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

To: Icebrg who wrote (3454)	10/31/2002 5:13:30 AM
From: Icebrg	Read Replies (2) \| Respond to of 10345

Comments from Ireland.. Elan: No surprises after September guidance (Goodbody Stockbrokers). Hold Elan’s Q3’02 results provided little surprise after the company’s 30th September downward guidance. At first glance our overall revenue figures for 2002 will remain largely unchanged. The uptick in amortised fee revenue on the cessation of joint ventures will balance product shortfalls. We anticipate little change to our fully diluted earnings before other costs forecast for 2002, currently at a loss of $0.09 per share. The issues raised in Elan’s September pre-announcement were ones of unexplained cash burn and lower than forecast revenues. On the former, the questioned $130m was made up of fixed and contingent product payments ($82.8m) and Capex ($46.7m). Through the recovery programme, Elan is guiding committed cash outlays excluding operating cashflows of approximately $650m. We estimate this will be made up of Capex ($175m), product payments ($337m) and restructuring costs and other payments ($140m). Product revenues fell in Q3’02 due to unspecified third party manufacturing problems. Elan stated that these have largely been resolved. If this is the case, we believe that given the prescription trends, individual product line sales (with the exception of Zanaflex) will pick up again over the next two quarters but not perhaps to Q1’02/Q2’02 levels. The over-riding issue for Elan, however, remains the successful generation of cash through asset disposals to service short and medium term debt while retaining a core business capable of supporting its pipeline development. As such, newsflow on the sale of assets is of more concern in the short-term. Elan remained bullish on the realisation of its $1.5bn cash target ahead of schedule but, as expected, gave no specific information on the progress. Pharma & Healthcare (Davy Stockbrokers). Elan Q3 results As anticipated, Elan's Q3 results contained no incremental negatives beyond what was outlined in the pre-close statement. Indeed, the downward revisions on working capital and cash outlays were positive, together with an upbeat tone in the conference call. The recovery plan is underway, evidenced by the headcount reduction of 700 and cash proceeds of over $460m already generated from divestitures. Taking a broad mediumterm view, management views the new Elan as a company with $400-500m in product revenues, gross margins of up to 75%, and operating costs of $500-600m (including R&D of $250m). This implies that the business will be loss-making and will likely continue to absorb rather than generate cash. Profitability for the 'steady state' business will only occur if and when the pipeline materialises, probably in the 2005-2006 period. If the near-term liquidity risk can be averted through divestitures, and the SEC review proves benign, then Elan’s prospects for profitability are a call on its pipeline. Overall, the balance of the risk still leaves us cautious on Elan, acknowledging the early (though positive) stage of the recovery plan and the time to market for its pipeline. Jack Gorman onbusiness.ie