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ISEQ holds-Elan results examined

Wednesday, October 24 09:18:13

The ISEQ was up early this morning and above the 3,200 level as Chinese output data pleased the European markets however the PMI figures, emerging in the past hour have dampened sentiment and the ISEQ is virtually unchanged at 3,193.

Elan results are examined by Davy Stockbrokers:

Q3 revenues and adjusted EBITDA ahead of expectations, although the latter is aided by the reclassification of Neotope (its discovery arm) to discontinued operations. Elan re-affirmed FY adjusted EBITDA of over $200m.

ANALYSIS: Q3 revenues grew by 10pc to $306.6m, some 2pc ahead of forecast, driven in particular by US growth at Tysabri (Elan books this region's revenue fully). Adjusted EBITDA advanced by 38pc to $67.6m. This was some $20m ahead of expectations, although $6.4m of this was due to the reclassification of Neotope to discontinued operations.

Tysabri global revenues were $403.8m, up just 3pc yoy (Davy fc +7.5pc). The strong advance in patient numbers was almost fully offset by the negative fx movement on RoW revenues and the impact of the Italian revenue reserve ($14.2m). Units sold increased by 8pc yoy (+10pc US, +7pc RoW). Tysabri patients on commercial therapy stood at 70,300 at the end of the quarter, up 13pc yoy and broadly in line with our forecast of 70,900.

As expected, it was a busy quarter for non-recurring charges. A $100.3m charge was taken for restructuring of early stage research activities; a $11m IP R&D charge was taken for the ELND005 milestone to Transition; and a $117.3m impairment charge was taken for JAI post the failure of Bapineuzumab. More charges are anticipated in Q4.

Net cash and equivalents were $217.2m at end Q3, including the investment in Alkermes plc. By year-end, the cash costs of the restructuring, refinancings and Neotope spin-off will bring Elan into a modest (c.$100m) net debt position. Elan re-affirmed its FY outlook of over $200m in adjusted EBITDA. The known $25m hit from Italian revenue deferral is now offset by the reclassification of Neotope to discontinued operations.

DAVY VIEW: The key takeaway from the Q3 results is that underlying Tysabri patient growth continues (+13pc yoy). The balance sheet will be cleansed further in the next quarter (via refinancing) so that Tysabri's impact on profitability and cash flow will be easily apparent in 2013 and beyond according to Davy Stockbrokers.