Revenue up, costs down. It's a good direction for
Elan (NYSE: ELN) to take, even if the
company's final earnings number was slightly inflated.
Total revenue rose 6% thanks to Tysabri's slow but steady
growth;
Biogen Idec (Nasdaq: BIIB)
spilled the beanson that earlier in the week. Just as
importantly, selling, general, and administrative expenses
were lower than the year before, as Elan slowly but surely
makes its way towards being cash flow-positive.
Tysabri is and will be the most important drug for Elan
for years to come, but the company's royalty income should
soon enjoy another boost.
Johnson & Johnson (NYSE: JNJ) recently
got a long-lasting version of its antipsychotic Invega
approved, incorporating Elan's NanoCrystal technology. Elan
will also get double-digit royalties from
Acorda Therapeutics ' (Nasdaq: ACOR) multiple
sclerosis drug Amaya, in the
more than likelyevent that the Food and Drug
Administration approves it. (Eventually.)
Elan actually showed a profit this quarter, but that owed
entirely to closing its
convoluted dealwith Johnson & Johnson to buy half of
Elan's half of its Alzheimer's-disease program.
Pfizer (NYSE: PFE) owns the other half, now
that it has closed its acquisition of Wyeth.
While I wasn't very excited about the deal that Elan got,
it did provide the company with some much-needed cash, which
helped
refinanceits debt. Investors really couldn't have
expected too much more, considering the bind that Elan had
worked itself into.
Thanks to the increased revenue and the decreased costs,
the company expects to have an adjusted operating profit in
the fourth quarter for the first time in many years. That's a
nice start, but I'll be more impressed when the
Motley Fool Rule Breakers
recommendation is making enough to cover all its bills,
including taxes and interest payments.
This article was originally published as
Elan's Headed in the Right Directionon
Fool.com
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