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Elan Corporation, plc Message Board

  • simonig simonig Jan 31, 2003 12:49 PM Flag

    Transcript from Bloomberg Interview PT1

    01/31 12:02
    Elan's Armen on Sale of Drug Rights and Unit (Transcript)

    New York, Jan. 30, 2003 (Bloomberg) -- Garo Armen, chairman of Elan Corp., talks with Bloomberg's Lane Bajardi about the sale of drug rights for its insomnia treatment Sonata and muscle relaxant Skelaxin, and a unit with more than 400 salespeople, to King Pharmaceuticals Inc. for $850 million. Elan, Ireland's biggest drugmaker, is shedding assets to pay off debt.

    (This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)

    BAJARDI: We have the pharmaceutical industry today, with Irish drugmaker Elan Corporation agreeing to sell a unit and drug rights to King Pharmaceuticals. Now today's asset sale amounts to $850 million, giving King U.S. rights to two of Elan's drugs and a unit with more than 400 sales people.

    Joining us now to outline today's asset sale and company strategy, Garo Armen, chairman of Elan Corporation.

    Thanks for being here.

    Now, your stock price rose today, 70 cents on this news, the second largest percentage gain on the New York Stock Exchange today, behind Flowers Industries. A positive response to the news that you made today.

    ARMEN: Well, I think it's positive because we announced our recovery plan back in July of last year and told investors that we would sell $1.5 billion worth of assets in order to shore up our balance sheets so that we would remove any financial risk associated with the company. And we're approximately a year ahead of schedule in accomplishing that.

    BAJARDI: So tell us more about why you sold off this and got the cash flow and what you're going to do with the cash?

    ARMEN: Well, as you may remember, Elan had some financial difficulties early on last year, as a result of a number of factors, some of which was related to the presence of a number of financing instruments that became cash obligations for the company when the stock price dropped precipitously. And so we found ourselves in a position to make good for a number of these obligations, including debt and certain other product payments, and we decided that we would sell a number of our assets in order to be able to meet these obligations and secure our future.

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    • Hello John,
      I think your thinking is quite logical. I am betting on Elan hitting the mid teens this year based on a lot of good news to come. I am "betting" on strong Crohns PIII results for Antegren based on the PII outcomes. Once the price rises to the teens (after SEC clearance), I think the buyout offers will likely come based on their strong pipeline. IMHO it is more likely for Elan to get bought out somewhere between $20 and $30 than to survive past that $30 (~$10 billion valuation) milestone. Thank you for your replies.

      Best Regards,

      Simon

      PS: IMHO the bottom line is that Elan will survive and it is currently grossly undervalued by the market.

    • Simon,

      As you know, $30B market cap is ~$90/sh.

      You may be right: Elan could recover to teens this year. I don't think that would be justified, unless Crohns PIII data is strong.

      $3B in revenue is a very long term target. Elan can probably generate $600MM without Antegren. Crohns may generate $200MM in revenue in 2004 and $600 in 2005 - half of which will be ascribed to Elan. This still leaves us shy of $1B in 2005 (assuming no huge uptick in Frova or Prialt sales). Another $2B is a big big stretch.

      I think you can reach $2B in sales by 2008. This is the same year that $650MM in Athena notes is due - so cash will still not be piling up in the treasury. From that point forward, however, Elan should make money hand over fist and sock it away. Hopefully, the AD programs will have borne some fruit by that time, too.

      So, in summary, $3B is a total pipe dream and so is $90/sh. $40/sh is attainable, but that number is 5 years out. $20/sh is probably only 2 years out.

      All IMO.

      John Doe III

    • How much of those losses per employee are due to asset write-downs, vs. actual operating losses? The former will disappear shortly...prob. after this quarter's results. The latter will lessen as cost reduction programs take hold, and revenues on new and pipeline products ramp up. So don't go too far back in history to come up with your negative analytical perspective. Sometimes it pays to look forward.

      Frankie

    • Good job, thanks Simonig.

      • 1 Reply to watchitgoupandaway
      • Hello Watchit,
        I was inspired by your posting of the transcripts. Thank You.

        Best Regards,

        Simon

        PS:IMHO ELN is way undervalued by the market. This is going to be Elan's year. In addition to getting the good news we expect (about Antegren, Alzheimer's ...etc) we will most likely get some good unexpected news about Frova, Prialt, and other JVs this year. I believe that their pipeline is very valuable and could attract buyout offers in the $20 to $30 range when the SEC investigation is resolved and the stock recovers to around $15.

    • BAJARDI: As you mentioned, you are ahead of schedule. Is there anything else you feel you need to do right now? Are you going to continue with this plan or just, now that you're ahead of schedule, turn your attention to growing the company?

      ARMEN: I think the primary interest of the company, obviously, is for the future of Elan, we have a very robust pipeline, starting with Antegren, which is slated for introduction next year for the treatment of Crohn's disease and subsequent to that for the treatment of MS. And beyond that, we have a very, very exciting Alzheimer's program. And in order for us to be able to finance all these programs, Elan needs to restore its financial credibility and financial health. And today's movement was a major step towards that goal.

      BAJARDI: What will be your biggest product, now that you're - that these rights are being transferred? What's the largest revenue producer here, or potential revenue producer?

      ARMEN: The revenues of Elan, when we're done with the restructuring, will be in the range of $400 to $500 million a year. And among our larger products will be a neurology product called Zonegran, as well as products for the hospital market, such as Maxipime and Azactam. Combined, these products will command sales in an excess of $200 million.

      BAJARDI: You have about 2,900 employees there, is that correct?

      ARMEN: We are down to approximately 2,800 employees, after the sale. And the goal of the company is to approach about 2,000, which means that we have several other assets that will be sold in the course of this year, which will bring in additional cash as well.

      BAJARDI: What's next? What's the next asset to sell, do you think?

      ARMEN: We have never divulged, if you will, what assets we have to sell. We have a shopping list of assets, and we've said that we will sell any asset on the shopping list that is not core of Elan and not necessarily selling the whole thing, if you will.

      BAJARDI: OK.

      ARMEN: So we will sell assets if sale prices materialize for them. And we're confident that we will accomplish that by the end of this year.

      BAJARDI: Garo Armen, thank you very much.

      ARMEN: Thank you.

      • 5 Replies to simonig
      • ARMEN: We are down to approximately 2,800 employees, after the sale. And the goal of the company is to approach about 2,000, which means that we have several other assets that will be sold in the course of this year, which will bring in additional cash as well.

        Question for those in the know: What parts of Elan total about 800 employees, the total that Dr. Armen says will be displaced as the downsizing continues? Drug Delivery? Hospital Products? Any thoughts?

        Have a good evening, all. Not a bad week, really, was it?

      • "a very, very exciting Alzheimer's program"

        Whenever he talks in these interviews, HE SAYS SOMETHING! Listen to those words and THINK!

        If the Alzheimers program works, this stock will be $100

        <<"ARMEN: I think the primary interest of the company, obviously, is for the future of Elan, we have a very robust pipeline, starting with Antegren, which is slated for introduction next year for the treatment of Crohn's disease and subsequent to that for the treatment of MS. And beyond that, we have a very, very exciting Alzheimer's program. And in order for us to be able to finance all these programs, Elan needs to restore its financial credibility and financial health. And today's movement was a major step towards that goal. >>

        Don't sell. You'll regret it.

        Great science here--trust me!
        Creed

        P.S.--Great week! Congrats longs. The Kelly Martin show starts Monday and I could not be more excited for this new period in Elan's history.

      • so he meant after all the asset sales are completed IN THE FUTURE, annual revenue will be around $400M -$500M. So even without any breakthrough, Elan is worthy $4B -$5B?

        What is the average valuation for a 2000- employee, $400M sales biopharm company?

        Any thoughts? Thanks in advance...

      • so he meant after all the asset sales are completed IN THE FUTURE, annual revenue will be around $400M -$500M. So even without any new progress, Elan is worthy $4B -$5B?

        What is the average valuation for a 2000- employee, $400M sales biopharm company?

        Any thoughts? Thanks in advance...

      • simonig -- Thanks for the transcript. We really appreciate the work. R

 

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