Elan Reports Fourth Quarter and Full-Year 2006 Financial Results

Business Wire, Feb 20, 2007

DUBLIN, Ireland -- Elan Corporation, plc today announced its full-year and fourth quarter 2006 financial results and provided guidance for its financial outlook for 2007. Commenting on Elan's business, Kelly Martin, Elan's president and chief executive officer, said, "Elan's 2006 performance further demonstrates our focus on execution and the delivery of results. Our financial performance improved and our pipeline portfolio continued to progress. In that regard, I want to acknowledge the efforts of all of Elan's employees, who worked tirelessly in 2006 to move all parts of our business forward."

Mr Martin added, "Our activity and concentration for 2007 will revolve around three primary goals and objectives. First and foremost, by remaining disciplined and operationally focused, we will aim to accelerate the move to profitability. Second, our commitment to the scientific and clinical pipeline, particularly Alzheimer's disease, has never been greater. We expect to make tangible progress in all areas of our portfolio over the course of the year. Lastly, Elan remains firmly focused on bringing therapeutic options to those who need them the most - the patients. As we have demonstrated with Tysabri, we will continue to work closely with the patients and their physicians to seek solutions that will meaningfully address disease pathology in the areas of our expertise."

Commenting on Elan's 2006 financial results and 2007 outlook, Shane Cooke, Elan's executive vice president and chief financial officer, said, "2006 was a critical year in our drive towards profitability and was marked by significant progress in a number of areas: our operating margins improved with a 30% decrease in net loss and a 58% decrease in Adjusted EBITDA losses due to a 14% increase in revenues and reduced operating expenses; Tysabri, which we are confident will be a blockbuster drug in MS, was reintroduced in the US and launched in the EU; and our financial flexibility increased due to reduced debt with no scheduled repayments for almost five years." Mr Cooke added, "The outlook for the business is strong and we are confident that we will advance to profitability in the foreseeable future. We expect to make further significant progress in 2007 with Tysabri, our Alzheimer's programs and a number of initiatives in the drug technology business, and we are optimistic that Elan will achieve break-even, on an Adjusted EBITDA basis, by the end of the year.''

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To supplement its consolidated financial statements presented on a US GAAP basis, Elan provides readers with EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) and Adjusted EBITDA, non-GAAP measures of operating results. EBITDA is defined as net loss from continuing operations plus or minus depreciation and amortization of costs and revenues, provisions for income tax and net interest expense. Adjusted EBITDA is defined as EBITDA plus or minus share-based compensation, net gains or losses on divestment of products and businesses, other net gains or charges, net investment gains or losses and net charge on debt retirements. EBITDA and Adjusted EBITDA are not presented as, and should not be considered alternative measures of, operating results or cash flow from operations, as determined in accordance with US GAAP. Elan's management uses EBITDA and Adjusted EBITDA to evaluate the operating performance of Elan and its business and these measures are among the factors considered as a basis for Elan's planning and forecasting for future periods. Elan believes EBITDA and Adjusted EBITDA are measures of performance used by some investors, equity analysts and others to make informed investment decisions. EBITDA and Adjusted EBITDA are used as analytical indicators of income generated to service debt and to fund capital expenditures. EBITDA and Adjusted EBITDA do not give effect to cash used for interest payments related to debt service requirements and do not reflect funds available for investment in the business of Elan or for other discretionary purposes. EBITDA and Adjusted EBITDA, as defined by Elan and presented in this press release, may not be comparable to similarly titled measures reported by other companies. Reconciliations of EBITDA and Adjusted EBITDA to net loss from continuing operations are set out in the tables above titled, "Non-GAAP Financial Information Reconciliation Schedule."

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Net Loss

For the full-year 2006, the net loss decreased by 30% to $267.3 million from $383.6 million for the full-year 2005. The reduction in net loss was principally due to improved operating margins and reduced net interest expense, offset by the inclusion for the first time of share-based compensation expense of $47.1 million. The improvement of over $100 million in the operating margin results from a 14% increase in revenues, a 3% improvement in gross margin and a reduction of 9% in aggregate research and development (R&D) and selling, general and administrative (SG&A) expenses (excluding share-based compensation).