Irish drugmaker Elan Corp. plc's (ELN) second quarter 2010 loss (excluding special items) of 2 cents per share was narrower than the year-ago adjusted loss of 13 cents per share. However, on a reported basis, Elan’s loss widened to 36 cents in the reported quarter from a loss of 14 cents per share in the year-ago quarter.
The wider loss reported in the quarter included the $206.3 million set aside to cover an expected settlement with the US Attorney's Office for the District of Massachusetts, which had been investigating the sales and marketing practices related to the epilepsy drug Zonegran, divested in 2004. The Zacks Consensus Estimate for the second quarter of 2010 was a loss of 5 cents per share.
Total revenue in the reported quarter dipped 4% year over year to $264.5 million. The bulk of the revenues in the reported quarter came from Tysabri, in partnership with Biogen Idec Inc. (BIIB), indicated for treating multiple sclerosis (MS).
Sales of the blockbuster, as recorded by Elan, jumped 19% year over year to $207.4 million in the reported quarter. The US sales of the drug, as recorded by Elan, jumped approximately 16% year over year to $144.9 million. The strong sales of the MS drug caused revenues from the BioNeurology unit to increase 5% year over year to $212.9 million.
However, the 29% year-over-year decline in revenues at the Elan Drug Technologies (EDT) segment caused overall revenues to fall. The Irish company, founded in 1969, is evaluating the possibility of divesting its EDT business. However, the poor performance of the segment in the quarter may prove to be a dampener to the spin-off plans.
Selling, general and administrative expenses in the reported quarter declined 8% year over year to $63.8 million. The decline was attributable to the reduced sales and marketing costs and amortization expense related to pain drug Prialt coupled with the cost containment measures of the company.
Research & development (R&D) expenses for the reported declined approximately 19% year over year to $65.5 million. The reduction was primarily attributable to cost savings arising out of the divestment of the Alzheimer’s Immunotherapy Program (AIP) in 2009.
Our Recommendation
Elan Corp. is a Zacks #3 Rank (Hold) stock, which indicates that it is expected to perform in line with the overall US equity market for the next 1 to 3 months. Our long-term Neutral stance on the company indicates that the stock is expected to replicate its short-term performance over the next 6+ months. Consequently, we advise investors to retain the stock over the time period.
Our short-term as well as long-term recommendation on the stock is supported by the lack of estimates revisions by the analysts covering Elan over the last thirty days. This indicates a lack of directional pressure on the stock.
Read the full analyst report on "ELN"
Read the full analyst report on "BIIB"
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