ELN Elan Corp., Plc Adr

Elan Corporation’s (ELN) loss of 3 cents per share (excluding special items) for the first quarter of 2012 was broader than the Zacks Consensus Estimate of 2 cents per share but narrower the loss of 5 cents per share (excluding special items) in the year-ago period. Increased revenues helped reduce loss during the quarter.

First quarter 2012 revenues increased 16.7% from the year-ago figure to $288.4 million. The Zacks Consensus Estimate was $286 million. The increase was primarily attributable to strong Tysabri sales.

Quarter in Details

In-market net sales of Tysabri climbed 14.2% to $399 million in the reported quarter. The increase was driven by increased global demand and higher price in the US market. The sales of Tysabri recorded by Elan rose 17.5% to $288.2 million.

We note that Elan has a co-development agreement with Biogen Idec Inc. (BIIB) for Tysabri, under which Elan markets the drug in the US and books the entire sales as its revenues.

Outside the US, Biogen is responsible for distribution, and Elan records as revenue its share of the profit/loss on these sales of Tysabri. The agreement provides Elan with the option to buy the rights of Tysabri if Biogen changes hands.

During the reported quarter, selling, general and administrative (SG&A) expenses increased 25.7% to $60.1 million, reflecting higher Tysabri marketing expenses. Research and development (R&D) expenses came in at $49 million, up 2.9% from the year-ago quarter.

Outlook Reaffirmed

Elan said that the company is on-track to attain the full-year guidance announced earlier. Elan expects 2012 revenues to be in the range of $1.20 billion – $1.25 billion. The Zacks Consensus Estimate of $1.23 billion is within the company’s guidance range.

Gross profit margin is expected to be in the range of 44%–47% of total revenues. Combined SG&A and R&D expenses for 2012 are projected in the range of $420 - $440 million.

Our Recommendation

We currently have a Neutral recommendation on Elan. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

 
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