Elan reduces net debt to $650 million, enhances liquidity in 2009

By Jennifer Lanning Drey

Portland, Ore., Feb. 10 - Elan Corp. plc reduced its net debt to approximately $650 million at Dec. 31, versus $1.5 billion at the end of June 2009, through its previously announced strategic transaction with Johnson & Johnson and successful fourth-quarter bond offering, Shane Cooke, chief financial officer of Elan, said Wednesday during the company's fourth-quarter earnings conference call.

"The combination of the Johnson & Johnson transaction and the bond issuance allowed us to significantly enhance our liquidity position, reduce our debt and stagger its maturity over the next seven years," Cooke said.

The company used the proceeds from its offering of $625 million of 8¾% bonds, as well as some of the proceeds from the Johnson & Johnson transaction, to retire all of its $850 million of fixed-rate bonds due 2011.

Johnson & Johnson bought an 18.4% stake in Elan for $885 million and acquired substantially all of Elan's assets and rights related to its Alzheimer's immunotherapy program.

Elan had more than $836.5 million of cash and cash equivalents at Dec. 31.

Operating profits expected in 2010

Looking at 2010, Elan expects to generate operating profits before gains and other charges for the first time in several years, driven by higher revenues and lower costs, Cooke said.

The company is targeting adjusted EBITDA to approach, if not exceed, $150 million, representing an increase of at least 50% over 2009.

During the year, revenues are expected to transition from some of Elan's older declining legacy products to higher growth products such as Tysabri, Cooke said.

At the same time, operating expenses are expected to decrease in 2010 to a range of $475 million to $525 million from $562 million in 2009.

Tysabri boosts 2009 revenues

For the full year, Elan's revenues grew by 11% to $1.1 billion, led by a 30% increase in revenues from Tysabri. Operating expenses decreased by 9% before other charges and gains.

As a result, Elan posted adjusted EBITDA of $96.3 million for 2009, compared with adjusted EBITDA of $4.3 million in 2008.

"2009 was a solid year for the company from a financial performance point of view," Kelly Martin, Elan's chief executive officer, said during the call.

Elan is a Dublin-based neuroscience-based biotechnology company.

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