a decrease in milestones earned by Elan’s drug delivery business. During the quarter Elan received a $7.0 million milestone on filing of the Biologics License Application (BLA) of Antegren(TM) for multiple sclerosis (MS). This milestone has been deferred and will be recognised as revenue over approximately the next two years.Gross ProfitThe gross profit margin on product revenue was 54% in the second quarter of 2004 compared to 58% in the second quarter of 2003. During the second quarter of 2003, royalties of $20.6 million were paid to Pharma Marketing Ltd. (Pharma Marketing) and included in cost of sales. These royalties amounted to 11% of total product revenue. No royalties were paid to Pharma Marketing in 2004 following the termination of all remaining agreements with Pharma Marketing in the fourth quarter of 2003. In addition, the gross margin was negatively affected in 2004 by the change in the mix of product revenue and particularly the disposal of higher gross margin products during 2003 and 2004.Operating ExpensesResearch and development expenses were $65.0 million in the second quarter of 2004 compared to $71.9 million in the second quarter of 2003. This reduction reflects the refocusing of research and development efforts on key programmes: Antegren, Prialt(TM) and the Alzheimer’s programmes. Selling, general and administrative expenses decreased by 34% to $75.3 million in the second quarter of 2004 from $114.4 million in the second quarter of 2003, reflecting the successful implementation of the recovery plan and related cost reduction initiatives.Operating expenses in the second quarter of 2004 include $11.2 million in respect of the Zonegran and Frova products, which were divested during the second quarter of 2004. Included in the $11.2 million is $5.3 million in respect of cost of goods sold and $5.9 million in respect of selling, general and administration expenses.Net Gain on Divestment of BusinessesThe gains on divestment of businesses for the second quarter of 2004 and 2003 and for the six months ended June 30, 2004 and 2003 are as follows:
Three Months Six Months
Ended Ended
June 30 June 30
2003 2004 2003 2004
US$m US$m US$m US$m
—————— ———————————- —————-
- 38.1 Zonegran - 38.1
255.5 - Primary care franchise 243.6 -
0.4 0.4 Other 6.7 (3.3)
——– ——— ——- ——–
255.9 38.5 250.3 34.8
======== ========= ======= ========
The sale of Zonegran closed on April 27, 2004 for a total consideration of approximately $130 million before making a $17.0 million payment to Dainippon Pharmaceutical Co., Ltd. related to the assignment of the Zonegran license agreements. This resulted in a gain during the second quarter of 2004 of $38.1 million. Additional deferred consideration of up to $110.0 million may be received in the period through January 2006 and will result in future gains if received.The sale of Frova closed on May 18, 2004 for a total consideration of approximately $55.0 million to be received through December 31, 2005, of which $5.0 million was received during the second quarter of 2004. Of the remaining balance of approximately $50 million, Elan has agreed to accept approximately $44.0 million in full settlement if paid on or before August 31, 2004. Included in assets held for sale at June 30, 2004 is $21.7 million related to Frova. If Vernalis settles its obligation by August 31, 2004, Elan expects to record a gain of approximately $20 million in the third quarter of 2004.Recovery Plan and Other Significant ChargesRecovery plan and other significant charges for the second quarters of 2004 and 2003 and for the six months ended June 30, 2004 and 2003 are as follows:
Three Months Six Months
Ended Ended
June 30 June 30
2003 2004 2003 2004
US$m US$m US$m US$m
—————– ———————————– —————-
Severance costs, relocation and
11.6 1.8 exit costs 14.7 2.9
Costs related to shareholder
1.0 1.1 litigation, SEC investigation 4.0 5.4
- 12.8 Co-promotion termination - 12.8
Purchase of Pharma Operating Ltd.
196.4 - royalty rights 196.4 -
(0.4) - Other 10.0 -
——– ——– ——- ——–
208.6 15.7 225.1 21.1
======== ======== ======= ========
In May 2004, Elan terminated its co-promotion arrangements with UCB related to Frova.EBITDANegative EBITDA, excluding net gains on divestment of businesses and other significant charges of $22.8 million for the second quarter of 2004, amounted to $46.0 million compared to a negative EBITDA of $33.6 million in the second quarter of 2003, excluding net gains on divestment of businesses, recovery plan and other significant charges of $47.3 million, (See “Non-GAAP Financial Information” on page 3). The increase in negative EBITDA primarily results from the reduction in revenues and related costs associated with products and businesses disposed of during 2003 and 2004.Net Interest and Investment Gains and LossesNet interest and investment gains and losses amounted to a loss of $71.1 million in the second quarter of 2004 compared to a gain of $30.8 million in the second quarter of 2003.In the second quarter of 2004, net interest expense amounted to $23.9 million compared to $26.6 million in the second quarter of 2003, reflecting the interest costs associated with the $460.0 million convertible notes issued in the fourth quarter of 2003, offset by lower interest expense due to Liquid Yield Option Notes (LYONs) repurchases in December 2003.Investments gains in the second quarter of 2004 of $12.5 million included realised gains on investment disposals of $10.4 million and $2.1 million in relation to the mark-to-market of certain investments. This gain was offset by investment and other losses of $59.7 million, including impairments of $28.3 million and a charge under the Elan Pharmaceutical Investments II, Ltd. (EPIL II) guarantee of $33.4 million. Included in investment gains of $73.8 million in the second quarter of 2003 was $38.6 million in respect of the sale of the company’s remaining investment in Ligand.Elan had guaranteed loan notes issued by EPIL II to the extent that the investments held by EPIL II were insufficient to repay the loan notes and accrued interest. EPIL II was a Qualifying Special Purpose Entity and was not consolidated under U.S. GAAP. On June 28, 2004, the guaranteed notes of $450.0 million, together with accrued interest for the period from December 31, 2003 to June 28, 2004 of $21.5 million, were repaid. Of the aggregate payment of $471.5 million, $79.7 million was funded from the cash resources in EPIL II and through the sale of EPIL II’s entire investment portfolio. The balance of $391.8 million was funded by Elan under its guarantee and resulted in a charge in the second quarter of 2004 of $33.4 million, arising from interest of $10.8 million and investment losses of $22.6 million.In addition, as a result of the sale of certain publicly quoted investments and the mark-to-market of others, there was a net reduction during the quarter in unrealised gains recorded as a component of shareholders’ equity of $31.0 million from $93.8 million to $62.8 million at June 30, 2004.LiquidityAt June 30, 2004, Elan had $677.0 million in cash and cash equivalents compared with $910.9 million at March 31, 2004 and $807.5 million at December 31, 2003.At June 30, 2004, the major contracted and potential non-operating cash payments relating to Elan’s business are:
Less 4 Years June 30, December
Than 1-3 and 2004 31, 2003
One Years After Total US$m
Year US$m US$m US$m
US$m
————————- ——————————————–
7.25% senior notes - - 650.0 650.0 650.0
6.5% convertible notes - - 460.0 460.0 460.0
Fixed product payments 1.9 - - 1.9 19.4
EPIL II (1) - - - - 450.0
EPIL III 390.0 - - 390.0 390.0
3.25% LYONs - - 0.9 0.9 0.9
Capital lease obligations 9.6 20.7 48.9 79.2 85.4
——- —— ——— ——— ———
401.5 20.7 1,159.8 1,582.0 2,055.7
Operating lease
obligations 12.1 32.0 100.1 144.2 157.6
——- —— ——— ——— ———
$413.6 $52.7 $1,259.9 $1,726.2 $2,213.3
======= ====== ========= ========= =========
(1) In order to comply with U.S. GAAP, at December 31, 2003, $344.5
million of this amount was provided on the balance sheet.
Recent Business HighlightsElan and Biogen Idec submitted a BLA for Antegren (natalizumab) for the treatment of MS to the U.S. Food and Drug Administration (FDA), which subsequently designated the submission for Priority Review and Accelerated Approval and formally accepted the file. Elan and Biogen Idec also submitted a Marketing Authorisation Application (MAA) for Antegren as a potential treatment for MS to the European Medicines Agency, which has accepted the file for review.Elan and Biogen Idec plan to submit an MAA for Antegren for Crohn’s disease in the fourth quarter of 2004. The decision to file was made after discussions with European regulatory officials, based on the results from the ENACT-1 trial and the statistically significant primary endpoint data from the ENACT-2 maintenance trial in Crohn’s disease. Discussions with the FDA are ongoing regarding a BLA filing for Antegren in Crohn’s disease, and a Phase III induction study to evaluate Antegren in patients with Crohn’s disease is currently recruiting patients.In May, Elan and Biogen Idec announced the results from the Phase III maintenance trial of Antegren in Crohn’s disease at Digestive Disease Week. Antegren maintained clinical response and remission rates throughout six months among patients with Crohn’s disease who had previously achieved clinical response. Additionally, a majority of Antegren-treated patients who were also receiving chronic corticosteroid therapy were able to withdraw from corticosteroids and maintain response in contrast to those patients on placebo.Elan submitted an amendment to its New Drug Application (NDA) to the FDA for approval of Prialt (ziconotide) for the treatment of severe chronic pain.Elan announced several key strategic hires, including Gordon S. Francis, M.D., who joined the company as Vice President, Neurology, and Richard Chin, M.D., who joined as Senior Vice President, Medical Affairs. Dr. Francis was most recently responsible for strategic direction and clinical development in neurology at Serono, and Dr. Chin was formerly Group Director and Director of Clinical Research, Biotherapeutics Unit, at Genentech, Inc.Elan entered into a manufacturing and supply agreement with Eli Lilly under which Elan will supplement Lilly’s manufacture of duloxetine hydrochloride capsules beginning in mid-2005. Elan also agreed to license its proprietary NanoCrystal(TM) drug delivery technology to Roche.In July, the U.S. Patent and Trademark Office issued Neuralab Limited, a wholly owned subsidiary of Elan, three patents for Elan and Wyeth’s joint research on immunotherapeutic approaches to the treatment of Alzheimer’s disease.Last week, Elan and Wyeth announced findings from their Phase IIa clinical trial of an investigational Alzheimer’s disease treatment, AN-1792. While clinical development of the compound has been terminated, the results support the companies’ ongoing beta amyloid immunotherapy approach to the treatment of Alzheimer’s disease.About ElanElan is a neuroscience-based biotechnology company that is focused on discovering, developing, manufacturing, selling and marketing advanced therapies in neurodegenerative diseases, autoimmune diseases and severe pain. Elan’s (NYSE: ELN) shares trade on the New York, London and Dublin Stock Exchanges.Forward-Looking StatementsThis document and the Appendix contain forward-looking statements about Elan’s financial condition, results of operations and estimates, business prospects and the 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”, “envisage”, “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 Antegren as a treatment for MS and Crohn’s disease; the potential of Prialt as an intrathecal treatment for severe pain; Elan’s ability to maintain sufficient cash, liquid resources, and investments and other assets capable of being monetised to meet its liquidity requirements; the outcome of the ongoing SEC investigation and the shareholder and other pending litigation; the success of research and development activities and the speed with which regulatory authorisations and product launches may be achieved; competitive developments affecting Elan’s current products; the ability to successfully market both new and existing products; difficulties or delays in manufacturing; trade buying patterns; the ability to meet generic and branded competition after the expiration of Elan’s patents; the trend towards managed care and health care cost containment, including Medicare and Medicaid; the potential impact of the Medicare Prescription Drug, Improvement and Modernisation Act 2003; possible legislation affecting pharmaceutical pricing and reimbursement, both domestically and internationally; exposure to product liability and other types of lawsuits; Elan’s ability to protect its patents and other intellectual property; 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. and Irish generally accepted accounting principles; growth in costs and expenses; changes in product mix; 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, 2003, and in its Reports of Foreign Issuer on Form 6-K. Elan assumes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.Appendix 1In previous quarters and in accordance with SFAS No. 144, Elan recorded the results and gains or losses on the divestment of its discontinued operations including Elan Transdermal Technologies, Athena Diagnostics, Elan Diagnostics, a manufacturing business in Italy, the pain portfolio of products, Actiq(TM), the dermatology portfolio of products, Abelcet(TM) U.S. and Canada, and two products which were marketed in the United Kingdom and Ireland, within discontinued operations in the income statement. In the second quarter of 2004, the results of Myobloc are also included as discontinued operations. Consequently, the revenues and costs of the second quarter in 2003 have been adjusted to reflect this treatment. An analysis of the results of the discontinued operations is set out in Appendix 1.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 activities.
Discontinued Operations (unaudited)
Three Months Ended Six Months Ended
June 30 June 30
2003 2004 2003 2004
US$m US$m US$m US$m
———————————————————————-
Revenue
35.2 4.6 Product revenue 86.0 13.2
0.5 0.3 Contract revenue 0.5 0.3
——– ——– ——- ——–
35.7 4.9 Total revenue 86.5 13.5
——– ——– ——- ——–
Operating Expenses
17.7 0.8 Cost of goods sold 38.2 1.7
9.2 3.5 Research and development 16.5 5.6
7.1 1.0 Selling, general and administrative 17.2 2.1
Net loss on divestment of
0.3 - businesses 1.1 -
Recovery plan and other significant
4.7 - charges 5.5 -
——– ——– ——- ——–
39.0 5.3 Total operating expenses 78.5 9.4
——– ——– ——- ——–
(3.3) (0.4) Operating profit (loss) 8.0 4.1
——– ——– ——- ——–
Net Interest and Investment Losses
(1.0) 0.3 Investment losses and other (2.0) 0.4
——– ——– ——- ——–
(1.0) 0.3 Net interest and investment losses (2.0) 0.4
——– ——– ——- ——–
Net income from discontinued
(4.3) (0.1) operations before tax 6.0 4.5
(0.3) - Provision for tax (0.3) -
——– ——– ——- ——–
Net income from discontinued
(4.6) (0.1) operations 5.7 4.5
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Non-GAAP Financial Information
EBITDA
(3.3) (0.4) Operating profit (loss) 8.0 4.1
Depreciation and amortisation
included in operating profit
7.4 - (loss) 14.2 0.3
Amortised revenue included in total
- - revenue (10.5) -
——– ——– ——- ——–
4.1 (0.4) EBITDA 11.7 4.4
——– ——– ——- ——–
Net loss on divestment of
0.3 - businesses 1.1 -
Recovery plan and other significant
4.7 - charges 5.5 -
——– ——– ——- ——–
EBITDA before net losses on
divestment of businesses, recovery
9.1 (0.4) plan and other significant charges 18.3 4.4
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