Elan Reports Third Quarter 2008 Financial Results

DUBLIN, Ireland--(Business Wire)--
Elan Corporation, plc today announced its third quarter 2008
financial results and provided a business update. Commenting on Elan's
business, Kelly Martin, Elan's president and chief executive officer,
said, "This quarter's results demonstrate continued focus on
execution. The brief overview presentation of the Phase II data for
bapineuzumab at the International Conference on Alzheimer's Disease
(ICAD) and the emergence of two confirmed cases of progressive
multifocal leukoencephalopathy (PML) with Tysabri have contributed to
increased volatility in our equity value and a change in the risk
perception of Elan within the marketplace. We have incorporated these
events into our plans and activities - sharing relevant medical
information with regulatory agencies, treating physicians and their
patients to continue to responsibly advance our programs. Our energies
and investments have been and will continue to be channeled to grow
Tysabri and to advance our pipeline. Tangible progress will assist in
addressing the perceptions of risk and allow volatility of our equity
to reduce over time."

Commenting on Elan's third quarter financial results, Shane Cooke,
Elan's executive vice president and chief financial officer said, "We
are pleased to report a robust financial performance with revenues
increasing by 53%, compared to revenues in the third quarter of 2007,
and Adjusted EBITDA losses reduced to almost breakeven levels at $1.6
million for the quarter. This strong revenue growth, together with an
increased investment in R&D associated with the advancement of our
Alzheimer's clinical development programs, led to a decrease of 4% in
the net loss for the quarter. The increases in revenue and improvement
in related margins was driven by the continued growth of Tysabri,
which generated in-market sales of $237.0 million on a worldwide basis
this quarter. Tysabri is fast approaching blockbuster status, defined
in the industry as revenues exceeding $1 billion on an annual run-rate
basis."

Mr. Cooke added, "For the remainder of the year, Elan is on track
to record revenues approaching $1 billion and Adjusted EBITDA losses
of less than $50 million for the full year 2008 as we continue to
invest in our strategic portfolio of potential Alzheimer's products."

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*T
Unaudited Consolidated U.S. GAAP Income Statement Data

Three Months Nine Months
Ended Ended
September 30 September 30
2007 2008 2007 2008
U.S.$m U.S.$m U.S.$m U.S.$m
----------------------------------------------------------------------
Revenue (see page 7)
171.5 266.4 Product revenue 521.9 715.4
5.1 3.7 Contract revenue 19.2 15.0
------ ------ ------- -------
176.6 270.1 Total revenue 541.1 730.4
84.6 134.1 Cost of goods sold 240.1 366.9
------ ------ ------- -------
92.0 136.0 Gross margin (see page 12) 301.0 363.5

Operating Expenses (see page 12)
82.3 77.5 Selling, general and administrative 261.0 226.3
59.0 90.0 Research and development 180.0 244.7
14.3 7.8 Other net charges 81.4 13.4
------ ------ ------- -------
155.6 175.3 Total operating expenses 522.4 484.4
------ ------ ------- -------
(63.6) (39.3) Operating loss (221.4) (120.9)

Net Interest and Investment Gains and
Losses (see page 13)
26.8 32.9 Net interest expense 79.6 100.9
(0.2) 8.2 Net investment (gains)/losses (1.5) 11.0
-- -- Net charge on debt retirement 18.8 --
------ ------ ------- -------
Net interest and investment gains and
26.6 41.1 losses 96.9 111.9
------ ------ ------- -------

Net loss from continuing operations
(90.2) (80.4) before tax (318.3) (232.8)
Provision for/(benefit from) income
(2.8) 3.1 taxes 3.2 7.7
------ ------ ------- -------
(87.4) (83.5) Net loss (321.5) (240.5)
====== ====== ======= =======

Basic and diluted net loss per ordinary
(0.19) (0.18) share (0.69) (0.51)
Basic and diluted weighted average
number of ordinary shares outstanding
469.5 474.6 (in millions) 468.1 473.1
*T

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Unaudited Non-GAAP Financial Information - EBITDA

Three Months Non-GAAP Financial Information Nine Months
Ended Reconciliation Schedule Ended
September 30 September 30
2007 2008 2007 2008
U.S.$m U.S.$m U.S.$m U.S.$m
----------------------------------------------------------------------

(87.4) (83.5) Net loss (321.5) (240.5)
26.8 32.9 Net interest expense 79.6 100.9
Provision for/(benefit from) income
(2.8) 3.1 taxes 3.2 7.7
27.5 18.0 Depreciation and amortization 141.7 52.1
(1.2) (0.2) Amortized fees (9.6) (2.5)
------ ------ ------- -------
(37.1) (29.7) EBITDA (106.6) (82.3)
====== ====== ======= =======

Three Months Non-GAAP Financial Information Nine Months
Ended Reconciliation Schedule Ended
September 30 September 30
2007 2008 2007 2008
U.S.$m U.S.$m U.S.$m U.S.$m
----------------------------------------------------------------------
(37.1) (29.7) EBITDA (106.6) (82.3)
8.9 12.1 Share-based compensation 32.7 35.5
14.3 7.8 Other net charges 29.2 13.4
(0.2) 8.2 Net investment (gains)/losses (1.5) 11.0
-- -- Net charge on debt retirement 18.8 --
------ ------ ------- -------
(14.1) (1.6) Adjusted EBITDA (27.4) (22.4)
====== ====== ======= =======
*T

To supplement its consolidated financial statements presented on a
U.S. GAAP basis, Elan provides readers with EBITDA (Earnings Before
Interest, Taxes, Depreciation and Amortization) and Adjusted EBITDA,
non-GAAP measures of operating results. EBITDA is defined as net loss
plus or minus depreciation and amortization of costs and revenues,
provisions for income tax and net interest expense. Adjusted EBITDA is
defined as EBITDA plus or minus share-based compensation, other net
charges, net investment gains or losses and net charge on debt
retirement. EBITDA and Adjusted EBITDA are not presented as, and
should not be considered alternative measures of, operating results or
cash flow from operations, as determined in accordance with U.S. GAAP.
Elan's management uses EBITDA and Adjusted EBITDA to evaluate the
operating performance of Elan and its business and these measures are
among the factors considered as a basis for Elan's planning and
forecasting for future periods. Elan believes EBITDA and Adjusted
EBITDA are measures of performance used by some investors, equity
analysts and others to make informed investment decisions. EBITDA and
Adjusted EBITDA are used as analytical indicators of income generated
to service debt and to fund capital expenditures. EBITDA and Adjusted
EBITDA do not give effect to cash used for interest payments related
to debt service requirements and do not reflect funds available for
investment in the business of Elan or for other discretionary
purposes. EBITDA and Adjusted EBITDA, as defined by Elan and presented
in this press release, may not be comparable to similarly titled
measures reported by other companies. Reconciliations of EBITDA and
Adjusted EBITDA to net loss from continuing operations are set out in
the tables above titled, "Non-GAAP Financial Information
Reconciliation Schedule."

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Unaudited Consolidated U.S. GAAP Balance Sheet Data

December 31 September 30
2007 2008
U.S.$m U.S.$m
----------------------------------------------------------------------
Assets
Current Assets
Cash and cash equivalents 423.5 444.1
Restricted cash -- current 20.1 20.2
Investment securities -- current 276.9 54.3
Prepaid and other current assets 195.9 232.8
----------- -------------
Total current assets 916.4 751.4

Non-Current Assets
Intangible assets, net 457.6 512.9
Property, plant and equipment, net 328.9 333.1
Investment securities -- non-current 22.5 8.8
Restricted cash -- non-current 9.5 15.0
Other assets 46.5 46.0
----------- -------------
Total Assets 1,781.4 1,667.2
=========== =============

Liabilities and Shareholders' Deficit
Accounts payable, accrued and other
liabilities 251.1 289.7
Long-term debt 1,765.0 1,765.0
Shareholders' deficit(1) (see page 14) (234.7) (387.5)
----------- -------------
Total Liabilities and Shareholders' Deficit 1,781.4 1,667.2
=========== =============
*T

(1) Elan's debt covenants do not require it to maintain or adhere
to any specific financial ratios. Consequently, the shareholders'
deficit has no impact on Elan's ability to comply with its debt
covenants.

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Unaudited Consolidated U.S. GAAP Cash Flow Data

Three Months Nine Months
Ended Ended
September 30 September 30
2007 2008 2007 2008
U.S.$m U.S.$m U.S.$m U.S.$m
----------------------------------------------------------------------

(1.2) 1.1 Cash flows from operating activities 12.4 (13.5)
(12.2) (11.0) Movement on debt interest and tax (110.1) (85.3)
(20.6) (8.4) Working capital movement 9.0 (41.5)
Net purchases of tangible and intangible
(5.1) (87.5) assets (18.0) (110.7)
(10.9) 19.0 Net proceeds from sale of investments (8.5) 224.2
2.0 -- Net proceeds from product divestment 4.0 2.0
6.8 13.0 Cash flows from financing activities (608.6) 51.6
-- (10.1) Restricted cash movement (6.0) (6.2)
------ ------ ------- -------
(41.2) (83.9) Net cash movement (725.8) 20.6
826.0 528.0 Beginning cash balance 1,510.6 423.5
------ ------ ------- -------
Cash and cash equivalents at end of
784.8 444.1 period 784.8 444.1
====== ====== ======= =======
*T

Summary

Total revenue increased by 53% in the third quarter of 2008 to
$270.1 million, compared to the same period in 2007. Revenue from the
Biopharmaceuticals business grew by 85% while revenue from the Elan
Drug Technologies (EDT) business increased by 3%. The increase in
revenue from the Biopharmaceuticals business was driven by a strong
performance from Tysabri, with Elan's recorded sales increasing 159%
to $164.5 million in the third quarter of 2008 from $63.5 million in
the third quarter of 2007. Total in-market sales of Tysabri were
$237.0 million in the third quarter 2008, an increase of 154% over the
$93.3 million recorded in the same quarter of 2007.

The gross margin was $136.0 million for the third quarter of 2008,
compared to $92.0 million for the same quarter of 2007. The increased
gross margin principally reflects higher sales of Tysabri.

Although total revenue increased by 53%, selling, general and
administrative (SG&A) expenses declined by 6%, reflecting reduced
sales and marketing costs and amortization expense relating to
Maxipime and Azactam, and the operating leverage associated with
Tysabri. Total research and development (R&D) expense increased by 53%
primarily related to the advancement of Elan's Alzheimer's disease
programs in the clinic.

The net loss for the third quarter of 2008 decreased by 4% to
$83.5 million from $87.4 million in the third quarter of 2007. The
decrease in the net loss was primarily due to the 53% increase in
revenues and related gross margin, which more than offset the
increased investment in R&D and a higher net interest expense.
Excluding other charges and R&D expenses, Elan recorded an operating
profit of $58.5 million in the quarter, an improvement over the $9.7
million recorded in the same quarter last year, driven by a 53%
increase in revenues and improved operating margins, compared to the
third quarter of 2007.

During the quarter, Elan completed an evaluation of the strategic
options for a more formal separation of Elan's Drug Technology
business. A number of parties expressed considerable interest in
participating in the future success of the EDT business, sharing
Elan's excitement for its potential, based on EDT's current
established portfolio of products, its pipeline, its unique platform
of technologies and its strong management team. However, given the
recent dislocation and uncertainty in the financial and credit
markets, Elan has decided to retain the EDT business for the
foreseeable future and to put in place structures to allow EDT to
develop and grow as an independent wholly owned subsidiary of Elan.
Included in other charges is $7.3 million of deferred transaction
costs in relation to the completion of this strategic evaluation.

Adjusted EBITDA

Adjusted EBITDA losses for the third quarter of 2008 were $1.6
million, compared to $14.1 million in the same period of 2007. The
improvement principally reflects the 53% increase in revenues and
related gross margin, partially offset by increased R&D investment.
Tysabri contributed over $40 million in Adjusted EBITDA in the third
quarter of 2008, compared to Adjusted EBITDA losses of $7.1 million in
the same quarter of 2007.

A reconciliation of negative Adjusted EBITDA to net loss from
continuing operations, is presented in the table titled, "Unaudited
Non-GAAP Financial Information - EBITDA," included on page 3. Included
at Appendices I and II are further analyses of the results and
Adjusted EBITDA between the Biopharmaceuticals business and the EDT
business.

Total Revenue

Total revenue for the third quarter of 2008 increased 53% to
$270.1 million from $176.6 million in the same period of 2007,
primarily driven by the strong growth of Tysabri. Revenue from the
Biopharmaceuticals business increased by 85% (see page 8), while
revenue from the EDT business increased by 3% (see page 11). Revenue
is analyzed below between revenue from the Biopharmaceuticals and EDT
business units.

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*T
Three Months Nine Months
Ended Ended
September 30 September 30
2007 2008 2007 2008
U.S.$m U.S.$m U.S.$m U.S.$m
----------------------------------------------------------------------
Revenue from the Biopharmaceuticals
107.4 198.9 business 323.6 518.0
69.2 71.2 Revenue from the EDT business 217.5 212.4
------ ------ ------ ------
176.6 270.1 Total revenue 541.1 730.4
====== ====== ====== ======
*T

Revenue from the Biopharmaceuticals business

For the third quarter of 2008, revenue from the Biopharmaceuticals
business unit increased by 85% to $198.9 million from $107.4 million
in the third quarter of 2007. The increase was driven primarily by
strong growth in Tysabri, which more than compensated for reduced
sales of Maxipime, which has been adversely impacted by generic
competition.

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Three Months Nine Months
Ended Ended
September 30 September 30
2007 2008 2007 2008
U.S.$m U.S.$m U.S.$m U.S.$m
----------------------------------------------------------------------

Product revenue
58.5 121.4 Tysabri - U.S. 141.1 307.0
5.0 43.1 Tysabri - Rest of world (ROW) -- 97.9
------ ------ ------ ------
63.5 164.5 Total Tysabri 141.1 404.9
20.7 24.2 Azactam 62.9 76.1
19.2 5.7 Maxipime 106.7 24.0
3.0 4.2 Prialt 8.2 12.1
0.4 0.3 Royalties 0.6 0.9
------ ------ ------ ------
106.8 198.9 Total product revenue 319.5 518.0

0.6 -- Contract revenue 4.1 --

------ ------ ------ ------
Total revenue from Biopharmaceuticals
107.4 198.9 business 323.6 518.0
====== ====== ====== ======
*T

Tysabri

Global in-market net sales of Tysabri can be analyzed as follows:

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*T
Three Months Nine Months
Ended Ended
September 30 September 30
2007 2008 2007 2008
U.S.$m U.S.$m U.S.$m U.S.$m
----------------------------------------------------------------------
58.5 121.4 United States 141.1 307.0
34.8 115.6 ROW 72.7 289.7
------ ------ ------ ------
93.3 237.0 Total Tysabri in-market net sales 213.8 596.7
====== ====== ====== ======
*T

For the third quarter of 2008, Tysabri in-market net sales
increased by 154% to $237.0 million from $93.3 million in the same
period of 2007, reflecting strong patient demand across global
markets. At the end of September 2008, approximately 35,500 patients
were on therapy worldwide, comprising approximately 34,800 on
commercial therapy and approximately 700 in the multiple sclerosis
(MS) clinical trials, representing an increase of 12% over the
approximately 31,800 patients who were on therapy at the end of June
2008, and more than double the approximately 17,000 patients who were
on therapy at the end of September 2007.

During the third quarter of 2008, approximately 3,700 net new
patients were added, compared to approximately 3,000 in the third
quarter of 2007, an increase of 23%, and compared to approximately
5,700 patients who were added in the second quarter of 2008.

Tysabri was developed and is being marketed in collaboration with
Biogen Idec Inc. (Biogen Idec). In general, subject to certain
limitations imposed by the parties, Elan shares with Biogen Idec most
of the development and commercialization costs for Tysabri. Biogen
Idec is responsible for manufacturing the product. In the United
States, Elan purchases Tysabri from Biogen Idec and is responsible for
distribution. Consequently, Elan records as revenue the net sales of
Tysabri in the U.S. market. Elan purchases product from Biogen Idec at
a price that includes the cost of manufacturing, plus Biogen Idec's
gross margin on Tysabri, and this cost, together with royalties
payable to other third parties, is included in cost of sales.

Outside of the United States, Biogen Idec is responsible for
distribution and Elan records as revenue its share of the profit or
loss on these sales of Tysabri, plus Elan's directly-incurred expenses
on these sales.

Given the continued strong growth in Tysabri sales, we expect to
pay a second milestone payment of $50.0 million to Biogen Idec in
early 2009 in order to maintain our percentage share of Tysabri at
approximately 50% for annual global in-market net sales of Tysabri
that are in excess of $1.1 billion.

Tysabri - U.S.

MS

In the U.S. market, Elan recorded net sales of $121.4 million in
the third quarter of 2008, an increase of 108% over $58.5 million in
the same period of 2007.

As of the end of September 2008, approximately 3,200 doctors had
enrolled patients and approximately 19,300 patients were on commercial
therapy, which represents increases of 52% and 84%, respectively,
since the end of September 2007.

Crohn's Disease (CD)

On January 14, 2008, the U.S. Food and Drug Administration (FDA)
approved the supplemental Biologics License Application for Tysabri,
for the treatment of patients with CD, and Tysabri was launched in
this indication at the end of the first quarter of 2008.

At the end of September 2008, approximately 200 Crohn's disease
patients were on therapy generating $1.2 million in revenue during the
third quarter of 2008.

Tysabri - ROW

As previously mentioned, in the ROW market, Biogen Idec is
responsible for distribution and Elan records as revenue its share of
the profit or loss on ROW sales of Tysabri, plus Elan's
directly-incurred expenses on these sales. As a result, in the ROW
market, Elan recorded net revenue of $43.1 million for the third
quarter of 2008, compared to $5.0 million for the same period of 2007.
Elan's net Tysabri ROW revenue is calculated as follows:

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*T
Three Months Nine Months
Ended Ended
September 30 September 30
2007 2008 2007 2008
U.S.$m U.S.$m U.S.$m U.S.$m
----------------------------------------------------------------------
34.8 115.6 ROW in-market sales by Biogen Idec 72.7 289.7
ROW operating expenses incurred by Elan
(35.3) (63.4) and Biogen Idec (95.1) (180.9)
------ ------ ------ -------
ROW operating profit/(loss) incurred by
(0.5) 52.2 Elan and Biogen Idec (22.4) 108.8
------ ------ ------ -------
Elan's 50% share of Tysabri ROW
(0.3) 26.1 collaboration operating profit/(loss) (11.2) 54.4
5.3 17.0 Elan's directly incurred costs 11.2 43.5
------ ------ ------ -------
5.0 43.1 Net Tysabri ROW revenue -- 97.9
====== ====== ====== =======
*T

As of the end of September 2008, approximately 15,300 patients,
principally in the European Union (EU), were on commercial therapy, an
increase of 14% over the approximately 13,400 who were on therapy at
the end of June 2008, and an increase of 178% over the approximately
5,500 who were on therapy at the end of September last year.

Other Biopharmaceuticals products

Revenue from Azactam was $24.2 million in the third quarter of
2008, compared to $20.7 million in the same period of 2007, an
increase of 17%, reflecting increased demand. Azactam lost its patent
exclusivity in October 2005 and its future sales are expected to be
negatively impacted by generic competition. However, to date no
generic form of Azactam has been approved.

Revenue from Maxipime decreased 70% to $5.7 million in the third
quarter of 2008 from $19.2 million in the third quarter of 2007. The
decrease was principally due to the introduction of generic
competition. The first generic cefepime hydrochloride was launched in
June 2007, and additional generic forms of Maxipime have since been
launched. Elan expects that the generic competition will continue to
adversely affect Elan's revenues from, and gross margin for, Maxipime.

Revenue from Prialt was $4.2 million in the third quarter of 2008,
compared to $3.0 million in the same period of 2007. The increase is
primarily due to higher demand for the product.

Revenue from the EDT business

Revenue from the EDT business unit increased by 3% to $71.2
million in the third quarter of 2008 from $69.2 million in the third
quarter of 2007.

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Three Months Nine Months
Ended Ended
September 30 September 30
2007 2008 2007 2008
U.S.$m U.S.$m U.S.$m U.S.$m
----------------------------------------------------------------------
Product revenue
Manufacturing revenue and royalties
15.1 16.8 Tricor(R) 42.2 45.6
10.6 10.9 Skelaxin(R) 28.1 28.3
7.5 8.5 Focalin(R) XR / RitalinLA(R) 23.0 25.7
5.2 5.6 Verelan(R) 20.5 16.8
2.6 3.2 Zanaflex 10.3 12.1
5.7 2.9 Diltiazem(R) 15.5 10.4
18.0 19.6 Other 58.3 58.5
------ ------ ------ ------
Total manufacturing revenue and
64.7 67.5 royalties 197.9 197.4

-- -- Amortized revenue - Adalat(R) 4.5 --
------ ------ ------ ------
64.7 67.5 Total product revenue 202.4 197.4

Contract revenue
1.1 0.3 Amortized fees 3.3 2.4
3.4 3.4 Research revenue and milestones 11.8 12.6
------ ------ ------ ------
4.5 3.7 Total contract revenue 15.1 15.0

------ ------ ------ ------
69.2 71.2 Total revenue from the EDT business 217.5 212.4
====== ====== ====== ======
*T

Manufacturing revenue and royalties comprise revenue earned from
products manufactured for clients and royalties earned principally on
sales by clients of products that incorporate Elan's technologies.
Except as noted above, no other product accounted for more than 10% of
total manufacturing revenue and royalties in the third quarter of 2008
or 2007. Of the total of $67.5 million (2007: $64.7 million) in
manufacturing revenue and royalties, 50% (2007: 48%) consisted of
royalties received on products that were not manufactured by Elan.

Potential generic competitors have challenged the existing patent
protection for several of the products from which Elan earns
manufacturing revenue and royalties. Elan and its clients defend the
parties' intellectual property rights vigorously. However, if these
challenges are successful, Elan's manufacturing revenue and royalties
will be materially and adversely affected.

Additional analyses of the results between the Biopharmaceuticals
and EDT business units are set out in Appendices I and II. In the
third quarter of 2008, EDT recorded Adjusted EBITDA of $26.9 million
compared to $28.9 million in the third quarter of 2007.

Gross Margin

The gross margin was $136.0 million for the third quarter of 2008,
compared to $92.0 million for the same quarter of 2007. The increased
gross margin results principally from higher sales of Tysabri.

The total gross margin as a percentage of revenue was 50% in the
third quarter of 2008, compared to 52% in the same period of 2007. The
decrease was due principally to the change in the mix of product
sales, including the impact of Tysabri and Maxipime as described
above. The Tysabri gross margin was 44% in the third quarter of 2008,
compared to 33% in the same period of 2007, reflecting the increased
proportion of ROW revenues compared to the prior period. The gross
margin is impacted by the profit sharing and operational arrangements
in place with Biogen Idec. Elan's gross margin on sales of Tysabri in
the United States was approximately 38% in the third quarter of 2008,
compared to 36% in the same period of 2007.

Operating Expenses

Selling, general and administrative

For the third quarter of 2008, SG&A expenses decreased 6% to $77.5
million from $82.3 million in the same period of 2007, principally
reflecting reduced sales and marketing costs and amortization expense
relating to Maxipime and Azactam, and the operating leverage
associated with Tysabri, and can be analyzed as follows:

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*T
Three Months Nine Months
Ended Ended
September 30 September 30
2007 2008 2007 2008
U.S.$m U.S.$m U.S.$m U.S.$m
----------------------------------------------------------------------
51.4 54.8 Biopharmaceuticals 164.4 160.6
11.7 10.2 EDT 29.5 32.0
14.5 6.1 Depreciation and amortization 49.7 14.4
4.7 6.4 Share-based compensation 17.4 19.3
------ ------ ------ ------
82.3 77.5 Total 261.0 226.3
====== ====== ====== ======
*T

The SG&A expenses related to the Tysabri ROW sales are reflected
in the Tysabri ROW revenue as previously described on page 10.

Research and development

For the third quarter of 2008, R&D expenses increased 53% to $90.0
million from $59.0 million in the same period of 2007. The increase
was primarily due to increased expenses associated with the
progression of Elan's Alzheimer's disease programs, including the
advance of bapineuzumab into Phase 3 clinical trials and the advance
of ELND-005 into Phase 2 clinical trials during the second half of
2007.

Other charges

For the third quarter of 2008, other net charges of $7.8 million
were primarily related to the write-off of $7.3 million of deferred
transaction costs related to the evaluation of the strategic options
associated with the potential separation of EDT. The total other net
charges of $14.3 million in the third quarter of 2007 consisted of
severance and restructuring charges that arose principally from the
consolidation of Elan's U.S. west coast locations, which resulted in
the closure of the San Diego facility and the expansion of Elan's
operations in South San Francisco.

Net interest and investment gains and losses

For the third quarter of 2008, net interest and investment gains
and losses increased to $41.1 million from the $26.6 million recorded
for the third quarter of 2007. This increase was primarily due to
investment impairment charges and an increase in net interest expense.
Investment impairment charges for the third quarter of 2008 were $7.8
million, compared to $0.5 million in the third quarter of 2007,
primarily as a result of an impairment related to an investment in
auction rate securities. Net interest expense for the third quarter of
2008 was $32.9 million, compared to $26.8 million in the third quarter
of 2007, principally reflecting decreased interest income as a result
of lower cash balances and reduced interest rates.

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*T
Movement in Shareholders' Deficit

U.S.$m
-------------------------------------------------------------
Balance at June 30, 2008 (328.3)
Net loss for the period (83.5)
Share-based compensation 12.4
Issuance of share capital 12.2
Other (0.3)
---------------
Balance at September 30, 2008 (387.5)
===============
*T

Elan's debt covenants do not require it to maintain or adhere to
any specific financial ratios. Consequently, the shareholders' deficit
has no impact on Elan's ability to comply with its debt covenants.

Research and Development Update

During the course of 2008, Elan's goal is to continue its progress
throughout its R&D programs, including Alzheimer's disease,
Parkinson's disease, MS and other neurodegenerative areas.

Alzheimer's disease and other neurodegenerative diseases

Elan is focused on further enhancing its breakthrough basic and
clinical research in Alzheimer's disease, as well as other
neurodegenerative diseases including MS and Parkinson's disease. With
bapineuzumab (AAB-001, a monoclonal antibody targeted against beta
amyloid peptide), Elan and Wyeth continue to lead the field in
immunotherapy for Alzheimer's disease, conducting worldwide four Phase
3 clinical studies in patients with mild to moderate Alzheimer's
disease. With respect to ELND-005, an orally-administered therapeutic
agent under active investigation by Elan and Transition Therapeutics,
Inc. for Alzheimer's disease, we have recently achieved the patient
enrollment target of a Phase 2 clinical study in North America.
Finally in Alzheimer's disease, the development program for ELND-006,
a small molecule gamma secretase inhibitor, has commenced with dosing
in a Phase 1 clinical study.

ELND-002, a small molecule targeting alpha-4 integrins, is in
Phase 1 testing with plans for additional early stage clinical testing
in patients early next year.

In addition, Elan and Biogen Idec have initiated a Phase 1/2
clinical trial of Tysabri in oncology in patients with relapsed or
refractory multiple myeloma.

In the post marketing setting, as previously reported by Elan and
Biogen Idec on July 31, 2008, two additional cases of progressive
multifocal leukoencephalopathy (PML) have occurred in Tysabri-treated
MS patients who were not receiving concomitant immunomodulatory
therapy. Elan and Biogen Idec, in conjunction with the FDA and the
European Medicines Agency, have updated the full prescribing
information for Tysabri to reflect this development.

About Elan

Elan Corporation, plc (NYSE: ELN) is a neuroscience-based
biotechnology company 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. Elan shares trade on the New York,
London and Dublin Stock Exchanges. For additional information about
the company, please visit http://www.elan.com.

Forward-Looking Statements

This document contains forward-looking statements about Elan's
financial condition, results of operations, business prospects and
products in research and 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. Among the factors that
could cause actual results to differ materially from those described
or projected herein are the following: the potential of Tysabri, the
incidence of serious adverse events associated with Tysabri (including
any additional cases of PML), and the potential for the successful
development and commercialization of additional products;, the
potential of Elan's other marketed products; 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 research and development activities including, in
particular, whether the Phase 3 clinical trials for bapineuzumab are
successful and the speed with which regulatory authorizations and
product launches may be achieved; competitive developments affecting
Elan's products (including, in particular, when Azactam will face
generic competition); the ability to successfully market both new and
existing products; difficulties or delays in manufacturing and supply
of Elan's products; trade buying patterns; the impact of generic and
branded competition, whether restrictive covenants in Elan's debt
obligations will adversely affect Elan; the trend towards managed care
and health care cost containment, including Medicare and Medicaid; the
potential impact of the Medicare Prescription Drug, Improvement and
Modernization Act 2003; possible legislation affecting pharmaceutical
pricing and reimbursement, both domestically and internationally;
failure to comply with kickback and false claims laws including in
respect to past practices related to the marketing of Zonegran(R)
which are being investigated by the U.S. Department of Justice and the
U.S. Department of Health and Human Services (the resolution of this
Zonegran matter could require Elan to pay substantial fines and to
take other actions that could have a material adverse effect on Elan);
failure to comply with Elan's payment obligations under Medicaid and
other governmental programs; exposure to product liability 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 products or product
candidates; interest rate and foreign currency exchange rate
fluctuations; governmental laws and regulations affecting domestic and
foreign operations, including tax obligations; general changes in
United States and International generally accepted accounting
principles; growth in costs and expenses; changes in product mix; 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,
2007, and in its Reports of Foreign Issuer on Form 6-K filed with the
U.S. Securities and Exchange Commission. Elan assumes no obligation to
update any forward-looking statements, whether as a result of new
information, future events or otherwise.

Appendix I

-0-
*T
Three Months Ended Three Months Ended
September 30, 2007 September 30, 2008
Biopharma- Biopharma-
ceuticals EDT Total ceuticals EDT Total
U.S.$m U.S.$m U.S.$m U.S.$m U.S.$m U.S.$m
----------------------------------------------------------------------
Revenue
106.8 64.7 171.5 Product revenue 198.9 67.5 266.4
0.6 4.5 5.1 Contract revenue -- 3.7 3.7
---------- -------- ------ ---------- ------ ------
107.4 69.2 176.6 Total revenue 198.9 71.2 270.1
57.0 27.6 84.6 Cost of goods sold 102.5 31.6 134.1
---------- -------- ------ ---------- ------ ------
50.4 41.6 92.0 Gross margin 96.4 39.6 136.0

Operating Expenses
Selling, general
and
70.3 12.0 82.3 administrative(1) 65.5 12.0 77.5
Research and
47.7 11.3 59.0 development 78.1 11.9 90.0
14.1 0.2 14.3 Other net charges 7.8 -- 7.8
---------- -------- ------ ---------- ------ ------
Total operating
132.1 23.5 155.6 expenses 151.4 23.9 175.3
---------- -------- ------ ---------- ------ ------
Operating
(81.7) 18.1 (63.6) (loss)/income (55.0) 15.7 (39.3)

Depreciation and
18.2 9.3 27.5 amortization 9.2 8.8 18.0
(0.2) (1.0) (1.2) Amortized fees -- (0.2) (0.2)
Share-based
6.6 2.3 8.9 compensation 9.5 2.6 12.1
14.1 0.2 14.3 Other net charges 7.8 -- 7.8
---------- -------- ------ ---------- ------ ------
(43.0) 28.9 (14.1) Adjusted EBITDA (28.5) 26.9 (1.6)
========== ======== ====== ========== ====== ======
*T

(1) General and corporate costs have been allocated between the
two segments.

Appendix II

-0-
*T
Nine Months Ended Nine Months Ended
September 30, 2007 September 30, 2008
Biopharma- Biopharma-
ceuticals EDT Total ceuticals EDT Total
U.S.$m U.S.$m U.S.$m U.S.$m U.S.$m U.S.$m
----------------------------------------------------------------------
Revenue
319.5 202.4 521.9 Product revenue 518.0 197.4 715.4
4.1 15.1 19.2 Contract revenue -- 15.0 15.0
---------- ------ ------- ---------- ------ -------
323.6 217.5 541.1 Total revenue 518.0 212.4 730.4
152.5 87.6 240.1 Cost of goods sold 271.6 95.3 366.9
---------- ------ ------- ---------- ------ -------
171.1 129.9 301.0 Gross margin 246.4 117.1 363.5

Operating Expenses
Selling, general
and
229.0 32.0 261.0 administrative(1) 190.1 36.2 226.3
Research and
145.7 34.3 180.0 development 209.3 35.4 244.7
77.9 3.5 81.4 Other net charges 13.4 -- 13.4
---------- ------ ------- ---------- ------ -------
Total operating
452.6 69.8 522.4 expenses 412.8 71.6 484.4
---------- ------ ------- ---------- ------ -------
Operating
(281.5) 60.1 (221.4) (loss)/income (166.4) 45.5 (120.9)

Depreciation and
114.7 27.0 141.7 amortization 24.0 28.1 52.1
(1.7) (7.9) (9.6) Amortized fees -- (2.5) (2.5)
Share-based
25.8 6.9 32.7 compensation 27.9 7.6 35.5
25.7 3.5 29.2 Other net charges 13.4 -- 13.4
---------- ------ ------- ---------- ------ -------
(117.0) 89.6 (27.4) Adjusted EBITDA (101.1) 78.7 (22.4)
========== ====== ======= ========== ====== =======
*T

(1) General and corporate costs have been allocated between the
two segments.

Elan Corporation
Investor Relations:
Chris Burns, 800-252-3526
David Marshall, 353-1-709-4444
or
Media Relations:
Jonathan Birt, 212-850-5664 or 44-20-7269-7205
Niamh Lyons, 353-1-663-3602

Copyright Business Wire 2008