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This excerpt taken from the ELN 6-K filed Aug 28, 2009. Summary
of Operating Performance
Total revenue increased by 9% to $384.6 million in the
first half of 2009, compared to the same period in 2008. The
increase was driven by a strong performance from Tysabri,
which more than compensated for the reduced sales of
Maxipime®,
following the introduction of generic competition in June 2007;
and
Azactam®,
principally as a result of supply shortages. Total in-market
sales of Tysabri were $481.3 million in the first
half of 2009, an increase of 34% over the $359.7 million
recorded in the same period of 2008, and resulted in recorded
Tysabri revenue of $191.0 million (2008:
$134.3 million).
Table of Contents
Gross profit, including other charges, was $205.9 million
for the first half of 2009, compared to $208.7 million for
the same period of 2008. Other charges of $20.9 million
(2008: $Nil) included in cost of sales consisted of a non-cash
asset impairment charge of $13.1 million related to the
postponement of our biologics manufacturing activities, and
severance and restructuring costs of $7.8 million related
to the postponement of these activities and other strategic
redesign and realignment initiatives.
The gross profit, excluding other charges of $20.9 million
(2008: $Nil), increased by 9% to $226.8 million for the
first half of 2009, compared to $208.7 million for the same
period of 2008. The increased gross profit, excluding other
charges, was earned from higher sales of Tysabri which
more than replaced lost gross profit as a result of lower sales
of Maxipime and Azactam.
Although total revenue increased by 9%, selling, general and
administrative (SG&A) expenses, excluding other charges of
$9.5 million (2008: $2.5 million), declined by 17% to
$109.9 million in the first half, compared to
$132.8 million for the same period in 2008, reflecting
reduced litigation expenses, and lower headcount from the
reduction in support activities, along with continued cost
control.
R&D expenses, excluding other charges of $10.2 million
(2008: $3.1 million), increased by 4% to
$161.4 million in the first half of 2009, compared to
$155.9 million for the same period in 2008. R&D
expenses include $57.0 million (2008: $46.2 million)
in relation to the Alzheimer’s Immunotherapy Program (AIP)
which is the subject of the proposed transaction with
Johnson & Johnson (see pages 4 and 5 for
additional information relating to the transaction).
For a reconciliation of operating loss before other charges to
operating loss under IFRS, refer to page 10.
The legal settlement gain of $18.0 million relates to a
Settlement Agreement and Release entered into by Elan and Watson
Pharmaceuticals, Inc. (Watson) in March 2009 to settle
litigation with respect to Watson’s marketing of a generic
version of
Naprelan®.
As part of the Settlement Agreement and Release, Watson
stipulated that our patent at issue is valid and enforceable and
that Watson’s generic formulations of Naprelan
infringed our patent. In connection with the settlement, we
received $18.0 million from Watson in March 2009.
Excluding R&D expenses, other charges and the legal
settlement gain, we recorded an operating profit for the first
half of 2009 of $116.9 million, an increase of 54% over the
$75.9 million recorded in the first half of 2008, driven by
the 9% increase in revenues and the 17% decrease in SG&A
expenses.
The net loss increased by 4% to $165.3 million in the first
half of 2009, compared to $159.4 million for the same
period in 2008. The increase was primarily due to the inclusion
of $40.6 million (2008: $5.6 million) in other charges
in the first half of 2009 partially offset by the legal
settlement gain of $18.0 million. The other charges relate
to the postponement of our biologics manufacturing activities,
the strategic redesign and realignment of the R&D
organisation within our Biopharmaceuticals business, and a
reduction of related support activities. These adjustments
resulted in a reduction in our global workforce of approximately
230 positions, or 14% of our total workforce.
For additional discussion of the results of operations for the
first half of 2009, refer to pages 7 to 11 of this interim
management report.
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