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Biotech / Medical : Elan Corporation, plc (ELN) -- Ignore unavailable to you. Want to Upgrade?

To: Qualified Opinion who wrote (1655)	2/13/2002 5:02:06 PM
From: Icebrg	Read Replies (1) \| Respond to of 10345

The full release: MOODY'S DOWNGRADES DEBT RATINGS OF ELAN CORPORATION PLC (Sr. TO Baa3 FROM Baa2); RATINGS REMAIN UNDER REVIEW FOR POSSIBLE FURTHER DOWNGRADE Approximately $2.6 Billion of Rated Debt Affected. New York, February 13, 2002 -- Moody's Investors Service downgraded the debt ratings of Elan Corporation plc (senior guaranteed debt to Baa3 from Baa2), and retained the ratings on review for possible further downgrade. This action is based on Moody's expectation that Elan's near term cash flow relative to debt will be impacted by lower earnings (including higher R&D and SG&A), as well as higher capital expenditures. In addition, we believe the recent SEC investigation into the company's accounting may limit Elan's ability to access new funds to support business development. The following ratings were lowered and remain under review for possible further downgrade: Athena Neurosciences Finance, LLC guaranteed notes (on a senior basis) and shelf: to Baa3/(P)Baa3 from Baa2/(P)Baa2 Elan Finance Corporation Ltd. guaranteed notes (on a subordinated basis): to Ba1 from Baa3; Elan Pharmaceutical Investments II Ltd. guaranteed notes (on a subordinated basis): to Ba1 from Baa3; Elan Pharmaceutical Investments III Ltd. guaranteed notes (on a subordinated basis): to Ba1 from Baa3; Dura Pharmaceuticals, Inc. subordinated notes: to Ba2 from Ba1 Moody's notes that Elan reported $594 million in cash flow from operations in 2001 on a U.S. GAAP basis. However, Moody's believes that after certain adjustments -- including interest on off-balance sheet debt, and any one-time benefits from 2001 product rationalization -- the company's ongoing rate of operating cash flow generation is substantially lower. Moody's expects that Elan's 2002 cash flow will be impacted by higher R&D to support clinical trials and larger SG&A expenses for salesforce expansion. Furthermore, Moody's anticipates 2002 capital expenditures in the range of $200 to $250 million in part to increase manufacturing capacity and to establish biologics capabilities. Based on this information, Moody's stated that its review of Elan's cash flow relative to debt levels (both gross debt and net debt) is a factor in the ratings downgrade. Moody's will continue to review and assess Elan's cash flow generating capabilities, including the treatment of license fees received from joint ventures, and the possible introduction of generic competition on certain products. In addition, Moody's is continuing to review Elan's balance sheet, including the composition of intangible assets, the treatment of equity in joint ventures, and the portfolio of marketable securities. Moody's believes that the company has a large cash position and portfolio of investments which should help to support liquidity over the near term. However, Moody's notes that a sizeable portion of Elan's investments are in private companies, including those with which Elan has entered strategic collaborations. Since many of these investments support the debt issued by Elan's special purpose financing vehicles, Moody's review will focus on both valuation and liquidity of the investment portfolio. Moody's stated that stabilizing factors include Elan's recent realignment of its sales and marketing organization, favorable prescription trends on certain key products, and the anticipated near term launch of Frova (for migraines). Moody's believes that recent news of the SEC's investigation into Elan's accounting presents uncertainty in terms of both timing and outcome. In addition, Moody's believes that until the investigation is concluded, Elan's ability to access new funds for business development activities could be limited. Moody's will continue to review Elan's ratings and may make further rating adjustments before the conclusion of the SEC review if it resolves the issues highlighted above. Elan is a specialty pharmaceutical and drug delivery company headquartered in Dublin, Ireland, with current areas of pharmaceutical focus in neurology, pain management, oncology, infectious diseases and dermatology.