Elan Corporation’s (ELN) earnings per share of $0.02 (excluding special items) for the third quarter of 2011 were higher than the breakeven earnings per share hinted at by Zacks Consensus Estimate.
The company suffered an adjusted loss of approximately $0.05 in the year-ago quarter. The profit was attributable to the higher revenues and lower expenses recorded in the reported quarter.
Revenues
Third quarter 2011 revenues increased 17% to $328.5 million, lower than the Zacks Consensus Estimate of $345 million. The year over year increase was primarily attributable to higher revenues from BioNeurology segment.
Segment Details
On September 16, 2011, Elan announced the completion the merger of its Elan Drug Technologies (EDT) segment with Alkermes for approximately $1 billion. The merged entity is known as Alkermes plc (ALKS) and headquartered in Dublin, Ireland. Per the terms of the deal, Alkermes made cash payment of $500 million apart from giving Elan 31.9 million of its ordinary shares. Elan is now focused solely on its BioNeurology segment.
Revenues from the EDT segment went down to $49.1 million from $63.2 million in the third quarter 2010. The decrease was due to sale of EDT segment on September 16, 2011, two weeks before the end of the third quarter and no shipments of Ampyra during the reported period.
Revenues from the BioNeurology segment climbed 28% to $279.4 million. Higher Tysabri sales led to the increase. 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.
In-market net sales of Tysabri, indicated for the treatment of multiple sclerosis and Crohn’s disease, climbed 28% to $392.6 million in the reported quarter. Worldwide increased demand, higher price in the US market and favorable exchange rate movements in rest of the world (RoW) led to the rise. The sales of Tysabri recorded by Elan rose 29.2% to $279 million.
Expenses
During the reported quarter, selling, general and administrative (SG&A) expenses declined 12% to $56.5 million. The decrease was attributable to sale of EDT segment, two weeks prior to third quarter end, reduced legal expense and lower support costs due to the restructuring of the research and development (R&D) wing of the BioNeurology division in 2010. R&D expenses came in at $59.2 million, down 7.2% from the year-ago quarter.
Outlook
The company has reiterated the revenue guidance and expects the BioNeurology segment to generate revenues exceeding $1 billion.
Our Recommendation
We currently have a Neutral recommendation on Elan. The stock carries a Zacks #3 Rank (Hold rating) in the short run. The company is highly dependent on Tysabri for revenue generation. In this scenario, we note that an increase in the number of progressive multifocal leukoencephalopathy cases associated with the use of Tysabri could lead to a slowdown in the sales of the drug going forward.
ALKERMES INC (ALKS): Free Stock Analysis Report
BIOGEN IDEC INC (BIIB): Free Stock Analysis Report
ELAN CP PLC ADR (ELN): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment