Merrill, no change
Loss higher than expected due to SG&A
Elan’s 2Q06 revenues were in line with our forecasts, but missed on the bottom
line due to higher than expected Selling, General & Admin. expenses, of which
Tysabri-related SG&A expenses were reported at $21mn. The 2Q06 net loss was
about 40% lower than last year. Reported 2Q06 results vs. Merrill Lynch 2Q06
estimates & consensus (% YoY change):
• Revenues $136mn vs. MLe $136mn vs. cons. $142mn (+15%)
SG&A expenses $96mn vs. MLe $82mn (+5%)
R&D expenses $53mn vs. MLe $52mn (-18%)
Operating loss $65mn vs. MLe $49mn
Net loss from Cont. Ops $91mn vs. MLe $78mn
Loss per share $0.21 vs. MLe $0.18 vs. cons. $0.19
Tysabri launched in first EU countries, Alzheimer’s on track
Elan announced that in addition to the US, Tysabri was launched in the UK,
Ireland, Germany and Sweden in July. We currently forecast Tysabri sales of
$73mn in 2006, all of which are derived from the US. We are likely to amend our
2006 forecast so that a proportion is derived from EU sales. R&D programs in
Alzheimer’s are progressing as planned, with an interim look at phase II clinical
data for the most advanced compound AAB-001, expected sometime in 2H06. It
is not clear whether Elan and Wyeth would move this drug into phase III or further
phase II studies if the interim data are encouraging.
Retaining Sell rating
Elan’s shares appear to be pricing in Tysabri multiple sclerosis sales of over $2bn
(treating over 100,000 patients), which we think is over-optimistic. Our clinical
contacts suggest that they would use Tysabri to treat <10% of their patients,
hence our Tysabri sales forecast of $586mn by 2010E. Our fair value is less than
$5 per ADR, and does not include any value for the Alzheimer’s programs. |
