Elan Reports Second Quarter 2007 Financial Results

Business Wire, July 26, 2007

DUBLIN, Ireland -- Elan Corporation, plc today announced its second quarter 2007 financial results and provided a business update. Commenting on Elan's business, Kelly Martin, Elan's president and chief executive officer, said, "We continue to make progress in our pipeline and focus on moving our science towards the patients. Business discipline and growth in both Tysabri and EDT should provide a solid platform for continued advancement throughout the balance of the year."

Commenting on Elan's second quarter financial results, Shane Cooke, Elan's executive vice president and chief financial officer, said, "We are very pleased with the progress we have made in the second quarter of the year with revenue growth of 38% and a reduction of two-thirds in Adjusted EBITDA losses as we continue to carefully manage our cost base. The net loss increased to $141.1 million, mainly due to a non-cash charge of $52.2 million related to the write down of intangible assets as a result of the approval of a generic competitor to Maxipime. Tysabri had a solid quarter with approximately 14,000 patients on therapy as of mid-July 2007, an increase of over 40% from when we reported last quarter. We expect Tysabri to continue to drive revenue growth."

Mr. Cooke added, "With the earlier than expected entry of generic competition to Maxipime, we will immediately adjust our commercial infrastructure, reducing related selling and administration costs, and we are targeting to contain Adjusted EBITDA losses for 2007 at the previously guided $50 million level."

[TABLE OMITTED]
[TABLE OMITTED]
[TABLE OMITTED]

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 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 product, other net charges, net investment gains or losses and net charge on debt retirement. 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."

Unaudited Consolidated US GAAP Balance Sheet Data

[TABLE OMITTED]
[TABLE OMITTED]

Net Loss

The net loss for the second quarter of 2007 increased to $141.1 million from $90.5 million in the second quarter of 2006 after including a non-cash charge of $52.2 million relating to Maxipime([R]) and Azactam([R]) intangible assets. This charge resulted from the approval by the United States Food and Drug Administration (FDA) of a generic form of Maxipime in June 2007, which was earlier than expected (see page 9).

The net loss for the second quarter of 2007, before including the non-cash charge of $52.2 million and severance and restructuring costs primarily associated with the consolidation of Elan's activities on the west coast of the United States (US) into one site based in South San Francisco of $14.9 million, was $74.0 million, a reduction of 18% from the net loss of $90.5 million recorded in the second quarter of 2006. This improvement in underlying operating performance reflects a 38% increase in revenues and improved operating margins. Revenue growth was driven by the launch of Tysabri([R]) in the second half of 2006 and strong growth in manufacturing and royalty revenues, offset by reduced sales of Maxipime related to the approval of a generic form. The gross margin fell from 65% in the second quarter of 2006 to 56% in the second quarter of 2007, reflecting the impact of sales of Tysabri, which have a lower gross margin due to the collaboration agreement with Biogen Idec Inc. (Biogen Idec). In addition, selling, general and administrative (SG&A) and research and development (R&D) costs in the second quarter of 2007 were held at approximately the same level as in the second quarter of 2006.