Elan Reports Second Quarter 2002 Financial Results

Business Wire, July 31, 2002

Business Editors

DUBLIN, Ireland--(BUSINESS WIRE)--July 31, 2002

Elan Corporation, plc(NYSE:ELN):

Second quarter financial highlights (Pro forma)

- Recovery plan announced today.

- Acquisition of all the royalty rights, including royalty rights over Antegren, held by Autoimmune Diseases Research & Development Corporation ("Autoimmune") for a net cash outflow of $82.5 million.

- Repayment in full of the $325.0 million revolving credit facility and termination of facility.

- Repayment in full of $62.6 million of 3.5% convertible notes at maturity.

- Cash balances after taking account of these actions $903.6 million (including cash held as collateral of $148.0 million).

July Actions

- Recovery plan announced today.

- Acquisition of all the royalty rights, including royalty rights over Antegren, held by Autoimmune Diseases Research & Development Corporation ("Autoimmune") for a net cash outflow of $82.5 million.

- Repayment in full of the $325.0 million revolving credit facility and termination of facility.

- Repayment in full of $62.6 million of 3.5% convertible notes at maturity.

- Cash balances after taking account of these actions $903.6 million (including cash held as collateral of $148.0 million).

Introduction

Elan Corporation, plc (NYSE: ELN) ("Elan") today announced a net loss of $802.0 million ($2.29 loss per diluted share) for the second quarter of 2002 compared to net income of $134.3 million for the second quarter of 2001 ($0.37 earnings per diluted share). Pro forma earnings, before other mainly non-cash charges of $826.6 million, amounted to $24.6 million or $0.07 per diluted share. Other charges arose primarily from investment related charges and intangible asset writedowns.

The following analysis is based on the pro forma income statement data excluding other charges included on page 12.

Revenue

Total revenue decreased to $456.1 million in the second quarter of 2002 from $461.2 million in the second quarter of 2001.

Total revenue can be further analysed as follows:

                                       3 Months ended June 30,
                                  2001        2002           %
                                 US$m         US$m         Change
(a) Product Revenue
Product sales                    216.7       325.0           50%
Rationalisation revenue          106.3        34.6          (67%)
Pharma Marketing/Autoimmune       33.3        15.1          (55%)
                                -------     --------
Total product revenue            356.3       374.7            5%
                                -------     --------
(b) Contract Revenue
Amortisation of fees              63.7        50.0          (22%)
Research revenue and milestones   30.2        16.9          (44%)
Pharma Marketing/Autoimmune       11.0        14.5            32%
                                -------     --------
Total contract revenue           104.9        81.4          (22%)
                                -------     --------
Total Revenue                    461.2       456.1           (1%)
                                -------     --------

(a) Product Revenue

Product sales increased by 50% in the second quarter 2002 compared to the second quarter 2001. Product revenues from Elan's U.S. promoted products, as set out in the attached revenue analysis, increased by 75% to $248.4 million in the second quarter of 2002 compared to $142.0 million in the second quarter of 2001. Excluding acquisitions and new product launches (i.e. Sonata, the Roxane pain portfolio and Frova), Elan's U.S. promoted products increased by 44% in the second quarter of 2002 over the second quarter of 2001. Elan's U.S. promoted products accounted for 66% of total product revenue in the second quarter of 2002 compared to 40% in the second quarter of 2001 reflecting the acquisition of Sonata and the Roxane pain portfolio, the launch of Frova and the growth of Elan's other U.S. promoted products.

In the second quarter of 2002, Skelaxin, Maxipime, Abelcet and Zonegran each experienced continuing strong prescription growth resulting in U.S. product sales increases of 12%, 47%, 23% and 229%, respectively, over the second quarter of 2001, to $42.0 million, $23.3 million, $23.3 million and $17.1 million, respectively. Myobloc/Neurobloc global product sales were $4.0 million in the second quarter of 2002 compared to $2.6 million in the second quarter of 2001. Product sales from Sonata and the Roxane pain portfolio were $24.8 million and $13.6 million, respectively, for the second quarter of 2002. These products were acquired in the second half of 2001 and therefore had no reported sales in the second quarter of 2001. Frova had sales of $6.2 million in the second quarter (which reflected initial stocking of the trade channels).

Included in product revenue are co-marketing fees received from Pharma Marketing/Autoimmune of $15.1 million for the second quarter of 2002 and $33.3 million for the second quarter of 2001. No further co-marketing fees will be received from Pharma Marketing or Autoimmune. In the case of Pharma Marketing the program has been completed and the arrangements for Autoimmune were terminated in July 2002. Total revenues of $29.6 million were recorded from Autoimmune in the second quarter 2002 (product revenue $15.1 million and contract revenue $14.5 million) and no revenues were received from Pharma Marketing. As part of the termination, Elan acquired all of the royalty rights, including those related to Antegren, previously sold to Autoimmune for a net cash outflow of $82.5 million. As part of the arrangements with Pharma Marketing, the royalties payable to Pharma Marketing were $15.7 million (2001: $3.9 million) during the quarter. These royalty payments are included in cost of sales. Elan has the right to initiate an auction process to purchase the royalty rights previously sold to Pharma Marketing at any time prior to June 2003. The purchase price is capped at an amount of approximately $385.0 million at June 30, 2002. The purchase price increases by approximately 25% annually.