Elan Reports Second Quarter and First Half 2013 Financial Results

  Elan Reports Second Quarter and First Half 2013 Financial Results

Business Wire

DUBLIN -- July 24, 2013

Elan Corporation, plc (NYSE:ELN) today reported its second quarter and first
half 2013 financial results.

“We are focused squarely on the process of exploring a sale of the company as
announced by our Board of Directors on June 14, 2013,” commented Mr. Kelly
Martin, CEO, adding, “the Board of Directors and executive management are in
complete alignment with regard to exploring all opportunities to maximize
shareholder value.”

Mr. Martin further added that,“the collective work and effort over the
previous years has produced a business platform that is highly unique across a
number of tactical as well as strategic dimensions. We will continue to
advance the process and communicate the outcome to the marketplace at the
appropriate time.”

Mr. Nigel Clerkin, chief financial officer, said, “our second quarter results
have been substantially impacted by the completion of the Tysabri transaction,
the subsequent $1.0 billion share buyback, debt retirements and other
transactions. Our net income for the quarter, of $2,288.7 million, reflects
the gain recorded on the Tysabri transaction of $2,540.2 million, while our
sharecount was reduced by approximately 15%. We remain in a very strong
financial position, and ended the quarter with over $1.9 billion in cash and
cash equivalents, and no debt.”

Unaudited Consolidated U.S. GAAP Income Statement Data
Three Months Ended                                       Six Months Ended
June 30                                                      June 30
2012      2013                                              2012     2013
US$m      US$m                                         US$m     US$m
                       Continuing Operations
(0.2)      56.3        Revenue (see page 7)                  —         56.5
0.1        —           Cost of goods sold                    0.2       —
(0.3)      56.3        Gross margin                          (0.2)     56.5
                                                                       
                       Operating Expenses (see page 7)
32.8       26.2        Selling, general and                  62.8      55.2
                       administrative
25.6       22.2        Research and development              50.5      41.6
(0.1)      97.5        Other net charges/(gain) (see         1.9       116.2
                       page 9)
58.3       145.9       Total operating expenses              115.2     213.0
(58.6)     (89.6)      Operating loss                        (115.4)   (156.5)
                                                                       
                       Net Interest and Investment Gains
                       and Losses (see page 10)
12.4       4.5         Net interest expense                  29.2      13.6
—          140.2       Net charge on debt retirements        —         140.2
34.3       14.3        Net loss on equity method             50.2      29.2
                       investments
46.7       159.0       Net interest and investment gains     79.4      183.0
                       and losses
                                                                       
(105.3)    (248.6)     Net loss from continuing              (194.8)   (339.5)
                       operations before tax
(15.3)     3.2         Provision for/(benefit from)          (30.1)    (14.9)
                       income taxes
(90.0)     (251.8)     Net loss from continuing              (164.7)   (324.6)
                       operations
                                                                       
                       Discontinued Operations
                       Net income from discontinued
61.5       2,540.5     operations, net of tax (see page      104.4     2,676.6
                       12)
(28.5)     2,288.7     Net income/(loss)                     (60.3)    2,352.0
                                                                       
                       Basic and diluted net loss per
(0.15)     (0.47)      ordinary share - continuing           (0.28)    (0.57)
                       operations
                       Basic and diluted net income per
0.10       4.75        ordinary share – discontinued         0.18      4.73
                       operations
                       Basic and diluted net
(0.05)     4.28        income/(loss) per ordinary share      (0.10)    4.16
                       – total operations
                       Basic and diluted weighted
                       average number of ordinary shares
591.8      535.3       outstanding (in millions) –           591.3     565.8
                       continuing and discontinued
                       operations
                                                                       

Unaudited Non-GAAP Financial Information – Adjusted EBITDA

Three Months Ended   Non-GAAP Financial Information    Six Months Ended
June 30                Reconciliation Schedule             June 30
2012    2013                                              2012     2013
US$m    US$m                                         US$m     US$m
                                                                     
(28.5)   2,288.7       Net income/(loss)                   (60.3)    2,352.0
                       Net income/(loss) from
                       discontinued operations:
(67.9)   (2,540.5)     Net income from Tysabri             (138.8)   (2,633.9)
6.6      —             Net loss from Prothena              14.1      0.5
(0.2)    —             Net (income)/loss from              20.3      (43.2)
                       EDT/Alkermes
(90.0)   (251.8)       Net loss from continuing            (164.7)   (324.6)
                       operations
12.4     4.5           Net interest expense                29.2      13.6
(15.3)   3.2           Provision for/(benefit from)        (30.1)    (14.9)
                       income taxes
3.2      1.1           Depreciation and amortization       6.5       2.2
—        —             Amortized fees                      (0.1)     (0.1)
(89.7)   (243.0)       EBITDA from continuing              (159.2)   (323.8)
                       operations
8.2      4.4           Share-based compensation            19.1      12.3
(0.1)    97.5          Other net charges/(gain)            1.9       116.2
34.3     14.3          Net loss on equity method           50.2      29.2
                       investments
—        140.2         Net charge on debt retirements      —         140.2
(47.3)   13.4          Adjusted EBITDA from continuing     (88.0)    (25.9)
                       operations^(1)
                                                                     

^(1) A reconciliation of Adjusted EBITDA from discontinued operations to net
income/(loss) from discontinued operations for the three and six months ended
June 30, 2012 and 2013 is set out in Appendix I and II.

To supplement its consolidated financial statements presented on a U.S. GAAP
basis, Elan provides readers with Adjusted EBITDA, a non-GAAP measure of
operating results. Adjusted EBITDA is defined as net loss from continuing
operations plus or minus net income or loss from discontinued operations, net
interest expense, provision for or benefit from income taxes, depreciation and
amortization of costs and revenue, share-based compensation, other net charges
or gains, net loss on equity method investments and net charges on debt
retirements. Adjusted EBITDA is not presented as, and should not be considered
an alternative measure of operating results or cash flows from operations, as
determined in accordance with U.S. GAAP. Elan’s management uses Adjusted
EBITDA to evaluate the operating performance of Elan and its business and this
measure is among the factors considered as a basis for Elan’s planning and
forecasting for future periods. Elan believes Adjusted EBITDA is a measure of
performance used by some investors, equity analysts and others to make
informed investment decisions. Adjusted EBITDA is used as an analytical
indicator of income generated to service debt and to fund capital
expenditures. Adjusted EBITDA does not give effect to cash used for interest
payments related to debt service requirements and does not reflect funds
available for investment in the business of Elan or for other discretionary
purposes. Adjusted EBITDA, as defined by Elan and presented in this press
release, may not be comparable to similarly titled measures reported by other
companies. A reconciliation of Adjusted EBITDA to net income/(loss) is set out
in the table above titled, “Non-GAAP Financial Information Reconciliation
Schedule”.

Unaudited Consolidated U.S. GAAP Balance Sheet Data
                                                                  
                                                       December 31     June 30
                                                       2012            2013
                                                    US$m          US$m
Assets
Current Assets
Cash and cash equivalents                              431.3           1,918.3
Restricted cash and cash equivalents — current         2.6             3.4
Investment securities — current                        167.9           42.0
Held for sale assets                                   220.1           —
Deferred tax assets — current                          380.9           —
Other current assets                                   206.7           83.7
Total current assets                                   1,409.5         2,047.4
                                                                       
Non-Current Assets
Intangible assets, net                                 99.0            97.8
Property, plant and equipment, net                     12.7            8.2
Equity method investments                              14.0            69.5
Investment securities — non-current                    8.6             9.0
Deferred tax assets — non-current                      64.6            —
Restricted cash and cash equivalents — non-current     13.7            0.9
Other assets                                           18.1            17.2
Total Assets                                           1,640.2         2,250.0
                                                                       
Liabilities and Shareholders’ Equity
Accounts payable, accrued and other liabilities        422.0           199.9
Long-term debt                                         600.0           —
Shareholders’ equity                                   618.2           2,050.1
Total Liabilities and Shareholders’ Equity             1,640.2         2,250.0
                                                                       

Movement in Shareholders’ Equity
                                                           
Three Months                                                    Six Months
ended June 30,                                                  ended June 30,
2013                                                            2013
US$m                                                       US$m
682.2              Opening shareholders’ equity                 618.2
2,288.7            Net income for the period                    2,352.0
4.4                Share-based compensation                     13.2
16.7               Issuance of share capital                    29.3
24.8               Unrealized movement on defined benefit       24.8
                   pension plan
19.8               Increase in net unrealized gain on           0.7
                   investment securities
(1,013.9)          Share repurchase and associated costs        (1,016.4)
27.4^(1)           Excess tax benefits from share based         28.3
                   compensation
2,050.1            Closing shareholders’ equity                 2,050.1
                                                                

^(1) $27.4 million of excess tax benefits from share based compensation have
been recognised in the three months ended June 30, 2013 as a result of the
utilization of U.S. federal stock compensation net operating loss carryovers
against a portion of the upfront profit on the sale of Tysabri which is
attributed to the U.S.

Unaudited Consolidated U.S. GAAP Cash Flow Data
Three Months Ended                                      Six Months Ended
June 30                                                     June 30
2012    2013                                               2012    2013
US$m    US$m                                          US$m    US$m
                                                                     
(47.3)   13.4          Adjusted EBITDA from continuing      (88.0)   (25.9)
                       operations
82.6     —             Adjusted EBITDA from                 169.6    116.9
                       discontinued operations^(1)
(13.8)   (40.2)        Net interest and tax^(2)             (28.5)   (52.0)
(0.1)    (133.4)       Other net charges^(3)                (1.5)    (155.4)
(2.3)    22.1          Working capital                      (38.5)   (49.3)
                       decrease/(increase)
19.1     (138.1)       Cash flows provided by/(used in)     13.1     (165.7)
                       operating activities
(1.5)    0.2           Net purchases of tangible and        (6.0)    (0.7)
                       intangible assets
(0.2)    (0.2)         Purchase of investments              (0.4)    (0.3)
(48.7)   (25.8)        Funding provided to equity           (48.7)   (55.7)
                       method investment (Janssen AI)
                       Net proceeds from sale of            —        169.7
                       Alkermes shares
—        3,249.5       Proceeds from sale of Tysabri        —        3,249.5
                       business
—        (40.0)        Purchase of equity method            —        (40.0)
                       investment (Newbridge)
0.2      —             Net proceeds from sale of equity     381.1    —
                       method investment (Alkermes plc)
7.0      —             Receipt of deferred                  7.0      —
                       consideration (Prialt)
3.6      (1,695.4)     Cash provided by/(used in)           8.6      (1,681.8)
                       financing activities^(4)
—        12.0          Restricted cash and cash             —       12.0
                       equivalents movement^(5)
(20.5)   1,362.2       Net cash movement                    354.7    1,487.0
646.9    556.1         Beginning cash balance               271.7    431.3
626.4    1,918.3       Cash and cash equivalents at end     626.4    1,918.3
                       of period
                                                                     

^(1) A reconciliation of Adjusted EBITDA from discontinued operations to net
income/(loss) from discontinued operations for the three and six months ended
June 30, 2012 and 2013 is set out in Appendix I and II.

^(2) Includes a non-cash reclassification to cash used in financing activities
of $27.4 million of excess tax benefits from share based compensation for the
three months ended June 30, 2013 related to the utilization of stock
compensation net operating loss carryovers against the gain on sale of
Tysabri.

^(3) Includes cash other net charges of $100.7 million for the three months
ended June 30, 2013 in addition to cash transaction costs of $32.7 million
related to the Tysabri Transaction.

^(4) Includes Share Repurchase costs incurred to date of $1,011.7 million and
debt redemption costs of $727.8 million reduced by a non-cash reclassification
to net interest and tax of excess tax benefits from share based compensation
of $27.4 million and proceeds from issue of share capital of $16.7 million for
the three months ended June 30, 2013.

^(5) Includes release of security deposit from exiting South San Francisco
building leases in the three months ended June 30, 2013.

Overview

The net income for the second quarter of 2013 of $2,288.7 million (2012: net
loss of $28.5 million) includes a net loss from continuing operations of
$251.8 million (2012: $90.0 million) (see page 7), and net income from
discontinued operations of $2,540.5 million (2012: $61.5 million) related to
the Tysabri, Prothena and EDT businesses (see page 12 and Appendix I).

The net income for the first half of 2013 of $2,352.0 million (2012: net loss
of $60.3 million) includes a net loss from continuing operations of $324.6
million (2012: $164.7 million) (see page 8), and net income from discontinued
operations of $2,676.6 million (2012: $104.4 million) related to the Tysabri,
Prothena and EDT businesses (see page 12 and Appendix II).

Sale Process

On June 14, 2013, Elan announced that it is proceeding with a formal sale
process in light of the expressions of interest received to date. As
previously stated, the Elan Board and management are aligned in maximizing the
full value potential of the business on behalf of its shareholders. The sale
process is continuing and the outcome will be communicated at the appropriate
time.

Tysabri^®  Transaction

On April 2, 2013, Elan completed the previously announced Tysabri Transaction
(see page 12). In accordance with the terms of the transaction, the existing
collaboration arrangements with Biogen Idec Inc (Biogen Idec) terminated, and
Biogen Idec paid an upfront payment of $3.25 billion to Elan, and will pay
continuing royalties on Tysabri in-market sales. Elan recorded a net after-tax
gain on the Tysabri Transaction of $2,540.2 million in the second quarter of
2013.

Share Repurchase

On April 18, 2013, Elan announced the results of the $1.0 billion Dutch
Auction share repurchase program (the “Share Repurchase”) at a total cost of
$1,016.4 million (including $16.4 million of taxes and transaction costs). The
Share Repurchase resulted in the purchase of 88.9 million shares at $11.25 per
share, and reduced the number of shares in issue by approximately 15%, to
approximately 510.0 million.

Continuing Operations

As a consequence of the Tysabri Transaction, the results of the Tysabri
business for the period through April 2, 2013, the date the Tysabri
Transaction was completed, are presented as a discontinued operation, and the
comparative amounts have been restated to reflect this classification. The net
income from the Tysabri discontinued operation includes the gain on the
disposal of the Tysabri business.

Under the Tysabri Transaction agreement, Elan received as revenue a 50% share
of Tysabri profits for the month of April 2013, after which continuing
royalties will be received. These receipts are recorded as revenue within
continuing operations. The continuing royalties include a royalty of 12% of
global net sales of Tysabri for 12 months from May 1, 2013. Thereafter, Elan
will earn a royalty of 18% of global net sales up to $2.0 billion each year,
and a 25% royalty on global net sales above $2.0 billion.

Quarter 2, 2013

Total revenue from continuing operations for the second quarter of 2013 of
$56.3 million (2012: $(0.2) million) includes a 50% share of Tysabri profits
for the month of April 2013 and a royalty of 12% of global net sales of
Tysabri for May and June 2013.

SG&A expenses decreased to $26.2 million for the second quarter of 2013, from
$32.8 million for the same period of 2012, primarily as a result of lower
costs due to the closure of the South San Francisco facility during the first
quarter of 2013.

R&D expenses decreased by 13% for the second quarter of 2013 to $22.2 million
from $25.6 million for the same period of 2012. This decrease reflects the
impact of the operations restructuring during the fourth quarter of 2012.

Adjusted EBITDA from continuing operations increased to $13.4 million for the
second quarter of 2013, from Adjusted EBITDA losses of $47.3 million for the
same period of 2012. Operating income excluding other net charges for the
second quarter of 2013 was $7.9 million, compared to an operating loss
excluding other net charges of $58.7 million for the second quarter of 2012.
These improvements principally reflect the Tysabri revenue recognised during
the second quarter of 2013 following the completion of the Tysabri Transaction
on April 2, 2013 and reduced operating expenses.

First half of 2013

Adjusted EBITDA losses from continuing operations decreased to $25.9 million
for the first half of 2013, from Adjusted EBITDA losses of $88.0 million for
the same period of 2012, principally reflecting the Tysabri revenue of $56.3
million recognised during the second quarter of 2013 following the completion
of the Tysabri Transaction on April 2, 2013, and decreased operating expenses.

SG&A expenses decreased by 12% to $55.2 million for the first half of 2013,
from $62.8 million for the same period of 2012, primarily as a result of lower
costs due to the closure of the South San Francisco facility during the first
quarter of 2013.

R&D expenses decreased by 18% for the first half of 2013 to $41.6 million from
$50.5 million for the same period of 2012. This decrease reflects the impact
of the operations restructuring during the fourth quarter of 2012.

Clinical update

On July 17, 2013, we announced that the U.S. Food and Drug Administration
granted ELND005 fast track designation to its development program for the
treatment of Neuropsychiatric Symptoms in Alzheimer’s disease (AD). The
ongoing ELND005 clinical program includes the Phase 2 Study AG201 in patients
with AD, who are experiencing at least moderate levels of agitation/aggression
and the safety extension Study AG251. ELND005 is also being studied as a
maintenance treatment of Bipolar Disease in an ongoing study BPD201 and its
safety extension study BPD251.

Other net charges/(gain)

Other net charges for the three and six months ended June 30, 2013 and 2012
were as follows:

Three Months Ended                                        Six Months Ended
June 30                                                       June 30
2012       2013                                              2012     2013
US$m       US$m                                         US$m     US$m
—           79.0       Transaction and other costs            —         79.8
—           21.4       University of Cambridge donation       —         21.4
—           1.0        Severance, restructuring and other     1.4       5.4
                       costs
—           (3.9)      Defined benefit pension plan gain      —         (3.9)
—           —          Intarcia investment                    —         12.5
(0.1)       —          Facilities and other asset             0.5       1.0
                       impairment charges
(0.1)       97.5       Total                                  1.9       116.2
                                                                        

During the second quarter of 2013, Elan proposed a number of transactions for
shareholder approval. Elan proposed to enter into a royalty participation
agreement with Theravance Therapeutics Inc. (the Theravance Transaction),
acquire AOP Orphan Pharmaceuticals (the AOP Transaction), divest ELND005 to an
independent company, Speranza Therapeutics (the ELND005 Transaction), and
authorize a $200 million share repurchase program (the $200 million Share
Repurchase). The Extraordinary General Meeting (EGM) to consider these
transactions was held on June 17, 2013. Shareholders approved the $200 million
Share Repurchase but did not approve the Theravance Transaction, the AOP
Transaction or the ELND005 Transaction. As a result of the approval by
shareholders of the $200 million Share Repurchase, the offer by Royalty Pharma
for the entire share capital of Elan (the Royalty Pharma Offer) lapsed under
its terms.

During the second quarter of 2013, we incurred transaction and other costs in
relation to these proposed transactions, the defense of the Royalty Pharma
Offer, and the formal sale process of $79.0 million, which includes break fees
of $10.0 million in relation to the Theravance Transaction and $6.5 million in
relation to the AOP Transaction.

During the second quarter of 2013, we made a donation to the University of
Cambridge of $21.4 million to fund innovative research initiatives at the
university. We also incurred a $1.0 million severance and restructuring charge
during the second quarter of 2013 related to the reduction in headcount
following the completion of the Tysabri Transaction on April 2, 2013.

During the second quarter of 2013, we closed Elan’s defined benefit pension
plans to the future accrual of benefits. In relation to this, we recognised a
defined benefit pension plan settlement gain of $3.9 million arising from the
settlement of pension obligations as part of an enhanced transfer value
program for members to transfer their benefits from the defined benefit plans
to the company’s defined contribution plan.

Net Interest and Investment Gains and Losses

Net interest expense

For the second quarter of 2013, net interest expense decreased to $4.5
million, from $12.4 million for the second quarter of 2012. This decrease is
primarily due to the redemption of the 6.25% Senior Notes due 2019 on May 2,
2013.

Net charge on debt retirements

On April 2, 2013, we announced that we had issued an irrevocable notice of
redemption to redeem all of the $600 million in aggregate principal amount of
the then outstanding 6.25% Senior Notes due 2019 (the 2019 Notes). The total
redemption payment on the 2019 Notes was $706.7 million plus accrued and
unpaid interest. The redemption was completed on May 2, 2013. In connection
with the redemption, we recorded a net charge on debt retirement of $118.1
million in the second quarter of 2013, including a non-cash write-off of
approximately $11.4 million related to unamortized deferred financing costs.

We also incurred debt issuance transaction costs of $19.1 million and interest
costs of $3.0 million related to the offering and subsequent redemption of
$850.0 million in aggregate principal amount of 6.25% Senior Notes due 2021
(the 2021 Notes). The offering of the 2021 Notes closed into escrow on May 31,
2013, subject to the completion of the Theravance Transaction. Following the
result of the EGM on June 17, 2013, the 2021 Notes were redeemed on June 20,
2013, at par plus accrued interest.

Net loss on equity method investments

The losses on equity method investments for the three and six months ended
June 30, 2013 and 2012 can be analyzed as follows:

Three Months Ended                  Six Months Ended
June 30                                 June 30
2012       2013                        2012      2013
US$m       US$m                   US$m      US$m
33.5        11.0       Janssen AI       48.3       25.1
0.8         0.9        Proteostasis     1.9        1.7
—           2.4        Newbridge        —          2.4
34.3        14.3       Total            50.2       29.2
                                                   

Janssen AI

As part of Elan’s 2009 transaction with Johnson & Johnson, Janssen AI, a
subsidiary of Johnson & Johnson, acquired substantially all of Elan’s assets
and rights related to its Alzheimer’s Immunotherapy Program (AIP)
collaboration with Wyeth (which has been acquired by Pfizer). Under the terms
of this transaction, Johnson & Johnson provided an initial $500.0 million
funding to Janssen AI and Elan has a 49.9% shareholding in Janssen AI. Any
additional funding in excess of the initial $500.0 million funding commitment
is required to be funded equally by Elan and Johnson & Johnson up to a maximum
additional commitment of $400.0 million in total.

During the second quarter of 2013, Elan provided funding of $25.8 million to
Janssen AI. Following the provision of this funding, Elan’s remaining funding
commitment to Janssen AI is $67.4 million. Elan recorded a net loss of $11.0
million on the equity method investment during the second quarter of 2013,
relating to its share of the losses of Janssen AI.

Proteostasis

Elan made a $20.0 million equity investment in Proteostasis Therapeutics, Inc
(Proteostasis) in May 2011, which represents approximately 22% of the equity
of Proteostasis. The net loss recorded on the equity method investment in the
second quarter of 2013 was $0.9 million.

Newbridge

In April 2013, Elan invested $40.0 million in Newbridge Pharmaceuticals
Limited (Newbridge) in return for a 48% equity stake in the company. Elan has
an option to acquire the company for a further approximately $243 million,
between January 2014 and March 2015. Elan’s investment in Newbridge has been
recorded as an equity method investment on the balance sheet. The net loss
recorded on the equity method investment in the second quarter of 2013 was
$2.4 million.

Discontinued Operations

Net income from discontinued operations for the three and six months ended
June 30, 2013 and 2012 includes the following:

Three Months Ended              Six Months Ended
June 30                             June 30
2012     2013                      2012    2013
US$m     US$m                 US$m    US$m
67.9      2,540.5      Tysabri      138.8    2,633.9
(6.6)     —            Prothena     (14.1)   (0.5)
0.2       —            EDT          (20.3)   43.2
61.5      2,540.5      Total        104.4    2,676.6
                                             

Tysabri

On April 2, 2013, Elan completed the asset purchase transaction with Biogen
Idec, which was announced on February 6, 2013, whereby Elan transferred to
Biogen Idec all Tysabri IP and other assets related to Tysabri (the Tysabri
Transaction). In accordance with the terms of the Tysabri Transaction, the
existing collaboration arrangements with Biogen Idec terminated and Biogen
Idec paid an upfront payment of $3.25 billion to Elan and will pay continuing
royalties on Tysabri in-market sales. The results of the Tysabri business for
the period through April 2, 2013, the date the Tysabri transaction was
completed, are presented as a discontinued operation, and the comparative
amounts have been restated to reflect this classification. The net income from
the Tysabri discontinued operation in the second quarter of 2013 of $2,540.5
million is primarily comprised of the after-tax gain on the disposal of the
Tysabri  business.

The pre-tax gain recorded on divestment of the Tysabri business amounted to
$3,021.6million, and was calculated as follows:

                                               US$m
Cash consideration                               3,249.5
Goodwill                                         (110.8)
Other intangible assets                          (84.4)
Transaction and other costs                      (32.7)
Net gain on divestment of business               3,021.6
Tax provision                                    (481.4)
Net after-tax gain on divestment of business     2,540.2
                                                 

The tax charge on the Tysabri Transaction of $481.4 million includes a cash
tax charge of approximately $9.2 million related to U.S. State taxes and
Federal alternative minimum taxes, and the remainder of the charge is a
non-cash charge and relates to the utilization of deferred tax assets.

Under the agreement, Elan received as revenue a 50% share of Tysabri profits
for the month of April 2013, after which Elan will receive continuing
royalties. The continuing royalties include a royalty of 12% of global net
sales of Tysabri for 12 months from May 2013. Thereafter, Elan will earn a
royalty of 18% of global net sales up to $2.0 billion each year, and a 25%
royalty on global net sales above $2.0 billion. These receipts are recorded as
revenue within continuing operations.

Prothena

On December 21, 2012, Elan announced the completion of the spin-off to
shareholders of a substantial portion of its drug discovery business platform,
which is referred to as the “Prothena business”, into a new, publicly traded
company incorporated in Ireland named Prothena Corporation, plc (“Prothena”).
Elan retains an 18% equity holding in Prothena which has been recognized as an
available for sale investment.

The results of the Prothena business that are included in the Consolidated
Income Statement for the second quarter and first half of 2012 are presented
as a discontinued operation. The net loss from discontinued operations for the
first half of 2013 includes $0.5 million of transaction costs associated with
the spin-off of Prothena.

Elan Drug Technologies

In September 2011, Alkermes plc and Elan completed the merger between
Alkermes, Inc. and EDT, which combined to form Alkermes plc. In connection
with the transaction, Elan received $500.0 million in cash and 31.9million
ordinary shares of Alkermes plc. Elan sold 76% (24.15 million ordinary shares)
of its shareholding in Alkermes plc in March 2012 and received net proceeds of
$380.9 million.

In February 2013, Elan sold the remaining 7.75 million ordinary shares of
Alkermes plc. and received proceeds of $169.7 million and recognized a
realized gain of $43.2 million.

The net loss from discontinued operations for the first half of 2012 includes
a net loss on the Alkermes equity method investment of $7.2 million, and a net
loss on the disposal of the Alkermes plc ordinary shares in March 2012 of
$13.1 million.

About Elan

Elan is a biotechnology company, headquartered in Ireland, committed to making
a difference in the lives of patients and their families by dedicating itself
to bringing innovations in science to fill significant unmet medical needs
that continue to exist around the world. For additional information about
Elan, please visit http://www.elan.com.

The Directors of Elan accept responsibility for the information contained in
this announcement. To the best of their knowledge and belief (having taken all
reasonable care to ensure such is the case); the information contained in this
announcement is in accordance with the facts and does not omit anything likely
to affect the import of such information.

Any holder of 1% or more of any class of relevant securities of Elan may have
disclosure obligations under Rule 8.3 of the Irish Takeover Panel Act, 1997,
Takeover Rules 2007 (as amended).

Forward-Looking Statements

This document contains forward-looking statements about Elan’s financial
condition, results of operations, business prospects, Tysabri and products in
development that involve substantial risks and uncertainties. You can identify
these statements by the fact that they use words such as “anticipate”,
“estimate”, “project”, “target”, “intend”, “plan”, “will”, “believe”, “expect”
and other words and terms of similar meaning in connection with any discussion
of future operating or financial performance or events. On June 14, 2013 we
announced that we were proceeding with a formal sale process for Elan in light
of expressions of interest. There can be no assurance that the sale process
will result in a sale of Elan or, if the sale process does result in a sale of
Elan, of the terms or the timing of the sale. Further, we are deemed to be in
an “offer period” for the purposes of the Irish Takeover Rules which may
restrict our ability to execute our strategy on a timely basis. Among the
additional factors that could cause actual results to differ materially from
those described or projected herein are the following: as our principal source
of revenue is a royalty on sales of Tysabri, the potential of Tysabri, which
may be severely constrained by increases in the incidence of serious adverse
events (including death) associated with Tysabri (in particular, by increases
in the incidence rate for cases of PML), or by competition from existing or
new therapies (in particular, oral therapies), and the potential for the
successful development and commercialization of products, whether internally
or by acquisition, especially given the separation of the Prothena business
which left us with no material pre-clinical research programs or capabilities;
Elan’s ability to maintain sufficient cash, liquid resources, and investments
and other assets capable of being monetized to meet its liquidity
requirements; the success of our development activities, and research and
development activities in which we retain an interest, including, in
particular, the impact of the announced discontinuation of the development of
bapineuzumab; failure to comply with anti-kickback, bribery and false claims
laws in the United States, Europe and elsewhere; difficulties or delays in
manufacturing and supply of Tysabri; trade buying patterns; the impact of
potential biosimilar competition, the trend towards managed care and health
care cost containment, including Medicare and Medicaid; legislation and other
developments affecting pharmaceutical pricing and reimbursement (including, in
particular, the dispute in Italy with respect to Tysabri sales), both
domestically and internationally; failure to comply with Elan’s payment
obligations under Medicaid and other governmental programs; exposure to
product liability (including, in particular, with respect to Tysabri) and
other types of lawsuits and legal defense costs and the risks of adverse
decisions or settlements related to product liability, patent protection,
securities class actions, governmental investigations and other legal
proceedings; Elan’s ability to protect its patents and other intellectual
property; claims and concerns that may arise regarding the safety or efficacy
of Elan’s product candidates; interest rate and foreign currency exchange rate
fluctuations and the risk of a partial or total collapse of the euro;
governmental laws and regulations affecting domestic and foreign operations,
including tax obligations; whether we are deemed to be an Investment Company
or a Passive Foreign Investment Company; general changes in United States and
International generally accepted accounting principles; growth in costs and
expenses; and the impact of acquisitions, divestitures, restructurings,
product withdrawals and other unusual items. A further list and description of
these risks, uncertainties and other matters can be found in Elan’s Annual
Report on Form 20-F for the fiscal year ended December 31, 2012, and in its
Reports of Foreign Issuer on Form 6-K filed with the SEC. Elan assumes no
obligation to update any forward-looking statements, whether as a result of
new information, future events or otherwise

Appendix I

Unaudited Financial Information – Net Income/(Loss) and Adjusted EBITDA from
Discontinued Operations for the three months ended June 30, 2012 and 2013

Three Months Ended                                    Three Months Ended
June 30, 2012                                             June 30, 2013
Tysabri  Prothena  EDT    Total                        Tysabri    Prothena  EDT   Total
US$m     US$m      US$m   US$m                    US$m       US$m      US$m  US$m
288.4     —          —       288.4     Revenue            —           —          —      —
160.1    —         —      160.1     Cost of goods      —          —         —     —
                                       sold
128.3     —          —       128.3     Gross margin       —           —          —      —
                                                                                        
                                       Operating
                                       Expenses
                                       Selling,
27.6      0.4        —       28.0      general and        —           —          —      —
                                       administrative
16.2      7.4        —       23.6      Research and       —           —          —      —
                                       development
                                       Net gain on
—         —          —       —         divestment of      (3,021.6)   —          —      (3,021.6)
                                       business
—        —         —      —         Other net          (0.3)      —         —     (0.3)
                                       gains
                                       Total
43.8     7.8       —      51.6      operating          (3,021.9)  —         —     (3,021.9)
                                       expenses
84.5      (7.8)      —       76.7      Operating          3,021.9     —          —      3,021.9
                                       income/(loss)
                                                                                        
                                       Net interest
—        —         (0.2)  (0.2)     and investment     —          —         —     —
                                       gains
                                       Net
84.5      (7.8)      0.2     76.9      income/(loss)      3,021.9     —          —      3,021.9
                                       before tax
                                       Provision
16.6     (1.2)     —      15.4      for/(benefit       481.4      —         —     481.4
                                       from) income
                                       taxes
67.9      (6.6)      0.2     61.5      Net                2,540.5     —          —      2,540.5
                                       income/(loss)

Adjusted EBITDA Reconciliation Schedule
                                                                                        
67.9      (6.6)      0.2     61.5      Net                2,540.5     —          —      2,540.5
                                       income/(loss)
                                       Net interest
—         —          (0.2)   (0.2)     and investment     —           —          —      —
                                       gains and
                                       losses
                                       Net gain on
—         —          —       —         divestment of      (3,021.6)   —          —      (3,021.6)
                                       business
                                       Provision
16.6      (1.2)      —       15.4      for/(benefit       481.4       —          —      481.4
                                       from) income
                                       taxes
                                       Depreciation
3.2       0.3        —       3.5       and                —           —          —      —
                                       amortization
0.7       1.7        —       2.4       Share-based        —           —          —      —
                                       compensation
—        —         —      —         Other net          (0.3)      —         —     (0.3)
                                       gains
88.4     (5.8)     —      82.6      Adjusted           —          —         —     —
                                       EBITDA
                                                                                        

Appendix II

Unaudited Financial Information – Net Income/(Loss) and Adjusted EBITDA from
Discontinued Operations for the six months ended June 30, 2012 and 2013

Six Months Ended                                       Six Months Ended
June 30, 2012                                              June 30, 2013
Tysabri  Prothena  EDT     Total                        Tysabri    Prothena  EDT     Total
US$m     US$m      US$m    US$m                    US$m       US$m      US$m    US$m
576.6     —          —        576.6     Revenue            344.0       —          —        344.0
315.3    —         —       315.3     Cost of goods      186.8      —         —       186.8
                                        sold
261.3     —          —        261.3     Gross margin       157.2       —          —        157.2
                                                                                                     
                                        Operating
                                        Expenses
                                        Selling,
57.3      0.8        —        58.1      general and        25.5        —          —        25.5
                                        administrative
32.0      15.7       —        47.7      Research and       15.4        —          —        15.4
                                        development
                                        Net
—         —          —        —         (gain)/loss on     (3,021.6)   0.5        —        (3,021.1)
                                        divestment of
                                        business
—        —         —       —         Other net          3.7        —         —       3.7
                                        charges
                                        Total
89.3     16.5      —       105.8     operating          (2,977.0)  0.5       —       (2,976.5)
                                        expenses
172.0     (16.5)     —        155.5     Operating          3,134.2     (0.5)      —        3,133.7
                                        income/(loss)
                                                                                                     
                                        Net interest
—        —         20.3    20.3      and investment     —          —         (43.2)  (43.2)
                                        (gains)/losses
                                        Net
172.0     (16.5)     (20.3)   135.2     income/(loss)      3,134.2     (0.5)      43.2     3,176.9
                                        before tax
                                        Provision
33.2     (2.4)     —       30.8      for/(benefit       500.3      —         —       500.3
                                        from) income
                                        taxes
138.8     (14.1)     (20.3)   104.4     Net                2,633.9     (0.5)      43.2     2,676.6
                                        income/(loss)
                                                                                                     
Adjusted EBITDA Reconciliation Schedule
                                                                                                     
138.8     (14.1)     (20.3)   104.4     Net                2,633.9     (0.5)      43.2     2,676.6
                                        income/(loss)
                                        Net interest
—         —          20.3     20.3      and investment     —           —          (43.2)   (43.2)
                                        (gains)losses
                                        Net
—         —          —        —         (gain)/loss on     (3,021.6)   0.5        —        (3,021.1)
                                        divestment of
                                        business
                                        Provision
33.2      (2.4)      —        30.8      for/(benefit       500.3       —          —        500.3
                                        from) income
                                        taxes
                                        Depreciation
6.4       0.5        —        6.9       and                0.1         —          —        0.1
                                        amortization
2.0       5.2        —        7.2       Share-based        0.5         —          —        0.5
                                        compensation
—        —         —       —         Other net          3.7        —         —       3.7
                                        charges
180.4    (10.8)    —       169.6     Adjusted           116.9      —         —       116.9
                                        EBITDA
                                                                                                     

Contact:

Elan Corporation, plc
Investor Relations:
Chris Burns, + 1-800-252-3526
David Marshall, 353-1-709-4444
or
Media Relations:
Emer Reynolds, + 353-1-709-4022
Jonathan Birt, +44-786-036-1746
Jamie Tully, +1-212-687-8080
 
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