Breakeven Earnings at Elan - Analyst Blog


Elan Corporation ( ELN ) reported breakeven earnings in the second quarter of 2013 from its continuing operations, compared to the year-ago loss of 16 cents per share.

Elan's second quarter of 2013 revenues from continuing operations came in at $56.3 million. Second quarter revenues included a 50% share of the  multiple sclerosis drug, Tysabri, profits for the month of Apr 2013 along with a 12% royalty on net sales of the drug for the months of May and June. We note that Tysabri is currently marketed by Biogen Idec ( BIIB ) and Elan receives royalties on the drug.

However, the company reported earnings of $4.28 per share from its total operations (including discontinued operations), compared to a loss of 5 cents in the year-ago quarter.

Earnings and revenues, as per the Zacks Consensus Estimate, were 5 cents per share and $68 million, respectively.

During the reported quarter, selling, general and administrative (SG&A) expenses decreased 20.1% to $26.2 million. Research and development (R&D) expenses came in at $22.2 million, down 13.3%.

Elan provided $26 million of funding to Janssen AI, a subsidiary of Johnson & Johnson ( JNJ ), in the second quarter of 2013. The company is left with funding commitment of $67.5 million to Janssen AI.

Pipeline Update

Earlier in the month, Elan received fast track designation from the U.S. Food and Drug Administration for ELND005 for the treatment of neuropsychiatric symptoms in Alzheimer's disease. Elan is also developing ELND005 for the treatment of Down's syndrome.

Tysabri Transaction

Elan closed its Tysabri collaboration transaction with Biogen earlier this year. Biogen paid an upfront payment of $3.25 billion to Elan. As a result, Biogen gained full strategic, commercial, and operational control over the drug.

Elan already received a 50% share of Tysabri profits as revenue for the month of April this year and will be receiving continuing royalties in the future. Elan is eligible to receive a royalty payment of 12% on worldwide net sales of Tysabri (for all indications) for the first year. After the first year, Elan will receive a royalty of 18% on up to $2 billion of global net sales of Tysabri and 25% thereafter.

Other Updates

We remind investors that last month, Elan's shareholders rejected several proposed strategic transactions including the divestment of ELND005. However, the shareholders approved the company's proposed $200 million share repurchase program.

Following the rejection of its strategic transactions, Elan announced that it is gearing up for a formal sale process. However, the company is yet to provide any update regarding this. We expect investor focus to remain on this story.

Elan, a biotechnology company, currently carries a Zacks Rank #4 (Sell). Currently, well-placed biotech stocks include Zacks Ranked #1 (Strong Buy) WuXi PharmaTech ( WX ).

BIOGEN IDEC INC (BIIB): Free Stock Analysis Report

ELAN CP PLC ADR (ELN): Free Stock Analysis Report

JOHNSON & JOHNS (JNJ): Free Stock Analysis Report

WUXI PHARMATECH (WX): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: BIIB , ELN , JNJ , WX

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