Elan Corporation's
(
ELN
) loss of 5 cents per share (excluding special items) for the
second quarter of 2012 was wider than the Zacks Consensus Estimate
of a loss of 1 cent per share. Lower-than-expected revenues were
primarily responsible for the wider-than-expected loss incurred by
Elan in the second quarter of 2012. The company incurred an
adjusted loss of 8 cents per share in the second quarter of 2012.
Second quarter 2012 revenues increased 6.4% from the year-ago
figure to $288.0 million. The increase was primarily attributable
to higher Tysabri sales. Total revenues included Tysabri sales
recorded by Elan, adjustments related to Azactam (which the company
no longer markets) and royalties. Revenues, however, fell short of
the Zacks Consensus Estimate of $301 million.
All the percentages mentioned below are on a year-over-year basis.
Quarter in Detail
The sales of Tysabri recorded by Elan rose 7.1% to $288.4 million.
As of the end of June 2012, about 69,100 patients were on
commercial and clinical Tysabri therapy worldwide. This represents
an increase from 66,700 patients at the end of March 2012.
We note that Elan has a co-development agreement with
Biogen Idec Inc.
(
BIIB
) for Tysabri, under which Elan markets the drug in the US and
books the entire sales as its revenues.
Outside the US, Biogen is responsible for distribution, and Elan
records as revenue its share of the profit/loss on these sales of
Tysabri. The agreement provides Elan with the option to buy the
rights of Tysabri if Biogen changes hands.
Global in-market net sales of Tysabri climbed 2% to $395.5 million
in the reported quarter. In the US, Elan recorded net sales of
$211.5 million, up 16%. The rise was primarily attributable to an
increase in patient base coupled with a higher selling price.
Tysabri rest of the world (ROW) revenues went down 10.6% to $184
million. Out of the total ROW revenues, Elan recorded revenues of
$76.9 million, down 10.8%. The sales in ROW were impacted by
negative currency translations and $16.3 million of deferred
revenue in Italy.
During the fourth quarter of 2011, Biogen received a
notification from the Italian National Medicines Agency stating
that Tysabri sales had exceeded a limit established during its 2006
price determination. Biogen is contesting the claim.
During the second quarter, Elan received a major pipeline setback
when
Pfizer, Inc.
(
PFE
) announced disappointing top-line results on Alzheimer's disease
candidate bapineuzumab. Elan is collaborating with
Johnson & Johnson
(
JNJ
) and Pfizer for the development of the candidate. Pfizer said that
bapineuzumab failed to meet its co-primary endpoints in a phase III
study (Study 302).
During the reported quarter, selling, general and administrative
(SG&A) expenses increased 20.5% to $60.6 million. The increase
was due to higher expenses incurred for marketing Tysabri. Research
and development (R&D) expenses came in at $49.2 million, down
3.3% from the year-ago quarter.
Outlook
Elan expects Biogen to resolve the Tysabri-related issue in
Italy during 2012, which is reflected in the 2012 revenue guidance.
However, failure of Biogen to do so will impact Elan's revenues by
approximately $30-$35 million in 2012. Elan expects 2012 revenues
to be in the range of $1.20 billion - $1.25 billion. The Zacks
Consensus Estimate of $1.2 billion is at the low end of the
company's guidance range.
Our Recommendation
We currently have a Neutral recommendation on Elan. The stock
carries a Zacks #5 Rank (Strong Sell rating) in the short run.
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