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Elan Reports Fourth Quarter And Full-Year 2012 Financial Results

Stocks in this article: ELN

Mr. Clerkin added, “The Tysabri transaction will provide us with greatly increased strategic flexibility, while maintaining a substantial participation in the future growth potential of this tremendous product. We expect Tysabri in-market sales to show further strong growth in 2013, and to increase by approximately 15% over the $1.6 billion achieved in 2012. Additionally, we expect our operating expenses, excluding Tysabri, to be substantially lower than in 2012, and to be in the range of $170-190 million for the year.”

Unaudited Consolidated U.S. GAAP Income Statement Data

Three Months Ended December 31

   

Twelve Months Ended December 31

2011 US$m

 

2012 US$m

     

2011 US$m

 

2012 US$m

  Continuing Operations  
0.4 0.2 Revenue (see page 8) 4.0 0.2
Cost of goods sold 0.8 0.2
0.4 0.2 Gross margin 3.2
 
Operating Expenses (see page 12)
30.9 26.8 Selling, general and administrative 107.2 113.6
25.5 21.5 Research and development 106.8 95.0
21.4 59.3 Other net charges (see page 13) 24.3 168.9
77.8 107.6 Total operating expenses 238.3 377.5
(77.4) (107.4) Operating loss (235.1) (377.5)
 
Net Interest and Investment Gains and Losses
16.7 12.4 Net interest expense 104.9 56.6
17.2 25.8 Net loss on equity method investments 81.1 221.8
1.2 Impairment of investments 1.2
47.0 76.1 Net charge on debt retirement 47.0 76.1
(0.1) Net investment gains (2.6)
80.8 115.5 Net interest and investment gains and losses 230.4 355.7
 
(158.2) (222.9) Net loss from continuing operations before tax (465.5) (733.2)
31.7 (314.2) Provision for/(benefit from) income taxes (12.0) (360.5)
(189.9) 91.3 Net income/(loss) from continuing operations (453.5) (372.7)
 
Discontinued Operations
55.2 61.5 Net income from discontinued operations, net of tax (see page 17) 1,014.0 235.3
(134.7) 152.8 Net income/(loss) 560.5 (137.4)
 
(0.32) 0.15 Basic net income/(loss) per ordinary share - continuing operations (0.77) (0.63)
0.09 0.10 Basic net income/(loss) per ordinary share – discontinued operations 1.73 0.40
589.2 594.3 Basic weighted average number of ordinary shares outstanding (in millions) – continuing and discontinued operations 587.6 592.4
(0.32) 0.15 Diluted net income/(loss) per ordinary share - continuing operations (0.77) (0.63)
0.09 0.10 Diluted net income/(loss) per ordinary share – discontinued operations 1.73 0.40
589.2 599.8 Diluted weighted average number of ordinary shares outstanding (in millions) – continuing and discontinued operations 587.6 592.4
 
Unaudited Non-GAAP Financial Information – Adjusted EBITDA
       

Three Months Ended December 31

Non-GAAP Financial Information Reconciliation Schedule

Twelve Months Ended December 31

2011 US$m

 

2012 US$m

     

2011 US$m

 

2012 US$m

 
(134.7) 152.8 Net income/(loss) 560.5 (137.4)
Net income/(loss) from discontinued operations:
(67.7) (81.2) Net income from Tysabri (270.4) (302.0)
7.6 19.5 Net loss from Prothena 22.8 46.2
4.9 0.2 Net (income)/loss from EDT (766.4) 20.5
(189.9) 91.3 Net income/(loss) from continuing operations (453.5) (372.7)
16.7 12.4 Net interest expense 104.9 56.6
31.7 (314.2) Provision for/(benefit from) income taxes (12.0) (360.5)
3.3 2.1 Depreciation and amortization 14.8 11.5
(0.1) Amortized fees (0.5) (0.3)
(138.3) (208.4) EBITDA from continuing operations (346.3) (665.4)
5.4 4.5 Share-based compensation 21.6 29.3
21.4 59.3 Other net charges 24.3 168.9
17.2 25.8 Net loss on equity method investments 81.1 221.8
1.2 Impairment of investments 1.2
47.0 76.1 Net charge on debt retirement 47.0 76.1
(0.1) Net investment gains (2.6)
(47.4) (41.5) Adjusted EBITDA from continuing operations (1) (174.9) (168.1)
 

(1) A reconciliation of Adjusted EBITDA to net income/(loss) on a pro forma basis, including the results of the Tysabri business for the three and twelve months ended December 31, 2011 and 2012, is set out in Appendix I and Appendix II. A reconciliation of Adjusted EBITDA from discontinued operations to net income/(loss) from discontinued operations for the three and twelve months ended December 31, 2011 and 2012 is set out in Appendix III and IV.

To supplement its consolidated financial statements presented on a U.S. GAAP basis, Elan provides readers with Adjusted EBITDA, a non-GAAP measure of operating results. Adjusted EBITDA is defined as net income/(loss) from continuing operations plus or minus net income or loss from discontinued operations, net interest expense, provision for or benefit from income taxes, depreciation and amortization of costs and revenue, share-based compensation, other net charges, net loss on equity method investment, impairment of investments, net charge on debt retirement and net investment gains. Adjusted EBITDA is not presented as, and should not be considered an alternative measure of operating results or cash flows from operations, as determined in accordance with U.S. GAAP. Elan’s management uses Adjusted EBITDA to evaluate the operating performance of Elan and its business and this measure is among the factors considered as a basis for Elan’s planning and forecasting for future periods. Elan believes Adjusted EBITDA is a measure of performance used by some investors, equity analysts and others to make informed investment decisions. Adjusted EBITDA is used as an analytical indicator of income generated to service debt and to fund capital expenditures. Adjusted 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. Adjusted EBITDA, as defined by Elan and presented in this press release, may not be comparable to similarly titled measures reported by other companies. A reconciliation of Adjusted EBITDA to net 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 2011 US$m

   

December 31 2012 US$m

Assets
Current Assets
Cash and cash equivalents 271.7 431.3
Restricted cash and cash equivalents — current 2.6 2.6
Investment securities — current 0.3 167.9
Held for sale assets 220.1
Deferred tax assets — current 26.2 380.9
Other current assets 217.2 206.7
Total current assets 518.0 1,409.5
 
Non-Current Assets
Intangible assets, net 309.9 99.0
Property, plant and equipment, net 83.2 12.7
Equity method investments 675.8 14.0
Investment securities — non-current 9.8 8.6
Deferred tax assets — non-current 118.9 64.6
Restricted cash and cash equivalents — non-current 13.7 13.7
Other assets 24.5 18.1
Total Assets 1,753.8 1,640.2
 
Liabilities and Shareholders’ Equity
Accounts payable, accrued and other liabilities 337.0 422.0
Long-term debt 615.0 600.0
Shareholders’ equity 801.8 618.2
Total Liabilities and Shareholders’ Equity 1,753.8 1,640.2
 

Movement in Shareholders’ Equity

   

Three Months ended December 31, 2012 US$m

     

Twelve Months ended December 31, 2012 US$m

601.6 Opening shareholders’ equity 801.8
152.8 Net income/(loss) for the period (137.4)
(105.7) Prothena distribution (105.7)
6.3 Share-based compensation 45.9
(24.7) Unrealized movements on defined benefit pension (24.7)
4.0 Issuance of share capital 20.8
(16.1) Increase/(decrease) in net unrealized gain on investment securities 17.5
618.2 Closing shareholders’ equity 618.2
 
Unaudited Consolidated U.S. GAAP Cash Flow Data

Three Months Ended December 31

   

Twelve Months Ended December 31

2011 US$m

 

2012 US$m

     

2011 US$m

   

2012 US$m

   
(47.4) (41.5) Adjusted EBITDA from continuing operations (174.9) (168.1)
77.1 92.3 Adjusted EBITDA from discontinued operations (1) 387.9 361.7
(9.1) (8.6) Net interest and tax (98.1) (52.6)
(17.8) (62.7) Other net charges (153.0) (2) (105.8)
(27.1) EDT divestment transaction costs (34.1)
(11.8) 46.8 Working capital decrease/(increase) (48.0) 20.1
(36.1) 26.3 Cash flows provided by/(used in) operating activities (120.2) 55.3
(7.4) (2.7) Net purchases of tangible and intangible assets (28.5) (12.3)
0.2 (0.2) Net proceeds from sale/(purchase) of investments 2.2 (0.7)
(28.1) Funding provided to equity method investment (Janssen AI) (76.9)
Purchase of equity method investment (Proteostasis) (20.0)
Net proceeds from sale of equity method investment (Alkermes plc) 381.1
Net proceeds from sale of EDT business 500.0
5.0 Receipt of deferred consideration (Prialt) 12.0
(125.0) Prothena distribution (125.0)
(695.5) (90.6) Cash used in financing activities (691.1) (73.9)
1.3 Restricted cash and cash equivalents movement 206.8 (2)
(737.5) (215.3) Net cash movement (150.8) 159.6
1,009.2 646.6 Beginning cash balance 422.5 271.7
271.7 431.3 Cash and cash equivalents at end of period 271.7 431.3
 

(1) A reconciliation of Adjusted EBITDA to net income/(loss) on a pro forma basis, including the results of the Tysabri business for the three and twelve months ended December 31, 2011 and 2012, is set out in Appendix I and Appendix II. In addition, a reconciliation of Adjusted EBITDA from discontinued operations to net income/(loss) from discontinued operations for the three and twelve months ended December 31, 2011 and 2012 is set out in Appendix III and IV.

(2) Other charges for the twelve months ended December 31, 2011 includes the settlement reserve charge outflow of $206.3 million related to the Zonegran settlement that was paid in March 2011. The restricted cash and cash equivalents movement includes the $203.7 million that was held in escrow in relation to this settlement.

Overview

Tysabri ® Transaction

On February 6, 2013, Elan announced that it had entered into an asset purchase agreement with Biogen Idec Inc. (Biogen) to transfer to Biogen all Tysabri Intellectual Property (IP) and other assets related to Tysabri. In accordance with the terms of the transaction, upon close, the existing collaboration arrangements with Biogen will be terminated and Biogen will pay an upfront payment of $3.25 billion to Elan and continuing royalties on Tysabri in-market sales. The transaction is expected to close in the first half of 2013, subject to the satisfaction of certain conditions, including customary regulatory approvals.

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