Elan Corporation
's (
ELN
) loss of 12 cents per share (excluding special items) for the
third quarter of 2012 was wider than the Zacks Consensus Estimate
of a loss of 8 cents per share. The company incurred an adjusted
loss of 9 cent per share in the third quarter of 2011.
Third quarter 2012 revenues increased 9.7% from the year-ago
figure to $306.6 million. The increase was primarily attributable
to higher Tysabri sales. Total revenues included Tysabri sales
recorded by Elan as well as royalties from the drug. Revenues
beat the Zacks Consensus Estimate of $302 million.
All the percentages mentioned below are on a year-over-year
basis.
Quarter in Detail
Sales of Tysabri recorded by Elan rose 9.8% to $306.4 million.
As of the end of September 2012, about 71,100 patients were on
commercial and clinical Tysabri therapy worldwide. This
represents a 3% increase from 69,000 patients at the end of June
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 3% to $403.8
million in the reported quarter. In the US, Elan recorded net
sales of $230.5 million, up 16.9%. The rise was primarily
attributable to an increase in patient base in conjunction with a
higher selling price.
Tysabri rest of the world (ROW) revenues went down 11% to
$173.3 million. Out of the total ROW revenues, Elan recorded
revenues of $75.9 million, down 7.3%. The sales in ROW were
impacted by negative currency translations and $47.0 million of
deferred revenue in Italy.
During the third quarter, Elan received a major pipeline
setback when
Pfizer, Inc.
(
PFE
) and
Johnson & Johnson
(
JNJ
) announced the discontinuation of Alzheimer's disease candidate
bapineuzumab. Elan is collaborating with Johnson & Johnson
and Pfizer for the development of the candidate. Pfizer said that
bapineuzumab failed to meet its co-primary endpoints in both the
phase III studies (Studies 302 and 301).
Elan started a phase II study of oral ELND005 during the third
quarter of 2012. ELND005 is being developed for the treatment of
bipolar I disorder. The company also filed an Investigational New
Drug (IND) application for NEOD001 for the treatment of amyloid
light chain amyloidosis during the quarter.
During the reported quarter, selling, general and
administrative (SG&A) expenses decreased 1.8% to $48 million.
The decrease was due to lower sales and marketing expenses in the
US for Tysabri. Research and development (R&D) expenses came
in at $37.0 million, down 16.7% from the year-ago quarter.
Discontinued Operations
We remind investors that in August this year, Elan announced
its decision to split into two separate publicly traded
companies. The spin-off, approved by its Board of Directors, is
expected to be completed by year end. While one company will
focus on drug discovery, the other, which will retain the company
name, will have Tysabri. The company which will focus on drug
discovery will be named Neotope Biosciences.
Outlook
Elan expects 2012 revenues to be around $1.2 billion. The
company expects that the Tysabri Italian price dispute to be
resolved by year end. The Zacks Consensus Estimate is in line
with the company's guidance.
Elan expects operating expenses for 2012 in the range of
$380-$400 million (previous guidance: $420-$440 million).
Our Recommendation
We currently have a Neutral recommendation on Elan. The stock
carries a Zacks #2 Rank (Strong Buy rating) in the short run.
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