This excerpt taken from the ELN 6-K filed Aug 28, 2009.
Liquid Resources and Shareholders Deficit
Our liquid resources and shareholders deficit were as follows:
We have historically financed our operating and capital resource requirements through cash flows from operations, sales of investment securities and borrowings. We consider all highly liquid deposits with an original maturity of three months or less to be cash equivalents. Our primary source of funds at 30 June 2009 consisted of cash and cash equivalents of $218.4 million, which excludes current restricted cash and cash equivalents of $16.8 million and current available-for-sale investments of $22.7 million. Cash and cash equivalents primarily consist of bank deposits and holdings in U.S. Treasuries funds.
At 30 June 2009, our shareholders deficit was $370.5 million, compared to $223.4 million at 31 December 2008. The increase in the deficit is due primarily to the net loss incurred during the first half of 2009 and the recognition of deferred tax benefits in shareholders equity that exceed cumulative share-based compensation expense, partially offset by the share-based compensation cost recorded in the first half of 2009 and the issuance of ordinary shares for employee share option exercises. Our debt covenants do not require us to maintain or adhere to any specific financial ratios. Consequently, the shareholders deficit has no impact on our ability to comply with our debt covenants. Our recorded shareholders deficit is substantially lower than our market capitalisation, in particular because the carrying values of our intangible assets do not fully reflect the value created through our R&D activities.
On 2 July 2009, following an in depth strategic review, we announced a definitive agreement whereby Johnson & Johnson will acquire substantially all of the assets and rights of our AIP, through a newly formed Johnson & Johnson company in which we will receive a 49.9% equity interest. In addition, Johnson & Johnson will invest $1 billion in Elan in exchange for newly issued American Depositary Shares of Elan which will represent 18.4% of our outstanding ordinary shares.
The closing of the transaction, which is subject to customary closing conditions, is expected in the second half of 2009.