Elan Corporation, plc (ELN) Message Board

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Biotech / Medical : Elan Corporation, plc (ELN)

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To: William Partmann who started this subject	2/16/2002 10:39:44 PM
From: Robohogs	Read Replies (4) of 10345

Valuation work on this one is almost impossible to do given the lack of transparency which was apparently going on with it's numbers. Value can be thought of in many ways. 1. Growth stock where growth has stopped - usually trade right at 10x estimated earnings. ELN guidance for $1.60 area included about $0.30 for acquired products. Using $1.30 yields $13.00 from this approach. Please note that TYC is currently at 8x $3.40 forward EPS. 2. Value if ships is righted. Good quality EPS in 2003 should be around $1.50 or so. Assuming low end of industry multiple yields 20-25x for $30-37.50 by end of this year. 3. Breakup analysis. Revenue Mult Value Cash 2,358.9 Stock portfolio 900.0 Off B-S Stocks 1,000.0 Zanaflex 200.0 2.0 400.0 Skelaxin 150.0 2.0 300.0 Other pain 75.0 4.0 300.0 Zonegran 50.0 8.0 400.0 Frova 50.0 4.0 200.0 Myobloc 25.0 4.0 100.0 Sonata 100.0 4.0 400.0 Maxipine Hosp 100.0 4.0 400.0 Albecet Hosp 100.0 4.0 400.0 Actazam Hosp 50.0 4.0 200.0 Antegren 100.5 8.0 803.8 Dermatology 50.0 4.0 200.0 Europe Other 100.0 4.0 400.0 International 100.0 4.0 400.0 Diagnostics 75.0 8.0 600.0 Less: Debt (1,989.0) Off B-S Debt (1,000.0) Value 6,773.7 Shares 385 Value/Share 17.59 A few notes: Purposely low-balled and does not include new licensed revenues. Also does not give credit for low taxes. Sales numbers are for 2002E. Does not include acquired revenues - have not done it yet. No credit for contract mfg and royalties from drug delivery technology ($125 MM or so at 6x given high bottom-line impact of royalties and technology base would add $2) Numbers within management guidance otherwise. Zanaflex and Skelaxin at 2x due to generic competion soon. Zonegran, Antegren and Diagnostics at 8x due to specific niches targeted - less competition. Rest at 4x reflecting low growth, mature products. Europe could be 6x given growth expected but I do not know what is really in there. Could argue 8x for Myobloc but not really significant. Antegren represents $1 B in 2007 sales discounted back 5 years at 20% and multiplied by 50% for ELN's share and 50% risk factor (not approved). On balance sheet stock portfolio is assumed $200 MM over books based on recent comments. Off balance sheet portfolio assumed to match debt per management comments. Last thought: ELN will not have near-term liquidity concerns - only $65 MM debt due in 2002 although I do wonder why they drew down European loan facility. Real base value here of $20 if drug delivery tech added. 4. Breakup Analysis II Antegren $1 B - $2 B Drug Delivery $2 B - $3 B Drugs ($1.2B Core) $3 B - $6 B Cash/stock $1 B - $1 B Drugs in JVs $1 B - $5 B Total $8 B - $17B Share Value $20+ - $40+ I assume drugs in JVs (including Alzheimers) have much value. This stock is worth at least $20 and could be $40 once Enron/Tyco/Elan die down. Jon

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