Sunday 22 October 2017

Elan blames market drop on business restructuring costs

Peter Flanagan

Peter Flanagan

SHARES in Elan fell after the company reported quarterly results that missed market forecasts and confirmed plans to restructure its business.

For the three months to the end of September, the pharmaceuticals company swung to a net loss from continuing operations of $216.2m (€166m), down from a $3.5m (€2.7m) profit a year earlier. Revenue however climbed almost 10pc to $306.6m (€236.8m).

The company blamed the loss on one-time charges related to business changes it is making. A drug Elan was developing failed clinical trials this year and, in August, the company said it would spin out its research division into a business called Neotope and reposition Elan as a standalone entity.

Chief executive Kelly Martin said the process was going well.

"We are separating our early discovery science business from the income business and in making that move there are a number of restructuring charges that have to be made," he claimed.

He confirmed Elan would close a research facility in San Francisco with the loss of around 200 jobs and shift much of its operations back to Ireland. The new Elan, which will be profitable immediately, will employ around 120 staff split evenly between Dublin and Boston.

Revenue growth was driven by the company's multiple sclerosis drug Tysabri, which saw the number of patients increase 3pc to 71,000 worldwide.

Sales of the drug increased to $403.8m (€311.8m) as a 17pc jump in US business offset an 11pc drop worldwide.

"Growth levels in utilisation and demand for Tysabri remain on track," said Mr Martin.

Every 10,000 Tysabri patients is said to equate to about $100m (€77.2m) in operating earnings.

"The MS market will continue to grow and by 2016 it will be close to a million patients worldwide and Tysabri will play a part in that, particularly for JC negative patients," Mr Martin said.

JC is a virus that can cause a serious brain condition and has been linked to Tysabri in the past, patients that don't have the JC virus are considered to be at much lower risk to side effects of the drug.

Apart from Tysabri, the company is also working on a "small molecule" -- ELND 005 -- which is being developed for bipolar disorder. The company hopes to bring that to market in the next two to three years.

Mr Martin wouldn't comment on whether the firm would be involved in M&A activity, but admitted it would be "pretty active" assessing businesses "across the value chain".

Despite yesterday's loss, the company reaffirmed its full year guidance of earnings before interest, depreciation and amortisation of more than $200m (€154.4m) on revenue of $1.2bn (€0.92bn).

Analysts were broadly positive. Davy Stockbrokers' Jack Gorman said the "key takeaway" was that underlying Tysabri patient growth continued.

"The balance sheet will be cleansed further in the next quarter via refinancing so that Tysabri's impact on profitability and cash flow will be easily apparent in 2013 and beyond," he said.

Analysts at Dolmen Securities however described the results as "very noisy", adding: "The underlying numbers will do little to move the share price, which, we believe currently reflects the take-out value of Tysabri."

In New York, Elan was down 1.2pc at $10.74, while in Dublin the stock was little changed at €8.32.

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