Edgar Filing: ELAN CORP PLC

Form 20-F

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 20-F

(Mark One)

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR(g) OF THE SECURITIES EXCHANGE ACT OF 1934

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2011

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number: 001-13896

Elan Corporation, plc

(Exact name of Registrant as specified in its charter)

Ireland

(Jurisdiction of

incorporation or organization)

Treasury Building, Lower Grand Canal Street,

Dublin 2, Ireland

(Address of principal executive offices)

William Daniel, Secretary

Elan Corporation, plc

Treasury Building, Lower Grand Canal Street

Dublin 2, Ireland

011-353-1-709-4000

liam.daniel@elan.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:


Title of Each Class		Name of Exchange on Which Registered
American Depositary Shares (ADSs), representing Ordinary Shares,		New York Stock Exchange
Par value €0.05 each (Ordinary Shares) Ordinary Shares		New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 589,346,275 Ordinary Shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No þ

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP þ International Financial Reporting Standards as issued by the International Accounting Standards Board ¨ Other ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: Item 17 ¨ Item 18 ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ¨ No þ

TABLE OF CONTENTS


		Page
General			2
Forward-Looking Statements			2

PART I
Item 1.	Identity of Directors, Senior Management and Advisers		4
Item 2.	Offer Statistics and Expected Timetable		4
Item 3.	Key Information		4
Item 4.	Information on the Company		15
Item 4A.	Unresolved Staff Comments		27
Item 5.	Operating and Financial Review and Prospects		27
Item 6.	Directors, Senior Management and Employees		61
Item 7.	Major Shareholders and Related Party Transactions		81
Item 8.	Financial Information		85
Item 9.	The Offer and Listing		85
Item 10.	Additional Information		87
Item 11.	Quantitative and Qualitative Disclosures about Market Risk		93
Item 12.	Description of Securities Other than Equity Securities		95

PART II
Item 13.	Defaults, Dividend Arrearages and Delinquencies		97
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds		97
Item 15.	Controls and Procedures		97
Item 16.	Reserved		99
Item 16A.	Audit Committee Financial Expert		99
Item 16B.	Code of Ethics		99
Item 16C.	Principal Accountant Fees and Services		99
Item 16D.	Exemptions from the Listing Standards for Audit Committees		101
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers		101
Item 16F.	Change in Registrant’s Certifying Accountant		101
Item 16G.	Corporate Governance		102

PART III
Item 17.	Consolidated Financial Statements		104
Item 18.	Consolidated Financial Statements		104
Item 19.	Exhibits		180
Signatures			184
Financial Statement Schedule			185

General

As used herein, “we,” “our,” “us,” “Elan” and the “Company” refer to Elan Corporation, plc (public limited company) and its consolidated subsidiaries, unless the context requires otherwise. All product names appearing in italics are trademarks of Elan. Non-italicized product names are trademarks of other companies.

Our Consolidated Financial Statements contained in this Form 20-F have been prepared on the basis of accounting principles generally accepted in the United States (U.S. GAAP). In addition to the Consolidated Financial Statements contained in this Form 20-F, we also prepare separate Consolidated Financial Statements, included in our Annual Report, in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS), which differ in certain significant respects from U.S. GAAP. The Annual Report under IFRS is a separate document from this Form 20-F.

Unless otherwise indicated, our Consolidated Financial Statements and other financial data contained in this Form 20-F are presented in United States dollars ($). We prepare our Consolidated Financial Statements on the basis of a calendar fiscal year beginning on January 1 and ending on December 31. References to a fiscal year in this Form 20-F shall be references to the fiscal year ending on December 31 of that year. In this Form 20-F, financial results and operating statistics are, unless otherwise indicated, stated on the basis of such fiscal years.

Forward-Looking Statements

Statements included herein that are not historical facts are forward-looking statements. Such forward-looking statements are made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. The forward-looking statements involve a number of risks and uncertainties and are subject to change at any time. In the event such risks or uncertainties materialize, our results could be materially affected.

This Form 20-F contains forward-looking statements about our financial condition, results of operations and estimates, business prospects and products and potential products that involve substantial risks and uncertainties. These statements can be identified 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: (1) any negative developments relating to Tysabri^® (natalizumab), such as safety or efficacy issues (including increased incidence of deaths and cases of progressive multifocal leukoencephalopathy (PML)), the introduction or greater acceptance of competing products, including biosimilars, or adverse regulatory or legislative developments may reduce our revenues and adversely affect our results of operations; (2) the potential for the successful discovery, development and commercialization of additional products; (3) our ability to maintain financial flexibility and sufficient cash, cash equivalents, and investments and other assets capable of being monetized to meet our liquidity requirements; (4) whether restrictive covenants in our debt obligations will adversely affect us; (5) our dependence on Johnson & Johnson and Pfizer Inc. (Pfizer) for the development and potential commercialization, and the funding required from us for such development and potential commercialization, of bapineuzumab and any other potential products in the Alzheimer’s Immunotherapy Program (AIP); (6) the success of research and development (R&D) activities in which we retain an interest, including, in particular, whether the Phase 3 clinical trials for bapineuzumab (AAB-001) are successful or whether other potential AIP products are successfully developed, and the speed with which regulatory authorizations and product launches may be achieved; (7) while we own approximately 25% of the outstanding shares of Alkermes plc, the transfer or disposition of the shares is restricted by securities law and contract and we do not know when or whether we will be able to dispose of these shares or what value we will receive for the shares if we are able to dispose of them; (8) competitive developments, including the introduction of new oral therapies competitive with Tysabri and potentially biosimilar competition if we lost patent protection for Tysabri; (9) our ability to protect our patents and other intellectual property and defend against intellectual property lawsuits asserted against us or our collaborator Biogen Idec, Inc. (Biogen Idec); (10) difficulties or delays in manufacturing Tysabri (we are dependent on Biogen Idec for the manufacture of Tysabri); (11) pricing pressures and uncertainties regarding

healthcare reimbursement and reform and from countries seeking to reduce their public expenditures on healthcare, in particular as the result of the sovereign debt crisis in Europe; (12) the effects of our settlement with the U.S. government relating to marketing practices with respect to our former Zonegran^® (zonisamide) product, which required us to pay $203.5 million in fines and to take other actions that could have a material adverse effect on Elan; (13) failure to comply with anti-kickback, bribery and false claims laws in the United States and elsewhere; (14) extensive government regulation; (15) risks from potential environmental liabilities; (16) failure to comply with our reporting and payment obligations under Medicaid or other government programs; (17) exposure to product liability risks, in particular with respect to Tysabri; (18) an adverse effect that could result from the putative class action lawsuits alleging we disseminated false and misleading statements related to bapineuzumab and the outcome of our other pending or future litigation; (19) our business is exposed to the volatility of currency exchange rates and the risks of a partial or total collapse of the euro; and (20) some of our agreements that may discourage or prevent others from acquiring us and Johnson & Johnson is our largest shareholder with an 18.2% interest in our outstanding Ordinary Shares and is largely in control of our remaining interest in the AIP, which may discourage others from seeking to work with or acquire us. We assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law.

Part I

Item 1.

Identity of Directors, Senior Management and Advisers.

Not applicable.

Item 2.

Offer Statistics and Expected Timetable.

Not applicable.

Item 3.

Key Information.

A.	Selected Financial Data

The selected financial data set forth below, (in millions, except per share data), is derived from our Consolidated Financial Statements and should be read in conjunction with, and is qualified by reference to, Item 5. “Operating and Financial Review and Prospects” and our Consolidated Financial Statements and related notes thereto.


Years Ended December 31,	2011			2010			2009			2008			2007
Statement of Operations Data:
Total revenue	$	1,246.0		$	1,169.7		$	1,113.0		$	1,000.2		$	759.4
Operating income/(loss)	$	840.2	⁽¹⁾	$	(188.6	)⁽²⁾	$	31.9	⁽³⁾	$	(143.5	)⁽⁴⁾	$	(265.3	)⁽⁵⁾
Net income/(loss)	$	560.5	⁽⁶⁾	$	(324.7	)⁽⁷⁾	$	(176.2	)⁽⁸⁾	$	(71.0	)⁽⁹⁾	$	(405.0	)⁽¹⁰⁾
Basic income/(loss) per Ordinary Share⁽¹¹⁾	$	0.95		$	(0.56	)	$	(0.35	)	$	(0.15	)	$	(0.86	)
Diluted income/(loss) per Ordinary Share⁽¹¹⁾	$	0.94		$	(0.56	)	$	(0.35	)	$	(0.15	)	$	(0.86	)
Basic weighted-average number of shares outstanding		587.6			584.9			506.8			473.5			468.3
Diluted weighted-average number of shares outstanding		593.5			584.9			506.8			473.5			468.3
Other Financial Data:
Adjusted EBITDA⁽¹²⁾	$	213.0		$	166.5		$	96.3		$	4.3		$	(30.4	)
Pro forma Adjusted EBITDA⁽¹³⁾	$	146.7		$	62.7		$	(20.9	)	$	(125.5	)	$	(157.1	)

At December 31,	2011			2010			2009			2008			2007
Balance Sheet Data:
Cash and cash equivalents	$	271.7		$	422.5		$	836.5		$	375.3		$	423.5
Restricted cash — current and non-current	$	16.3		$	223.1		$	31.7		$	35.2		$	29.6
Investment securities — current	$	0.3		$	2.0		$	7.1		$	30.5		$	277.6
Total assets	$	1,753.8		$	2,017.5		$	2,337.8		$	1,867.6		$	1,780.8
Debt	$	615.0	⁽¹⁴⁾	$	1,270.4	⁽¹⁵⁾	$	1,532.1	⁽¹⁶⁾	$	1,765.0		$	1,765.0
Total shareholders’ equity/(deficit)	$	801.8		$	194.3		$	494.2		$	(232.2	)	$	(234.7	)

⁽¹⁾

After a net gain on divestment of business of $652.9 million; and after other net gains of $42.2 million, primarily relating to legal settlement gains of $84.5 million, offset by severance, restructuring and other costs of $20.4 million, and facilities and other asset impairment charges of $21.9 million.

⁽²⁾

After a settlement reserve charge of $206.3 million; other net charges of $56.3 million, primarily relating to severance, restructuring and other costs of $19.6 million, facilities and other asset impairment charges of $16.7 million, net loss on divestment of the Prialt business of $1.5 million, a legal settlement of $12.5 million, net acquired in-process research and development costs of $6.0 million; and after a net gain on divestment of business of $1.0 million.

⁽³⁾

After a net gain on divestment of business of $108.7 million; and after other net charges of $67.3 million, primarily relating to intangible asset impairment charges of $30.6 million, severance, restructuring and other costs of $29.0 million, facilities and other asset impairment charges of $16.1 million, acquired in-process research and development costs of $5.0 million, reduced by net legal awards of $13.4 million.

⁽⁴⁾

After other net charges of $34.2 million, primarily relating to severance, restructuring and other costs of $21.2 million, the write-off of deferred transaction costs of $7.5 million, a legal settlement of $4.7 million and facilities and other asset impairment charges of $0.8 million.

⁽⁵⁾

After other net charges of $84.6 million, primarily relating to a $52.2 million impairment of the Maxipime and Azactam intangible assets and net severance and restructuring costs of $32.4 million.

⁽⁶⁾

After a net gain on divestment of business of $652.9 million; after other net gains of $42.2 million, primarily relating to legal settlement gains of $84.5 million, offset by severance, restructuring and other costs of $20.4 million, facilities and other asset impairment charges of $21.9 million; after a net loss on equity method investments of $81.8 million; after a net charge on debt retirement of $47.0 million; and after a tax charge of $40.0 million relating to the write-down of U.S. state deferred tax assets.

⁽⁷⁾

After a settlement reserve charge of $206.3 million; other net charges of $56.3 million, primarily relating to severance, restructuring and other costs of $19.6 million, facilities and other asset impairment charges of $16.7 million, net loss on divestment of the Prialt business of $1.5 million, a legal settlement of $12.5 million, net acquired in-process research and development costs of $6.0 million; after a net gain on divestment of business of $1.0 million; after a net loss on equity method investment of $26.0 million; and after a net charge on debt retirement of $3.0 million.

⁽⁸⁾

After a net gain on divestment of business of $108.7 million; after other net charges of $67.3 million, primarily relating to intangible asset impairment charges of $30.6 million, severance, restructuring and other costs of $29.0 million, facilities and other asset impairment charges of $16.1 million, acquired in-process research and development costs of $5.0 million, reduced by net legal awards of $13.4 million; and after a net charge on debt retirement of $24.4 million.

⁽⁹⁾

After other net charges of $34.2 million, primarily relating to severance, restructuring and other costs of $21.2 million, the write-off of deferred transaction costs of $7.5 million, a legal settlement of $4.7 million, facilities and other asset impairment charges of $0.8 million; and after a tax credit of $236.6 million, which resulted from the release of a deferred tax asset valuation allowance.

⁽¹⁰⁾

After other net charges of $84.6 million, primarily relating to a $52.2 million impairment of the Maxipime and Azactam intangible assets and net severance and restructuring costs of $32.4 million; and after an $18.8 million net charge on debt retirement.

⁽¹¹⁾

Basic and diluted net income/(loss) per ordinary share is based on the weighted-average number of outstanding Ordinary Shares and the effect of potential dilutive securities including stock options, Restricted Stock Units, warrants and convertible debt securities, unless anti-dilutive.

⁽¹²⁾

Refer to pages 50 and 51 for a reconciliation of net income/(loss) to Adjusted EBITDA and page 49 for our reasons for presenting this non-GAAP measure.

⁽¹³⁾

Refer to pages 50 and 51 for a reconciliation of net income/(loss) to pro forma Adjusted EBITDA and to pages 38 and 49 for our reasons for presenting this pro forma non-GAAP financial information.

⁽¹⁴⁾

Net of unamortized original issue discount of $9.5 million.

⁽¹⁵⁾

Net of unamortized original issue discount of $14.6 million.

⁽¹⁶⁾

Net of unamortized original issue discount of $7.9 million.

B.	Capitalization and Indebtedness

Not applicable.

C.	Reasons for the Offer and Use of Proceeds

Not applicable.

D.	Risk Factors

You should carefully consider all of the information set forth in this Form 20-F, including the following risk factors, when investing in our securities. The risks described below are not the only ones that we face. Additional risks not currently known to us or that we presently deem immaterial may also impair our business operations. We could be materially adversely affected by any of these risks. This Form 20-F also contains forward-looking statements that involve risks and uncertainties. Forward-looking statements are not guarantees of future performance, and actual results may differ materially from those contemplated by such forward-looking statements.

We are substantially dependent on revenues from Tysabri.

Sales of our only marketed product Tysabri represented approximately 85% of our total revenues and approximately 100% of our pro forma revenues (see page 38 for a reconciliation Elan’s total GAAP revenues to

pro forma Elan revenues) during 2011. The Elan Drug Technologies (EDT) business, which we sold to Alkermes, Inc. on September 16, 2011, accounted for approximately 14% of our total revenues in 2011. Although we continue to seek to discover and develop additional products for commercial introduction, we may be substantially dependent on sales from Tysabri for many years. Any negative developments relating to Tysabri, such as safety, efficacy or reimbursement issues, the introduction or greater acceptance of competing products, including biosimilars, or adverse regulatory or legislative developments may reduce our revenues and adversely affect our results of operations. New competing products for use in multiple sclerosis (MS) are beginning to (or will soon) enter the market, including BG-12 which our collaborator, Biogen Idec has in late stage development, and if they have a similar or more attractive profile in terms of efficacy, convenience or safety, future sales of Tysabri could be limited, which would reduce our revenues.

Tysabri’s sales growth cannot be assured given the significant restrictions on its use and the significant safety warnings in the label, including the risk of developing PML, a serious brain infection. The risk of developing PML increases with prior immunosuppressant (IS) use, which may cause patients who have previously received immunosuppressants or their physicians to refrain from using or prescribing Tysabri. The risk of developing PML also increases with longer treatment duration, with limited experience beyond four years. This may cause prescribing physicians or patients to suspend treatment with Tysabri. In addition, the risk of developing PML is heightened when a patient has anti-JC virus (JCV) antibodies. In January 2012, the U.S. Food and Drug Administration (FDA) approved a product label change for Tysabri that identifies anti-JCV antibody status as a risk factor for PML. This risk had already been incorporated into the European label for Tysabri in June 2011. Physicians have discontinued treatment and are likely to continue to discontinue treatment with Tysabri in patients who test positive for JCV antibodies. Increased incidences of PML could limit sales growth, prompt regulatory review, require significant changes to the label or result in market withdrawal. Additional regulatory restrictions on the use of Tysabri or safety-related label changes, including enhanced risk management programs, whether as a result of additional cases of PML or otherwise, may significantly reduce expected revenues and require significant expense and management time to address the associated legal and regulatory issues. In addition, ongoing or future clinical trials involving Tysabri, efforts at stratifying patients into groups with lower or higher risk for developing PML and the commercial availability of the JCV antibody assay may have an adverse impact on prescribing behavior and reduce sales of Tysabri. Further, the utility of the JCV antibody assay may be diminished as a result of the assay’s false negative rate and because a patient who tests negative for JCV antibodies may be infected by the JCV after testing.

Our long-term success depends upon the successful development and commercialization of other product candidates.

Our long-term viability and growth will depend upon the successful discovery, development and commercialization of other products from our R&D activities, including bapineuzumab, which is being developed by Johnson & Johnson and Pfizer and in which we retain an approximate 25% economic interest. Product development and commercialization are very expensive and involve a high degree of risk. Only a small number of R&D programs result in the commercialization of a product. Success in preclinical work or early stage clinical trials does not ensure that later stage or larger scale clinical trials will be successful. Even if later stage clinical trials are successful, product candidates may not receive marketing approval if regulatory authorities disagree with our view of the data or require additional studies.

We have substantial cash needs and we may not be successful in generating or otherwise obtaining the funds necessary to meet our cash needs.

As of December 31, 2011, we had $624.5 million of debt falling due in October 2016 (2010: $1,285.0 million, comprised of $460.0 million that was due in December 2013 and $825.0 million due in October 2016). At such date, we had total cash and cash equivalents, restricted cash and cash equivalents and investments of $298.1 million (2010: $453.3 million). Our substantial indebtedness could have important adverse consequences to us. For example, it does or could:

•

Increase our vulnerability to general adverse economic and industry conditions;

•

Require us to dedicate a substantial portion of our cash flow from operations to payments on indebtedness, thereby reducing the availability of our cash flow to fund R&D (including our funding commitments to Janssen Alzheimer Immunotherapy (Janssen AI) for the AIP), working capital, capital expenditures, acquisitions, investments and other general corporate purposes;

•

Limit our flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate;

•

Place us at a competitive disadvantage compared to our competitors that have less debt; and

•

Limit our ability to borrow additional funds.

We estimate that we have sufficient cash, liquid resources and current assets and investments to meet our liquidity requirements for at least the next 12 months. Our future operating performance will be affected by general economic, financial, competitive, legislative, regulatory and business conditions and other factors, many of which are beyond our control. Even if our future operating performance does meet our expectations, including continuing to successfully commercialize Tysabri, we may need to obtain additional funds to meet our longer term liquidity requirements. We may not be able to obtain those funds on commercially reasonable terms, or at all, which would force us to curtail programs, sell assets or otherwise take steps to reduce expenses or cease operations. Any of these steps may have a material adverse effect on our prospects.

Restrictive covenants in our debt instruments restrict or prohibit our ability to engage in or enter into a variety of transactions and could adversely affect us.

The agreements governing our outstanding indebtedness contain various restrictive covenants that limit our financial and operating flexibility. The covenants do not require us to maintain or adhere to any specific financial ratio, but do restrict within limits our ability to, among other things:

•

Incur additional debt;

•

Create liens;

•

Enter into transactions with related parties;

•

Enter into some types of investment transactions;

•

Engage in some asset sales or sale and leaseback transactions;

•

Pay dividends or buy back our shares; and

•

Consolidate, merge with, or sell substantially all our assets to another entity.

The breach of any of these covenants may result in a default under the applicable agreement, which could result in the indebtedness under the agreement becoming immediately due and payable. Any such acceleration would result in a default under our other indebtedness subject to cross-acceleration provisions. If this were to occur, we might not be able to pay our debts or obtain sufficient funds to refinance them on reasonable terms, or at all. In addition, complying with these covenants may make it more difficult for us to successfully execute our business strategies and compete against companies not subject to similar constraints.

We depend on Johnson & Johnson, in addition to Pfizer, for the clinical development and potential commercialization of bapineuzumab and any other AIP products.

before the initial $500.0 million funding commitment has been spent, Johnson & Johnson is not required to contribute the full $500.0 million. As of December 31, 2011, the remaining unspent amount of the Johnson & Johnson $500.0 million funding commitment was $57.6 million (2010: $272.0 million), which reflects the $214.4 million utilized in 2011 (2010: $179.0 million). Any required additional expenditures in respect of Janssen AI’s obligations under the AIP collaboration in excess of the initial $500.0 million funding commitment is required to be funded by Elan and Johnson & Johnson in proportion to their respective shareholdings up to a maximum additional commitment of $400.0 million in total. Based on current spend levels, we anticipate that we will be called upon to provide funding to Janssen AI commencing in the second quarter of 2012. In the event that further funding is required beyond the $400.0 million, such funding will be on terms determined by the board of Janssen AI, with Johnson & Johnson and Elan having a right of first offer to provide additional funding. If we fail to provide our share of the $400.0 million commitment or any additional funding that is required for the development of the AIP, and if Johnson & Johnson elects to fund such an amount, our interest in Janssen AI could, at the option of Johnson & Johnson, be commensurately reduced. We refer to these transactions as the “Johnson & Johnson Transaction” in this Form 20-F.

The Johnson & Johnson Transaction resulted in the assignment of our AIP collaboration agreement with Wyeth (which has been acquired by Pfizer) and associated business, which primarily constituted intellectual property, to Janssen AI. While we have a 49.9% equity interest in Janssen AI, Johnson & Johnson exercises effective control over Janssen AI and consequently over our share of the AIP collaboration. As a result of the Johnson & Johnson Transaction, our financial interest in the AIP collaboration has been reduced from approximately 50% to approximately 25%. The success of the AIP collaboration will be dependent, in part, on the efforts of Johnson & Johnson. The interests of Johnson & Johnson may not be aligned with our interests. The failure of Johnson & Johnson to pursue the development and commercialization of AIP products in the same manner we would have pursued such development and commercialization could materially and adversely affect us.

Future returns from the Johnson & Johnson Transaction are dependent, in part, on the successful development and commercialization of bapineuzumab and other potential AIP products.

Under the terms of the Johnson & Johnson Transaction, in general, we are entitled to a 49.9% share of all net profits generated by Janssen AI beginning from the date Janssen AI becomes net profitable, and certain royalty payments from Janssen AI in respect of sales of bapineuzumab and other potential AIP products. Royalties will generally only arise after Johnson & Johnson has earned profits from the AIP equal to Johnson & Johnson’s (up to) $500.0 million initial investment. Any such payments are dependent on the future commercial success of bapineuzumab and other potential AIP products. If no drug is successfully developed and commercialized, we may not receive any profit or royalty payments from Janssen AI.

Almost all of our investments are shares of Alkermes plc which we are restricted in transferring or disposing.

We own approximately 25% of the outstanding shares of Alkermes plc, which acquired our EDT business on September 16, 2011. The transfer or disposition of these shares is restricted by securities law and by contract. We do not know when or whether we will be able to dispose of these Alkermes plc shares, or, if we can dispose of these shares, what value we will receive for these Alkermes plc shares. If the value of Alkermes plc shares should fall substantially before we can dispose of our holdings of Alkermes plc shares, then the market value of our investment in Alkermes plc shares will be commensurately reduced.

Our industry is highly competitive.

Our principal pharmaceutical competitors consist of major international companies, many of which are larger and have greater financial resources, technical staff, manufacturing, R&D and marketing capabilities than us. We also compete with smaller research companies and generic and biosimilar drug manufacturers. In addition, our collaborator on Tysabri, Biogen Idec, markets a competing MS therapy, Avonex^® and has another potentially competitive MS therapy (BG-12) in late stage development.

A drug may be subject to competition from alternative therapies during the period of patent protection or regulatory exclusivity and, thereafter, it may be subject to further competition from generic or biosimilar products. The price of pharmaceutical products typically declines as competition increases. Tysabri sales may be very sensitive to additional new competing products (in particular, from oral therapies approved or filed for U.S. and European approvals or under development). If these products have a similar or more attractive overall profile in terms of efficacy, convenience and/or safety, future sales of Tysabri could be adversely impacted.

Generic and biosimilar competitors do not have to bear the same level of R&D and other expenses associated with bringing a new branded product to market. As a result, they can charge less for a competing version of a product. Managed care organizations (MCOs) typically favor generics over brand name drugs, and governments encourage, or under some circumstances mandate, the use of generic products, thereby reducing the sales of branded products that are no longer patent protected. Governmental and other pressures toward the dispensing of generic or biosimilar products may rapidly and significantly reduce, or slow the growth in, the sales and profitability of any products not protected by patents or regulatory exclusivity and may adversely affect our future results and financial condition. The launch of competitive products, including generic or biosimilar versions of products, has had and may have a material and adverse effect on our revenues and results of operations.

Our competitive position depends, in part, upon our continuing ability to discover, acquire and develop innovative, cost-effective new products, as well as new indications and product improvements, and to protect all of this with patents and other intellectual property rights. We also compete on the basis of price and product differentiation. If we fail to maintain our competitive position, then our revenues and results of operations may be materially and adversely affected.

If we are unable to obtain or enforce patent rights, trade secrets or other intellectual property, then our revenues and potential revenues may be materially reduced.

Because of the significant time and expense involved in developing new products in our industry and obtaining regulatory approvals, it is very important to obtain patent and other intellectual property protection for new technologies, products and processes. Our success depends in large part on our continued ability to obtain patents for products and technologies, maintain patent protection for both acquired and developed products, preserve our trade secrets, obtain and preserve other intellectual property such as trademarks and copyrights, and operate without infringing the valid and enforceable proprietary rights of third parties.

The degree of patent protection that will be afforded to technologies, products and processes, including ours, in the United States and in other markets is dependent upon the scope of protection provided by patent offices, courts and legislatures in these countries. There is no certainty that our existing patents or, if obtained, future patents, will provide us with substantial protection or commercial benefit. In addition, there is no assurance that our patent applications or patent applications licensed from third parties will ultimately be granted or that those patents that have been issued or are issued in the future will prevail in any court challenge. Our competitors may also develop products, including generic or biosimilar products, similar to ours using methods and technologies that are beyond the scope of our patent protection, which could adversely affect the sales of our products.

Although we believe that we make reasonable efforts to protect our intellectual property rights and to ensure that our proprietary technology does not infringe the valid and enforceable rights of other parties, we cannot ascertain the existence of all potentially conflicting claims. Therefore, there is a risk that third parties may make claims of infringement against our product or technologies. In addition, third parties may be able to obtain patents that prevent the sale or use of our products or require us to obtain a license and pay significant fees or royalties in order to continue selling our products.

There has been, and we expect there will continue to be, significant litigation in the industry regarding patents and other intellectual property rights. Litigation and other proceedings concerning patents and other intellectual property rights in which we are involved have been and will continue to be protracted and expensive and could be distracting to our management and business operations. Our competitors have sued and may sue us or our collaborators as a means of delaying the introduction of products, or to extract royalties against a marketed product. Any litigation, interference proceedings, re-examinations or oppositions against us or our licensors, may

be costly and time consuming and could adversely affect us. In addition, litigation has been and may be instituted to determine the validity, scope or non-infringement of patent rights claimed by third parties to be pertinent to the manufacturing, use or sale of our or their products. The outcome of any such litigation could adversely affect the validity and scope of our patents or other intellectual property rights, hinder, delay or prevent the marketing and sale of our products and cost us substantial sums of money.

If there are significant delays in the manufacture or supply of Tysabri or in the supply of raw materials for Tysabri, then sales of Tysabri could be materially and adversely affected.

Biogen Idec manufactures Tysabri. Our dependence upon Biogen Idec for the manufacture of Tysabri may result in unforeseen delays or other problems beyond our control. For example, if Biogen Idec is not in compliance with current good manufacturing practices (cGMP) or other applicable regulatory requirements, then the supply of Tysabri could be materially and adversely affected. If Biogen Idec experiences delays or difficulties in producing Tysabri, then sales of Tysabri could be materially and adversely affected. Biogen Idec requires supplies of raw materials for the manufacture of Tysabri. Biogen Idec does not have dual sourcing of all required raw materials. The inability to obtain sufficient quantities of required raw materials could materially and adversely affect the supply of Tysabri.

We are subject to pricing pressures and uncertainties regarding healthcare reimbursement and reform.

In the United States, many pharmaceutical products and biologics are subject to increasing pricing pressures. Our ability to commercialize products successfully depends, in part, upon the extent to which healthcare providers are reimbursed by third-party payers, such as governmental agencies, including the Centers for Medicare and Medicaid Services, private health insurers and other organizations, such as health maintenance organizations (HMOs), for the cost of such products and related treatments. In addition, if healthcare providers do not view current or future Medicare reimbursements for our products favorably, then they may not prescribe our products. Third party payers are increasingly challenging the pricing of pharmaceutical products by, among other things, limiting the pharmaceutical products that are on their formulary lists. As a result, competition among pharmaceutical companies to place their products on these formulary lists has reduced product prices. If reasonable reimbursement for our products is unavailable or if significant downward pricing pressures in the industry occur, then we could be materially and adversely affected.

The Obama Administration and the Congress in the United States have significantly changed U.S. healthcare law and regulation, which may change the manner by which drugs and biologics are developed, marketed and purchased. In addition, MCOs, HMOs, preferred provider organizations, institutions and other government agencies continue to seek price discounts. Further, some states in the United States have proposed and some other states have adopted various programs to control prices for their seniors’ and low-income drug programs, including price or patient reimbursement constraints, restrictions on access to certain products, importation from other countries, such as Canada, and bulk purchasing of drugs.

We encounter similar regulatory and legislative issues in most other countries. In the European Union and some other international markets, the government provides healthcare at low direct cost to consumers and regulates pharmaceutical prices or patient reimbursement levels to control costs for the government-sponsored healthcare system. Many countries are seeking to reduce their public expenditures on healthcare. These efforts may result in patient access restrictions, increased pressure on drug pricing, including denial of price increases, prospective and retrospective price decreases and increased mandatory discounts or rebates. For instance, a revenue reserve of $14.1 million was recorded in 2011 on Tysabri in-market sales in Italy, arising from a disagreement between Biogen Idec and the Italian Medicines Agency on a contract interpretation of a limit established by the agency in 2007. The revenue reserve is discussed further on page 40. The sovereign debt crisis in Europe and elsewhere may accelerate efforts by governments to cut public expenditures on healthcare. These efforts may negatively impact Tysabri.

We settled with the U.S. government with respect to its investigation of the marketing practices concerning our former Zonegran product which required us to pay $203.5 million in criminal and civil fines and penalties and take other actions that could have a material adverse effect on us.

In December 2010, we resolved all aspects of the U.S. Department of Justice’s investigation of sales and marketing practices for Zonegran, an antiepileptic prescription medicine that we divested in 2004. In the first quarter of 2011, we paid $203.5 million pursuant to the terms of a global settlement of all U.S. federal and related state Medicaid claims. In addition, we pleaded guilty to a misdemeanor violation of the U.S. Federal Food Drug & Cosmetic Act (FD&C Act) and entered into a Corporate Integrity Agreement with the Office of Inspector General of the Department of Health and Human Services to promote our compliance with the requirements of U.S. federal healthcare programs and the FDA. If we materially fail to comply with the requirements of U.S. federal healthcare programs or the FDA, or otherwise materially breach the terms of the Corporate Integrity Agreement, such as by a material breach of the compliance program or reporting obligations of the Corporate Integrity Agreement, severe sanctions could be imposed upon us. This resolution of the Zonegran investigation could give rise to other investigations or litigation by state government entities or private parties.

The pharmaceutical industry is subject to anti-kickback, bribery and false claims laws in the United States and elsewhere.

In addition to the FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrict some marketing practices in the pharmaceutical industry in recent years. These laws include anti-kickback, bribery and false claims statutes. The federal healthcare program anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting, or receiving remuneration to induce or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand, and prescribers, purchasers and formulary managers on the other. Although there are a number of statutory exemptions and regulatory safe harbors protecting some common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Our practices may not in all cases meet all of the criteria for safe harbor protection from anti-kickback liability.

Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to get a false claim paid. In recent years, many pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Additionally, we and other pharmaceutical companies have settled charges under the federal False Claims Act, and related state laws, relating to off-label promotion. We are now operating under a Corporate Integrity Agreement with the Office of Inspector General of the U.S. Department of Health and Human Services to promote our compliance with the requirements of U.S. federal healthcare programs and the FDA. If we materially fail to comply with the requirements of U.S. federal healthcare programs or the FDA, or otherwise materially breach the terms of the Corporate Integrity Agreement, such as by a material breach of the compliance program or reporting obligations of the Corporate Integrity Agreement, severe sanctions could be imposed upon us. The majority of states also have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items, and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer. Sanctions under these federal and state laws may include civil monetary penalties, exclusion of a manufacturer’s products from reimbursement under government programs, criminal fines, and imprisonment.

The Foreign Corrupt Practices Act (FCPA) and the United Kingdom Bribery Act (U.K. Bribery Act) prohibits companies and their representatives from offering, promising, authorizing or making payments to foreign officials (and some private individuals under the U.K. Bribery Act) for the purpose of obtaining or retaining business abroad. In many countries, the healthcare professionals we interact with may meet the

definition of a foreign government official for purposes of the FCPA. Failure to comply with domestic or foreign laws could result in various adverse consequences, including possible delay in approval or refusal to approve a product, recalls, seizures, withdrawal of an approved product from the market, the imposition of civil or criminal sanctions and the prosecution of executives overseeing our international operations.

We are subject to extensive government regulation, which may adversely affect our ability to bring new products to market and may adversely affect Tysabri.

The pharmaceutical industry is subject to significant regulation by state, local, national and international governmental regulatory authorities. In the United States, the FDA, and in the European Union, the European Medicines Agency (EMA) regulate the design, development, preclinical and clinical testing, manufacturing, labeling, storing, distribution, import, export, record keeping, reporting, marketing and promotion of pharmaceutical products, which include drugs, biologics and medical devices. Failure to comply with regulatory requirements at any stage during the regulatory process could result in, among other things, delays in the approval of applications or supplements to approved applications, refusal of a regulatory authority to review pending market approval applications or supplements to approved applications, warning letters, fines, import or export restrictions, product recalls or seizures, injunctions, total or partial suspension of production, civil penalties, withdrawals of previously approved marketing applications or licenses, recommendations by the FDA or other regulatory authorities against governmental contracts, and criminal prosecutions.

We must obtain and maintain approval for products from regulatory authorities before such products may be sold in a particular jurisdiction. The submission of an application to a regulatory authority with respect to a product does not guarantee that approval to market the product will be granted. Each authority generally imposes its own requirements and may delay or refuse to grant approval, even though a product has been approved in another country. In our principal markets, including the United States, the approval process for a new product is complex, lengthy, expensive and subject to unanticipated delays. We cannot be sure when or whether approvals from regulatory authorities will be received or that the terms of any approval will not impose significant limitations that could negatively impact the potential profitability of the approved product. Even after a product is approved, it may be subject to regulatory action based on newly discovered facts about the safety and efficacy of the product, on any activities that regulatory authorities consider to be improper or as a result of changes in regulatory policy. Regulatory action may have a material adverse effect on the marketing of a product, require changes in the product’s labeling or even lead to the withdrawal of the regulatory marketing approval of the product.

All facilities and manufacturing techniques used for the manufacture of products and devices for clinical use or for sale in the United States must be operated in conformity with cGMPs, the FDA’s regulations governing the production of pharmaceutical products. There are comparable regulations in other countries, including regulations issued by the EMA for the European Union. Any finding by the FDA, the EMA or other regulatory authority that we are not in substantial compliance with cGMP regulations or that we or our employees have engaged in activities in violation of these regulations could interfere with the continued manufacture and distribution of the affected products, up to the entire output of such products, and, in some cases, might also require the recall of previously distributed products. Any such finding by the FDA, the EMA or other regulatory agency could also affect our ability to obtain new approvals until such issues are resolved. The FDA, the EMA and other regulatory authorities conduct scheduled periodic regulatory inspections of facilities to ensure compliance with cGMP regulations. Any determination by the FDA, the EMA or other regulatory authority that we, or one of our suppliers, are not in substantial compliance with these regulations or are otherwise engaged in improper or illegal activities could result in substantial fines and other penalties and could cut off our product supply.

Our business exposes us to risks of environmental liabilities.

We use hazardous materials, chemicals and toxic compounds that could expose people or property to accidental contamination and result in events of non-compliance with environmental laws, regulatory enforcement and claims related to personal injury and property damage. If an accident occurred or if we were to discover contamination caused by prior operations, then we could be liable for cleanup, damages or fines, which could have an adverse effect on us.

The environmental laws of many jurisdictions impose actual and potential obligations on us to remediate contaminated sites. These obligations may relate to sites that we currently own or lease, sites that we formerly owned or operated, or sites where waste from our operations was disposed. These environmental remediation obligations could significantly impact our operating results. Stricter environmental, safety and health laws and enforcement policies could result in substantial costs and liabilities to us, and could subject our handling, manufacture, use, reuse or disposal of substances or pollutants to more rigorous scrutiny than is currently the case. Consequently, compliance with these laws could result in significant capital expenditures, as well as other costs and liabilities, which could materially adversely affect us.

If we fail to comply with our reporting and payment obligations under the Medicaid rebate program or other governmental pricing programs, then we could be subject to material reimbursements, penalties, sanctions and fines.

As a condition of reimbursement under Medicaid, we participate in the U.S. federal Medicaid rebate program, as well as several state rebate programs. Under the federal and state Medicaid rebate programs, we pay a rebate to each state for a product that is reimbursed by those programs. The amount of the rebate for each unit of product is set by law, based on reported pricing data. The rebate amount may also include a penalty if our prices increase faster than the rate of inflation.

For manufacturers of single-source, innovator and non-innovator multiple-source products, rebate calculations vary among products and programs. The calculations are complex and, in some respects, subject to interpretation by governmental or regulatory agencies, the courts and us. The Medicaid rebate amount is computed each quarter based on our pricing data submission to the Centers for Medicare and Medicaid Services at the U.S. Department of Health and Human Services. The terms of our participation in the program impose an obligation to correct the prices reported in previous quarters, as may be necessary. Any such corrections could result in an overage or shortfall in our rebate liability for past quarters (up to 12 past quarters), depending on the direction of the correction. Governmental agencies may also make changes in program interpretations, requirements or conditions of participation, some of which may have implications for amounts previously estimated or paid.

U.S. federal law requires that any company that participates in the federal Medicaid rebate program extend comparable discounts to qualified purchasers under the Public Health Service’s (PHS) pharmaceutical pricing program. This pricing program extends discounts comparable to the Medicaid net price to a variety of community health clinics and other entities that receive health services grants from the PHS, as well as outpatient utilization at hospitals that serve a disproportionate share of poor patients.

Additionally, each calendar quarter, we calculate and report an Average Sales Price (ASP) for Tysabri, which is covered by Medicare Part B (primarily injectable or infused products). We submit ASP information for Tysabri within 30 days of the end of each calendar quarter. This information is then used to set reimbursement levels to reimburse Part B providers for the drugs and biologicals dispensed to Medicare Part B participants. Furthermore, pursuant to the Veterans Health Care Act, a Non-Federal Average Manufacturer Price is calculated each quarter and a Federal Ceiling Price is calculated each year for Tysabri. These prices are used to set pricing for purchases by the military arm of the government. These price reporting obligations are complicated and often involve decisions regarding issues for which there is no clear-cut guidance from the government. Failure to submit correct pricing data can subject us to material civil, administrative and criminal penalties.

We are subject to continuing potential product liability risks, in particular with respect to Tysabri, which could cost us material amounts of money.

Risks relating to product liability claims are inherent in the development, manufacturing and marketing of products. Any person who is injured while using our product, or products that we are responsible for, may have a product liability claim against us. Since we distribute a product to a wide number of end users, the risk of such claims could be material. Persons who participate in our clinical trials may also bring liability claims. We are a defendant in product liability actions related to products that Elan marketed. In addition, we are defendants in

product liability lawsuits arising out of serious adverse events, including deaths, that occurred in patients taking Tysabri. We expect additional product liability lawsuits related to Tysabri usage to be filed. While we intend to vigorously defend these lawsuits, we cannot predict how these cases will be resolved. Adverse results in one or more of these cases could result in substantial monetary judgments against us.

Excluding any self-insured arrangements, we do not maintain product liability insurance for the first $10.0 million of aggregate claims, but do maintain coverage with our insurers for the next $140.0 million. Our current insurance coverage may not be sufficient to cover fully all potential claims, nor can we guarantee the solvency of any of our insurers.

If our claims experience results in higher rates, or if product liability insurance otherwise becomes costlier because of general economic, market or industry conditions, then we may not be able to maintain product liability coverage on acceptable terms. If sales of our product increase materially, or if we add significant products to our portfolio, then we will require increased coverage and may not be able to secure such coverage at reasonable rates or terms.

We and some of our officers and directors were named as defendants in putative class actions; an adverse outcome in the class actions could result in a substantial judgment against us.

We and some of our officers and directors were named as defendants in five putative class action lawsuits filed in the U.S. District Court for the Southern District of New York in 2008. The cases have been consolidated. The plaintiffs’ Consolidated Amended Complaint was filed on August 17, 2009, and alleged claims under the U.S. federal securities laws and sought damages on behalf of all purchasers of our stock during periods ranging between May 21, 2007 and October 21, 2008. The complaint alleged that we issued false and misleading public statements concerning the safety and efficacy of bapineuzumab. In July 2010, a second securities case was filed in the U.S. District Court for the Southern District of New York, as a “related case” to the existing 2008 matter, by purchasers of Elan call options during the period of June and July 2008. These cases have been dismissed with prejudice by the trial court, but an appeal has been filed to the 2^nd Circuit by the plaintiffs in the related case. Adverse results in this lawsuit or in any litigation to which we are a party could have a material adverse affect on us.

Our sales and operations are subject to the risks of fluctuations in currency exchange rates and to the risk of a partial or total collapse of the euro.

Our headquarters are in Ireland and three of the major markets for Tysabri are Germany, France and Italy. As a result, changes in the exchange rate between the U.S. dollar and the euro can have significant effects on our results of operations. In addition, the partial or total collapse of the euro would cause severe and adverse consequences to sales of Tysabri in Europe and to reimbursements for sales of Tysabri in Europe.

Provisions of agreements to which we are a party may discourage or prevent a third party from acquiring us and could prevent our shareholders from receiving a premium for their shares.

We are a party to agreements that may discourage a takeover attempt that might be viewed as beneficial to our shareholders who wish to receive a premium for their shares from a potential bidder. For example:

•

Our collaboration agreement with Biogen Idec provides Biogen Idec with an option to buy the rights to Tysabri in the event that we undergo a change of control, which may limit our attractiveness to potential acquirers;

•

Johnson & Johnson is our largest shareholder and is largely in control of our share of the AIP; however, Johnson & Johnson and its affiliates are subject to a standstill agreement until September 17, 2014, pursuant to which, subject to limited exceptions, they will not be permitted to acquire additional shares in Elan or take other actions to acquire control of Elan;

•

The Corporate Integrity Agreement that we entered into with the U.S. government with respect to the settlement of the Zonegran matter contains provisions that may require any acquirer to assume the

obligations imposed by the Corporate Integrity Agreement, which may limit our attractiveness to a potential acquirer; and

•

Under the terms of indentures governing much of our debt, any acquirer would be required to make an offer to repurchase the debt for cash in connection with some change of control events.

Item 4.

Information on the Company.

A.	History & Development of the Company

Elan Corporation, plc, an Irish public limited company, is a leading neuroscience-based biotechnology company, listed on the New York and Irish Stock Exchanges, and headquartered in Dublin, Ireland. Elan was incorporated as a private limited company in Ireland in December 1969 and became a public limited company in January 1984. Our registered office and principal executive offices are located at Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland (Telephone: 011-353-1-709-4000).

Elan is focused on discovering and developing advanced therapies in neurodegenerative and autoimmune diseases, and in realizing the potential of our scientific discoveries to benefit patients and shareholders. As of December 31, 2011, we employed over 400 people. Our principal R&D facilities are located in the United States.

Tysabri, a treatment for MS and Crohn’s disease that we market and distribute with Biogen Idec, had over $1.5 billion in global in-market sales in 2011. Almost all of those sales were in relation to the MS indication.

On September 16, 2011, we completed the sale of our EDT business to Alkermes, Inc. EDT and Alkermes, Inc. were combined under a new holding company incorporated in Ireland named Alkermes plc. In connection with the transaction, we received $500.0 million in cash and 31.9 million ordinary shares of Alkermes plc. As of December 31, 2011, we held approximately 25% of the equity of Alkermes plc. For additional information on this transaction, refer to Note 5 to the Consolidated Financial Statements.

For information on our principal expenditures on property, plants and equipment, see Item 4D. “Property, Plant & Equipment.” For information on our significant investments in R&D, see Item 5C. “Research and Development, Patents and Licenses, etc.” For information on our significant investments in other companies, refer to Note 9 to the Consolidated Financial Statements.

B.	Business Overview

Elan’s business focuses on neurodegenerative diseases, such as Alzheimer’s disease and Parkinson’s disease; autoimmune diseases, including MS and Crohn’s disease and neo-epitope based targets for treatments across a broad range of therapeutic indications.

We made significant changes during 2011, which resulted in a more refined focus on neuroscience. Facilitated by the sale of our EDT business, we reduced the total principal amount of our debt by 51%. We achieved revenue growth of over 19% on a pro forma basis (see page 38 for a reconciliation of Elan’s total GAAP revenues to pro forma Elan revenues) and remained disciplined on cost. Finally, we made progress on Tysabri, particularly in relation to the awareness of the benefits and risks associated with taking this drug.

Tysabri

Tysabri, an alpha-4 integrin inhibitor invented by Elan scientists and available since 2006, continues to be a successful therapy for MS, a neurological disorder involving central nervous system dysfunction among adults.

Tysabri is approved in more than 65 countries. Tysabri is approved in the United States as a monotherapy for relapsing forms of MS, generally for patients who have had an inadequate response to, or are unable to tolerate, an alternative MS therapy. In the European Union, it is approved for highly active relapsing-remitting MS (RRMS) in adult patients who have failed to respond to beta interferon or have rapidly evolving, severe RRMS.

Tysabri has advanced the treatment of MS patients with its established efficacy. Data from the Phase 3 AFFIRM trial, which was published in the New England Journal of Medicine, showed that after two years, Tysabri treatment led to a 68% relative reduction (p<0.001) in the annualized relapse rate when compared with placebo and reduced the relative risk of disability progression by 42% to 54% (p<0.001).

We continue to work closely with our collaborator on Tysabri, Biogen Idec, as well as the clinical and scientific communities, to generate significant understanding — in both efficacy and safety of the therapy — so it may be positioned for the clinical benefit of patients.

As of December 31, 2011, there were approximately 64,400 patients on Tysabri therapy worldwide, compared to 57,200 patients as of December 31, 2010, which represents an increase of 13%. In 2011, global in-market sales of Tysabri exceeded $1.5 billion and constituted approximately 12% of the global MS market by value.

Tysabri increases the risk of PML, an opportunistic viral infection of the brain which usually leads to death or severe disability. Infection by the JCV is required for the development of PML and patients who are anti-JCV antibody positive have a higher risk of developing PML. Recent studies suggest that irrespective of MS treatment, approximately 55% of MS patients are anti-JCV antibody positive. Factors that increase the risk of PML are presence of anti-JCV antibodies, prior IS use, and longer Tysabri treatment duration. Patients who have all three risk factors have the highest risk of developing PML. Other serious adverse events that have occurred in Tysabri-treated patients include hypersensitivity reactions (for example, anaphylaxis) and infections, including opportunistic and other atypical infections. Clinically significant liver injury has also been reported in the post-marketing setting.

In the United States, Europe and in other countries, programs are in place to inform patients of the risks associated with Tysabri therapy, including PML, and to enhance collection of post-marketing data on the safety and utilization of Tysabri for MS. In 2011, we made significant progress in better understanding the risk of PML associated with Tysabri and in building awareness of Tysabri’s benefit/risk profile.

Tysabri – label updates provide a more informed “benefit/risk” analysis

Europe

In June 2011, the European Commission (EC) approved the inclusion of the anti-JCV antibody status as an additional factor in stratifying patients at risk for developing PML in the Summary of Product Characteristics’ (SmPC) for Tysabri in the European Union. In addition, as part of a standard review process, the EC concluded the quality, safety and efficacy of Tysabri continues to be adequately demonstrated, and renewed Tysabri’s five year marketing authorization in the EU.

The new SmPC language states that patients who are anti-JCV antibody positive are at an increased risk of developing PML compared to patients who are anti-JCV antibody negative. The SmPC language also states that patients who are anti-JCV antibody positive, have received prior IS therapy, and have received treatment with Tysabri for more than two years have the highest risk of developing PML.

This update to the SmPC was based on analysis of data from Biogen Idec’s and Elan’s quantitative risk stratification algorithm, which was presented at a number of major international medical meetings. The analysis showed that patients who were anti-JCV antibody negative were at a lower risk for developing PML. Patients who were anti-JCV antibody positive had varying degrees of risk for developing PML, depending on prior IS use and Tysabri treatment duration. The revised SmPC will enable a more informed “benefit vs risk” discussion between patients and physicians, ultimately better stratifying the risk for those on or considering Tysabri as an appropriate therapy.

United States

We also made progress to stratify PML risk for MS patients in the United States. In January 2012, the FDA approved an update to the Prescribing Information for Tysabri to include anti-JCV antibody status as a factor to

help stratify the risk of PML in the Tysabri-treated population. The inclusion of anti-JCV antibody status as a risk factor along with prior IS use and treatment duration enables the identification of differing levels of risk and provides the information patients and physicians need to make a more informed treatment decision.

We developed a two-step enzyme-linked immunosorbent assay (ELISA) called STRATIFY JCV with Biogen Idec. The assay detects anti-JCV antibodies in the blood of patients, and is widely commercially available in Europe. In January 2012, the FDA cleared the assay for commercial use in the United States. As of December 31, 2011, over 80,000 tests had been administered using the assay.

Advancement with Tysabri risk stratification in 2011 exceeded our expectations, and is facilitating a more personalized approach to treatment selection.

Tysabri is marketed and distributed by Elan and Biogen Idec. For full prescribing information and more information about Tysabri, please visit www.elan.com or www.biogenidec.com. Information about Tysabri treatment for MS, including important safety information, is available at www.Tysabri.com.

Tysabri for Secondary Progressive Multiple Sclerosis

In 2011, Elan and Biogen Idec initiated patient enrollment in ASCEND, a Phase 3 trial to test the effectiveness of Tysabri treatment on the reduction of disability progression in subjects with secondary progressive MS.

Science, Discovery and Translational Medicine

We started an initiative in 2010 to build the next generation of science and discovery, which continues today and is facilitated by our new business structure.

As part of this initiative, we established the Parkinson’s disease genetics (PDG) group which researches fundamental pathways of Parkinson’s biology, genetics-based animal models, and structural characterization of genetic targets for drug design. A separate research group, which is called Neotope, is focused on creating novel monoclonal antibodies based on neo-epitope targets for the treatment of a broad range of therapeutic indications.

We plan to continue to make measured and disciplined investment in our Alzheimer’s disease and MS pipelines and to continue to utilize external collaborations and relationships to enhance our focus on scientific discovery, which is our key strength.

Alzheimer’s Disease Programs

Our Scientific Approach

Elan’s scientists have been leaders in Alzheimer’s disease research for more than 25 years, and insights gained from our work are an important part of the scientific foundation of understanding this disease. We are known and respected for our innovative Alzheimer’s disease research and our commitment to creating new therapeutic opportunities for patients desperately in need of them.

Our scientific approach to treating Alzheimer’s disease has focused principally on beta amyloid. The process by which this protein is generated, aggregates and is ultimately deposited in the brain is often referred to as the beta amyloid cascade. The formation of beta amyloid plaques is the hallmark pathology of Alzheimer’s disease.

Beta amyloid, also known as Abeta, is a small part of a larger protein called the amyloid precursor protein (APP). Beta amyloid is formed when certain enzymes called secretases “clip” (or cleave) APP. It is becoming increasingly clear that once beta amyloid is released, it exists in multiple physical forms with distinct functional activities. It is believed that the toxic effects of these forms may be involved in the complex cognitive, functional and behavioral deficits characteristic of Alzheimer’s disease.

Beta amyloid immunotherapies (AIP)

Beta amyloid immunotherapy pioneered by our scientists involves the potential treatment of Alzheimer’s disease by inducing or enhancing the body’s immune response in order to clear toxic species of beta amyloid from the brain. In almost a decade of collaboration with Wyeth (which has been acquired by Pfizer), our scientists developed a series of therapeutic monoclonal antibodies and active vaccination approaches that may have the ability to reduce or clear beta amyloid from the brain. These new approaches have the potential to alter the underlying cause of the disease by reducing a key pathway associated with it. The AIP includes bapineuzumab (intravenous and subcutaneous delivery) and ACC-001, as well as other compounds.

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Bapineuzumab is an experimental humanized monoclonal antibody delivered intravenously that is being studied as a potential treatment for mild to moderate Alzheimer’s disease. Bapineuzumab is thought to bind to and clear beta amyloid peptide in the brain. It is designed to provide antibodies to beta amyloid directly to the patient (passive immunotherapy), rather than prompting patients to produce their own immune responses (active immunotherapy).

As part of the Johnson & Johnson Transaction in 2009, Janssen AI, a subsidiary of Johnson & Johnson, acquired substantially all of our assets and rights related to the AIP collaboration. Under the terms of this transaction, Johnson & Johnson provided an initial $500 million funding to Janssen AI and we have a 49.9% shareholding in Janssen AI. In general, we are entitled to a 49.9% share of all net profits generated by Janssen AI beginning from the date Janssen AI becomes net profitable and certain royalty payments upon the commercialization of products under the AIP collaboration. As of December 31, 2011, the remaining unspent amount of the $500.0 million funding commitment was $57.6 million. Based on current spend levels, we expect that we will be called upon to provide funding to Janssen AI commencing in the second quarter of 2012.

In January 2011, Johnson & Johnson and Pfizer reported that enrollment was completed for the North American Phase 3 trials and sub-studies of bapineuzumab. Bapineuzumab has received fast-track designation from the FDA, which means that it may receive expedited approval in certain circumstances, in recognition of its potential to address the significant unmet needs of patients with Alzheimer’s disease.

The Phase 3 program includes four randomized, double-blind, placebo-controlled studies across two subpopulations (based on ApoE4 genotype) with mild to moderate Alzheimer’s disease, with patients distributed between North America and the rest of world. Johnson & Johnson now anticipates that the North American bapineuzumab Phase 3 trials will be completed in 2012 and Phase 3 rest of world trials will be completed in 2014.

ELND005, an Aß aggregation inhibitor

In 2006, we entered into an exclusive, worldwide collaboration with Transition Therapeutics, Inc. (Transition) for the joint development and commercialization of a novel therapeutic agent for Alzheimer’s disease. The small molecule ELND005 (Scyllo-inositol) is a beta amyloid anti-aggregation agent that has been granted fast-track designation by the FDA. Preclinical data suggest that ELND005 may act through the mechanism of preventing and reversing the fibrilisation of beta amyloid (the aggregation of beta amyloid into clumps of insoluble oligomers), thus enhancing clearance of amyloid and preventing or reducing plaque deposition.

In December 2010, we modified our Collaboration Agreement with Transition and as a result, Transition is no longer funding any continuing development or commercialization of ELND005 and has relinquished its 30% ownership of ELND005 to Elan. Under the modified agreement, we paid Transition $9.0 million in January 2011. While Transition is still eligible to receive a further $11.0 million payment upon the commencement of the next ELND005 clinical trial, it is no longer eligible to receive a $25.0 million milestone that would have been due upon the commencement of a Phase 3 trial for ELND005, under the terms of the original agreement.

In July 2011, Elan presented data from the Phase 2 clinical trial of ELND005 in mild to moderate Alzheimer’s disease patients at the Alzheimer’s Association International Conference 2011. Poster presentations on the safety and efficacy results of the Phase 2 randomized, placebo-controlled, dose-ranging study of ELND005 in mild to moderate Alzheimer’s disease and on the population pharmacokinetic analysis of plasma, cerebrospinal fluid (CSF) and brain ELND005 in patients with mild to moderate Alzheimer’s disease were presented. An oral presentation on imaging and cerebrospinal fluid biomarker results of a Phase 2 dose-ranging study of ELND005 in mild to moderate Alzheimer’s disease was also presented.

In November 2011, ELND005 was featured during four oral presentations and on two posters, at the 4th Conference on Clinical Trials on Alzheimer’s disease, where new analyses were presented from the Phase 2 Alzheimer’s disease study. The presentations focused on treatment effects at earlier stages of the disease, using validated “composite” cognitive endpoints. These results support the general direction of the field for earlier intervention. In addition, data on ELND005’s role in reducing the emergence of neuropsychiatric symptoms in Alzheimer’s patients was highlighted. The results of the Phase 2 clinical study data of ELND005 in mild to moderate Alzheimer’s disease were published in Neurology, the peer-reviewed journal, in September 2011.

ELND005 may have additional applications in psychiatric indications such as bipolar disorder. Our goal is to initiate a proof of concept Phase 2 study in bipolar disorder in 2012, post-completion of discussions with therapeutic area experts and regulators.

In November 2011, we entered into a manufacturing agreement for the supply of the active pharmaceutical ingredient for ELND005 with Lonza Group AG.

Parkinson’s Disease Genetics

Parkinson’s disease is a slowly progressive disease of the nervous system and the second most common degenerative neurological disorder after Alzheimer’s disease. In general, it affects one in 100 people over the age of 60, though people younger than this also live with the disease.

Elan’s discovery approach, through our dedicated PDG group, is guided by our expertise in Alzheimer’s disease research. The goal of our discovery efforts is to pursue a number of genetically validated targets that could prevent the neurodegenerative cascade associated with the Parkinson’s disease and other neurological disorders.

Like many other neurodegenerative disorders, Parkinson’s disease involves the formation and accumulation of misfolded proteins in the brain. Alpha-synuclein is a protein genetically linked to Parkinson’s disease — abnormal aggregates of alpha-synuclein, including fibrils and inclusions known as Lewy bodies, occur in degenerating neurons in brain regions controlling movement and can involve other regions of the brain as well. Alterations in alpha-synuclein are believed to play a critical role in Parkinson’s disease.

Our scientists are examining the different forms of alpha-synuclein and the role that they can play in normal and abnormal cellular functions, as well as the pathogenicity of alpha-synuclein in animal models of disease.

Parkin is a protein found in the brain that, like alpha-synuclein, has been genetically linked to Parkinson’s disease. Parkin may be involved in the elimination of misfolded proteins within neurons, and has demonstrated neuroprotective capabilities in cells. Some familial forms of Parkinson’s disease have been linked to mutations in parkin, with more than 50% of early onset Parkinson’s disease being linked to a loss of parkin protein and function in neurons. Our scientists continue the process of determining how parkin can regulate the processes of neurodegeneration.

In addition to our dedicated internal research group, in 2011, we expanded our collaborative effort with the University of Cambridge, and also began working with Proteostasis Therapeutics, Inc. (Proteostasis) to help us advance more quickly from the laboratory to the clinic.

Neotope Biosciences Limited

Neotope Biosciences Limited (Neotope) is our wholly owned subsidiary that focuses on the discovery and development of antibodies to neo-epitope related targets for the potential treatment of a broad range of indications including amyloidosis, diabetes, cancer and macular degeneration. Neotope’s strategy is to apply its expertise in generating novel therapeutic antibodies working with a broad range of collaborators in specific disease models, to select candidates for further clinical development.

Approach

An epitope is the molecular target recognized by an antibody. A neo-epitope is formed upon a modification of a protein. Of particular interest are sites on proteins that become accessible only after modification, such as cleavage or other covalent modifications (for example, phosphorylation) or by misfolding into an abnormal shape. The neo-epitopes targeted by Neotope may occur as part of a disease-associated pathological process. For each neo-epitope target, Neotope is developing novel, specific monoclonal antibodies for the potential treatment of patients having a disease associated with the neo-epitope.

Programs

Neotope’s portfolio of targets includes alpha-synuclein for the potential treatment of synucleinopathies, such as Lewy body dementia and Parkinson’s disease, tau for Alzheimer’s disease and other tauopathies. We also have a program for type 2-diabetes. Additional discovery efforts target other disease indications such as age-related macular degeneration and cancer.

Onclave Therapeutics Limited

Our wholly owned subsidiary Onclave Therapeutics Limited (Onclave) was formed to develop assets originating from Elan that have potential application in oncology related diseases. Onclave’s lead program, NEOD001, which originated from Neotope, is being investigated for the potential treatment of AL amyloidosis, a fatal disease involving abnormal accumulation of amyloid in organs and tissue. In 2011, Onclave filed for orphan drug designation of NEOD001. Onclave’s pipeline includes additional novel compounds with potential relevance in diverse cancer indications.

LOGO

Scientific Collaborations and Relationships

Cambridge-Elan Centre — Parkinson’s and Alzheimer’s Disease Research

In November 2011, we launched a collaboration with the University of Cambridge, England, the Cambridge-Elan Centre for Research Innovation and Drug Discovery (Cambridge-Elan Centre). The goal of the Cambridge-Elan Centre is to discover novel compounds capable of altering the behavior of proteins associated with neurodegenerative disorders that can be developed into new treatments.

The Cambridge-Elan Centre will bring together Elan’s more than two decades of experience in Alzheimer’s research and our knowledge of biology and model systems with the University of Cambridge’s pioneering contributions in the development of biophysical approaches to study the molecular basis of protein misfolding and aggregation, and their links to disease. This ten-year agreement paves the way for a long-term collaboration between the University of Cambridge and Elan.

Dublin Neurological Institute (DNI)

In November 2011, we entered into a sponsorship agreement with the DNI to provide financial support over a five year term for an initiative to support improved access and quality of neurological patient care in Ireland. The total financial support amount pledged by us to the DNI is €1.5 million.

University College Dublin (UCD)

In December 2011, we announced an initiative with UCD to support leadership in the global biotechnology industry, including the establishment of Europe’s first interdisciplinary Chair in the “Business of Biotechnology”. The initiative is expected to run for at least seven years and will include a contribution in excess of €3 million from Elan.

Proteostasis

We entered into a strategic business relationship with Proteostasis in May 2011. Our $20.0 million equity interest in Proteostasis represented approximately 24% of the equity of Proteostasis at the time of the investment and has been recorded as an equity method investment on our Consolidated Balance Sheet. The net loss recorded on the equity method investment in 2011 was $2.7 million.

Proteostasis has expertise in protein turnover and biological pathways, central to diseases associated with neurodegeneration, and is a complementary fit for our vision and scientific direction in Parkinson’s disease. It is anticipated that the collaborative agreement will enable discovery and development of disease-modifying small molecule drugs and diagnostics for the treatment of neurodegenerative disorders such as Parkinson’s disease, Huntington’s disease, MS and amyotrophic lateral sclerosis (ALS), and a broad array of dementia-related diseases including Alzheimer’s.

ENVIRONMENT

The U.S. market is our most important market. Refer to Note 4 to the Consolidated Financial Statements for an analysis of revenue by geographic region. For this reason, the factors discussed below, such as “Government Regulation” and “Product Approval,” place emphasis on requirements in the United States.

Government Regulation

The pharmaceutical industry is subject to significant regulation by international, national, state and local governmental regulatory agencies. Pharmaceutical product registration is primarily concerned with the safety, efficacy and quality of new drugs and devices and, in some countries, their pricing. A product must generally undergo extensive clinical trials before it can be approved for marketing. The process of developing a new pharmaceutical product, from idea to commercialization, can take in excess of 10 years.

Governmental authorities, including the FDA and comparable regulatory authorities in other countries, regulate the design, development, testing, manufacturing and marketing of pharmaceutical products. Non-compliance with applicable requirements can result in fines and other judicially imposed sanctions, including product seizures, import restrictions, injunctive actions and criminal prosecutions of both companies and individuals. In addition, administrative remedies can involve requests to recall violative products; the refusal of the government to enter into supply contracts; or the refusal to approve pending product approval applications for drugs, biological products or medical devices until manufacturing or other alleged deficiencies are brought into compliance. The FDA also has the authority to cause the withdrawal of approval of a marketed product or to impose labeling restrictions.

In addition, the U.S. Centers for Disease Control and Prevention regulate select biologics and toxins. This includes registration and inspection of facilities involved in the transfer or receipt of select agents. Select agents are subject to specific regulations for packaging, labeling and transport. Non-compliance with applicable requirements could result in criminal penalties and the disallowance of research and manufacturing of clinical products. Exemptions are provided for select agents used for a legitimate medical purpose or for biomedical research, such as toxins for medical use and vaccines.

The pricing of pharmaceutical products is regulated in many countries and the mechanism of price regulation varies. In the United States, while there are limited indirect federal government price controls over private sector purchases of drugs, it is not possible to predict future regulatory action on the pricing of pharmaceutical products.

In December 2010, we resolved all aspects of the U.S. Department of Justice’s investigation of sales and marketing practices for Zonegran, an antiepileptic prescription medicine that we divested in 2004. In March 2011, we paid $203.5 million pursuant to the terms of a global settlement resolving all U.S. federal and related state Medicaid claims. As part of the agreement, our subsidiary Elan Pharmaceuticals, Inc. (EPI), pleaded guilty to a misdemeanor violation of the FD&C Act, and we entered into a Corporate Integrity Agreement with the Office of Inspector General of the U.S. Department of Health and Human Services to promote our compliance with the requirements of U.S. federal healthcare programs and the FDA. If we materially fail to comply with the requirements of U.S. federal healthcare programs or the FDA, or otherwise materially breach the terms of the Corporate Integrity Agreement, such as by a material breach of the compliance program or reporting obligations of the Corporate Integrity Agreement, severe sanctions could be imposed upon us. The resolution of the Zonegran investigation could give rise to other investigations or litigation by state government entities or private parties.

Product Approval

Preclinical tests assess the potential safety and efficacy of a product candidate in animal models. The results of these studies must be submitted to the FDA as part of an Investigational New Drug Application before human testing may proceed.

The clinical trial process can take three to ten years or more to complete, and there can be no assurance that the data collected will demonstrate that the product is safe or effective or, in the case of a biologic product, pure and potent, or will provide sufficient data to support FDA approval of the product. The FDA may place clinical trials on hold at any point in this process if, among other reasons, it concludes that clinical subjects are being exposed to an unacceptable health risk. Trials may also be terminated by institutional review boards, which must review and approve all research involving human subjects. Side effects or adverse events that are reported during clinical trials can delay, impede or prevent marketing authorization.

The results of the preclinical and clinical testing, along with information regarding the manufacturing of the product and proposed product labeling, are evaluated and, if determined appropriate, submitted to the FDA through a license application such as a new drug application (NDA) or a Biologics License Application (BLA). In certain cases, an Abbreviated New Drug Application (ANDA) can be filed in lieu of filing an NDA.

There can be no marketing in the United States of any drug, biologic or device for which a marketing application is required until the application is approved by the FDA. Until an application is actually approved, there can be no assurance that the information requested and submitted will be considered adequate by the FDA.

Additionally, any significant change in the approved product or in how it is manufactured, including changes in formulation or the site of manufacture, generally require prior FDA approval. The packaging and labeling of all products developed by us are also subject to FDA approval and ongoing regulation.

Whether or not FDA approval has been obtained, approval of a pharmaceutical product by comparable regulatory authorities in other countries outside the United States must be obtained prior to the marketing of the product in those countries. The approval procedure varies from country to country. It can involve additional testing and the time required can differ from that required for FDA approval. Although there are procedures for unified filings for E.U. countries, in general, most other countries have their own procedures and requirements.

Once a product has been approved, significant legal and regulatory requirements apply in order to market a product. In the United States, these include, among other things, requirements related to adverse event and other reporting, product advertising and promotion, and ongoing adherence to cGMP requirements, as well as the need to submit appropriate new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. Further, Elan’s Corporate Integrity Agreement regulates certain aspects of current, and future, development and marketing of Elan products.

The FDA also enforces the requirements of the Prescription Drug Marketing Act, which, among other things, imposes various requirements in connection with the distribution of product samples to physicians. Sales, marketing and scientific/educational grant programs must comply with the Medicare-Medicaid Anti-Fraud and Abuse Act, as amended, the False Claims Act, as amended, and similar state laws. Pricing and rebate programs must comply with the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of 1990, as amended. We are also subject to Section 6002 of the Affordable Care Act (ACA), commonly known as the Physician Payment Sunshine Act (Sunshine Act) which regulates disclosure of payments to certain healthcare professionals and providers.

The FCPA and U.K. Bribery Act prohibit companies and their representatives from offering, promising, authorizing or making payments to foreign officials (and certain private individuals under the U.K. Bribery Act) for the purpose of obtaining or retaining business abroad. In many countries, the healthcare professionals we interact with may meet the definition of a foreign government official for purposes of the FCPA. Failure to comply with domestic or foreign laws could result in various adverse consequences, including possible delay in approval or refusal to approve a product, recalls, seizures, withdrawal of an approved product from the market, the imposition of civil or criminal sanctions and the prosecution of executives overseeing our international operations.

Patents and Intellectual Property Rights

Our competitive position depends on our ability to obtain patents on our technologies and our potential products, to defend our patents, to protect our trade secrets and to operate without infringing valid and enforceable patents or trade secrets of others. We own or license a number of patents in the United States and other countries.

Tysabri is covered by issued patents and pending patent applications in the United States and other countries. A primary U.S. patent covering the humanized antibody expires in 2017. Additional U.S. patents and patent applications of Elan and/or our collaborator Biogen Idec covering (i) methods of use, including the use of Tysabri to treat MS, irritable bowel disease and a variety of other indications and (ii) methods of manufacturing Tysabri, generally expire between 2012 and 2023. Outside the United States, patents and pending patent applications covering Tysabri, methods of using Tysabri and methods of manufacturing Tysabri generally expire between 2014 and 2023. Patents in the United States and outside the United States may be granted additional patent term due to various mechanisms for obtaining patent term extensions. In addition to the noted patents, we and Biogen Idec have additional patents and pending patent applications covering various aspects of Tysabri that may confer additional patent protection.

In addition to our Tysabri collaboration with Biogen Idec, we have entered into licenses covering intellectual property related to Tysabri. We pay royalties under these licenses based upon the level of Tysabri sales. We may be required to enter into additional licenses related to Tysabri intellectual property. If these licenses are not available, or are not available on reasonable terms, we may be materially and adversely affected.

Competition

The pharmaceutical industry is highly competitive. Our principal pharmaceutical competitors consist of major international companies, many of which are larger and have greater financial resources, technical staff, manufacturing, R&D and marketing capabilities than we have. We also compete with smaller research companies and generic drug and biosimilar manufacturers.

Tysabri, a treatment for relapsing forms of MS, competes primarily with Avonex marketed by our collaborator Biogen Idec, Betaseron^® marketed by Berlex (an affiliate of Bayer Schering Pharma AG) in the United States and sold under the name Betaferon^® by Bayer Schering Pharma in Europe, Rebif^® marketed by Merck Serono and Pfizer in the United States and by Merck Serono in Europe, Copaxone^® marketed by Teva Neurosciences, Inc. in the United States and co-promoted by Teva and Sanofi-Aventis in Europe and Novartis AG’s Gilenya™, an oral treatment for relapsing MS. Additional oral treatments for MS are awaiting regulatory approval or are under development, including BG-12, which is being developed by Biogen Idec. Many companies are working to develop new therapies or alternative formulations of products for MS that, if successfully developed, would compete with Tysabri.

A drug may be subject to competition from alternative therapies during the period of patent protection or regulatory exclusivity and, thereafter, it may be subject to further competition from generic products or biosimilars. Governmental and other pressures toward the dispensing of generic products or biosimilars may rapidly and significantly reduce, slow or reverse the growth in sales and profitability of any product not protected by patents or regulatory exclusivity, and may adversely affect our future results and financial condition. The launch of competitive products, including generic or biosimilar versions of our products, has had and may have a material adverse effect on our revenues and results of operations.

Our competitive position depends, in part, upon our continuing ability to discover, acquire and develop innovative, cost-effective new products, as well as new indications and product improvements protected by patents and other intellectual property rights. We also compete on the basis of price and product differentiation. If we fail to maintain our competitive position, our business, financial condition and results of operations may be materially and adversely affected.

Distribution

We sell Tysabri primarily to drug wholesalers. Our revenue reflects, in part, the demand from these wholesalers to meet the in-market consumption of Tysabri and to reflect the level of inventory that Tysabri wholesalers carry. Changes in the level of inventory can directly impact our revenue and could result in our revenue not reflecting in-market consumption of Tysabri.

Product Supply

Supplies are generally available in quantities adequate to meet the needs of our business. We are dependent on Biogen Idec to manufacture Tysabri. An inability to obtain product supply could have a material adverse impact on our business, financial condition and results of operations.

Employees

As of December 31, 2011, we had 412 employees worldwide, of whom 226 were engaged in R&D activities and the remainder worked in selling, marketing, general and administrative areas.

C.	Organizational Structure

At December 31, 2011, we had the following principal subsidiary undertakings:


Company	Nature of Business	Group Share %		Registered Office & Country of Incorporation


Athena Neurosciences, Inc.	Holding company		100	180 Oyster Point Blvd., South San Francisco, CA, USA
Crimagua Ltd.	Holding company		100	Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland
Elan Holdings Ltd.	Holding company		100	Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland
Elan International Services Ltd.	Financial services company		100	Juniper House, 30 Oleander Hill, Smiths, FL-08, Bermuda
Elan Pharma International Ltd.	R&D, sale and distribution of pharmaceutical products, management services and financial services		100	Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland
Elan Pharmaceuticals, Inc.	R&D and sale of pharmaceutical products		100	180 Oyster Point Blvd., South San Francisco, CA, USA
Elan Science One Ltd.	Holding company		100	Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland
Elan Science Three Ltd.	Holding company		100	Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland
Keavy Finance Ltd.	Dormant		100	Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland
Monksland Holdings BV	Holding company		100	Claude Debussylaan 24, 1082 MD, Amsterdam

D.	Property, Plants and Equipment

We consider that our properties are in good operating condition and that our equipment has been well maintained.

For additional information, refer to Note 18 to the Consolidated Financial Statements, which discloses amounts invested in land and buildings and plant and equipment; Note 28 to the Consolidated Financial Statements, which discloses future minimum rental commitments; Note 29 to the Consolidated Financial Statements, which discloses capital commitments for the purchase of property, plant and equipment; and Item 5B. “Liquidity and Capital Resources,” which discloses our capital expenditures.

The following table lists the location, ownership interest, use and approximate size of our principal properties:


Location and Ownership Interest	Use	Size (Sq. Ft.)
Location and Ownership Interest	Use	Size (Sq. Ft.)
Leased: South San Francisco, CA, USA	R&D, sales and administration	441,000⁽¹⁾
Leased: King of Prussia, PA, USA	Former R&D and manufacturing facility	113,000⁽²⁾
Leased: Dublin, Ireland	Corporate administration	41,000

⁽¹⁾

Approximately 66,636 square feet of laboratory and office space in South San Francisco, which was no longer being utilized by our R&D, sales and administrative functions is sublet to Janssen AI and is included in the 441,000 square feet noted above.

⁽²⁾

The EDT facility in King of Prussia was closed in 2011. Approximately 25,000 square feet of this space was sublet in February 2012.

Item 4A.

Unresolved Staff Comments.

Not applicable.

Item 5.

Operating and Financial Review and Prospects.

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements, the accompanying notes thereto and other financial information, appearing in Item 18. “Consolidated Financial Statements.”

Our Consolidated Financial Statements contained in this Form 20-F have been prepared on the basis of U.S. GAAP. In addition to the Consolidated Financial Statements contained in this Form 20-F, we also prepare separate Consolidated Financial Statements, included in our Annual Report, in accordance with IFRS, which differ in certain significant respects from U.S. GAAP. The Annual Report under IFRS is a separate document from this Form 20-F.

This financial review primarily discusses:

•

Current operations;

•

Critical accounting policies;

•

Recently issued accounting pronouncements;

•

Results of operations for the year ended December 31, 2011, compared to 2010 and 2009; and

•

Liquidity and capital resources.

Our operating results may be affected by a number of factors, including those described under Item 3D. “Risk Factors.”

CURRENT OPERATIONS

Elan is a neuroscience-based biotechnology company engaged in research, development and commercial activities primarily in the areas of Alzheimer’s disease, Parkinson’s disease and MS. For additional information on our current operations, refer to Item 4B. “Business Overview.”

CRITICAL ACCOUNTING POLICIES

The Consolidated Financial Statements include certain estimates based on management’s best judgments. Estimates are used in determining items such as the carrying amounts of long-lived assets, our equity method investments, revenue recognition, estimating sales discounts and allowances, the fair value of share-based compensation, and the accounting for contingencies and income taxes, among other items. Because of the uncertainties inherent in such estimates, actual results may differ materially from these estimates.

Goodwill, Other Intangible Assets, Tangible Fixed Assets and Impairment

Total goodwill and other intangible assets amounted to $309.9 million at December 31, 2011 (2010: $376.5 million) and our property, plant and equipment had a carrying amount at December 31, 2011 of $83.2 million (2010: $287.5 million).

Goodwill is not amortized, but instead is reviewed for impairment at least annually.

Intangible assets with estimable useful lives are amortized on a straight-line basis over their respective estimated useful lives to their estimated residual values and, as with other long-lived assets such as property, plant and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset be tested for possible impairment, we compare undiscounted cash flows expected to be generated by an asset to the carrying amount of the asset. If the carrying amount of the long-lived asset is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. We

determine fair value using the income approach based on the present value of expected cash flows. Our cash flow assumptions consider historical and forecasted revenue and operating costs and other relevant factors. If we were to use different estimates, particularly with respect to the likelihood of R&D success, the likelihood and date of commencement of generic competition or the impact of any reorganization or change of business focus, then a material impairment charge could arise. We believe that we have used reasonable estimates in assessing the carrying amounts of our intangible assets. The results of certain impairment tests on intangible assets with estimable useful lives are discussed below.

We first assess qualitative factors to determine whether it is necessary to perform the two-step goodwill impairment test. The qualitative factors assessed include, but are not limited to, macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant events affecting the reporting unit and the share price performance of the Company. If, after assessing the relevant qualitative factors, we determine that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill, then the first and second steps of the goodwill impairment test are not performed. If, after assessing the relevant qualitative factors, we determine that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill, then the first step of the goodwill impairment test is performed.

Under the first step, we compare the fair value of each reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired and step two does not need to be performed. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test would be performed to measure the amount of impairment charge, if any. The second step compares the implied fair value of the reporting-unit goodwill with the carrying amount of that goodwill, and any excess of the carrying amount over the implied fair value is recognized as an impairment charge. The implied fair value of goodwill is determined, by allocating the fair value of a reporting unit to individual assets and liabilities. The excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. In evaluating goodwill for impairment, we determine the fair values of the reporting units using the income approach, based on the present value of expected cash flows.

On September 16, 2011, Alkermes plc and Elan announced the completion of the merger between Alkermes, Inc. and EDT. As part of this transaction, we disposed of goodwill of $49.7 million which was allocated to the EDT reporting unit. We also disposed of patents, licenses, intellectual property and other intangible assets related to EDT with a net book value of $3.3 million and property, plant and equipment with a net book value of $202.0 million related to EDT.

We complete the annual goodwill impairment review on September 30 of each year. For the 2011 fiscal year annual goodwill impairment review, we assessed the relevant qualitative factors post-divestment of the EDT business and determined that it was not more likely than not that the fair value of the reporting unit was less than its carrying amount, including goodwill, so the first and second steps of the goodwill impairment test were not performed.

We performed the first step of the goodwill impairment test in 2010 and 2009 and the result of our tests did not indicate any impairment in either year. In addition, we performed a goodwill impairment test immediately subsequent to the disposal of the Prialt^® business in May 2010 and the result of our tests did not indicate any impairment.

There were no material impairment charges relating to intangible assets in 2011 or 2010. In December 2009, we recorded an impairment charge of $30.6 million within other net charges in the Consolidated Statement of Operations relating to the Prialt intangible asset, thus reducing the carrying value of the intangible asset to

$14.6 million. During 2010, we divested our Prialt assets and rights to Azur Pharma International Limited (Azur). We recorded a net loss of $1.5 million on this divestment. For additional information on goodwill and other intangible assets, refer to Note 19 to the Consolidated Financial Statements.

During 2011, we recorded a non-cash asset impairment charge of $10.0 million relating to property, plant and equipment, within other net charges in the Consolidated Statement of Operations which arose from the consolidation of our facilities in South San Francisco and the closure of EDT’s King of Prussia, Pennsylvania, site.

In 2010, we recorded a non-cash asset impairment charge of $11.0 million related to a consolidation of facilities in South San Francisco as a direct result of a realignment of the BioNeurology business. Following the transfer of our AIP manufacturing rights as part of the sale of the AIP business to Janssen AI in 2009, we re-evaluated our longer term biologics manufacturing and fill-finish requirements, and consequently recorded a non-cash asset impairment charge, included as part of the net gain on divestment of business, related to these activities of $41.2 million. The assets relating to biologics manufacturing were written off in full.

Equity Method Investments

Janssen AI

As part of the transaction whereby Janssen AI, a subsidiary of Johnson & Johnson, acquired substantially all of our assets and rights related to our AIP collaboration with Wyeth (which has been acquired by Pfizer), we received a 49.9% equity investment in Janssen AI. Johnson & Johnson also committed to fund up to an initial $500.0 million towards the further development and commercialization of the AIP to the extent the funding is required by the collaboration. We have recorded our investment in Janssen AI as an equity method investment on the Consolidated Balance Sheet as we have the ability to exercise significant influence, but not control, over the investee. The investment was initially recognized based on the estimated fair value of the investment acquired, representing the fair value of our proportionate 49.9% share of Janssen AI’s total net assets at inception, which were comprised of the AIP assets and the asset created by the Johnson & Johnson contingent funding commitment.

As of December 31, 2011, the carrying value of our Janssen AI equity method investment of $130.6 million (2010: $209.0 million) was approximately $185 million (2010: $120 million) below our share of Janssen AI’s reported book value of its net assets. This difference relates to the lower estimated value of Janssen AI’s AIP assets when the equity method investment was initially recorded and the asset created by the Johnson & Johnson contingent funding commitment. In relation to the AIP assets, in the event that an AIP product reaches market, our proportionate share of Janssen AI’s reported results will be adjusted over the estimated remaining useful lives of those assets to recognize the difference in the carrying values. In relation to the Johnson & Johnson contingent funding commitment asset, the differences in the carrying values is being amortized to the Consolidated Statement of Operations on a pro rata basis; based on the actual amount of Janssen AI losses that are solely funded by Johnson & Johnson in each period as compared to the total $500 million, which is the total amount we estimate will be solely funded by Johnson & Johnson.

During 2011, we recorded amortization expense of $50.9 million (2010: $26.0 million; 2009: $Nil) related to the basis differences between the cost of our equity method investment and the amount of our underlying equity in Janssen AI’s reported net assets.

Under the equity method, investors are required to recognize their share of the earnings or losses of an investee in the periods for which they are reported in the financial statements of the investee as this is normally considered an appropriate means of recognizing increases or decreases in the economic resources underlying the investments. However, Johnson & Johnson has committed to wholly fund up to an initial $500.0 million of development and commercialization expenses by Janssen AI so the recognition by Elan of a share of Janssen AI losses that are solely funded by Johnson & Johnson’s $500.0 million commitment would result in an inappropriate decrease in Elan’s share of the economic resources underlying the investment in Janssen AI. Accordingly, until the $500.0 million funding commitment is fully utilized, we have applied the hypothetical liquidation at book value (HLBV) method to determine how an increase or decrease in net assets of Janssen AI affects Elan’s interest in the net assets of Janssen AI on a period by period basis. Under the HLBV method, an

investor determines its share of the earnings or losses of an investee by determining the difference between its claim on the investee’s book value at the end and beginning of the period. After adjusting for the basis differences described above, Elan’s claim on Janssen AI’s book value as of December 31, 2011 was $117.3 million (2010: $117.3 million).

The net loss on the Janssen AI equity method investment for the year ended December 31, 2011 of $78.4 million (2010: $26.0 million; 2009: $Nil) was comprised of amortization expense of $50.9 million (2010: $26.0 million; $2009: $Nil) related to the basis differences described above and $27.5 million (2010: $Nil; 2009: $Nil) to correct an immaterial error from prior periods relating to our accounting for our equity method investment in Janssen AI.

As of December 31, 2011, the remaining unspent amount of the initial $500.0 million funding commitment was $57.6 million (2010: $272.0 million).

Alkermes plc and Proteostasis

We have recorded our investments in Alkermes plc and Proteostasis as equity method investments on the Consolidated Balance Sheet as we have the ability to exercise significant influence, but not control, over the investees. The investments were initially recognized based on the estimated fair value of the investment acquired. The carrying amount of the Alkermes equity method investment is approximately $300 million higher than our share of the book value of the net assets of Alkermes plc. Based on our preliminary assessment of the fair value of the net assets of Alkermes plc on the date of the transaction, this difference principally relates to identifiable intangible assets and goodwill attributable to the Alkermes Inc. business prior to its acquisition of EDT. Under the equity method, we recognize our share of the earnings or losses of our investees, adjusted for the amortization of basis differences, in the Consolidated Statement of Operations with a corresponding increase or decrease in the carrying amount of the investments on the Consolidated Balance Sheet. We recognize our share of the earnings or losses of Proteostasis in the same periods for which they are reported in the financial statements of the investee; and we recognize our share of the earnings or losses of Alkermes plc on a one-quarter time lag, as Alkermes plc’s financial information is generally not publicly available when our quarterly and annual results are reported.

Revenue Recognition

We recognize revenue from the sale of our products, royalties earned and contract arrangements. Up-front fees received by us are deferred and amortized when there is a significant continuing involvement by us (such as an ongoing product manufacturing contract or joint development activities) after an asset disposal. We defer and amortize up-front license fees to the income statement over the “performance period.” The performance period is the period over which we expect to provide services to the licensee as determined by the contract provisions. Accounting for milestone payments depends on the facts and circumstances of each contract. We apply the milestone method in accounting for substantive milestone payments under contracts that include R&D deliverables. A milestone is considered substantive if consideration earned from achievement of the milestone (1) is commensurate with either the vendor’s performance to achieve the milestone or the enhancement of the value of the delivered item, (2) relates solely to past performance, and (3) is reasonable in comparison to all of the deliverables and payment terms in the arrangement. If a milestone is considered substantive the consideration is recognized as revenue in the period in which the milestone is achieved. It is expected that the substantive milestone method will be appropriate for most contracts. If we determine the substantive milestone method is not appropriate, we apply the proportional performance method to the relevant contract. This method recognizes as revenue the percentage of cumulative non-refundable cash payments earned under the contract, based on the percentage of costs incurred to date compared to the total costs expected under the contract.

Sales Discounts and Allowances

We recognize revenue on a gross revenue basis (except for Tysabri revenue outside of the United States) and make various deductions to arrive at net revenue as reported in the Consolidated Statements of Operations. These adjustments are referred to as sales discounts and allowances and are described in detail below. Sales discounts and allowances include charge-backs, managed healthcare rebates and other contract discounts,

Medicaid rebates, cash and other discounts, sales returns and other adjustments. Estimating these sales discounts and allowances is complex and involves significant estimates and judgments, and we use information from both internal and external sources, including our historical experience, to generate reasonable and reliable estimates. We believe that we have used reasonable judgments in assessing our estimates, and this is borne out by our historical experience. At December 31, 2011, we had total provisions of $45.5 million for sales discounts and allowances, of which approximately 97%, 2% and 1% related to Tysabri, Maxipime^® and Azactam^®, respectively. We have almost six years of experience for Tysabri and we ceased distributing Maxipime on September 30, 2010 and Azactam on March 31, 2010, after more than 10 years experience with both products.

We do not conduct our sales using the consignment model. All of our product sales transactions are based on normal and customary terms whereby title to the product and substantially all of the risks and rewards transfer to the customer upon either shipment or delivery. Furthermore, we do not have an incentive program that would compensate a wholesaler for the costs of holding inventory above normal inventory levels, thereby encouraging wholesalers to hold excess inventory.

An analysis of the separate components of our revenue is set out in Item 5A. “Operating Results,” and in Note 3 to the Consolidated Financial Statements. The table below summarizes our sales discounts and allowances to adjust gross revenue to net revenue for each significant category (in millions).


	2011			2010			2009
Gross revenue subject to discounts and allowances	$	936.6		$	762.2		$	698.9
Net Tysabri ROW revenue		317.6			258.3			215.8
Manufacturing revenue and royalties		170.7			263.0			258.9
Contract revenue		9.9			13.7			18.7

Gross revenue	$	1,434.8		$	1,297.2		$	1,192.3

Sales discounts and allowances:
Charge-backs	$	(116.4	)	$	(71.2	)	$	(39.7	)
Medicaid rebates		(26.6	)		(20.4	)		(7.1	)
Cash discounts		(25.5	)		(18.7	)		(16.7	)
Managed healthcare rebates and other contract discounts		(7.4	)		(3.9	)		(1.2	)
Sales returns		(0.7	)		(2.0	)		(4.2	)
Other adjustments		(12.2	)		(11.3	)		(10.4	)

Total sales discounts and allowances	$	(188.8	)	$	(127.5	)	$	(79.3	)

Net revenue subject to discounts and allowances		747.8			634.7			619.6
Net Tysabri ROW revenue		317.6			258.3			215.8
Manufacturing revenue and royalties		170.7			263.0			258.9
Contract revenue		9.9			13.7			18.7

Net revenue	$	1,246.0		$	1,169.7		$	1,113.0

Total sales discounts and allowances were 20.2% of gross revenue subject to discounts and allowances in 2011, 16.7% in 2010 and 11.3% in 2009, as detailed in the rollforward below and as further explained in the following paragraphs.

Charge-backs as a percentage of gross revenue subject to discounts and allowances were 12.4% in 2011, 9.3% in 2010 and 5.7% in 2009. The increases in 2011 and 2010 are due to the expansion of the 340(b) PHS program and the increase in the minimum discount extended to our 340(b) customers, both of which resulted from the U.S. healthcare reform legislation enacted through the Patient Protection Affordable Care Act (PPACA) in 2010. The increases are also attributable to increases in the discounts due to the changes in Tysabri’s wholesaler acquisition cost price.

The Medicaid rebates as a percentage of gross revenue subject to discounts and allowances were 2.8% in 2011, 2.7% in 2010 and 1.0% in 2009. The increases in 2011 and 2010 are primarily due to the extension of Medicaid rebates to drugs supplied to enrollees of Medicaid MCOs, the increase in the rebate due to wholesaler acquisition cost price changes in Tysabri and the increase in 2010 of the U.S. base Medicaid rebate from 15.1% to 23.1%. Both the increase in the U.S. base Medicaid rebate to 23.1% and the extension of the Medicaid rebates to drugs supplied to enrollees of MCOs were introduced by the U.S. healthcare reform legislation.

Cash and other discounts as a percentage of gross revenue subject to discounts and allowances were 2.7% in 2011, 2.5% 2010 and 2.4% in 2009. Cash and other discounts include cash discounts, generally at 2% of the sales price, as an incentive for prompt payment by customers in the United States.

The managed healthcare rebates and other contract discounts as a percentage of gross revenue subject to discounts and allowances were 0.8% in 2011, 0.5% in 2010 and 0.2% 2009. The increase is primarily attributable to the increase in the number of qualified patients that are eligible for the Tysabri patient co-pay assistance program.

Sales returns as a percentage of gross revenue subject to discounts and allowances were 0.1% in 2011, 0.3% in 2010 and 0.6% in 2009. The decrease from 0.3% in 2010 to 0.1% in 2011 is primarily attributable to the changes in the product mix during 2010.

The following table sets forth the activities and ending balances of each significant category of adjustments for the sales discounts and allowances (in millions):


	Charge- Backs			Medicaid Rebates			Cash and other Discounts			Managed Healthcare Rebates and Other Contract Discounts			Sales Returns			Other Adjustments			Total
Balance at December 31, 2009	$	5.6		$	8.9		$	2.0		$	0.6		$	7.8		$	1.6		$	26.5
Provision related to sales made in current period		71.2			20.4			18.7			3.9			2.4			11.3			127.9
Provision related to sales made in prior periods		—			—			—			—			(0.4	)		—			(0.4	)
Returns and payments		(69.6	)		(10.8	)		(17.9	)		(3.9	)		(3.5	)		(10.4	)		(116.1	)

Balance at December 31, 2010	$	7.2		$	18.5		$	2.8		$	0.6		$	6.3		$	2.5		$	37.9

Provision related to sales made in current period		116.4			26.6			25.5			7.4			2.4			12.2			190.5
Provision related to sales made in prior periods		—			—			—			—			(1.7	)		—			(1.7	)
Returns and payments		(117.3	)		(17.2	)		(25.3	)		(6.6	)		(1.9	)		(12.9	)		(181.2	)

Balance at December 31, 2011	$	6.3		$	27.9		$	3.0		$	1.4		$	5.1		$	1.8		$	45.5

(a)

Charge-backs

In the United States, we participate in charge-back programs with a number of entities, principally the PHS, the U.S. Department of Defense, the U.S. Department of Veterans Affairs, Group Purchasing Organizations and other parties whereby pricing on products is extended below wholesalers’ list prices to participating entities. These entities purchase products through wholesalers at the lower negotiated price, and the wholesalers charge the difference between these entities’ acquisition cost and the lower negotiated price back to us. We account for charge-backs by accruing an amount equal to our estimate of charge-back claims attributable to a sale. We determine our estimate of the charge-backs primarily based on historical experience on a product-by-product and program basis, and current contract prices under the charge-back programs. We consider vendor payments, estimated levels of inventory in the wholesale distribution channel, and our claim processing time lag and adjust

accounts receivable and revenue periodically throughout each year to reflect actual and future estimated experience.

As described above, there are a number of factors involved in estimating the accrual for charge-backs, but the principal factor relates to our estimate of the levels of inventory in the wholesale distribution channel. At December 31, 2011, Tysabri, represented approximately 99.7% of the total charge-backs accrual balance of $6.3 million. If we were to increase our estimated level of inventory in the wholesale distribution channel by one month’s worth of demand for Tysabri, the accrual for charge-backs would increase by approximately $12.1 million. We believe that our estimate of the levels of inventory for Tysabri, in the wholesale distribution channel is reasonable because it is based upon multiple sources of information, including data received from all of the major wholesalers with respect to their inventory levels and sell-through to customers, third-party market research data, and our internal information.

(b)

Medicaid rebates

In the United States, we are required by law to participate in state government-managed Medicaid programs, as well as certain other qualifying federal and state government programs whereby discounts and rebates are provided to participating state and local government entities. Discounts and rebates provided through these other qualifying federal and state government programs are included in our Medicaid rebate accrual and are considered Medicaid rebates for the purposes of this discussion. We account for Medicaid rebates by establishing an accrual in an amount equal to our estimate of Medicaid rebate claims attributable to a sale. We determine our estimate of the Medicaid rebates accrual primarily based on our estimates of Medicaid claims, Medicaid payments, claims processing lag time, inventory in the distribution channel as well as legal interpretations of the applicable laws related to the Medicaid and qualifying federal and state government programs, and any new information regarding changes in the Medicaid programs’ regulations and guidelines that would impact the amount of the rebates on a product-by-product basis. We consider outstanding Medicaid claims, Medicaid payments, claims processing lag time and estimated levels of inventory in the distribution channel and adjust the accrual and revenue periodically throughout each year to reflect actual and future estimated experience. At December 31, 2011, Tysabri represented approximately 98.8% of the total Medicaid rebates accrual balance of $27.9 million.

(c)

Cash and other discounts

Cash and other discounts include cash discounts, generally at 2% of the sales price, as an incentive for prompt payment by customers in the United States. We account for cash and other discounts by reducing accounts receivable by the full amount of the discounts. We consider factors such as the payment performance of each customer and adjust the accrual and revenue periodically throughout each year to reflect actual experience and future estimates.

(d)

Managed healthcare rebates and other contract discounts

We offer rebates and discounts to managed healthcare organizations in the United States. We account for managed healthcare rebates and other contract discounts by establishing an accrual equal to our estimate of the amount attributable to a sale. We determine our estimate of this accrual primarily based on historical experience on a product-by-product and program basis and current contract prices. We consider the sales performance of products subject to managed healthcare rebates and other contract discounts, processing claim lag time and estimated levels of inventory in the distribution channel and adjust the accrual and revenue periodically throughout each year to reflect actual and future estimated experience.

(e)

Sales returns

We account for sales returns by establishing an accrual in an amount equal to our estimate of revenue recorded for which the related products are expected to be returned.

Our sales returns accrual is estimated principally based on historical experience, the estimated shelf life of inventory in the distribution channel, price increases and our return goods policy (goods may only be returned six

months prior to expiration date and for up to 12 months after expiration date). We also take into account product recalls and introductions of generic products. All of these factors are used to adjust the accrual and revenue periodically throughout each year to reflect actual and future estimated experience.

In the event of a product recall, product discontinuance or introduction of a generic product, we consider a number of factors, including the estimated level of inventory in the distribution channel that could potentially be returned, historical experience, estimates of the severity of generic product impact, estimates of continuing demand and our return goods policy. We consider the reasons for, and impact of, such actions and adjust the sales returns accrual and revenue as appropriate.

As described above, there are a number of factors involved in estimating this accrual, but the principal factor relates to our estimate of the shelf life of inventory in the distribution channel. We believe, based upon both the estimated shelf life and also our historical sales returns experience, that the vast majority of this inventory will be sold prior to the expiration dates, and accordingly believe that our sales returns accrual is appropriate. At December 31, 2011, 80.2% of the total sales returns accrual balance of $5.1 million related to Tysabri.

During 2011, we recorded adjustments of $1.7 million (2010: $0.4 million) to decrease the sales returns accrual related to sales made in prior periods.

(f)

Other adjustments

In addition to the sales discounts and allowances described above, we make other sales adjustments primarily related to estimated obligations for credits to be granted to wholesalers under wholesaler service agreements we have entered into with many of our pharmaceutical wholesale distributors in the United States. Under these agreements, the wholesale distributors have agreed, in return for certain fees, to comply with various contractually defined inventory management practices and to perform certain activities such as providing weekly information with respect to inventory levels of product on hand and the amount of out-movement of product. As a result, we, along with our wholesale distributors, are able to manage product flow and inventory levels in a way that more closely follows trends in prescriptions. We generally account for these other sales discounts and allowances by establishing an accrual in an amount equal to our estimate of the adjustments attributable to the sale. We generally determine our estimates of the accruals for these other adjustments primarily based on contractual agreements and other relevant factors, and adjust the accruals and revenue periodically throughout each year to reflect actual experience.

(g)

Use of information from external sources

We use information from external sources to identify prescription trends and patient demand, including inventory pipeline data from three major drug wholesalers in the United States. The inventory information received from these wholesalers is a product of their record-keeping process and excludes inventory held by intermediaries to whom they sell, such as retailers and hospitals. We also receive information from IMS Health, a supplier of market research to the pharmaceutical industry, which we use to project the prescription demand-based sales for our pharmaceutical products. Our estimates are subject to inherent limitations of estimates that rely on third-party information, as certain third-party information is itself in the form of estimates, and reflect other limitations, including lags between the date as of which third-party information is generated and the date on which we receive such information.

Share-Based Compensation

Share-based compensation expense for all equity-settled awards made to employees and directors is measured and recognized based on estimated grant date fair values. These awards include employee stock options, restricted stock units (RSUs) and stock purchases related to our employee equity purchase plan (EEPP). Share-based compensation cost for RSUs awarded to employees and directors is measured based on the closing fair market value of the Company’s shares on the date of grant. Share-based compensation cost for stock options awarded to employees and directors and shares issued under the EEPP is estimated at the grant date based on

each option’s fair value as calculated using an option-pricing model. The value of awards expected to vest is recognized as an expense over the requisite service periods. In 2011, we recognized $35.3 million (2010 and 2009: $31.5 million) relating to equity-settled share-based compensation.

Share-based compensation expense for equity-settled awards to non-employees in exchange for goods or services is based on the fair value of awards on the measurement date, which is the earlier of the date at which the commitment for performance by the non-employees to earn the awards is reached and the date at which the non-employees’ performance is complete. We have determined that the expected vest date is the measurement date for awards granted to non-employees.

Estimating the fair value of share-based awards at grant or vest date using an option-pricing model, such as the binomial model, is affected by our share price as well as assumptions regarding a number of complex variables. These variables include, but are not limited to, the expected share price volatility over the term of the awards, risk-free interest rates, and actual and projected employee exercise behaviors. If factors change and/or we employ different assumptions in estimating the fair value of share-based awards in future periods, the compensation expense that we record for future grants may differ significantly from what we have recorded in the Consolidated Financial Statements. However, we believe we have used reasonable assumptions to estimate the fair value of our share-based awards.

For additional information on our share-based compensation, refer to Note 26 to the Consolidated Financial Statements.

Contingencies Relating to Actual or Potential Administrative and Legal Proceedings

We are currently involved in legal and administrative proceedings relating to securities matters, patent matters, product liability matters and other matters, some of which are described in Note 30 to the Consolidated Financial Statements. We assess the likelihood of any adverse outcomes to contingencies, including legal matters, as well as potential ranges of probable losses. We record accruals for such contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. If an unfavorable outcome is probable, but the amount of the loss cannot be reasonably estimated, we estimate the range of probable loss and accrue the most probable loss within the range. If no amount within the range is deemed more probable, we accrue the minimum amount within the range. If neither a range of loss nor a minimum amount of loss is estimable, then appropriate disclosure is provided, but no amounts are accrued. As of December 31, 2011, we had accrued $0.7 million (2010: $207.0 million), representing our estimates of liability and costs for the resolution of these matters.

In March 2011, we paid $203.5 million relating to the agreement-in-principle announced in July 2010, which was finalized with the U.S. Attorney’s Office for the District of Massachusetts in December 2010 to resolve all aspects of the U.S. Department of Justice’s investigation of sales and marketing practices for Zonegran (zonisamide), an antiepileptic prescription medicine that we divested in 2004. At December 31, 2010, we held $203.7 million in an escrow account to cover the settlement amount and during 2010, we recorded a $206.3 million reserve charge for the settlement, interest and related costs. This resolution of the Zonegran investigation could give rise to other investigations or litigation by state government entities or private parties.

We developed estimates in consultation with outside counsel handling our defense in these matters using the facts and circumstances known to us. The factors that we consider in developing our legal contingency accrual include the merits and jurisdiction of the litigation, the nature and number of other similar current and past litigation cases, the nature of the product and assessment of the science subject to the litigation, and the likelihood of settlement and state of settlement discussions, if any. We believe that the legal contingency accrual that we have established is appropriate based on current factors and circumstances. However, it is possible that other people applying reasonable judgment to the same facts and circumstances could develop a different liability amount. The nature of these matters is highly uncertain and subject to change. As a result, the amount of our liability for certain of these matters could exceed or be less than the amount of our estimates, depending on the outcome of these matters.

Income Taxes

We account for income tax expense based on income before taxes using the asset and liability method. Deferred tax assets (DTAs) and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using tax rates projected to be in effect for the year in which the differences are expected to reverse. DTAs are recognized for the expected future tax consequences, for all deductible temporary differences and operating loss and tax credit carryforwards. A valuation allowance is required for DTAs if, based on available evidence, it is more likely than not that all or some of the asset will not be realized due to the inability to generate sufficient future taxable income.

Significant estimates are required in determining our provision for income taxes. Some of these estimates are based on management’s interpretations of jurisdiction-specific tax laws or regulations and the likelihood of settlement related to tax audit issues. Various internal and external factors may have favorable or unfavorable effects on our future effective income tax rate. These factors include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, changes in estimates of prior years’ items, past and future levels of R&D spending, likelihood of settlement, and changes in overall levels of income before taxes. Our assumptions, judgments and estimates relative to the recognition of the DTAs take into account projections of the amount and category of future taxable income, such as income from operations or capital gains income. Actual operating results and the underlying amount and category of income in future years could render our current assumptions of recoverability of net DTAs inaccurate.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We account for interest and penalties related to unrecognized tax benefits in income tax expense.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In September 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2011-08, “Intangibles — Goodwill and Other: Testing Goodwill for impairment (Topic 350)”, which gives entities the option to first assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of the reporting unit is less than its carrying amount, including goodwill. If, after assessing the relevant qualitative factors, we determine that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill, then the first and second steps of the goodwill impairment test are not performed. If, after assessing the relevant qualitative factors, we determine that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill, then the first step of the goodwill impairment test is performed. Previous guidance under Topic 350 required an entity to test goodwill for impairment, on at least an annual basis, by comparing the fair value of a reporting unit with its carrying amount, including goodwill (step one). If the fair value of a reporting unit is less than its carrying amount, then the second step of the test must be performed to measure the amount of the impairment loss, if any. The amendment in this update is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, but early adoption is permitted. We have early adopted the amendment for the 2011 fiscal year annual goodwill impairment review and after assessing the relevant qualitative factors, we determined that it was not more likely than not that the fair value of the reporting unit was less than its carrying amount, including goodwill, so the first and second steps of the goodwill impairment test were not performed.

or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments are effective for fiscal years beginning after December 15, 2011. We do not expect that the adoption of ASU 2011-04 will have an impact on our consolidated financial position, results of operations or cash flows.

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”, to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income/(loss) (OCI). To increase the prominence of items reported in OCI and to facilitate convergence of U.S. GAAP and IFRS, the FASB decided to eliminate the option to present components of OCI as part of the statement of changes in shareholders’ equity. The amendments require that all non-owner changes in shareholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total OCI, the components of OCI, and the total of comprehensive income. The amendments are effective for fiscal years beginning after December 15, 2011. We do not expect that the adoption of ASU 2011-05 will have an impact on our consolidated financial position, results of operations or cash flows.

A.	RESULTS OF OPERATIONS

2011 Compared to 2010 and 2009 (in millions, except per share amounts)


										% Increase/(Decrease)
	2011			2010			2009			2011/2010			2010/2009
Product revenue	$	1,236.1		$	1,156.0		$	1,094.3			7	%		6	%
Contract revenue		9.9			13.7			18.7			(28	)%		(27	)%

Total revenue		1,246.0			1,169.7			1,113.0			7	%		5	%
Cost of sales		639.7			583.3			560.7			10	%		4	%

Gross margin		606.3			586.4			552.3			3	%		6	%
Operating expenses:
Selling, general and administrative expenses		228.7			254.7			268.2			(10	)%		(5	)%
Research and development expenses		232.5			258.7			293.6			(10	)%		(12	)%
Net gain on divestment of business		(652.9	)		(1.0	)		(108.7	)		65190	%		(99	)%
Other net (gains)/charges		(42.2	)		56.3			67.3			(175	)%		(16	)%
Settlement reserve charge		—			206.3			—			(100	)%		100	%

Total operating (gains)/expenses		(233.9	)		775.0			520.4			(130	)%		49	%

Operating income/(loss)		840.2			(188.6	)		31.9			(545	)%		(691	)%

Net interest and investment gains and losses:
Net interest expense		105.9			117.8			137.9			(10	)%		(15	)%
Net loss on equity method investments		81.8			26.0			—			215	%		100	%
Net charge on debt retirement		47.0			3.0			24.4			1467	%		(88	)%
Net investment gains		(2.6	)		(12.8	)		(0.6	)		(80	)%		2033	%

Net interest and investment gains and losses		232.1			134.0			161.7			73	%		(17	)%

Net income/(loss) before income taxes		608.1			(322.6	)		(129.8	)		(288	)%		149	%
Provision for income taxes		47.6			2.1			46.4			2167	%		(95	)%

Net income/(loss)	$	560.5		$	(324.7	)	$	(176.2	)		(273	)%		84	%

Basic net income/(loss) per Ordinary Share	$	0.95		$	(0.56	)	$	(0.35	)		(270	)%		60	%
Diluted net income/(loss) per Ordinary Share	$	0.94		$	(0.56	)	$	(0.35	)		(268	)%		60	%

Pro Forma Reconciliation — Non-GAAP Financial Information

The table above shows the historical results of operations for Elan for each of the years ended December 31, 2011, December 31, 2010 and December 31, 2009, including the EDT business unit that was divested on September 16, 2011. In order to provide a more meaningful discussion of these results of operations, we have presented the analysis of Elan’s results in its two constituent parts. Firstly, we have presented and discussed on page 39 the results of operations for each of the years ended December 31, 2011, December 31, 2010 and December 31, 2009, on a pro forma basis to exclude the results of EDT; and secondly, we have presented and discussed on page 51 the results of operations for the EDT business unit for each of the years ended December 31, 2011, December 31, 2010 and December 31, 2009. The pro forma Elan revenue and operating income/(loss) as presented on page 39 are consistent with the segment results for the BioNeurology business unit for each of the years ended December 31, 2011, December 31, 2010 and December 31, 2009. The EDT revenue and operating income as presented on page 51 are consistent with the segment results for the EDT business unit for each of the years ended December 31, 2011, December 31, 2010 and December 31, 2009.

The following table shows a reconciliation from the Elan results of operations to the pro forma Elan results of operations for each of the years ended December 31, 2011, December 31, 2010 and December 31, 2009 (in millions):


	GAAP Elan			Pro Forma Adjustments to Exclude EDT			Pro Forma Elan			GAAP Elan			Pro Forma Adjustments to Exclude EDT			Pro Forma Elan			GAAP Elan			Pro Forma Adjustments to Exclude EDT			Pro Forma Elan
	2011			2011			2011			2010			2010			2010			2009			2009			2009
Product revenue	$	1,236.1		$	(168.0	)	$	1,068.1		$	1,156.0		$	(261.4	)	$	894.6		$	1,094.3		$	(257.2	)	$	837.1
Contract revenue		9.9			(9.9	)		—			13.7			(12.7	)		1.0			18.7			(18.7	)		—

Total revenue		1,246.0			(177.9	)		1,068.1			1,169.7			(274.1	)		895.6			1,113.0			(275.9	)		837.1
Cost of sales		639.7			(67.0	)		572.7			583.3			(118.4	)		464.9			560.7			(116.3	)		444.4

Gross margin		606.3			(110.9	)		495.4			586.4			(155.7	)		430.7			552.3			(159.6	)		392.7
Operating expenses:
Selling, general and administrative expenses		228.7			(23.8	)		204.9			254.7			(38.9	)		215.8			268.2			(35.9	)		232.3
Research and development expenses		232.5			(34.3	)		198.2			258.7			(53.7	)		205.0			293.6			(47.5	)		246.1
Net gain on divestment of business		(652.9	)		—			(652.9	)		(1.0	)		—			(1.0	)		(108.7	)		—			(108.7	)
Other net (gains)/charges		(42.2	)		68.1			25.9			56.3			(2.3	)		54.0			67.3			(5.7	)		61.6
Settlement reserve charge		—			—			—			206.3			—			206.3			—			—			—

Total operating (gains)/expenses		(233.9	)		10.0			(223.9	)		775.0			(94.9	)		680.1			520.4			(89.1	)		431.3

Operating income/(loss)		840.2			(120.9	)		719.3			(188.6	)		(60.8	)		(249.4	)		31.9			(70.5	)		(38.6	)

Net interest and investment gains and losses:
Net interest expense		105.9			(1.0	)		104.9			117.8			0.6			118.4			137.9			(1.8	)		136.1
Net loss on equity method investment		81.8			—			81.8			26.0			—			26.0			—			—			—
Net charge on debt retirement		47.0			—			47.0			3.0			—			3.0			24.4			—			24.4
Net investment gains		(2.6	)		—			(2.6	)		(12.8	)		—			(12.8	)		(0.6	)		—			(0.6	)

Net interest and investment gains and losses		232.1			(1.0	)		231.1			134.0			0.6			134.6			161.7			(1.8	)		159.9

Net income/(loss) before income taxes		608.1			(119.9	)		488.2			(322.6	)		(61.4	)		(384.0	)		(129.8	)		(68.7	)		(198.5	)
Provision for/(benefit from) income taxes		47.6			(4.2	)		43.4			2.1			(9.1	)		(7.0	)		46.4			(18.0	)		28.4

Net income/(loss)	$	560.5		$	(115.7	)	$	444.8		$	(324.7	)	$	(52.3	)	$	(377.0	)	$	(176.2	)	$	(50.7	)	$	(226.9	)

PRO FORMA ELAN (excluding EDT)

Pro Forma 2011 Compared to Pro Forma 2010 and Pro Forma 2009 (in millions)


	Pro Forma 2011			Pro Forma 2010			Pro Forma 2009
										% Increase/(Decrease)
										2011/2010			2010/2009
Product revenue	$	1,068.1		$	894.6		$	837.1			19	%		7	%
Contract revenue		—			1.0			—			(100	)%		100	%

Total revenue		1,068.1			895.6			837.1			19	%		7	%
Cost of sales		572.7			464.9			444.4			23	%		5	%

Gross margin		495.4			430.7			392.7			15	%		10	%
Operating expenses:
Selling, general and administrative expenses		204.9			215.8			232.3			(5	)%		(7	)%
Research and development expenses		198.2			205.0			246.1			(3	)%		(17	)%
Net gain on divestment of business		(652.9	)		(1.0	)		(108.7	)		65190	%		(99	)%
Other net charges		25.9			54.0			61.6			(52	)%		(12	)%
Settlement reserve charge		—			206.3			—			(100	)%		100	%

Total operating (gains)/expenses		(223.9	)		680.1			431.3			(133	)%		58	%

Operating income/(loss)		719.3			(249.4	)		(38.6	)		(388	)%		546	%

Net interest and investment gains and losses:
Net interest expense		104.9			118.4			136.1			(11	)%		(13	)%
Net loss on equity method investments		81.8			26.0			—			215	%		100	%
Net charge on debt retirement		47.0			3.0			24.4			1467	%		(88	)%
Net investment gains		(2.6	)		(12.8	)		(0.6	)		(80	)%		2033	%

Net interest and investment gains and losses		231.1			134.6			159.9			72	%		(16	)%

Net income/(loss) before income taxes		488.2			(384.0	)		(198.5	)		(227	)%		93	%
Provision for/(benefit from) income taxes		43.4			(7.0	)		28.4			(720	)%		(125	)%

Net income/(loss)	$	444.8		$	(377.0	)	$	(226.9	)		(218	)%		66	%

Pro Forma Revenue

Total revenue increased 19% to $1,068.1 million from $895.6 million in 2010 and increased by 7% between 2010 and 2009, from $837.1 million in 2009. The increase in both years was primarily driven by increased revenue from Tysabri, offset by the expected reduction in revenues from Maxipime, Azactam and Prialt.

Revenue can be analyzed as follows (in millions):


							% Increase/(Decrease)
	2011		2010		2009		2011/2010			2010/2009
Product revenue:
Tysabri- U.S.	$	746.5	$	593.2	$	508.5		26	%		17	%
Tysabri- ROW		317.6		258.3		215.8		23	%		20	%

Total Tysabri		1,064.1		851.5		724.3		25	%		18	%
Azactam		0.9		27.2		81.4		(97	)%		(67	)%
Maxipime		0.4		8.2		13.2		(95	)%		(38	)%
Prialt		—		6.1		16.5		(100	)%		(63	)%
Royalties		2.7		1.6		1.7		69	%		(6	)%

Total product revenue		1,068.1		894.6		837.1		19	%		7	%
Contract revenue		—		1.0		—		(100	)%		100	%

Total revenue	$	1,068.1	$	895.6	$	837.1		19	%		7	%

Tysabri

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


	2011		2010		2009		% Increase/(Decrease)
	2011		2010		2009		2011/2010			2010/2009
United States	$	746.5	$	593.2	$	508.5		26	%		17	%
ROW		764.1		636.8		550.7		20	%		16	%

Total Tysabri in-market net sales	$	1,510.6	$	1,230.0	$	1,059.2		23	%		16	%

Tysabri in-market net sales were $1,510.6 million in 2011, $1,230.0 million in 2010 and $1,059.2 million in 2009. The increase in 2011 reflects a 16% increase in units sold, higher pricing in the United States, and favorable exchange rate movements in the rest of world (ROW), partially reduced by a revenue reserve in Italy.

The revenue reserve in Italy relates to a notification received by Biogen Idec from the Italian National Medicines Agency, stating that sales of Tysabri had exceeded a limit established by the agency in 2007. Biogen Idec disagrees with this interpretation, and has filed an appeal seeking a ruling that Biogen Idec’s interpretation is valid and that the position of the agency is unenforceable, and hopes to have resolution in the first half of 2012. As a result of this dispute, Biogen Idec deferred $14.1 million of revenue recognized on in-market sales of Tysabri in Italy during the fourth quarter of 2011, and we expect that they will continue to defer a portion of in-market revenues on future sales of Tysabri for Italy until the matter is resolved. As a consequence of this deferral of in-market sales by Biogen Idec, we deferred $6.9 million of revenue in 2011 related to these sales, reflecting the operating and accounting arrangements between us.

As of the end of December 2011, approximately 64,400 patients were on therapy worldwide, including approximately 30,000 commercial patients in the United States and approximately 33,800 commercial patients in the ROW, representing an increase of 13% over the approximately 57,200 (revised) patients who were on therapy at the end of December 2010. The increase in Tysabri in-market net sales in 2010 reflected increased patient demand across global markets and a higher price in the United States, offset by exchange rate movements, a reduction in average infusions per patient and the impact of U.S. healthcare reform. As of the end of December 2009, approximately 48,400 patients were on therapy worldwide.

Tysabri was developed and is being marketed in collaboration with Biogen Idec. In general, subject to certain limitations imposed by the parties, we share with Biogen Idec most of the development and

commercialization costs for Tysabri. Biogen Idec is responsible for manufacturing the product. In the United States, we purchase Tysabri from Biogen Idec and are responsible for distribution. Consequently, we record as revenue the net sales of Tysabri in the U.S. market. We purchase 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 we record as revenue our share of the profit or loss on these sales of Tysabri, plus our directly incurred expenses on these sales, which are primarily comprised of royalties that we incur and are payable by us to third parties and are reimbursed by the collaboration.

Tysabri-U.S.

In the U.S. market, we recorded net sales of $746.5 million (2010: $593.2 million; 2009: $508.5 million). Almost all of these sales are in relation to the MS indication.

As of the end of December 2011, approximately 30,000 patients were on commercial therapy in the United States, which represents an increase of 9% over the approximately 27,600 patients who were on therapy at the end of December 2010. As of the end of December 2009, approximately 24,500 patients were on commercial therapy.

Tysabri-ROW

As previously mentioned, in the ROW markets, Biogen Idec is responsible for distribution and we record as revenue our share of the profit or loss on ROW sales of Tysabri, plus our directly incurred expenses on these sales, which are primarily comprised of royalties that we incur and are payable by us to third parties and are reimbursed by the collaboration. In 2011, we recorded ROW revenue of $317.6 million (2010: $258.3 million; 2009: $215.8 million), which was calculated as follows (in millions):


										% Increase/(Decrease)
	2011			2010			2009			2011/2010			2010/2009
ROW in-market sales by Biogen Idec		$764.1		$	636.8		$	550.7			20	%		16	%
ROW operating expenses incurred by Elan and Biogen Idec		(349.3	)		(303.8	)		(280.6	)		15	%		8	%

ROW operating profit generated by Elan and Biogen Idec		414.8			333.0			270.1			25	%		23	%

Elan’s 50% share of Tysabri ROW collaboration operating profit		207.4			166.5			135.0			25	%		23	%
Elan’s directly incurred costs		110.2			91.8			80.8			20	%		14	%

Net Tysabri ROW revenue	$	317.6		$	258.3		$	215.8			23	%		20	%

As of the end of December 2011, approximately 33,800 patients, principally in the European Union, were on commercial Tysabri therapy, an increase of 17% over the approximately 29,000 (revised) patients at the end of December 2010. As of the end of December 2009, approximately 23,400 patients were on commercial therapy.

Other products

We ceased distributing Azactam as of March 31, 2010 and Maxipime as of September 30, 2010. Our revenue from Azactam decreased by 67% to $27.2 million in 2010 from our 2009 sales level and our revenue from Maxipime decreased 38% to $8.2 million in 2010 from our 2009 sales level.

The revenue for Azactam and Maxipime in 2011 relates to adjustments to discounts and allowances associated with sales prior to the cessation of distribution.

We divested our Prialt assets and rights to Azur in May 2010. Prialt revenue was $6.1 million for 2010 and $16.5 million 2009. Refer to page 45 and Note 6 to the Consolidated Financial Statements for additional information regarding this divestment.

Pro Forma Cost of Sales

Cost of sales were $572.7 million in 2011, compared to $464.9 million in 2010 and $444.4 million in 2009. The increase is primarily attributable to the increased sales of Tysabri. The gross profit margin was 46% in 2011, 48% in 2010 and 47% in 2009. The gross margin increased by 15% in 2011 ($495.4 million), compared to 2010 ($430.7 million), and by 10% in 2010, compared to 2009 ($392.7 million). The increased gross margin in 2011, 2010 and 2009 principally reflects higher sales of Tysabri, which more than offset lower revenues from Maxipime, Azactam, and Prialt.

The Tysabri gross profit margin of 47% in 2011 and 2010 (2009: 45%) is impacted by the profit sharing and operational arrangements in place with Biogen Idec and reflects our gross margin on sales of the product in the United States of 40% in 2011 (2010: 39%; 2009: 37%), and our reported gross margin on ROW sales of 65% (2010: 65%; 2009: 63%). The increase in the gross margin in the United States primarily reflects higher pricing. The ROW gross margin reflects our share of the profit or loss on ROW sales plus our directly incurred expenses on these sales, which are primarily comprised of royalties that we incur and are payable by us to third parties and are reimbursed by the collaboration; offset by the inclusion in cost of sales of these royalties.

Pro Forma Selling, General and Administrative (SG&A) Expenses

SG&A expenses were $204.9 million in 2011, $215.8 million in 2010 and $232.3 million in 2009. The decrease of 5% in SG&A expenses in 2011, compared to 2010, is primarily as a result of lower support costs due to the realignment and restructuring of the R&D organization in 2010.

The decrease of 7% in SG&A expenses in 2010, compared to 2009, principally reflects reduced sales and marketing costs and amortization expense related to Prialt, along with continued cost control.

Pro Forma Research and Development Expenses

R&D expenses were $198.2 million in 2011, $205.0 million in 2010 and $246.1 million in 2009. The decrease of 3% in 2011, compared to 2010, is primarily as a result of lower costs due to the realignment and restructuring of the R&D organization in 2010.

The decrease of 17% in 2010, compared to 2009, primarily relates to the cost savings as a result of the divestment of the AIP in 2009. R&D expenses in 2009 included $92.3 million in relation to the AIP. Excluding the AIP, R&D expenses increased by $51.2 million, principally reflecting increased investment in development activities related to Tysabri.

The AIP was transferred to Janssen AI as part of the Johnson & Johnson Transaction in September 2009. Refer to Note 9 to the Consolidated Financial Statements for additional information on Janssen AI.

Pro Forma Net Gain on Divestment of Business

Disposal of the EDT business

On September 16, 2011, we announced the completion of the merger between Alkermes, Inc. and EDT following the approval of the merger by Alkermes, Inc. shareholders on September 8, 2011. Alkermes, Inc. and EDT were combined under a new holding company incorporated in Ireland named Alkermes plc. In connection with the transaction, we received $500.0 million in cash and 31.9 million ordinary shares of Alkermes plc common stock. At the close of the transaction, we held approximately 25% of the equity of Alkermes plc, with the existing shareholders of Alkermes, Inc. holding the remaining 75% of the equity. Alkermes plc shares are registered in the United States and trade on the NASDAQ stock market. Our equity interest in Alkermes plc was recorded as an equity method investment on the Consolidated Balance Sheet at a carrying amount of $528.6 million, based on the closing share price of $16.57 of Alkermes, Inc. shares on the date of the transaction.

The net gain recorded on divestment of the EDT business amounted to $652.9 million, and was calculated as follows (in millions):


Cash consideration	$	500.0
Investment in Alkermes plc		528.6

Total consideration	$	1,028.6
Property, plant and equipment		(202.0	)
Intangible assets⁽¹⁾		(53.0	)
Working capital and other net assets		(84.5	)
Transaction and other costs		(36.2	)

Net gain on divestment of business	$	652.9

⁽¹⁾	Includes goodwill of $49.7 million allocated to the EDT business.

Disposal of the AIP business

In 2010, we recorded a net gain of $1.0 million, as compared to a net gain of $108.7 million recorded for 2009, relating to the 2009 divestment of substantially all of Elan’s assets and rights related to our AIP collaboration with Wyeth (which has been acquired by Pfizer) to Janssen AI. These gains were calculated based upon the estimated fair value of the assets sold of $235.0 million, less their carrying value and transaction costs. Our equity interest in Janssen AI has been recorded as an equity method investment on the Consolidated Balance Sheet, and was initially recorded at its estimated fair value of $235.0 million.

The net gain of $108.7 million recorded in 2009 was calculated as follows (in millions):


Investment in Janssen AI	$	235.0
Intangible assets⁽¹⁾		(68.0	)
Biologics and fill-finish impairment⁽²⁾		(41.2	)
Transaction costs		(16.8	)
Share based compensation		1.2
Other		(1.5	)

Net gain on divestment of business	$	108.7

⁽¹⁾	Includes goodwill of $10.3 million allocated to the AIP business.

⁽²⁾	As a result of the disposal of the AIP business, we re-evaluated the longer term biologics manufacturing and fill-finish requirements, and consequently recorded a non-cash asset impairment charge related to these activities of $41.2 million.

For additional information relating to our equity method investments in Alkermes plc and Janssen AI, refer to Note 9 to the Consolidated Financial Statements.

Pro Forma Other Net Charges

The principal items classified as other net gains and charges include severance, restructuring and other costs, facilities and other asset impairment charges, legal settlements and awards, in-process research and development (IPR&D) costs, a net loss on divestment of the Prialt business and intangible asset impairment charges. These items have been treated consistently from period to period. We believe that disclosure of significant other charges is meaningful because it provides additional information in relation to analyzing certain items.

Other net charges for the years ended December 31 consisted of (in millions):


		2011		2010		2009
(a)	Severance, restructuring and other costs	$	10.4	$	17.3	$	23.3
(b)	Facilities and other asset impairment charges		15.5		16.7		16.1
(c)	Legal settlements and awards		—		12.5		(13.4	)
(d)	In-process research and development costs		—		6.0		5.0
(e)	Divestment of Prialt business		—		1.5		—
(f)	Intangible asset impairment charges		—		—		30.6

Total other net charges		$	25.9	$	54.0	$	61.6

(a)

Severance, restructuring and other costs

During 2011, we incurred severance, restructuring and other costs of $10.4 million, principally relating to the reduction in our general and administrative (G&A) and other support activities following the divestment of the EDT business.

During 2010 and 2009, we incurred severance and restructuring charges of $17.3 million and $23.3 million, respectively, principally associated with a realignment and restructuring of our R&D organization, and reduction of related support activities.

(b)

Facilities and other asset impairment charges

During 2011, we incurred facilities and other asset impairment charges of $15.5 million, which is comprised of asset impairment charges of $3.6 million and lease charges of $11.9 million relating to the consolidation of our facilities in South San Francisco and the closure of EDT’s King of Prussia, Pennsylvania site.

During 2010, we incurred facilities and other asset impairment charges of $16.7 million, which included asset impairment charges of $11.0 million and lease charges of $5.7 million relating to a consolidation of facilities in South San Francisco as a direct result of the realignment of our business.

During 2009, we incurred facilities and other asset impairment charges of $16.1 million, principally comprised of an asset impairment charge of $15.4 million associated with the postponement of our biologics manufacturing activities in the first half of the year. In addition, following the disposal of the AIP business in September 2009, we re-evaluated the longer term biologics manufacturing requirements and the remaining carrying amount of these assets was written off. This impairment charge was recorded as part of the net gain on divestment of business recorded in 2009. For additional information on the net gain on divestment of business, refer to Note 5.

(c)

Legal settlements and awards

During 2010, we reached an agreement in principle with the direct purchaser class plaintiffs with respect to nifedipine. As part of the settlement, we agreed to pay $12.5 million in settlement of all claims associated with the litigation. In January 2011, the U.S. District Court for the District of Columbia approved the settlement and dismissed the case.

In 2009, the net legal awards and settlement amount of $13.4 million was comprised of a legal award of $18.0 million received from Watson Pharmaceuticals, Inc. (Watson) and a legal settlement amount of $4.6 million in December 2009 relating to nifedipine antitrust litigation. The $18.0 million legal award primarily related to an agreement with Watson to settle litigation with respect to Watson’s marketing of a generic version of Naprelan^®. As part of the settlement, Watson stipulated that our patent at issue is valid and enforceable and that Watson’s generic formulations of Naprelan infringed our patent.

Following a settlement in late 2007 with the indirect purchaser class of the nifedipine antitrust litigation, in December 2009, we entered into a separate settlement agreement with the individual direct purchasers, resulting in a dismissal of this second segment of the litigation and the payment of a legal settlement amount of $4.6 million.

(d)

In-process research and development costs

In December 2010, we modified our Collaboration Agreement with Transition and, in connection with this modification, Transition elected to exercise its opt-out right under the original agreement. Under this amendment, we agreed to pay Transition $9.0 million, which is included in IPR&D charges in 2010. The $9.0 million payment was made in January 2011. Under the modified Collaboration Agreement, Transition will be eligible to receive a further $11.0 million payment from us upon the commencement of the next ELND005 clinical trial, and will no longer be eligible to receive a $25.0 million milestone payment that would have been due upon the commencement of a Phase 3 trial for ELND005 under the terms of the original agreement.

As a consequence of Transition’s decision to exercise its opt-out right, it will no longer fund the development or commercialization of ELND005 and has relinquished its 30% ownership of ELND005 to us. Consistent with the terms of the original agreement, following its opt-out decision, Transition will be entitled to receive milestone payments of up to $93.0 million (in addition to the $11.0 million described above), along with tiered royalty payments on net sales of ELND005 ranging in percentage from a high single digit to the mid teens, depending on future level of sales.

IPR&D charges in 2010 also included a credit of $3.0 million associated with the termination of the License Agreement with PharmatrophiX Inc. (PharmatrophiX). We recorded a $5.0 million IPR&D charge in 2009 upon entering into this agreement with PharmatrophiX.

(e)

Divestment of Prialt business

We divested our Prialt assets and rights to Azur in May 2010 and recorded a net loss on divestment of $1.5 million, which is comprised of total consideration of $14.6 million less the net book value of Prialt assets and transaction costs. Total consideration comprises cash proceeds received in 2010 of $5.0 million and the present value of deferred non-contingent consideration of at the close of the transaction of $9.6 million, which is expected to be received during 2012. We are also entitled to receive additional performance-related milestones and royalties.

(f)

Intangible asset impairment charges

During 2009, we recorded a non-cash impairment charge of $30.6 million relating to the Prialt intangible asset. Prialt was launched in the United States in 2005. Revenues from this product did not meet expectations and, consequently, we revised our sales forecast for Prialt and reduced the carrying value of the intangible asset to $14.6 million as of December 31, 2009.

Pro Forma Net Interest Expense

Net interest expense was $104.9 million in 2011, $118.4 million in 2010 and $136.1 million in 2009.

The decrease of 11% in the net interest expense in 2011 compared to 2010 and 13% in 2010 compared to 2009 is primarily due to debt refinancing transactions in 2009, 2010 and 2011. During 2009, 2010 and 2011, we repaid or refinanced $2.0 billion in debt as follows (in millions):


	2011			2010			2009			Total
2011 Fixed Rate Notes	$	—		$	—		$	(850.0	)	$	(850.0	)
2011 Floating Rate Notes		—			(300.0	)		—			(300.0	)
2013 Floating Rate Notes		(10.5	)		(139.5	)		—			(150.0	)
2013 Fixed Rate Notes		(449.5	)		(15.5	)		—			(465.0	)
2016 Notes issued October 2009		(152.9	)		—			—			(152.9	)
2016 Notes issued August 2010		(47.6	)		—			—			(47.6	)

Total aggregate principal amount of debt redeemed		(660.5	)		(455.0	)		(850.0	)		(1,965.5	)

2016 Notes issued October 2009		—			—			625.0			625.0
2016 Notes issued August 2010		—			200.0			—			200.0

Total aggregate principal amount of debt issued		—			200.0			625.0			825.0

Net reduction in total aggregate principal amount of debt	$	(660.5	)	$	(255.0	)	$	(225.0	)	$	(1,140.5	)

Pro Forma Net Loss on Equity Method Investments

Losses on equity method investments for the years ended December 31 consisted of the following (in millions):


	2011		2010
Janssen AI	$	78.4	$	26.0
Proteostasis		2.7		—
Alkermes plc		0.7		—

Total	$	81.8	$	26.0

Janssen AI

In September 2009, Janssen AI, a newly formed subsidiary of Johnson & Johnson, acquired substantially all of the assets and rights related to our AIP collaboration with Wyeth (which has been acquired by Pfizer). Johnson & Johnson also committed to fund up to $500.0 million towards the further development and commercialization of the AIP to the extent the funding is required by the collaboration. In the event that either an AIP product reaches market and Janssen AI is in a positive operating cash flow position, or the AIP is terminated before the initial $500.0 million funding commitment has been drawn down, Johnson & Johnson is not required to contribute the full $500.0 million. Any required additional expenditures in respect of Janssen AI’s obligations under the AIP collaboration in excess of the initial $500.0 million funding commitment is required to be funded by Elan and Johnson & Johnson in proportion to their respective shareholdings up to a maximum additional commitment of $400.0 million in total. Based on current spend levels, we anticipate that we will be called upon to provide funding to Janssen AI commencing in the second quarter of 2012. In the event that further funding is required beyond the $400.0 million, such funding will be on terms determined by the board of Janssen AI, with Johnson & Johnson and Elan having a right of first offer to provide additional funding. If we fail to provide our share of the $400.0 million commitment or any additional funding that is required for the development of the AIP, and if Johnson & Johnson elects to fund such an amount, our interest in Janssen AI could, at the option of Johnson & Johnson, be commensurately reduced.

Janssen AI becomes net profitable and certain royalty payments upon the commercialization of products under the AIP collaboration.

As of December 31, 2011, the carrying value of our Janssen AI equity method investment of $130.6 million (2010: $209.0 million) is approximately $185 million (2010: $120 million) below our share of Janssen AI’s reported book value of its net assets. This difference relates to the lower estimated value of Janssen AI’s AIP assets when the equity method investment was initially recorded, and the asset created by the Johnson & Johnson $500.0 million contingent funding commitment. In relation to the AIP assets, in the event that an AIP product reaches market, our proportionate share of Janssen AI’s reported results will be adjusted over the estimated remaining useful lives of those assets to recognize the difference in the carrying values. In relation to the Johnson & Johnson contingent funding commitment asset, the differences in the carrying values is being amortized to the Consolidated Statement of Operations on a pro rata basis; based on the actual amount of Janssen AI losses that are solely funded by Johnson & Johnson in each period as compared to the total $500 million, which is the total amount we estimate will be solely funded by Johnson & Johnson.

Under the equity method, investors are required to recognize their share of the earnings or losses of an investee in the periods for which they are reported in the financial statements of the investee as this is normally considered an appropriate means of recognizing increases or decreases in the economic resources underlying the investments. However, Johnson & Johnson has committed to wholly fund up to an initial $500.0 million of development and commercialization expenses incurred by Janssen AI so the recognition by Elan of a share of Janssen AI losses that are solely funded by Johnson & Johnson’s $500.0 million commitment would result in an inappropriate decrease in Elan’s share of the economic resources underlying the investment in Janssen AI. Accordingly, until the $500.0 million funding commitment is fully utilized, we have applied the HLBV method to determine how an increase or decrease in net assets of Janssen AI affects Elan’s interest in the net assets of Janssen AI on a period by period basis. Under the HLBV method, an investor determines its share of the earnings or losses of an investee by determining the difference between its claim on the investee’s book value at the end and beginning of the period. After adjusting for the basis differences described above, Elan’s claim on Janssen AI’s book value as of December 31, 2011 was $117.3 million (2010: $117.3 million).

As of December 31, 2011, the remaining unspent amount of the initial $500.0 million funding commitment was $57.6 million (2010: $272.0 million).

Alkermes plc

In connection with the divestment of our EDT business on September 16, 2011, we received 31.9 million ordinary shares of Alkermes plc, which represented approximately 25% of the equity of Alkermes plc at the close of the transaction. Our equity interest in Alkermes plc was recorded as an equity method investment on the Consolidated Balance Sheet at a carrying amount of $528.6 million, based on the closing share price of $16.57 of Alkermes, Inc. shares on the date of the transaction. The carrying amount is approximately $300 million below our share of the book value of the net assets of Alkermes plc. Based on our preliminary assessment of the fair value of the net assets of Alkermes plc on the date of the transaction, this difference principally relates to identifiable intangible assets and goodwill attributable to the Alkermes, Inc. business prior to its acquisition of EDT. We recognize our share of the earnings or losses of Alkermes plc on a one-quarter time lag as Alkermes plc’s financial information is generally not publicly available when our quarterly and annual results are reported.

For the year ended December 31, 2011, we recorded a net loss on the equity method investment of $0.7 million, on a one-quarter time lag basis, representing our share of the net losses of Alkermes plc from the date of acquisition of the equity interest on September 16, 2011 through September 30, 2011.

Proteostasis

In May 2011, we entered into a strategic business relationship with Proteostasis to advance Proteostasis’ platform for the discovery and development of disease-modifying, small molecule drugs and diagnostics for the treatment of neurodegenerative disorders such as Parkinson’s disease, Huntington’s disease, MS, ALS, and a broad array of dementia-related diseases including Alzheimer’s.

Under terms of the agreement, we invested $20.0 million into equity capital of Proteostasis and became a 24% shareholder. We have the opportunity to invest an additional $30 million in collaboration funding over five years and obtained a right of first negotiation to exclusively license potential compounds. Our chief executive officer (CEO), Kelly Martin, has joined the Board of Directors of Proteostasis and our chief scientific officer, Dale Schenk, has joined Proteostasis’ Scientific Advisory Board.

Our $20.0 million equity interest in Proteostasis has been recorded as an equity method investment on the Consolidated Balance Sheet. The net loss recorded on the equity method investment in 2011 was $2.7 million, representing our share of the net losses of Proteostasis from the date of acquisition of the equity interest on May 20, 2011 through December 31, 2011.

Pro Forma Net Investment Gains

Net investment gains were $2.6 million in 2011, compared to $12.8 million in 2010 and $0.6 million in 2009.

The net investment gains in 2011 are primarily related to the disposal of investment securities. The net investment gains in 2010 include a gain of $7.9 million related to a recovery realized on a previously impaired investment in auction rate securities (ARS) and gains on disposal of investment securities of $4.9 million.

The net investment gains in 2009 primarily related to gains realized from a fund that had previously been reclassified from cash equivalents to investments due to dislocations in the capital markets. We fully redeemed our remaining holding in this fund during 2010.

The framework used for measuring the fair value of our investment securities, is described in Note 27 to the Consolidated Financial Statements.

Pro Forma Net Charge on Debt Retirement

2011

In 2011, following the divestment of EDT, we redeemed the outstanding aggregate principal amount of the 8.875% Senior Fixed Rate Notes due 2013 (the 2013 Fixed Rate Notes) of $449.5 million and the outstanding aggregate principal amount of the Senior Floating Rate Notes Due 2013 (the 2013 Floating Rate Notes) of $10.5 million. We also redeemed $152.9 million of the outstanding aggregate principal amount of the 8.75% Senior Notes due 2016 issued October 2009 (the 2016 Notes issued October 2009) and $47.6 million of the outstanding aggregate principal amount of the 8.75% Senior Notes due 2016 issued August 2010 (the 2016 Notes issued August 2010). Refer to Note 22 for additional information on the 2011 debt redemptions.

We recorded a net charge on debt retirement of $47.0 million in 2011 in connection with the redemption of this debt. This was comprised of early redemption premiums of $33.4 million, the write-off of unamortized deferred financing costs and original issue discounts of $10.2 million and transaction costs of $3.4 million.

2010

aggregate principal amount of the 2013 Fixed Rate Notes and $139.5 million of the outstanding aggregate principal amount of the 2013 Floating Rate Notes. Refer to Note 22 for additional information on the 2010 debt redemptions.

We recorded a net charge on debt retirement of $3.0 million in 2010 in connection with the redemption of this debt, relating to the write-off of unamortized deferred financing costs associated with these notes.

2009

During 2009, we redeemed the full $850.0 million in aggregate principal amount of the 7.75% Senior Fixed Rate Notes due November 15, 2011 (2011 Fixed Rate Notes). We recorded a net charge on debt retirement of the 2011 Fixed Rate Notes of $24.4 million, comprised of an early redemption premium of $16.4 million, a write-off of unamortized deferred financing costs of $6.7 million and transaction costs of $1.3 million.

For additional information related to our debt, please refer to Note 22.

Pro Forma Provision for/(Benefit from) Income Taxes

For a discussion of the provision for income taxes for Elan and the pro forma adjustments relating to EDT for each of the years ended December 31, 2011, December 31, 2010 and December 31, 2009, refer to page 54.

Adjusted EBITDA — Non-GAAP Financial Information

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) is a non-GAAP measure of operating results. Elan’s management use this measure to evaluate our operating performance and is among the factors considered as a basis for our planning and forecasting for future periods. We believe that Adjusted EBITDA is a measure of performance used by some investors, equity analysts and others to make informed investment decisions.

Adjusted EBITDA is defined as net income or loss plus or minus net interest expense, provision for income taxes, depreciation and amortization of costs and revenue, share-based compensation, net gain on divestment of business, other net (gains)/charges, net loss on equity method investments, net charge on debt retirement, net investment gains and settlement reserve charge. 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.

The following table shows a reconciliation from the Elan net income/(loss) to the Adjusted EBITDA and pro forma Adjusted EBITDA for each of the years ended December 31, 2011, December 31, 2010 and December 31, 2009 (in millions):


	Elan			Pro Forma Adjustments to Exclude EDT			Pro Forma Elan			Elan			Pro Forma Adjustments to Exclude EDT			Pro Forma Elan			Elan			Pro Forma Adjustments to Exclude EDT			Pro Forma Elan
	2011			2011			2011			2010			2010			2010			2009			2009			2009
Net income/(loss)	$	560.5		$	(115.7	)	$	444.8		$	(324.7	)	$	(52.3	)	$	(377.0	)	$	(176.2	)	$	(50.7	)	$	(226.9	)
Net interest expense		105.9			(1.0	)		104.9			117.8			0.6			118.4			137.9			(1.8	)		136.1
Provision for/(benefit from) income taxes		47.6			(4.2	)		43.4			2.1			(9.1	)		(7.0	)		46.4			(18.0	)		28.4
Depreciation and amortization		35.8			(7.8	)		28.0			63.3			(33.0	)		30.3			75.0			(33.8	)		41.2
Amortized fees, net		(0.5	)		—			(0.5	)		(0.3	)		0.2			(0.1	)		(0.2	)		—			(0.2	)

EBITDA		749.3			(128.7	)		620.6			(141.8	)		(93.6	)		(235.4	)		82.9			(104.3	)		(21.4	)
Share based compensation		32.6			(5.7	)		26.9			30.5			(7.9	)		22.6			31.0			(7.2	)		23.8
Net gain on divestment of business		(652.9	)		—			(652.9	)		(1.0	)		—			(1.0	)		(108.7	)		—			(108.7	)
Other net (gains)/charges		(42.2	)		68.1			25.9			56.3			(2.3	)		54.0			67.3			(5.7	)		61.6
Net loss on equity method investments		81.8			—			81.8			26.0			—			26.0			—			—			—
Net charge on debt retirement		47.0			—			47.0			3.0			—			3.0			24.4			—			24.4
Net investment gains		(2.6	)		—			(2.6	)		(12.8	)		—			(12.8	)		(0.6	)		—			(0.6	)
Settlement reserve charge		—			—			—			206.3			—			206.3			—			—			—

Adjusted EBITDA	$	213.0		$	(66.3	)	$	146.7		$	166.5		$	(103.8	)	$	62.7		$	96.3		$	(117.2	)	$	(20.9	)

In 2011, we reported pro forma Adjusted EBITDA of $146.7 million, compared to pro forma Adjusted EBITDA of $62.7 million in 2010. The improvement reflects the 19% increase in revenue and a 4% decrease in combined SG&A and R&D expenses.

In 2010, we reported pro forma Adjusted EBITDA of $62.7 million, compared to a negative pro forma Adjusted EBITDA of $20.9 million in 2009. The improvement reflects the 7% increase in revenue, improved operating margins and a 12% decrease in combined SG&A and R&D expenses.

The following table shows a reconciliation from the Elan net income/(loss) to the pro forma Adjusted EBITDA for each of the years ended December 31, 2008 and December 31, 2007 (in millions):


	Elan			Pro Forma Adjustments to Exclude EDT			Pro Forma Elan			Elan			Pro Forma Adjustments to Exclude EDT			Pro Forma Elan
	2008			2008			2008			2007			2007			2007
Net income/(loss)	$	(71.0	)	$	(94.1	)	$	(165.1	)	$	(405.0	)	$	(82.3	)	$	(487.3	)
Net interest expense		132.0			0.5			132.5			113.1			0.2			113.3
Provision for/(benefit from) income taxes		(226.3	)		7.8			(218.5	)		6.9			(2.7	)		4.2
Depreciation and amortization		70.1			(36.6	)		33.5			118.3			(36.8	)		81.5
Amortized fees, net		(2.5	)		2.5			—			(11.4	)		8.7			(2.7	)

EBITDA		(97.7	)		(119.9	)		(217.6	)		(178.1	)		(112.9	)		(291.0	)
Share based compensation		46.0			(9.9	)		36.1			43.4			(10.2	)		33.2
Other net charges		34.2			—			34.2			84.6			(3.6	)		81.0
Net investment losses		21.8			—			21.8			0.9			—			0.9
Net charge on debt retirement		—			—			—			18.8			—			18.8

Adjusted EBITDA	$	4.3		$	(129.8	)	$	(125.5	)	$	(30.4	)	$	(126.7	)	$	(157.1	)

ELAN DRUG TECHNOLOGIES

The results of operations for the EDT business are set out below. The 2011 amounts include the results of the EDT business for the period up to September 16, 2011, the date of divestment of the EDT business.

2011 Compared to 2010 and 2009 (in millions)


								% Increase/(Decrease)
	2011			2010		2009		2011/2010			2010/2009
Product revenue	$	168.0		$	261.4	$	257.2		(36	)%		2	%
Contract revenue		9.9			12.7		18.7		(22	)%		(32	)%

Total revenue		177.9			274.1		275.9		(35	)%		(1	)%
Cost of sales		67.0			118.4		116.3		(43	)%		2	%

Gross margin		110.9			155.7		159.6		(29	)%		(2	)%
Operating expenses:
Selling, general and administrative expenses		23.8			38.9		35.9		(39	)%		8	%
Research and development expenses		34.3			53.7		47.5		(36	)%		13	%
Other net (gains)/charges		(68.1	)		2.3		5.7		(3061	)%		(60	)%

Total operating (gains)/expenses		(10.0	)		94.9		89.1		(111	)%		7	%

Operating income	$	120.9		$	60.8	$	70.5		99	%		(14	)%

Adjusted EBITDA	$	66.3		$	103.8	$	117.2		(36	)%		(11	)%

Reconciliation of EDT operating income to Adjusted EBITDA (in millions)


									% Increase/(Decrease)
	2011			2010			2009		2011/2010			2010/2009
Operating income	$	120.9		$	60.8		$	70.5		99	%		(14	)%
Depreciation and amortization		7.8			33.0			33.8		(76	)%		(2	)%
Amortized fees, net		—			(0.2	)		—		(100	)%		100	%
Share based compensation expense		5.7			7.9			7.2		(28	)%		10	%
Other net (gains)/charges		(68.1	)		2.3			5.7		(3061	)%		(60	)%

Adjusted EBITDA	$	66.3		$	103.8		$	117.2		(36	)%		(11	)%

EDT Revenue

Revenue from the EDT business for the period up to September 16, 2011, when the EDT business was divested by Elan, was $177.9 million compared to $274.1 million in 2010 and $275.9 million in 2009. The EDT revenue can be analyzed as follows (in millions):


							% Increase/(Decrease)
	2011		2010		2009		2011/2010			2010/2009
Product revenue:
Manufacturing revenue and royalties:
TriCor^® 145	$	35.5	$	54.5	$	61.6		(35	)%		(12	)%
Focalin^® XR/Ritalin^® LA		25.9		33.0		32.6		(22	)%		1	%
Ampyra^®		22.6		56.8		—		(60	)%		100	%
Verelan^®		18.1		21.8		22.1		(17	)%		(1	)%
Naprelan		5.9		12.6		16.0		(53	)%		(21	)%
Skelaxin^®		—		5.9		34.9		(100	)%		(83	)%
Other		60.0		76.8		90.0		(22	)%		(15	)%

Total product revenue from the EDT business		168.0		261.4		257.2		(36	)%		2	%

Contract revenue:
Research revenue		6.0		8.2		8.2		(27	%)		—
Milestone payments		3.9		4.5		10.5		(13	)%		(57	)%

Total contract revenue from the EDT business		9.9		12.7		18.7		(22	)%		(32	)%

Total revenue from the EDT business	$	177.9	$	274.1	$	275.9		(35	)%		(1	)%

Manufacturing revenue and royalties comprised revenue earned from products EDT manufactured for clients and royalties earned principally on sales by clients of products that incorporate EDT’s technologies.

Manufacturing revenue and royalties for the period up to September 16, 2011 were $168.0 million compared to $261.4 in 2010 and $257.2 million in 2009. The decrease in 2011 was principally due to the divestment of EDT on September 16, 2011 and the timing of Ampyra revenues. The manufacturing and royalty revenue recorded for Ampyra in 2010 of $56.8 million included shipments to Acorda Therapeutics Inc. (Acorda) to satisfy Acorda’s initial stocking requirements for the launch of the product in March 2010, as well as build-up of safety stock supply. Elan recorded revenue upon shipment of Ampyra to Acorda, as this revenue was not contingent upon ultimate sale of the shipped product by Acorda or its customers. Consequently, revenue varied with shipments and was not based directly on in-market sales. The increase in 2010 was primarily due to the Ampyra launch, offset by the expected reduced revenues from Skelaxin.

Except as noted above, no other single product accounted for more than 10% of EDT manufacturing revenue and royalties in 2011, 2010 or 2009. The royalties on products not manufactured by EDT were 34% of total manufacturing revenue and royalties in 2011 (2010: 32%; 2009: 47%).

Contract revenue

Contract revenue was $9.9 million for the period up to September 16, 2011, $12.7 million in 2010 and $18.7 million in 2009. Contract revenue consisted of research revenue, license fees and milestones arising from R&D activities performed on behalf of third parties. The changes between years in contract revenue were primarily due to the level of external R&D projects and the timing of when milestones were earned.

EDT Cost of Sales

Cost of sales were $67.0 million for the period up to September 16, 2011, compared to $118.4 million in 2010 and $116.3 million in 2009. The gross profit margin was 62% in 2011, 57% in 2010 and 58% in 2009. The decreased gross profit margin in 2011 primarily reflected the timing of divestment of the EDT business and the Ampyra launch in 2010. The decreased gross profit margin in 2010 primarily reflected lower revenues from Skelaxin and TriCor 145, offset by the Ampyra launch.

EDT Selling, General and Administrative Expenses

SG&A expenses were $23.8 million for the period to September 16, 2011, $38.9 million in 2010 and $35.9 million in 2009. The decrease of 39% in SG&A expenses in 2011, compared to 2010, primarily reflected the timing of divestment of the EDT business. The increase of 8% in SG&A expenses in 2010, compared to 2009, was primarily due to higher legal costs.

EDT Research and Development Expenses

R&D expenses were $34.3 million for the period to September 16, 2011, $53.7 million in 2010 and $47.5 million in 2009. The decrease of 36% in R&D expenses in 2011, compared to 2010, primarily reflected the timing of divestment of the EDT business. The increase in R&D expenses of 13% in 2010, compared to 2009, was primarily attributable to increased investment in development activities.

EDT Other Net (Gains)/Charges

During 2011, EDT incurred severance, restructuring and other costs of $10.0 million (2010: $2.3 million; 2009: $5.7 million), and facilities charges of $6.4 million (2010: $Nil; 2009: $Nil) arising from the closure of the King of Prussia, Pennsylvania site in 2011, offset by legal settlement gains of $84.5 million (2010: $Nil; 2009: $Nil). The severance, restructuring and other costs of $2.3 million in 2010 and $5.7 million in 2009 arose from the realignment of resources to meet our business structure.

In June 2008, a jury ruled in the U.S. District Court for the District of Delaware that Abraxis Biosciences, Inc. (Abraxis, since acquired by Celgene Corporation) had infringed a patent owned by us in relation to the application of NanoCrystal^® technology to Abraxane^®. We were awarded $55 million, applying a royalty rate of 6% to sales of Abraxane from January 1, 2005 through June 13, 2008 (the date of the verdict), though the judge had yet to rule on post-trial motions or enter the final order. This award and damages associated with the continuing sales of the Abraxane product were subject to interest. In February 2011, we entered into an agreement with Abraxis to settle this litigation. As part of the settlement agreement with Abraxis, we received $78.0 million in full and final settlement in March 2011 and recorded a gain of this amount. No continuing royalties will be received by us in respect of Abraxane.

During 2011, we entered into an agreement with Alcon Laboratories, Inc. (Alcon) to settle litigation in relation to the application of NanoCrystal technology. As part of the settlement agreement with Alcon, we received $6.5 million in full and final settlement.

EDT Provision for Income Taxes Adjustments

Provision for Income Taxes

Elan

We had a net tax provision of $47.6 million for 2011, compared to $2.1 million in 2010 and $46.4 million for 2009.

The overall tax provision for 2011 was $47.6 million (2010: $4.5 million; 2009: $50.0 million). No amount has been debited to shareholders’ equity in 2011 (2010: $2.4 million expense; 2009: $3.6 million expense) to reflect the net shortfalls related to equity awards. The entire $47.6 million (2010: $2.1 million; 2009: $46.4 million) is allocated to ordinary activities.

The 2011 tax provision reflects federal and state taxes at standard rates in jurisdictions in which we operate, foreign withholding tax and includes a deferred tax expense of $51.0 million for 2011 (2010: $0.1 million; 2009: $36.8 million).

Of the $51.1 million foreign deferred tax expense, $40.0 million arises due to the application of new state tax income attribution rates. Following the introduction of these new rates, we no longer expect to benefit from certain state tax loss and credit carry forwards and reduced our state DTA by this amount. We recognised these tax benefits in 2008 when it was considered more likely than not that we would be able to utilize these tax benefits.

Pro Forma Adjustments

The pro forma adjustment relating to the exclusion of EDT for 2011 was $4.2 million (2010: $9.1 million; 2009: $18.0 million). These adjustments were based on EDT’s U.S. book income at standard U.S. tax rates. In calculating these adjustments, no taxes have been attributed to EDT’s Irish book income due to the availability of tax losses when EDT was part of the Elan group.

B.	Liquidity and Capital Resources

Cash and Cash Equivalents, Liquidity and Capital Resources

Our liquid and capital resources at December 31 were as follows (in millions):


	2011		2010			Increase/ (Decrease)
Cash and cash equivalents	$	271.7	$	422.5			(36	)%
Restricted cash and cash equivalents — current		2.6		208.2	⁽¹⁾		(99	)%
Investment securities — current		0.3		2.0			(85	)%
Shareholders’ equity		801.8		194.3			313	%
Total aggregate principal amount of debt⁽²⁾		624.5		1,285.0			(51	)%

⁽¹⁾	Current restricted cash and cash equivalents as of December 31, 2010 included $203.7 million held in an escrow account in relation to the Zonegran settlement. Refer to Note 7 to the Consolidated Financial Statements for additional information.

⁽²⁾	Refer to Note 22 to the Consolidated Financial Statements for a reconciliation of the aggregate principal amount of the debt to the carrying amount.

As of December 31, 2011, our total cash and cash equivalents, current restricted cash and cash equivalents, and current investment securities of $274.6 million (2010: $632.7 million) included $235.8 million (2010: $435.8 million) that was held by foreign subsidiaries in the following jurisdictions:


	2011		2010			Increase/ (Decrease)
United States	$	172.8	$	371.7	⁽¹⁾		(54	)%
Bermuda		38.0		51.3			(26	)%
Other		25.0		12.8			95	%

Total	$	235.8	$	435.8			(46	)%

⁽¹⁾	The amount as of December 31, 2010 includes current restricted cash and cash equivalents of $203.7 million held in an escrow account in relation to the Zonegran settlement. Refer to Note 7 to the Consolidated Financial Statements for additional information.

There are currently no restrictions that would have a material adverse impact on the parent company or consolidated liquidity of Elan in relation to the intercompany transfer of cash held by our foreign subsidiaries.

We have historically financed our operating and capital resource requirements through cash flows from operations, sales of investment securities and borrowings. We consider all highly liquid deposits with a maturity on acquisition of three months or less to be cash equivalents. Our primary source of funds as of December 31, 2011, consisted of cash and cash equivalents of $271.7 million, which primarily comprise of bank deposits and holdings in U.S. Treasuries funds.

On September 16, 2011 we completed the sale of our EDT business unit to Alkermes Inc. and received $500.0 million in cash consideration and 31.9 million ordinary shares of Alkermes plc. Following the EDT divestment, we retired 51%, or $660.5 million, in principal amount of our outstanding debt. The remaining principal amount outstanding had been reduced from $1,285.0 million at December 31, 2010 to $624.5 million at December 31, 2011, with all of this remaining balance falling due in October 2016. Our cash and cash equivalents balance has been reduced from $422.5 million to $271.7 million as result of these transactions.

At December 31, 2011, our shareholders’ equity was $801.8 million, compared to $194.3 million at December 31, 2010. The increase is primarily due to the gain on divestment of the EDT business in 2011. Refer to Note 5 to the Consolidated Financial Statements for additional information on this divestment.

The 31.9 million ordinary shares of Alkermes plc received in connection with the EDT divestment represented approximately 25% of the equity of Alkermes plc at the close of the transaction on September 16, 2011. Our equity interest in Alkermes plc was recorded as an equity method investment on the Consolidated Balance Sheet at a carrying amount of $528.6 million, based on the closing share price of $16.57 of Alkermes, Inc. shares on the date of the transaction. The fair value of our Alkermes plc shares at December 31, 2011 was $553.8 million or $17.36 per share. Our shareholding in Alkermes plc is subject to three interlinked lock-up periods, the first of which expires six months after the date of divestment.

We believe that we have sufficient current cash, liquid resources, realizable assets and investments to meet our liquidity requirements for at least the next 12 months. Longer term liquidity requirements and debt repayments will need to be met out of available cash resources, future operating cash flows, financial and other asset realizations and future financing. However, events, including a material deterioration in our operating performance as a result of our inability to sell significant amounts of Tysabri, material adverse legal judgments, fines, penalties or settlements arising from litigation or governmental investigations, failure to successfully develop and receive marketing approval for products under development (in particular, bapineuzumab) or the occurrence of other circumstances or events described under Item 3D. “Risk Factors,” could materially and adversely affect our ability to meet our longer term liquidity requirements.

We commit substantial resources to our R&D activities, including collaborations with third parties such as Biogen Idec for the development of Tysabri. We expect to commit significant cash resources to the development and commercialization of products in our development pipeline. Refer to Item 5F. “Tabular Disclosure of

Contractual Obligations” for details of our commitments to provide funding to Janssen AI, which we expect to commence in the second quarter of 2012.

We continually evaluate our liquidity requirements, capital needs and availability of resources in view of, among other things, alternative uses of capital, debt service requirements, the cost of debt and equity capital and estimated future operating cash flow. We may raise additional capital; restructure or refinance outstanding debt; repurchase material amounts of outstanding debt (the 2016 Notes issued October 2009 and the 2016 Notes issued August 2010) or equity; consider the sale of interests in subsidiaries, investment securities or other assets, including our shares in Alkermes plc (subject to the lock-up restrictions described above); or take a combination of such steps or other steps to increase or manage our liquidity and capital resources. Any such actions or steps, including any repurchase of outstanding debt or equity, could be material. In the normal course of business, we may investigate, evaluate, discuss and engage in future company or product acquisitions, capital expenditures, investments and other business opportunities. In the event of any future acquisitions, capital expenditures, investments or other business opportunities, we may consider using available cash or raising additional capital, including the issuance of additional debt.

Cash Flow Summary

The components of the net decrease/increase in cash and cash equivalents at December 31 were as follows (in millions):


	2011			2010			2009
Net cash (used in)/provided by operating activities	$	(120.2	)	$	68.2		$	(86.3	)
Net cash provided by/(used in) investing activities		660.5			(216.0	)		(56.8	)
Net cash (used in)/provided by financing activities		(691.0	)		(266.1	)		604.1
Effect of exchange rate changes on cash		(0.1	)		(0.1	)		0.2

Net (decrease)/increase in cash and cash equivalents		(150.8	)		(414.0	)		461.2

Cash and cash equivalents at beginning of year		422.5			836.5			375.3

Cash and cash equivalents at end of year	$	271.7		$	422.5		$	836.5

Operating Activities

The components of net cash provided by/used in operating activities at December 31 were as follows (in millions):


	2011			2010			2009
Adjusted EBITDA	$	213.0		$	166.5		$	96.3
Net interest and tax		(98.1	)		(114.5	)		(141.9	)
Divestment of business — transaction costs		(34.1	)		1.0			(18.5	)
Other net charges		(153.0	)		(42.8	)		(18.8	)
Working capital (increase)/decrease		(48.0	)		58.0			(3.4	)

Net cash (used in)/provided by operating activities	$	(120.2	)	$	68.2		$	(86.3	)

Net cash used in operating activities was $120.2 million in 2011 (2010: provided $68.2 million; 2009: used $86.3 million).

The improvement in Adjusted EBITDA net cash inflow from $166.5 million in 2010 to $213.0 million in 2011 was primarily driven by the 7% increase in revenue and a 10% decrease in combined SG&A and R&D expenses.

The improvement in Adjusted EBITDA net cash inflow from $96.3 million in 2009 to $166.5 million in 2010 reflected the 5% increase in revenue, the improved operating margins and a 9% decrease in combined SG&A and R&D expenses.

Net interest and tax are discussed further on page 45 for net interest expense and on page 54 for income taxes. The interest and tax expenses within net cash used in operating activities exclude net non-cash charges of $55.4 million in 2011 (2010: $5.4 million; 2009: $42.4 million), comprised of net non-cash interest expenses of $4.4 million in 2011 (2010: $5.3 million; 2009: $5.6 million) and a net non-cash tax charge of $51.0 million (2010: $0.1 million; 2009: $36.8 million).

The divestment of business charge of $34.1 million in 2011 includes the transaction costs and other cash charges related to the divestment of EDT. The divestment of business gain of $1.0 million in 2010 included the release of accruals for transaction costs associated with the divestment of the AIP business which took place in 2009. The charge of $18.5 million in 2009 includes the transaction costs and other cash charges related to the divestment of the AIP.

The other net charges of $153.0 million in 2011 (2010: $42.8 million; 2009: $18.8 million) were principally related to the other net charges described on pages 43 to 45 and page 53, adjusted to exclude non-cash other charges of $11.1 million in 2011 (2010: $13.5 million; 2009: $48.5 million). The net cash outflow in 2011 is primarily attributable to the settlement reserve charge outflow of $206.3 million related to the Zonegran settlement that was recognized in 2010 and paid in March 2011, and was partially offset by the receipt of legal settlement gains of $84.5 million during 2011.

The working capital increase in 2011 of $48.0 million is primarily due to expansion of the Tysabri business, an increase in EDT working capital prior to the divestment and a lower debt interest accrual related to the debt retirement transactions during 2011.

The working capital decrease in 2010 of $58.0 million was primarily driven by a significant increase in accruals, principally related to the increase in the Medicaid rebate accruals due to changes in U.S healthcare reform and an amount payable to Transition relating to an amendment to the Collaboration Agreement, and a decrease in inventories primarily related to lower levels of EDT finished goods inventory and discontinuation of Maxipime in 2010. In addition, the restructuring accrual increased by $8.8 million as a result of the realignment and restructuring of the R&D organization within our BioNeurology business, and reduction of related support activities.

The working capital increase in 2009 of $3.4 million was principally due to increased Tysabri sales, partially offset by a decrease in royalty receivables due to the timing of payments.

Investing Activities

Net cash provided by investing activities was $660.5 million in 2011. The primary component of cash provided by investing activities was the cash consideration received from the disposal of the EDT business of $500.0 million, in addition to the decrease in restricted cash balances due to payment of the amount held in escrow in respect of the Zonegran settlement of $203.7 million in March 2011, partially offset by capital expenditures of $29.8 million.

Net cash used in investing activities was $216.0 million in 2010. The primary component of cash used in investing activities was the increase in restricted cash in the year, which includes a transfer of $203.7 million into restricted cash in respect of the Zonegran settlement. Also included in investing activities are capital expenditures of $44.5 million, partially offset by investment disposal proceeds of $16.4 million and business disposal proceeds of $4.3 million.

Net cash used in investing activities was $56.8 million in 2009. The primary components of cash used in investing activities were the $50.0 million optional payment made to Biogen Idec in order to maintain an approximate 50% share of Tysabri for annual global in-market net sales of Tysabri that are in excess of $1.1 billion and additional capital expenditure of $45.9 million, partially offset by proceeds of $7.3 million from

the disposal of property, plant and equipment and proceeds of $28.9 million from the liquidation of an investment in a fund that had been reclassified from cash equivalents to investments due to dislocations in the capital markets. We fully redeemed our remaining holding in this fund during 2009.

Financing Activities

Net cash used by financing activities of $691.0 million in 2011 was primarily comprised of outflows of $697.3 million related to the debt redemption of the 2013 Fixed Rate Notes and the 2013 Floating Rate Notes and partial redemption of the 2016 Notes issued October 2009 and 2016 Notes issued August 2010. The principal amount of debt repaid was $660.5 million and cash debt retirement costs of $36.8 were incurred upon early redemption of these notes.

Net cash used by financing activities of $266.1 million in 2010 was primarily comprised of outflows of $300.0 million related to the redemption of the 2011 Floating Rate Notes and $155.0 million related to the partial redemption of the 2013 Fixed Rate Notes and the 2013 Floating Rate Notes 2013 partially offset by proceeds from the issuance of $200.0 million (net of transaction costs of $12.9 million) of the 2016 Notes issued August 2010.

Net cash provided by financing activities of $604.1 million in 2009 was primarily comprised of net proceeds of $868.0 million (net of $17.0 million in transaction costs) from the investment by Johnson & Johnson, and the net proceeds of $603.0 million (net of $22.0 million in transaction costs and original issue discount) from the issuance of the 2016 Notes issued October 2009, partially offset by total payments of $867.8 million (including $17.8 million of an early redemption premium and transaction costs) related to the early redemption of the 2011 Notes.

Debt Facilities

At December 31, 2011, we had total outstanding debt with an aggregate principal amount of $624.5 million, which consisted of the following (in millions):


2016 Notes issued October 2009	$	472.1
2016 Notes issued August 2010		152.4

Total	$	624.5

Our substantial indebtedness could have important consequences to us. For example, it does or could:

•

Increase our vulnerability to general adverse economic and industry conditions;

•

Require us to dedicate a substantial portion of our cash flow from operations to payments on indebtedness, thereby reducing the availability of our cash flow to fund R&D, working capital, capital expenditures, acquisitions, investments and other general corporate purposes;

•

Limit our flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate;

•

Place us at a competitive disadvantage compared to our competitors that have less debt; and

•

Limit our ability to borrow additional funds.

During 2011, as of December 31, 2011, and, as of the date of filing of this Form 20-F, we were not in violation of any of our debt covenants. For additional information regarding our outstanding debt, refer to Note 22 to the Consolidated Financial Statements.

Commitments and Contingencies

For information regarding commitments and contingencies, refer to Notes 29 and 30 to the Consolidated Financial Statements.

Capital Expenditures

We believe that our current and planned research, product development and corporate facilities will adequately meet our current and projected needs. We will use our resources to make capital expenditures as necessary from time to time and also to make investments in the purchase or licensing of products and in marketing and other alliances with third parties to support our long-term strategic objectives.

C.	Research and Development, Patents and Licenses, etc.

Our research activities are aimed at developing new drug products. Our development activities involve the translation of our research into potential new drugs. The development activities of the EDT business unit, which was divested on September 16, 2011, involved the translation of research into designs for new processes or technologies, or for a significant improvement to existing drugs. R&D activities may be performed post-regulatory approval of drug products as required by regulators, to provide additional evidence as to the efficacy and safety of a product, to expand the indications for a product, or with the aim of significantly improving the approved product.

R&D expenses include personnel, materials, equipment and facilities costs that are allocated to clearly related R&D activities. The amortization of intangible assets used in R&D activities and the costs of intangible assets that are purchased from others for a particular R&D project and that have no alternative future uses are also included in R&D expenses.

The following table sets forth the R&D expenses incurred for our significant non-EDT programs (specifically, those non-EDT programs that have advanced to at least Phase 2 development with one or more compounds) and other non-EDT R&D expenses for the years ended December 31, 2011, 2010 and 2009, and the cumulative amounts to date (in millions):


	2011		2010		2009		Cumulative to date⁽¹⁾
Tysabri	$	72.5	$	71.4	$	35.8	$	771.8
Aggregation inhibitor (ELND005, with Transition)		18.1		20.3		21.9		109.5
Other R&D⁽²⁾		107.6		113.3		96.1

Total		198.2		205.0		153.8
AIP⁽³⁾		—		—		92.3		356.9

Total	$	198.2	$	205.0	$	246.1

⁽¹⁾	Cumulative R&D costs to date include the costs incurred from the date when these individual programs have been separately tracked in preclinical development. Expenditures in the early discovery stage are not tracked by program and accordingly have been excluded from these cumulative amounts.

⁽²⁾	Other R&D is comprised of programs related principally to the potential treatment of central nervous system (CNS) diseases that have not yet entered Phase 2 development.

⁽³⁾	As part of the Johnson & Johnson Transaction in September 2009, Janssen AI acquired substantially all of our assets and rights related to the AIP.

EDT

The following table sets forth the R&D expenses incurred for each significant category of R&D activity for EDT for the period up to September 16, 2011, when the EDT business was divested, and for the years ended December 31, 2010 and 2009, (in millions), namely: client projects; proprietary projects; and technology and equipment development. R&D work performed for client projects typically involved the application of EDT technologies to client-owned compounds, and was generally funded by these clients through research revenues, milestone payments and, if successfully developed and approved, manufacturing and/or royalty revenues. Proprietary projects were self-funded and normally involved EDT applying its technologies to selectively

develop product candidates. EDT technology and equipment projects were focused on improving core technology offerings and exploring new areas of drug delivery technology.


	2011		2010		2009
Client	$	8.0	$	14.4	$	18.9
Proprietary		10.8		24.2		18.1
Technology and equipment		15.5		15.1		10.5

Total	$	34.3	$	53.7	$	47.5

For further for information on our R&D, Patents and Licenses, etc., see Item 4B. “Business Overview”.

D.	Trend Information

See Item 4B. “Business Overview” and Item 5A. “Results of Operations” for trend information.

E.	Off-Balance Sheet Arrangements

As of December 31, 2011, we have no unconsolidated special purpose financing or partnership entities or other off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, that are material to investors.

F.	Tabular Disclosure of Contractual Obligations

The following table sets out (in millions), at December 31, 2011, our main contractual obligations due by period for debt principal and interest repayments and operating leases. These represent the major contractual, future payments that may be made by Elan. The table does not include items such as expected capital expenditures on plant and equipment or future investments in financial assets. As of December 31, 2011, the directors had authorized capital expenditures, which had been contracted for, of $3.0 million (2010: $8.0 million), primarily related to leasehold improvements for our buildings in South San Francisco. As of December 31, 2011, the directors had authorized capital expenditures, which had not been contracted for, of $6.4 million (2010: $12.5 million).


	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
2016 Notes issued October 2009	$	472.1	$	—	$	—	$	472.1	$	—
2016 Notes issued August 2010		152.4		—		—		152.4		—

Total debt principal obligations	$	624.5	$	—	$	—	$	624.5	$	—
Debt interest payments		261.8		54.6		109.3		97.9		—
Operating lease obligations		216.7		32.4		42.4		29.3		112.6

Total contractual obligations	$	1,103.0	$	87.0	$	151.7	$	751.7	$	112.6

Based on current spend levels, Elan anticipates that we may be called upon to provide funding to Janssen AI commencing in the second quarter of 2012. In the event that further funding is required beyond the $400.0 million, such funding will be on terms determined by the board of Janssen AI, with Johnson & Johnson and Elan having a right of first offer to provide additional funding. The table above does not reflect any amounts in relation to future funding that Elan may provide.

In December 2010, we modified our Collaboration Agreement with Transition and, in connection with this modification, Transition elected to exercise its opt-out right under the original agreement and we agreed to pay Transition $9.0 million, which we paid to them in January 2011. Under the modified Collaboration Agreement, Transition will be eligible to receive a further $11.0 million payment from us upon the commencement of the next ELND005 clinical trial, and will no longer be eligible to receive a $25.0 million milestone that would have been due upon the commencement of a Phase 3 trial for ELND005 under the terms of the original agreement.

At December 31, 2011, we had liabilities related to unrecognized tax benefits of $7.3 million (excluding total potential penalties and interest of $2.2 million). It is not possible to accurately assess the timing of or the amount of any settlement in relation to these liabilities.

At December 31, 2011, we had commitments to invest $2.6 million (2010: $3.4 million) in healthcare managed funds.

In disposing of assets or businesses, we often provide customary representations, warranties and indemnities (if any) to cover various risks. We do not have the ability to estimate the potential liability from such indemnities because they relate to unknown conditions. However, we have no reason to believe that these uncertainties would have a material adverse effect on our financial condition or results of operations.

Item 6.

Directors, Senior Management and Employees.

A.	Directors and Senior Management

Directors

Robert A. Ingram (69)


Position	Date of Appointment	Tenure as of December 31, 2011
Non-Executive Director	December 3, 2010	1 year
Chairman of the Board	January 26, 2011	11 months
Member of the Nominating and Governance Committee (NGC)	January 26, 2011	11 months

Mr. Ingram was appointed a director of Elan in December 2010, and assumed the role of chairman effective January 26, 2011. He is currently a general partner of Hatteras Venture Partners, and has served as an advisor to the CEO of GlaxoSmithKline plc since January 2010. Mr. Ingram served as vice chairman pharmaceuticals of GlaxoSmithKline, acting as a special advisor to the corporate executive team from January 2003 until December 2009. He was chief operating officer and president, pharmaceutical operations of GlaxoSmithKline from January 2001 to January 2003. Mr. Ingram was CEO of Glaxo Wellcome plc from 1997 to 2000, and chairman of Glaxo Wellcome Inc. from 1999 to 2000. He is lead director of CREE Inc. and Valeant Pharmaceuticals Inc. and a director of Allergan, Inc., HBM BioVentures AG and Edwards Lifesciences Corporation.

Lars Ekman, MD, PhD (62)


Position	Date of Appointment	Tenure as of December 31, 2011
Non-Executive Director	May 26, 2005	6 years 7 months
Member and Chairman of the Science and Technology Committee	September 8, 2006	5 years 3 months

Dr. Ekman was appointed a director of Elan in May 2005. He transitioned from his role as Elan’s president of R&D in 2007 to serve solely as a non-executive director. He joined Elan as executive vice president and president, global R&D, in 2001. Prior to joining Elan, Dr. Ekman was executive vice president, R&D, at Schwarz Pharma AG since 1997. From 1984 to 1997, Dr. Ekman was employed in a variety of senior scientific and clinical functions at Pharmacia (now Pfizer). Dr. Ekman is a board certified surgeon with a PhD in experimental biology and has held several clinical and academic positions in both the United States and Europe. He obtained his PhD and MD from the University of Gothenburg, Sweden. He serves as an executive partner to Sofinnova Ventures and as an advisor to Warburg Pincus. He is a director of Amarin Corporation, plc., Cebix Incorporated, InterMune, Inc., Ocera Inc and chairman of the board of Protox Therapeutics Inc.

Hans Peter Hasler (56)


Position	Date of Appointment	Tenure as of December 31, 2011
Non-Executive Director	September 15, 2011	3 months
Member of the Leadership, Development and Compensation Committee (LDCC)	September 15, 2011	3 months

Mr. Hasler was appointed a director of Elan in September 2011. He is currently the chairman of HBM Bioventures AG and principal of HPH Management GmbH. Previously, Mr. Hasler served with Biogen Idec in a number of key executive leadership roles from 2001 to 2009. Prior to his departure from Biogen Idec, Mr. Hasler served as its chief operating officer responsible for all commercial operations, business development, medical affairs and Biogen International. During his tenure at Biogen Idec, Mr. Hasler served as head of Global Neurology/Cardiovascular business and head of International business overseeing the launch of Tysabri in Europe and the management of Avonex. Before joining Biogen Idec, Mr. Hasler served as chief marketing officer and head of Global Strategic Marketing with Wyeth Pharmaceuticals.

Gary Kennedy (54)


Position	Date of Appointment	Tenure as of December 31, 2011
Non-Executive Director	May 26, 2005	6 years 7 months
Member of the Audit Committee	September 9, 2005	6 years 3 months
Chairman of the Audit Committee	May 24, 2007	4 years 7 months
Member of the LDCC	August 26, 2009	2 years 4 months

Mr. Kennedy was appointed a director of Elan in May 2005, and is currently a director of Greencore Group plc, IBRC Limited, Friends First, and serves as a board member to a number of private companies. From May 1997 to December 2005, he was group director, finance and enterprise technology, at Allied Irish Banks, plc (AIB) and a member of the main board of AIB, and was also on the board of M&T, AIB’s associate in the United States. Prior to that, Mr. Kennedy was group vice president at Nortel Networks Europe after starting his management career at Deloitte & Touche. He served on the board of the Industrial Development Authority of Ireland for 10 years until he retired in December 2005 and is a Fellow of Chartered Accountants Ireland.

Patrick Kennedy (42)


Position	Date of Appointment	Tenure as of December 31, 2011
Non-Executive Director	May 22, 2008	3 years 7 months
Member of the LDCC	September 10, 2008	3 years 3 months
Chairman of the LDCC	January 29, 2009	2 years 11 months

Mr. Kennedy was appointed a director of Elan in May 2008. He is currently chief executive of Paddy Power plc, an international betting and gaming group, listed on both the London and Irish Stock Exchanges; and is also a director of Bank of Ireland. Mr. Kennedy was previously chief financial officer of Greencore Group plc and prior to that worked with McKinsey & Company in both their London and Dublin offices. Mr. Kennedy also previously worked with KPMG’s corporate finance arm, splitting his time between Dublin and the Netherlands. Mr. Kennedy is a graduate of University College Dublin, Trinity College Dublin and a Fellow of Chartered Accountants Ireland.

Giles Kerr (52)


Position	Date of Appointment	Tenure as of December 31, 2011
Non-Executive Director	September 13, 2007	4 years 3 months
Member of the Audit Committee	January 31, 2008	3 years 11 months
Member of the NGC	January 27, 2010	1 year 11 months

Mr. Kerr was appointed a director of Elan in September 2007. He is currently the director of finance with the University of Oxford, England, and a fellow of Keble College. At present Mr. Kerr is a member of the board and the chairman of the audit committee of Victrex plc and BTG plc. He is also a director of Isis Innovation Ltd and a number of other private companies. Previously, Mr. Kerr was the group finance director and chief financial officer of Amersham plc, and prior to that, he was a partner with Arthur Andersen in the United Kingdom. Mr. Kerr is a Fellow of the Institute of Chartered Accountants in England and Wales.

G. Kelly Martin (52)


Position	Date of Appointment	Tenure as of December 31, 2011
Executive Director & CEO	February 4, 2003	8 years 10 months

Mr. Martin was appointed a director of Elan in February 2003 following his appointment as president and CEO. Before joining Elan, Mr. Martin spent more than 20 years at Merrill Lynch & Co., Inc., where he held a broad array of operating responsibilities.

Kieran McGowan (68)


Position	Date of Appointment	Tenure as of December 31, 2011
Non-Executive Director	December 1, 1998	13 years 1 month
Lead Independent Director	February 1, 2006	5 years 11 months
Member of the NGC	May 31, 2002	9 years 7 months
Chairman of the NGC	September 9, 2005	6 years 3 months

Mr. McGowan was appointed a director of Elan in December 1998. He is currently chairman of CRH, plc and is also a director Charles Schwab Worldwide Funds, plc, as well as sitting on the board of a number of private companies. From 1990 until his retirement in December 1998, Mr. McGowan was chief executive of the Industrial Development Authority of Ireland, and served as president of the Irish Management Institute. In addition, Mr. McGowan has also chaired the Governing Authority at University College Dublin.

Kyran McLaughlin (67)


Position	Date of Appointment	Tenure as of December 31, 2011
Non-Executive Director	January 30, 1998	13 years 11 months
Member of the NGC	May 31, 2002	9 years 7 months

Mr. McLaughlin was appointed a director of Elan in January 1998 and served as chairman from January 2005 to January 2011. He is deputy chairman at Davy, Ireland’s largest stockbroker firm. He is also a director of Ryanair Holdings plc and is a director of a number of private companies.

Donal O’Connor (61)


Position	Date of Appointment	Tenure as of December 31, 2011
Non-Executive Director	May 22, 2008	3 years 7 months
Member of the Audit Committee	September 10, 2008	3 years 3 months
Member of the LDCC	May 26, 2010	1 year 7 months

Mr. O’Connor was appointed a director of Elan in May 2008 and is also a director of Readymix plc and the administrator of Icarom plc. Prior to joining the Elan Board, Mr. O’Connor was the senior partner of PricewaterhouseCoopers in Ireland from 1995 until 2007. He was also a member of the PricewaterhouseCoopers Global Board and was a former chairman of the Eurofirms Board. Mr. O’Connor is a graduate of University College Dublin and a Fellow of Chartered Accountants Ireland.

Richard Pilnik (54)


Position	Date of Appointment	Tenure as of December 31, 2011
Non-Executive Director	July 16, 2009	2 years 5 months

Mr. Pilnik was elected a director of Elan in July 2009. Mr. Pilnik served in several leadership positions during his 25-year career at Eli Lilly & Company, most recently as group vice president and chief marketing officer, where he was responsible for commercial strategy, market research and medical marketing. Currently, Mr. Pilnik serves as executive vice president and president of Quintiles Commercial Solutions, which is a global pioneer in pharmaceutical services. Mr. Pilnik holds a B.A. from Duke University and an M.B.A. from the Kellogg School of Management at Northwestern University.

Dennis J. Selkoe, MD (68)


Position	Date of Appointment	Tenure as of December 31, 2011
Non-Executive Director⁽¹⁾	July 1, 1996	15 years 4 months
Member of the Science and Technology Committee	August 26, 2009	2 years 4 months
Member of the NGC	January 27, 2010	1 year 11 months

⁽¹⁾	Retired as a director July 16, 2009 and subsequently reappointed on August 26, 2009.

Dr. Selkoe was appointed a director of Elan in July 1996, following the acquisition of Athena Neurosciences, where he served as a director since July 1995. Dr. Selkoe was a scientific founder of Athena Neurosciences. Dr. Selkoe, a neurologist, is the Vincent and Stella Coates Professor of Neurologic Diseases at Harvard Medical School and co-director of the Center for Neurologic Diseases at the Brigham and Women’s Hospital.

Andrew von Eschenbach, MD (70)


Position	Date of Appointment	Tenure as of December 31, 2011
Non-Executive Director	September 15, 2011	3 months
Member of the Science and Technology Committee	September 15, 2011	3 months

Dr. von Eschenbach was appointed a director of Elan in September 2011. He is currently the President of Samaritan Health Initiatives Inc., a health care policy consultancy. He previously served as Commissioner of the FDA from 2005 to 2009. Prior to that he served as the Director of the National Cancer Institute and held a number of leadership roles at the University of Texas’ M.D. Anderson Cancer Center. He was educated at St. Joseph’s University, Philadelphia and received his M.D. from Georgetown University. His current responsibilities include serving on the boards of BioTime Inc., Histosonics Inc., Viamet Pharmaceuticals, Focused Ultrasound Surgery Foundation, and the National Comprehensive Cancer Centers Network Foundation. He also serves on the advisory boards of the Chugai Pharmaceutical International Advisory Council and GE Heathymagination, the scientific advisory board of Arrowhead Research Corporation and the Johnson & Johnson Corporate Office of Science & Technology External Scientific Advisory Board and is a Senior Fellow at the Milken Institute.

Senior Management

Nigel Clerkin (38)

Executive Vice President and Chief Financial Officer

Mr. Clerkin was named chief financial officer in May 2011. Prior to that, he had served as senior vice president, finance and group controller since January 2004. He previously held a number of financial and strategic planning positions since joining Elan in January 1998. Mr. Clerkin is a Fellow of Chartered Accountants Ireland and a graduate of Queen’s University Belfast.

William F. Daniel (59)

Executive Vice President and Company Secretary

Mr. Daniel was appointed a director of Elan in February 2003 and served until July 2007. He has served as the company secretary since December 2001, having joined Elan in March 1994 as group financial controller. From 1990 to 1992, Mr. Daniel was financial director of Xtravision, plc. Mr. Daniel is a Fellow of Chartered Accountants Ireland, a chartered director and a graduate of University College Dublin.

Fabiana Lacerca-Allen (44)

Chief Compliance Officer

Ms. Lacerca-Allen joined Elan as senior vice president, chief compliance officer in June 2010. Ms. Lacerca-Allen has more than 18 years of compliance and legal experience at Fortune 500 companies and law firms in the United States and in Argentina. She joined Elan from Mylan Laboratories, where she was senior vice president and chief compliance officer and led Mylan’s compliance programs, including the establishment of policies and compliance processes. Prior to her role with Mylan, Lacerca-Allen served as legal compliance director for Bristol-Myers Squibb where she was a member of the executive team for Latin America, Canada and Puerto Rico and led all compliance initiatives in those regions. She has also held significant positions with Microsoft, Merck, Sharpe & Dohme (a subsidiary of Merck) and AT&T Capital.

Grainne McAleese (32)

Group Controller and Principal Accounting Officer

Ms. McAleese was appointed group controller and principal accounting officer of Elan in June 2011. Since joining Elan in July 2004, Ms. McAleese has worked in a number of roles in the Group Finance area. Prior to joining Elan, she worked with PricewaterhouseCoopers in New York and KPMG in Dublin. Ms. McAleese is a

Certified Public Accountant in the United States, a Fellow of Chartered Accountants Ireland and a graduate of Dublin City University.

John B. Moriarty Jr. (44)

Senior Vice President and General Counsel

Mr. Moriarty was named general counsel in March 2010, having joined Elan in December 2008 as senior vice president, legal-commercial operations and litigation. Prior to joining Elan, Mr. Moriarty worked at Amgen, where he served as executive director and associate general counsel, global commercial operations, and was Amgen’s senior counsel, complex litigation, products liability and government investigations. Before working at Amgen, Mr. Moriarty was in private practice with a national law firm where his areas of expertise included reimbursement (Medicare, Medicaid and third-party payment programs), federal and state government investigations and proceedings, and corporate internal investigations. Earlier in his career, he was a healthcare fraud prosecutor in the Virginia Office of the Attorney General and also served for two years as a Special Assistant United States Attorney for healthcare fraud. Mr. Moriarty graduated from the University of Virginia, with distinction, and the University of Georgia School of Law, cum laude.

Grainne Quinn, MD (42)

Chief Medical Officer

Dr. Quinn was appointed chief medical officer in October 2011. Dr. Quinn joined Elan in January 2009, and in April 2010 was named vice president of Elan’s global pharmacovigilance and risk management group, which she continues to manage. Prior to joining Elan, Dr. Quinn worked with Quintiles Ireland Ltd., where she held several leadership positions, including executive director, medical and scientific services, global head of safety physicians. In addition, she has practiced as an internist in Boston, Massachusetts, and Minneapolis, Minnesota. Dr. Quinn earned her medical degree from the Royal College of Surgeons in Ireland, and received her board certification in internal medicine in 1995 from the American Board of Internal Medicine.

B.	Compensation

Executive Officers and Directors’ Remuneration

For the year ended December 31, 2011, all directors and executive officers as a group that served during the year (19 persons) received total compensation of $7.8 million (2010: $8.5 million).

We reimburse directors and officers for their actual business-related expenses. For the year ended December 31, 2011, an aggregate of $0.5 million (2010: $0.2 million) was accrued to provide pension, retirement and other similar benefits for directors and officers. We also maintain certain health and medical benefit plans for our employees in which our executive directors and officers participate.

Directors’ Remuneration


	Year Ended December, 31
	2011 Salary/ Fees		2011 Bonus		2011 Pension		2011 Benefit in kind		2011 Total		2010 Total
Executive Directors:
G. Kelly Martin	$	1,000,000	$	1,875,000	$	7,350	$	2,760	$	2,885,110	$	1,965,096
Shane Cooke⁽¹⁾		359,037		—		87,913		20,644		467,594		1,199,994

Total		1,359,037		1,875,000		95,263		23,404		3,352,704		3,165,090

Non-Executive Directors:
Robert A. Ingram⁽²⁾		240,793		—		—		—		240,793		4,334
Lars Ekman⁽³⁾		78,503		—		—		—		78,503		82,452
Jonas Frick⁽⁴⁾		25,714		—		—		—		25,714		67,500
Hans Peter Hasler⁽⁵⁾		19,626		—		—		—		19,626		—
Gary Kennedy		92,500		—		—		—		92,500		92,500
Patrick Kennedy		75,000		—		—		—		75,000		75,000
Giles Kerr		82,500		—		—		—		82,500		81,563
Kieran McGowan ⁽³⁾		95,000		—		—		—		95,000		86,923
Kyran McLaughlin^{(2) (3)}		84,292		—		—		—		84,292		300,000
Donal O’Connor		82,500		—		—		—		82,500		77,452
Richard Pilnik		60,604		—		—		—		60,604		71,971
Dennis J. Selkoe⁽⁶⁾		130,000		—		—		—		130,000		134,111
Andrew von Eschenbach⁽⁵⁾		19,626		—		—		—		19,626		—

Total	$	2,445,695	$	1,875,000	$	95,263	$	23,404	$	4,439,362	$	4,238,896

⁽¹⁾	Retired as a director on September 15, 2011.

⁽²⁾	On January 26, 2011, Robert A. Ingram replaced Kyran McLaughlin as chairman of the board.

⁽³⁾	In 2011, director’s fee was received in the form of RSUs which vest on the earlier of 90 days after retirement from the board or 10 years. For further information refer to the Report of the LDCC on page 73.

⁽⁴⁾	Retired as a director on May 26, 2011.

⁽⁵⁾	Appointed as a director on September 15, 2011.

⁽⁶⁾	Includes fees of $50,000 in 2011 and 2010 under a consultancy agreement. See Item 7B. “Related Party Transactions” for additional information.

C.	Board Practices

Policies

We are committed to the adoption and maintenance of the highest standards of corporate governance and compliance and have applied the provisions and principles of the U.K. Corporate Governance Code (the Code) as issued by the Financial Reporting Council (FRC) in June 2010 and adopted by the Irish Stock Exchange (ISE).

Our corporate governance guidelines (the Guidelines), which have been adopted by the board of directors cover the mission of the board, director responsibilities, board structure (including the roles of the chairman, CEO and the lead independent director, board composition, independent directors, definition of independence, board membership criteria, selection of new directors, time limits and mandatory retirement, board composition and evaluation), leadership development (including formal evaluation of the chairman and CEO, succession planning and director development), board committees, board meeting proceedings, board and independent director access to top management, independent advice and board interaction with institutional investors, research analysts and media.

Our policy is to conduct our business in compliance with all applicable laws, rules and regulations and therefore our employees are expected to perform to the highest standards of ethical conduct, consistent with legal and regulatory requirements. Our Code of Conduct applies to directors, officers and employees and provides guidance on how to fulfill these requirements, how to seek advice and resolve questions about the appropriateness of conduct, and how to report possible violations of our legal obligations or ethical principles. All employees have a mandatory compliance objective, which accounts for 10% of their performance goals and objectives. This is designed to ensure that employees comply with our Code of Conduct and all policies and procedures that govern our daily business activities. Our Corporate Compliance Office manages our corporate compliance program, which establishes a framework for adherence to applicable laws, rules and regulations and ethical standards, as well as a mechanism for preventing and reporting any breach of same. An executive-level Corporate Compliance Steering Committee also provides oversight of our compliance activities.

In October 2011, we applied to the ISE for the re-classification of the listing of our Ordinary Shares on the Official List of the ISE from a primary listing to a secondary listing and this became effective on November 3, 2011. There was no change to our listing on the New York Stock Exchange (NYSE). Our Ordinary Shares continue to be traded on the main market for listed securities of the ISE but we are not subject to the same ongoing listing requirements as those which would apply to an Irish company with a primary listing on the ISE, including the requirement that certain transactions require the approval of shareholders. In addition, the provisions of the Irish Corporate Governance Annex ceased to apply to the Company following the re-classification, however we have voluntarily incorporated the recommendations of the Irish Corporate Governance Annex.

The Guidelines, the Committee Charters and Code of Conduct are available on our website, www.elan.com. Any amendments to, or waivers from the Code of Conduct, will also be posted to our website. There have been no such waivers.

Board Role and Responsibilities

The board is responsible to the shareholders for ensuring that the Company is appropriately managed and that it achieves its objectives.

The board regularly reviews its responsibilities and those of its committees and management. The board meets regularly throughout the year, and all of the directors have full and timely access to the information necessary to enable them to discharge their duties. At board and committee meetings, directors receive regular reports on the Company’s financial position, risk management, key business issues and other material issues. The board held eight scheduled meetings in 2011. In addition, three meetings were held to deal with specific matters as they arose.

The board has reserved certain matters to its exclusive jurisdiction, thereby maintaining control of the Company and its future direction. All directors are appointed by the board, as nominated by its NGC, and subsequently elected by shareholders. Procedures are in place whereby directors and committees, in furtherance of their duties, may take independent professional advice, if necessary, at our expense.

Subject to certain limited exceptions, directors may not vote on matters in which they have a material interest. In the absence of an independent quorum, the directors may not vote compensation to themselves or any member of the board of directors. Directors are entitled to remuneration as shall, from time to time, be voted to them by ordinary resolution of the shareholders and to be paid such expenses as may be incurred by them in the course of the performance of their duties as directors. Directors who take on additional committee assignments or otherwise perform additional services for the Company, outside the scope of their ordinary duties as directors, shall be entitled to receive such additional remuneration as the board may determine. The directors may exercise all of the powers of the Company to borrow money. These powers may be amended by special resolution of the shareholders. There is no requirement for a director to hold shares.

The board has delegated authority over certain areas of our activities to four standing committees, as more fully described below.

For additional information, see Items 7B. “Related Party Transactions” and Item 10B. “Memorandum and Articles of Association.”

Board Composition

The Company’s Memorandum and Articles of Association provide that the number of directors will be no less than three and no more than fifteen. Currently the board comprises the non-executive chairman, 11 other non-executive directors and one executive director. The board considers that the current board size is appropriate and facilitates the work of the board and its committees whilst being small enough to maintain flexibility and to carry out its duties in a timely fashion.

The NGC keep the composition and skills profile of the board and its committees under review and recommends changes where appropriate. The board seeks to ensure that it has an appropriate mix of skills and experience in areas such as science, pharmaceuticals, finance, governance, management and general business amongst others. The board is satisfied that it has an appropriate balance of skills, experience, independence and knowledge of the Company to enable them to discharge their duties and responsibilities effectively. Further information on the work of the NGC is set out in its report on page 75.

Chairman

The roles of the chairman and CEO are separated. The chairman of the board is responsible for the leadership and management of the board. Our CEO is responsible for the operation of the business of the Company.

On January 26, 2011, Mr. Ingram replaced Mr. McLaughlin as chairman. Other significant commitments of the chairman are set out on page 61. On appointment, the chairman fulfilled the independence criteria set out in our Guidelines and the Code.

Lead Independent Director

The chair of the NGC serves as the lead independent director. The lead independent director coordinates, in a lead capacity, the other independent directors and provides ongoing and direct feedback from the directors to the chairman and the CEO. The specific responsibilities of the lead independent director are set out in our Guidelines. Mr. McGowan has served as the lead independent director since February 1, 2006.

Board Tenure

Under the terms of our Articles of Association, directors serve for a term of three years expiring at the Annual General Meeting (AGM) in the third year following their election at an AGM or as the case may be, their re-election at the AGM. Directors are not required to retire at any set age. Following our adoption of the requirements of the Code, all directors will stand for annual re-election with effect from the 2012 AGM.

The directors may from time to time appoint any person to be a director either to fill a casual vacancy or as an additional director. A director so appointed shall hold office until the conclusion of the AGM immediately following their appointment, where they shall retire and may offer themselves for election.

A director retiring at an AGM shall retain office until the close or adjournment of the meeting. No person shall be eligible for election or re-election to the office of director at any General Meeting unless recommended by the directors or proposed by a duly qualified and authorized member within the prescribed time period.

Induction and Development

Directors are provided with extensive induction materials on appointment and meet with key executives, with a particular focus on ensuring non-executive directors are fully informed on issues of relevance to the Company and its operations. All directors are encouraged to update and refresh their skills and knowledge, for example, through attending courses on technical areas or external briefings for non-executive directors.

Independence of Directors

Under our Guidelines, at minimum, two-thirds of the board are required to be independent. In addition to the provisions of the Code, we adopted a definition of independence based on the rules of the NYSE, the exchange

on which the majority of our shares are traded. For a director to be considered independent, the board must affirmatively determine that he or she has no material relationship with the Company. The specific criteria that affect independence are set out in the Guidelines and include former employment with the Company, former employment with the Company’s independent auditors, receipt of compensation other than directors’ fees, material business relationships and interlocking directorships.

In December 2011, the board considered the independence of each non-executive director, with the exception of Dr. Ekman who had retired as a full-time executive of the Company on December 31, 2007, and considers that the following non-executive directors, Mr. Hasler, Mr. Ingram, Mr. Gary Kennedy, Mr. Patrick Kennedy, Mr. Kerr, Mr. McGowan, Mr. McLaughlin, Mr. O’Connor, Mr. Pilnik, Dr. Selkoe and Dr. von Eschenbach, who represent in excess of two-thirds of the board were independent in character and judgment and there are no relationships or circumstances that are likely to affect their independent judgment. Under the Guidelines and the NYSE definition of independence, Dr. Ekman is considered to be an independent director as he has retired more than three years previously. Under the provisions of the Code, he will not be considered independent until five years has elapsed since his full time employment with the Company ceased.

In reaching this conclusion, the board gave due consideration to participation by board members in our equity compensation plans. The board also considered the positions of Mr. McLaughlin, Mr. McGowan and Dr. Selkoe who have served as non-executive directors for in excess of nine years. Additionally, Mr. McLaughlin is deputy chairman of Davy, the Company’s broker and sponsor on the ISE and Dr. Selkoe has an ongoing consultancy agreement with the Company, details of both these arrangements are set out in detail in Item 7B. “Related Party Transactions”. It is the board’s view that each of these non-executive directors discharges his duties in a thoroughly independent manner and constructively and appropriately challenges the executive directors and the board. For these reasons, the board considers that they are independent.

Conflicts of Interest

In January 2011, the board adopted a comprehensive Conflicts of Interests Policy for the board which sets out procedures covering the identification and management of such conflicts. The policy covers directors’ personal interests which may conflict with the interests of the Company, interfere with the director’s ability to perform his or her duties and responsibilities to the Company or give rise to a situation where a director may receive an improper personal benefit because of his or her position. The policy also extends to the director’s immediate family.

Where a director considers that they may have a conflict of interest with respect to any matter they must immediately notify this to the chairman of the Audit Committee or, if the chairman of the Audit Committee is the interested director, to the lead independent director. The Audit Committee (excluding, if applicable, the interested director) considers each notification to determine whether a conflict of interest exists. Until the Audit Committee has completed its determination the director will not participate in any vote, deliberation or discussion on the potential conflict with any other director or employee of the Company and the director will not be furnished with any board materials relating, directly or indirectly, to the potential conflict.

Board Effectiveness

Our Guidelines require that the board will conduct a self-evaluation at least annually to determine whether it and its committees are functioning effectively. An evaluation of the performance of the board and board committees was conducted during the year by the lead independent director through meetings with each member of the board. The results were presented to the NGC and to the board. The board concluded that it and its committees had operated satisfactorily during the year.

In December 2011, the lead independent director completed a separate evaluation of the CEO, the results of which were presented to the board in executive session.

In 2010, McKenna, Long & Aldridge LLP completed two reports which encompassed a thorough evaluation of the functioning of the board and its committees. The board intend to conduct a further external evaluation of its own performance and that of its committees and individual directors in 2013.

Board Committees

The board currently has four committees to assist it in exercising its authority. The current committees of the board are the Audit Committee, the LDCC, the NGC and the Science and Technology Committee. The Commercial Committee was abolished in April 2011.

Each of the committees has a charter under which authority is delegated to it by the board. The charter for each committee is available on our website, www.elan.com, or from the company secretary on request. Reports of each committee, except for the Audit Committee, are set out on pages 73 to 76. The Report of the Audit Committee is set out on pages 99 to 101.

Board and Board Committee Meetings

The following table shows the number of scheduled board and board committee meetings held and attended by each director and secretary during the year. In addition to regular scheduled board and board committee meetings, a number of other meetings were held to deal with specific matters. If directors are unable to attend a board or board committee meeting because of a prior unavoidable engagement, they are provided with all the documentation and information relevant to that meeting and are encouraged to discuss issues arising in that meeting with the chairman, CEO or company secretary.

Board

Audit
Committee

LDCC

NGC

Science &
Technology
Committee

Directors

Robert A. Ingram

8/8

—

4/4

—

Shane Cooke⁽¹⁾

7/7

—

Lars Ekman

8/8

—

2/2

Jonas Frick⁽²⁾

4/5

—

Hans Peter Hasler⁽³⁾

2/2

—

1/1

—

Gary Kennedy

8/8

4/4

—

Patrick Kennedy

8/8

—

4/4

—

Giles Kerr

8/8

7/8

—

4/4

—

G. Kelly Martin

8/8

—

Kieran McGowan

6/8

—

4/4

—

Kyran McLaughlin

8/8

—

4/4

—

Donal O’Connor

8/8

4/4

—

Richard Pilnik

7/8

—

Dennis J. Selkoe

6/8

—

4/4

2/2

Andrew von Eschenbach⁽³⁾

1/2

⁽⁴⁾

—

1/1

Secretary

William F. Daniel

8/8

3/4

4/4

2/2

⁽¹⁾	Resigned as a director on September 15, 2011

⁽²⁾	Resigned as a director on May 26, 2011

⁽³⁾	Appointed as a director on September 15, 2011

⁽⁴⁾	Dr. von Eschenbach joined the board on September 15, 2011, however, due to a prior outstanding commitment could not attend the board meeting on December 1, 2011

Company Secretary

All directors have access to the advice and services of the company secretary. The company secretary supports the chairman in ensuring the board functions effectively and fulfils its role. He is secretary to the Audit Committee, the LDCC, the NGC and the Science and Technology Committee. The company secretary ensures compliance with applicable rules and regulations. The appointment and removal of the company secretary is a matter for the board.

Relations with Shareholders

We communicate regularly with our shareholders throughout the year, specifically following the release of quarterly and annual results, and after major developments. Our website, www.elan.com, is the primary method of communication for the majority of our shareholders. We publish our annual report and accounts, quarterly results, Form 20-F, notice of AGM and other public announcements on our website. In addition, our AGMs, quarterly conference calls and presentations at healthcare investor conferences are webcast and are available on our website.

The directors consider it important to understand the views of shareholders and, in particular, any issues which concern them. The board periodically receives presentations on investor perceptions and during the year the NGC met with a number of institutional shareholders to discuss issues facing the Company.

Our investor relations department, with offices in Ireland and the United States, provides a point of contact for shareholders and full contact details are set out on the investor relations section of our website. Shareholders can also submit an information request through the shareholder services section of our website.

The principal forum for discussion with shareholders is our AGM and shareholder participation is encouraged. Formal notification, together with an explanation of each proposed resolution, is sent to shareholders at least 21 calendar days in advance of the AGM. At the meeting, the CEO provides a summary of the period’s events after which the board and senior management are available to answer questions from shareholders. All directors normally attend the AGM and shareholders are invited to ask questions during the meeting and to meet with directors after the formal proceedings have ended.

In accordance with the Code, the Company counts all proxy votes. On each resolution that is voted on with a show of hands, the Company indicates the level of proxies lodged, the number of votes for and against each resolution and the number of votes withheld. This information is made available on our website following the AGM.

Going Concern

The directors, having made inquiries, including consideration of the factors discussed in Item 5B. “Liquidity and Capital Resources,” believe that the Company has adequate resources to continue in operational existence for at least the next 12 months and that it is appropriate to continue to adopt the going concern basis in preparing our Consolidated Financial Statements.

Internal Control

The board of directors has overall responsibility for our system of internal control and for monitoring its effectiveness. The system of internal control is designed to provide reasonable, but not absolute, assurance against material misstatement or loss. The key procedures that have been established to provide effective internal control include:

•

A clear focus on business objectives is set by the board having considered the risk profile of the Company;

•

A formalized risk reporting system, with significant business risks addressed at each board meeting;

•

A clearly defined organizational structure under the day-to-day direction of our CEO. Defined lines of responsibility and delegation of authority have been established within which our activities can be planned, executed, controlled and monitored to achieve the strategic objectives that the board has adopted for the Company;

•

A comprehensive system for reporting financial results to the board, including a budgeting system with an annual budget approved by the board;

•

A system of management and financial reporting, treasury management and project appraisal — the system of reporting covers trading activities, operational issues, financial performance, working capital, cash flow and asset management; and

•

To support our system of internal control, we have separate Corporate Compliance and Internal Audit departments. Each of these departments reports periodically to the Audit Committee. The Internal Audit function includes responsibility for the Company’s compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

The directors reviewed our system of internal control and also examined the full range of risks affecting us and the appropriateness of the internal control structures to manage and monitor these risks. This process involved a confirmation that appropriate systems of internal control were in place throughout the financial year and up to the date of signing of the Consolidated Financial Statements. It also involved an assessment of the ongoing process for the identification, management and control of the individual risks and of the role of the various risk management functions and the extent to which areas of significant challenges facing us are understood and are being addressed. No material unaddressed issues emerged from this assessment.

Refer to Item 15. “Controls and Procedures,” for management’s annual report on internal control over financial reporting.

Compliance Statement

The directors confirm that the Company has complied throughout the year ended December 31, 2011 with the provisions of the Code. We follow a U.S. style compensation system for our senior management and our non-executive directors. As a result, we include the non-executive directors in our equity compensation plans. In accordance with the Code, we sought and received shareholder approval to make certain equity grants to our non-executive directors at our 2004 AGM.

Report of the Leadership Development and Compensation Committee

The LDCC held four scheduled meetings in 2011. Details of meeting attendance by LDCC members are included in the table on page 71. In addition, three meetings were held to deal with specific matters.

Committee Membership


Name		Status During 2011
Patrick Kennedy (Chairman)		Member for the whole period
Hans Peter Hasler		Member from September 15, 2011
Gary Kennedy		Member for the whole period
Donal O’Connor		Member for the whole period

The LDCC is composed entirely of independent non-executive directors. Each member of the committee is nominated to serve for a three-year term subject to a maximum of two terms of continuous service.

Role and Focus

The LDCC reviews the Company’s compensation philosophy and policies with respect to executive compensation, fringe benefits and other compensation matters. The LDCC determines, amongst other things, the compensation, terms and conditions of employment of the CEO and other executive directors. In addition, the LDCC reviews the recommendations of the CEO with respect to the remuneration and terms and conditions of employment of our senior management. The LDCC also exercises all the powers of the board of directors to issue Ordinary Shares on the exercise of share options and vesting of RSUs and to generally administer our equity award plans.

Remuneration Policy

Our policy on executive directors’ remuneration is to set remuneration levels that are appropriate for our senior executives having regard to their substantial responsibilities, their individual performance and the Company’s performance as a whole. The LDCC sets remuneration levels after reviewing remuneration packages

of executives in the pharmaceutical and biotech industries. The LDCC takes external advice from independent benefit consultants and considers Section D of the Code. The typical elements of the remuneration package for executive directors include basic salary and benefits, annual cash incentive bonus, pensions and participation in equity award plans. The LDCC grants equity awards to encourage identification with shareholders’ interests.

The LDCC has engaged Semler Brossy Consulting Group, LLC (SBCG) as independent compensation consultants to ensure that it receives objective advice in making recommendations to the board on compensation matters and to assist the LDCC in fulfilling its mission of actively overseeing the design and operation of Elan’s compensation program on behalf of the board of directors. The services provided by SBCG include, among other things: regular attendance at LDCC meetings; review of the LDCC’s charter and terms of reference; updates on trends in compensation, corporate governance, and regulatory/accounting developments; review and update of peer groups; evaluation of the market competitiveness of current compensation; review and provide updates on evolving practice in the area of severance; and input to discussions on CEO pay and CEO recommendations for senior executives. SBCG do not provide any other services to Elan.

Elements of Non-Executive Director Remuneration

Non-executive directors are compensated with fee payments and equity awards with additional payments where directors are members of board committees. Non-executive directors may elect to receive their fee payments in the form of RSUs, which will vest on the earlier of 90 days after retirement from the board or 10 years. In 2011, Dr. Ekman, Mr. McGowan and Mr. McLaughlin elected to receive their fee payments in the form of RSUs. Non-executive directors are also reimbursed for reasonable travel expenses to and from board meetings. For further details on non-executive directors’ terms of appointment, refer to Item 7B. “Related Party Transactions.”

Elements of Executive Director Remuneration

Executive Directors’ Basic Salary

The basic salaries of executive directors are reviewed annually having regard to personal performance, Company performance and market practice.

Annual Cash Incentive Bonus

We operate a cash bonus plan in which all employees, including executive directors, are eligible to participate if and when we achieve our strategic and operating goals. Bonuses are not pensionable. The cash bonus plan operates on a calendar year basis. We measure our performance against a broad series of financial, operational and scientific objectives and measurements and set annual metrics relating to them. A bonus target, expressed as a percentage of basic salary, is set for all employees. Payment will be made based on a combination of individual, team, group and company performance.

Share-Based Compensation

It is our policy, in common with other companies operating in the biotechnology industry, to award share options and RSUs to management and employees, in line with the best interests of the Company. In 2006, shareholders approved the Elan Corporation, plc 2006 Long Term Incentive Plan (2006 LTIP) which was amended in 2008. Equity awards are usually awarded annually if and when we achieve our strategic and operating goals. Equity awards are also granted to some individuals on joining the Company. The equity awards under this plan generally vest between one and four years and do not contain any performance conditions other than service.

In addition, we have an EEPP in which our employees, including executive directors, are eligible to participate. This plan allows eligible employees to purchase shares at a discount of up to 15% of the lower of the fair market value at the beginning or last trading day of the offering period. Purchases are limited and subject to certain U.S. Internal Revenue Code (IRC) restrictions.

Activities Undertaken During the Year

During the year, the LDCC reviewed the non-executive directors remuneration policy, the CEO and executive management compensation plans and the appropriateness of the 2011 Elan performance goals and objectives for all staff. In addition, the LDCC continued to monitor general compensation trends and CEO compensation in particular.

The LDCC also reviewed and commented on the arrangements for succession planning, severance packages and general talent management at Elan during the period. The committee was further involved in responding to the developments in the talent pool following the sale of the EDT business. The committee also engaged in a review of its charter with slight amendments recommended for implementation in early 2012.

On behalf of the LDCC,

Patrick Kennedy

Chairman of the LDCC and

Non-Executive Director

February 23, 2012

Report of the Nominating and Governance Committee

The NGC held four scheduled meetings in 2011. Details of meeting attendance by NGC members are included in the table on page 71. In addition there was one meeting held to deal with specific matters.

Committee Membership


Name		Status During 2011
Kieran McGowan (Chairman)		Member for the whole period
Robert Ingram		Member from January 26, 2011
Kyran McLaughlin		Member for the whole period
Giles Kerr		Member for the whole period
Dennis Selkoe		Member for the whole period

Role and Focus

The NGC reviews, on an ongoing basis, the membership of the board of directors and of the board committees and the performance of the directors. It recommends new appointments to fill any vacancy that is anticipated or arises on the board of directors. The NGC reviews and recommends changes in the functions of the various committees of the board. The guidelines and the charter of the committee set out the manner in which the performance evaluation of the board, its committees and the directors is to be performed and by whom.

Activities Undertaken During the Year

In December 2010, following a comprehensive selection process overseen by the NGC, Mr. Robert Ingram was appointed as a non-executive director and subsequently as chairman on January 26, 2011.

Under his employment agreement, Mr. Martin has agreed to serve as CEO and a director until May 1, 2012. During 2011, the NGC engaged CT Partners to assist the committee and the board of directors in recruiting a new CEO to succeed Mr. Martin in 2012. This process is ongoing.

Over the past number of years the board has engaged in an intensive process of board refreshment and renewal with over half of current directors being appointed during the previous six years. This process has continued, overseen by the NGC, in 2011 with the search for and appointment of two new directors, Mr. Hasler and Dr. von Eschenbach, as well as the consideration of a number of other candidates. In considering director appointments, the NGC evaluates the balance of skills, experience, independence and knowledge of the Company

on the board and compares this to the needs of the Company. This analysis allows the NGC to determine the role and capabilities required for a particular appointment. In assembling candidate lists, the NGC uses external search firms as well as considering candidates recommended by board members and/or shareholders.

During the year, the NGC reviewed the membership of the board’s committees and recommended a number of changes. The NGC also undertook a review of board and CEO performance, making recommendations and reporting its findings to the board and senior management.

On behalf of the NGC,

Kieran McGowan

Chairman of the NGC and

Non-Executive Director

February 23, 2012

Report of the Science and Technology Committee

The Science and Technology Committee held two scheduled meetings in 2011. Details of meeting attendance by Science and Technology Committee members are included in the table on page 71.

Committee Membership


Name		Status During 2011
Lars Ekman (Chairman)		Member for the whole period
Dennis Selkoe		Member for the whole period
Andrew von Eschenbach		Member from September 15, 2011

Role and Focus

The Science and Technology Committee advises the board in its oversight of matters pertaining to our research and technology strategy and provides a perspective on those activities to the board. It does so by reviewing the discovery approaches within our internal research effort and external innovation network and by reviewing internal and external technology capabilities against long-term trends and advancements.

Activities Undertaken During the Year

During the year the Science and Technology Committee met with the research & development leadership team and senior management and reviewed the direction and progress of the Company’s clinical programs.

On behalf of the Science and Technology Committee,

Lars Ekman

Chairman of the Science and Technology Committee and

Non-Executive Director

February 23, 2012

D.	Employees

See Item 4B. “Business Overview — Employees” for information on our employees.

E.	Share Ownership

Directors’ and Secretary’s Ordinary Shares

The beneficial interests of those persons who were directors and the secretary of Elan Corporation, plc at December 31, 2011, including their spouses and children under 18 years of age, were as follows:


	Ordinary Shares; Par Value €0.05 Each
	2011⁽²⁾		2010⁽²⁾
Directors
Robert A. Ingram		—		—
Lars Ekman		90,387		90,387
Hans Peter Hasler⁽¹⁾		—		—
Gary Kennedy		7,650		7,650
Patrick Kennedy		10,500		10,500
Giles Kerr		—		—
G. Kelly Martin		147,476		152,996
Kieran McGowan		6,200		1,200
Kyran McLaughlin		190,000		190,000
Donal O’Connor		18,900		18,900
Richard Pilnik		—		—
Dennis J. Selkoe		180,675		180,675
Andrew von Eschenbach⁽¹⁾		—		—
Secretary
William F. Daniel		46,274		73,246

⁽¹⁾	Appointed as a director on September 15, 2011

⁽²⁾	No director or executive officer beneficially owns 1% or more of our outstanding shares as of December 31, 2011, or as of December 31, 2010.

Directors’ and Secretary’s Options and Restricted Stock Units


	Date of Grant		At December 31, 2010⁽¹⁾		Exercise Price $		Granted 2011⁽¹⁾		Exercised or Vested/ Cancelled 2011⁽¹⁾		Market Price at Exercise/ Vest Date		At December 31, 2011⁽¹⁾		Earliest Vest Date	Option Expiry/ RSU Latest Vest Date
Robert A. Ingram		February 9, 2011		—		RSU		29,412		—		—		29,412			February 9, 2021	⁽²⁾
		February 9, 2011		—		RSU		29,412		—		—		29,412			February 9, 2021	⁽³⁾

				—				58,824		—		—		58,824

Lars Ekman		February 14, 2008		10,000		RSU		—		—		—		10,000			February 14, 2018	⁽²⁾
		February 11, 2009		7,500		RSU		—		—		—		7,500			February 11, 2019	⁽²⁾
		May 26, 2010		23,855		RSU		—		—		—		23,855			May 26, 2020	⁽²⁾
		February 9, 2011		—		RSU		18,382		—		—		18,382			February 9, 2021	⁽²⁾
		April 21, 2011		—		RSU		2,745		—		—		2,745			April 21, 2021	⁽³⁾
		July 28, 2011		—		RSU		1,685		—		—		1,685			July 28, 2021	⁽³⁾
		October 28, 2011		—		RSU		1,544		—		—		1,544			October 28, 2021	⁽³⁾

				41,355				24,356		—				65,711

Hans Peter Hasler⁽⁴⁾		—		—				—		—				—


	Date of Grant		At December 31, 2010⁽¹⁾		Exercise Price $		Granted 2011⁽¹⁾		Exercised or Vested/ Cancelled 2011⁽¹⁾		Market Price at Exercise/ Vest Date		At December 31, 2011⁽¹⁾		Earliest Vest Date		Option Expiry/ RSU Latest Vest Date
Gary Kennedy		May 26, 2005		15,000	$	8.05		—		—		—		15,000		May 26, 2007		May 25, 2015
		February 1, 2006		10,000	$	15.90		—		—		—		10,000		February 1, 2008		January 31, 2016
		February 21, 2007		10,000	$	13.95		—		—		—		10,000		February 21, 2009		February 20, 2017
		February 14, 2008		10,000		RSU		—		—		—		10,000				February 14, 2018	⁽²⁾
		February 11, 2009		7,500		RSU		—		—		—		7,500				February 11, 2019	⁽²⁾
		May 26, 2010		23,855		RSU		—		—		—		23,855				May 26, 2020	⁽²⁾
		February 9, 2011		—		RSU		18,382		—		—		18,382				February 9, 2021	⁽²⁾

				76,355				18,382		—				94,737

Patrick Kennedy		May 22, 2008		20,000	$	25.09		—		—		—		20,000		May 22, 2009		May 21, 2018
		February 11, 2009		7,500		RSU		—		—		—		7,500				February 11, 2019	⁽²⁾
		May 26, 2010		23,855		RSU		—		—		—		23,855				May 26, 2020	⁽²⁾
		February 9, 2011		—		RSU		18,382		—		—		18,382				February 9, 2021	⁽²⁾

				51,355				18,382		—				69,737

Giles Kerr		September 13, 2007		20,000	$	19.51		—		—		—		20,000		September 13, 2008		September 12, 2017
		February 14, 2008		10,000		RSU		—		—		—		10,000				February 14, 2018	⁽²⁾
		February 11, 2009		7,500		RSU		—		—		—		7,500				February 11, 2019	⁽²⁾
		May 26, 2010		23,855		RSU		—		—		—		23,855				May 26, 2020	⁽²⁾
		February 9, 2011		—		RSU		18,382		—		—		18,382				February 9, 2021	⁽²⁾

				61,355				18,382		—				79,737

G. Kelly Martin		February 6, 2003		944,000	$	3.85		—		—		—		944,000		December 31, 2003		February 5, 2013
		November 13, 2003		1,000,000	$	5.28		—		—		—		1,000,000		December 31, 2003		November 12, 2013
		March 10, 2004		60,000	$	16.27		—		—		—		60,000		January 1, 2005		March 9, 2014
		March 10, 2005		280,000	$	7.47		—		—		—		280,000		January 1, 2006		March 9, 2015
		December 7, 2005		750,000	$	12.03		—		—		—		750,000		December 31, 2006		December 6, 2015
		February 21, 2007		494,855	$	13.95		—		—		—		494,855		February 21, 2008		February 20, 2017
		February 14, 2008		329,590	$	25.01		—		—		—		329,590		February 14, 2009		February 13, 2018
		September 18, 2009		150,000	$	7.18		—		—		—		150,000		March 18, 2012		September 17, 2019
		February 11, 2010		673,797	$	7.05		—		—				673,797		February 11, 2011		February 10, 2020
		February 11, 2010		124,113		RSU		—		41,371	$	6.86		82,742		February 11, 2011		February 11, 2013
		February 9, 2011		—	$	6.80		932,134		—		—		932,134		February 9, 2012		February 8, 2021
		February 9, 2011		—		RSU		136,029		—		—		136,029		February 9, 2012		February 9, 2014

				4,806,355				1,068,163		41,371				5,833,147

Kieran McGowan		March 2, 2001		5,000	$	54.85		—		5,000		—		—		March 2, 2002		March 1, 2011
		March 10, 2004		40,000	$	16.27		—		—		—		40,000		March 10, 2005		March 9, 2014
		March 10, 2005		7,500	$	7.47		—		—		—		7,500		January 1, 2006		March 9, 2015
		February 1, 2006		10,000	$	15.90		—		—		—		10,000		February 1, 2008		January 31, 2016
		February 21, 2007		10,000	$	13.95		—		—		—		10,000		February 21, 2009		February 20, 2017
		February 14, 2008		10,000		RSU		—		—		—		10,000				February 14, 2018	⁽²⁾
		February 11, 2009		7,500		RSU		—		—		—		7,500				February 11, 2019	⁽²⁾
		May 26, 2010		23,855		RSU		—		—		—		23,855				May 26, 2020	⁽²⁾
		February 9, 2011		—		RSU		18,382		—		—		18,382				February 9, 2021	⁽²⁾
		April 21, 2011		—		RSU		2,980		—		—		2,980				April 21, 2021	⁽³⁾
		July 28, 2011		—		RSU		2,093		—		—		2,093				July 28, 2021	⁽³⁾
		October 28, 2011		—		RSU		1,956		—		—		1,956				October 28, 2021	⁽³⁾

				113,855				25,411		5,000				134,266


	Date of Grant		At December 31, 2010⁽¹⁾		Exercise Price $		Granted 2011⁽¹⁾		Exercised or Vested/ Cancelled 2011⁽¹⁾		Market Price at Exercise/ Vest Date		At December 31, 2011⁽¹⁾		Earliest Vest Date		Option Expiry/ RSU Latest Vest Date
Kyran McLaughlin		March 2, 2001		5,000	$	54.85		—		5,000		—		—		March 2, 2002		March 1, 2011
		March 10, 2004		40,000	$	16.27		—		—		—		40,000		March 10, 2005		March 9, 2014
		March 10, 2005		7,500	$	7.47		—		—		—		7,500		January 1, 2006		March 9, 2015
		February 1, 2006		10,000	$	15.90		—		—		—		10,000		February 1, 2008		January 31, 2016
		February 21, 2007		10,000	$	13.95		—		—		—		10,000		February 21, 2009		February 20, 2017
		February 14, 2008		10,000		RSU		—		—		—		10,000				February 14, 2018	⁽²⁾
		February 11, 2009		11,250		RSU		—		—		—		11,250				February 11, 2019	⁽²⁾
		May 26, 2010		28,626		RSU		—		—		—		28,626				May 26, 2020	⁽²⁾
		February 9, 2011		—		RSU		18,382		—		—		18,382				February 9, 2021	⁽²⁾
		April 21, 2011		—		RSU		4,224		—		—		4,224				April 21, 2021	⁽³⁾
		July 28, 2011		—		RSU		1,487		—		—		1,487				July 28, 2021	⁽³⁾
		October 28, 2011		—		RSU		1,390		—		—		1,390				October 28, 2021	⁽³⁾

				122,376				25,483		5,000				142,859

Donal O’Connor		May 22, 2008		20,000		25.09		—		—		—		20,000		May 22, 2009		May 21, 2018
		February 11, 2009		7,500		RSU		—		—		—		7,500				February 11, 2019	⁽²⁾
		May 26, 2010		23,855		RSU		—		—		—		23,855				May 26, 2020	⁽²⁾
		February 9, 2011		—		RSU		18,382		—		—		18,382				February 9, 2021	⁽²⁾

				51,355				18,382		—				69,737

Richard Pilnik		May 26, 2010		23,855		RSU		—		—		—		23,855				May 26, 2020	⁽²⁾
		February 9, 2011		—		RSU		18,382		—		—		18,382				February 9, 2021	⁽²⁾

				23,855				18,382		—				42,237

Dennis J. Selkoe		March 10, 2004		40,000	$	16.27		—		40,000		—		—		March 10, 2005		July 16, 2011
		March 10, 2005		7,500	$	7.47		—		7,500		—		—		January 1, 2006		July 16, 2011
		February 1, 2006		10,000	$	15.90		—		10,000		—		—		February 1, 2008		July 16, 2011
		February 21, 2007		10,000	$	13.95		—		10,000		—		—		February 21, 2009		July 16, 2011
		May 26, 2010		23,855		RSU		—		—		—		23,855				May 26, 2020	⁽²⁾
		February 9, 2011		—		RSU		18,382		—		—		18,382				February 9, 2021	⁽²⁾

				91,355				18,382		67,500				42,237

Andrew Von Eschenbach⁽⁴⁾		—		—				—		—				—

Secretary
William F. Daniel		March 2, 2001		25,000	$	54.85		—		25,000		—		—		January 1, 2002		March 1, 2011
		March 1, 2002		30,000	$	14.07		—		—		—		30,000		January 1, 2003		February 29, 2012
		May 1, 2003		6,000	$	3.84		—		—		—		6,000		January 1, 2004		April 30, 2013
		March 10, 2004		30,000	$	16.27		—		—		—		30,000		January 1, 2005		March 9, 2014
		March 10, 2005		50,000	$	7.47		—		—		—		50,000		January 1, 2006		March 9, 2015
		February 1, 2006		47,925	$	15.90		—		—		—		47,925		January 1, 2007		January 31, 2016
		February 21, 2007		69,372	$	13.95		—		—		—		69,372		February 21, 2008		February 20, 2017
		February 21, 2007		2,689		RSU		—		2,689	$	6.55		—		February 21, 2008		February 21, 2011
		February 14, 2008		17,758	$	25.01		—		—		—		17,758		February 14, 2009		February 13, 2018
		February 14, 2008		4,998		RSU		—		2,499	$	6.94		2,499		February 14, 2009		February 14, 2012
		February 11, 2009		77,643	$	7.75		—		—		—		77,643		August 11, 2011		February 10, 2019
		February 11, 2009		18,479		RSU		—		18,479	$	9.86		—		August 11, 2011		August 11, 2011
		February 11, 2010		51,337	$	7.05		—		—		—		51,337		February 11, 2011		February 10, 2020
		February 11, 2010		28,369		RSU		—		9,457	$	6.72		18,912		February 11, 2011		February 11, 2013
		February 9, 2011		—	$	6.80		103,458		—		—		103,458		February 9, 2012		February 8, 2021
		February 9, 2011		—		RSU		45,294		—		—		45,294		February 9, 2012		February 9, 2014

				459,570				148,752		58,124				550,198

⁽¹⁾	The amounts shown represent the number of Ordinary Shares callable by options or Ordinary Shares issuable upon the vesting of RSUs.

⁽²⁾	Will vest, after 90 days if after having served for a minimum of three years the non-executive director retires or is removed from the board of directors for any reason other than cause, or on the tenth anniversary of the grant date.

⁽³⁾	RSUs granted in fulfillment of director’s fee, and will vest, after 90 days if the non-executive director concerned retires or is removed from the board of directors for any reason other than cause, or on the tenth anniversary of the grant date.

⁽⁴⁾	Appointed as a director on September 15, 2011

During the year ended December 31, 2011, the closing market price ranged from $5.83 to $13.85 per ADS. The closing market price at February 17, 2012, on the NYSE, of our ADSs was $12.50.

The following changes in directors’ and secretary’s interests occurred between December 31, 2011, and February 17, 2012:


	Grant Date		Exercise Price		No. of Options		No. of RSUs
Directors
Robert A. lngram		February 9, 2012	$	—		—		30,372
Lars Ekman		February 9, 2012	$	—		—		16,610	⁽¹⁾
Hans Peter Hasler		February 9, 2012	$	—		—		15,186
Gary Kennedy		February 9, 2012	$	—		—		15,186
Patrick Kennedy		February 9, 2012	$	—		—		15,186
Giles Kerr		February 9, 2012	$	—		—		15,186
G. Kelly Martin		February 9, 2012	$	13.17		225,000		37,500
Kieran McGowan		February 9, 2012	$	—		—		16,989	⁽²⁾
Kyran McLaughlin		February 9, 2012	$	—		—		16,467	⁽³⁾
Donal O’Connor		February 9, 2012	$	—		—		15,186
Richard Pilnik		February 9, 2012	$	—		—		15,186
Dennis J. Selkoe		February 9, 2012	$	—		—		15,186
Andrew von Eschenbach		February 9, 2012	$	—		—		15,186
Secretary
William F. Daniel		February 9, 2012	$	13.17		105,146		37,965

⁽¹⁾	Includes 1,424 RSUs granted in fulfillment of director’s fee for September to December 2011.

⁽²⁾	Includes 1,803 RSUs granted in fulfillment of director’s fee for September to December 2011.

⁽³⁾	Includes 1,281 RSUs granted in fulfillment of director’s fee for September to December 2011.


	Date	RSUs Vested		Options Exercised		ADRs Sold
Directors
G. Kelly Martin	February 9, 2012		45,343		—		—
G. Kelly Martin	February 10, 2012		—		—		15,405
G. Kelly Martin	February 13, 2012		41,371		—		—
G. Kelly Martin	February 14, 2012		—		—		14,819
Secretary
William F. Daniel	February 9, 2012		15,098		—		11,324
William F. Daniel	February 13, 2012		9,456		—		7,092
William F. Daniel	February 14, 2012		2,499		—		1,874

Executive Directors’ Pension Arrangements

Pensions for executive directors are calculated on basic salary only (no incentive or benefit elements are included).

From July 2001 to December 2004, Mr. Cooke participated in a defined benefit pension plan, which is designed to provide eligible employees based in Ireland two-thirds of their basic salary at retirement at age 60 for full service. Mr. Cooke left the service of the Company in September 2011 and on that date had a total accumulated accrued annual benefit of €15,290 (2010: €15,290). Between December 2004 and September 2011 Mr. Cooke participated in a small self-administered pension fund to which we contributed.

Mr. Martin participates in a defined contribution plan (401(k) plan) for U.S. based employees.

Non-executive directors do not receive pensions.

For additional information on pension benefits for our employees, refer to Note 25 to the Consolidated Financial Statements.

Item 7.

Major Shareholders and Related Party Transactions.

A.	Major Shareholders

The following table sets forth certain information regarding the ownership of Ordinary Shares or ADSs of which we are aware at February 17, 2012 by major shareholders and all of our directors and officers as a group (either directly or by virtue of ownership of our ADSs):


Name of Owner or Identity of Group	No. of Shares			Date of Disclosure⁽¹⁾			Percent of Issued Share Capital⁽²⁾
Janssen Pharmaceuticals		107,396,285	⁽³⁾		September 18, 2009			18.2	%
Fidelity Management and Research Company		70,508,640			February 17, 2012			11.9	%
Wellington Management		37,305,855			December 31, 2011	⁽⁴⁾		6.3	%
Invesco Limited		29,861,469			February 7, 2012			5.1	%
Blackrock Inc.		23,735,433			September 28, 2011			4.0	%
All directors and officers as a group (17 persons)		6,441,112	⁽⁵⁾		February 17, 2012			1.1	%

⁽¹⁾	Since the date of disclosure, the interest of any person listed above in our Ordinary Shares may have increased or decreased. No requirement to notify us of any change would have arisen unless the holding moved up or down through a whole number percentage level.

⁽²⁾	Based on 591.2 million Ordinary Shares outstanding on February 17, 2012.

⁽³⁾	These shares were issued as part of the Johnson & Johnson Transaction. Refer to page 7 for additional information.

⁽⁴⁾	Sourced from SEC filings.

⁽⁵⁾	Includes 5.6 million Ordinary Shares issuable upon exercise of currently exercisable options held by directors and officers as a group as of February 17, 2012.

Except for these interests, we have not been notified as of February 17, 2012 of any interest of 3% or more of our issued share capital. Neither Janssen Pharmaceuticals, Fidelity Management and Research Company, Wellington Management, Invesco Limited nor Blackrock Inc. has voting rights different from other shareholders.

We, to our knowledge, are not directly or indirectly owned or controlled by another entity or by any government. We do not know of any arrangements, the operation of which might result in a change of control of the Company.

A total of 591,178,503 Ordinary Shares of Elan were issued and outstanding as of February 17, 2012, of which 3,163 Ordinary Shares were held by holders of record in the United States, excluding shares held in the form of ADRs. 493,602,812 Ordinary Shares were represented by our ADSs, evidenced by ADRs, issued by Citibank, N.A., as depositary, pursuant to a deposit agreement. As of February 17, 2012, the number of holders of record of Ordinary Shares was 7,474, which includes ten holders of record in the United States, and the number of registered holders of ADRs was 3,059. Because certain of these Ordinary Shares and ADRs were held by brokers or other nominees, the number of holders of record or registered holders in the United States is not representative of the number of beneficial holders or of the residence of beneficial holders.

B.	Related Party Transactions

There were no significant transactions with related parties during the year ended December 31, 2011, other than as outlined in Note 31 to the Consolidated Financial Statements.

Transactions with Directors

Except as set out below, there are no service contracts in existence between any of the directors and Elan.

Non-Executive Directors’ Terms of Appointment


Period	Three-year term which can be extended by mutual consent, contingent on satisfactory performance and re-election at the AGM.

Termination	By the director or the Company at each party’s discretion without compensation.

Fees	Board Membership Fees
	Chairman’s Fee	$	150,000	⁽¹⁾
	Director’s Fee	$	55,000	⁽²⁾
	Additional Board/Committee Fees
	Lead Independent Director’s Fee	$	20,000
	Audit Committee Chairman’s Fee	$	25,000	⁽³⁾
	Audit Committee Member’s Fee	$	15,000
	Other Committee Chairman’s Fee	$	20,000	⁽³⁾
	Other Committee Member’s Fee	$	12,500

Equity	Non-executive directors are entitled to be considered for an annual equity award, based on the recommendation of the LDCC and supported by the advice of the LDCC’s compensation consultants. Such equity awards are normally granted in February of each year and are currently made in the form of RSUs. The awards made in February 2012 had the following grant date fair values:
	Chairman	$	400,000	⁽¹⁾
	Other non-executive directors	$	200,000	⁽²⁾

Expenses	Reimbursement of travel and other expenses reasonably incurred in the performance of their duties.

Time commitment	Five scheduled in-person board meetings, the AGM and relevant committee meetings depending upon board/committee requirements and general corporate activity.
	Non-executive board members are also expected to be available for a number of unscheduled board and committee meetings, where applicable, as well as to devote appropriate preparation time ahead of each meeting.

Confidentiality	Information acquired by each director in carrying out their duties is deemed confidential and cannot be publicly released without prior clearance from the chairman of the board.

⁽¹⁾

The chairman’s compensation for 2012 consists of a fee of $150,000 (2011: $250,000) and RSUs with a grant date fair value of $400,000 (2011:$200,000), amounting to a total value of $550,000 in 2012 (2011: $450,000). The chairman does not receive additional compensation for sitting on board committees.

⁽²⁾

Non-executive directors can elect to receive their fee payments in the form of RSUs, which will vest on the earlier of 90 days after their retirement from the board or 10 years. In 2011, Dr. Ekman, Mr. McGowan and Mr. McLaughlin elected to receive their fee payments in the form of RSUs.

⁽³⁾

Inclusive of committee membership fee.

Dr. Ekman

Effective December 31, 2007, Dr. Lars Ekman resigned from his operational role as president of R&D and has continued to serve as a member of the board of directors of Elan.

Under the agreement reached with Dr. Ekman, we agreed by reference to Dr. Ekman’s contractual entitlements and in accordance with our severance plan to (a) make a lump-sum payment of $2,500,000; (b) make milestone payments to Dr. Ekman, subject to a maximum amount of $1,000,000, if we achieve certain milestones in respect of our Alzheimer’s disease program; (c) accelerate the vesting of, and grant a two-year exercise period, in respect of certain of his equity awards, with a cash payment being made in respect of one grant of RSUs (which did not permit accelerated vesting); and (d) continue to make annual pension payments in the amount of $60,000 per annum, provide the cost of continued health coverage and provide career transition services to Dr. Ekman for a period of up to two years. A total severance charge of $3.6 million was expensed in 2007 for Dr. Ekman, excluding potential future success milestone payments related to our Alzheimer’s disease program. To date, none of the milestones has been triggered, and they remain in effect.

Mr. Martin

On January 7, 2003, we and EPI entered into an agreement with Mr. G. Kelly Martin such that Mr. Martin was appointed president and CEO effective February 3, 2003.

Effective December 7, 2005, we and EPI entered into a new employment agreement with Mr. Martin, under which Mr. Martin continues to serve as our CEO with an initial base annual salary of $798,000. Mr. Martin is eligible to participate in our annual bonus plan, performance-based stock awards and merit award plans. Under the new agreement, Mr. Martin was granted an option to purchase 750,000 Ordinary Shares with an exercise price per share of $12.03, vesting in three equal annual instalments (the 2005 Options). Mr. Martin’s employment agreement was amended on December 19, 2008 to comply with the requirements of Section 409A of the IRC.

On June 2, 2010, Elan and Mr. Martin agreed to amend his 2005 employment contract from an open-ended agreement to a fixed term agreement. Under this 2010 agreement, Mr. Martin committed to remain in his current roles as CEO and director of the Company through to May 1, 2012. It was agreed that upon the completion of this fixed term Mr. Martin will then serve the board as executive adviser through to January 31, 2013. Under this amendment, Mr. Martin’s base salary was increased from $800,000 to $1,000,000 per year effective June 1, 2010, and when Mr. Martin moves to the role of executive adviser, his base salary will be reduced to $750,000 per year, he will not be eligible for a bonus and he will resign from the board.

The agreement, as amended, continues until Mr. Martin resigns, is involuntarily terminated, is terminated for cause or dies, or is disabled. In general, if Mr. Martin’s employment is involuntarily terminated (other than for cause, death or disability) or Mr. Martin leaves for good reason, we will pay Mr. Martin a lump sum equal to two (three, in the event of a change in control) times his salary and target bonus and his options will be exercisable until the earlier of (i) January 31, 2015 or (ii) tenth anniversary of the date of grant. In the event of a change in control, his options will be exercisable until the earlier of (i) three years from the date of termination, or January 31, 2015, whichever is later or (ii) the tenth anniversary of the date of grant of the stock option.

In the event of such an involuntary termination (other than as the result of a change in control), Mr. Martin will, for a period of two years (three years in the event of a change in control), or, if earlier, the date Mr. Martin obtains other employment, continue to participate in our health and medical plans and we shall pay Mr. Martin a lump sum of $50,000 to cover other costs and expenses. Mr. Martin will also be entitled to career transition assistance and the use of an office and the services of a full-time secretary for a reasonable period of time not to exceed two years (three years in the event of a change in control).

In addition, if it is determined that any payment or distribution to Mr. Martin would be subject to excise tax under Section 4999 of the IRC, or any interest or penalties are incurred by Mr. Martin with respect to such excise tax, then Mr. Martin shall be entitled to an additional payment in an amount such that after payment by Mr. Martin of all taxes on such additional payment, Mr. Martin retains an amount of such additional payment equal to such excise tax amount.

The agreement also obligates us to indemnify Mr. Martin if he is sued or threatened with suit as the result of serving as our officer or director. We will be obligated to pay Mr. Martin’s attorney’s fees if he has to bring an action to enforce any of his rights under the employment agreement.

Mr. Martin is eligible to participate in the retirement, medical, disability and life insurance plans applicable to senior executives in accordance with the terms of those plans. He may also receive financial planning and tax support and advice from the provider of his choice at a reasonable and customary annual cost.

No other director has an employment contract extending beyond 12 months or pre-determined compensation on termination which exceeds one year’s salary.

Mr. McLaughlin

In 2011 and 2010, Davy, an Irish based stockbroking, wealth management and financial advisory firm, of which Mr. McLaughlin is deputy chairman, provided advisory services to the company. The total invoiced value of these services was $0.2 million (2010: $0.3 million). Services rendered in 2011 included work in relation to the EDT divestment.

In November 2011, the Company engaged an adult son of Kyran McLaughlin as a consultant in relation to the Company’s investor relations programs for a six month period. The amount invoiced for these services in 2011 was €11,800. Mr. McLaughlin’s son is not an executive officer and does not have a key strategic role within Elan.

Mr. Pilnik

In 2009, prior to his joining the board of directors of Elan, Mr. Pilnik was paid a fee of $15,230 for consultancy services provided to Elan.

Dr. Selkoe

Effective as of July 1, 2009, EPI entered into a consultancy agreement with Dr. Selkoe under which Dr. Selkoe agreed to provide consultant services with respect to the treatment and/or prevention of neurodegenerative and autoimmune diseases. We pay Dr. Selkoe a fee of $12,500 per quarter under this agreement. The agreement is effective for three years unless terminated by either party upon 30 days written notice and supersedes all prior consulting agreements between Dr. Selkoe and Elan. Previously, Dr. Selkoe was a party to a similar consultancy agreement with EPI and Athena. Under the consultancy agreements, Dr. Selkoe received $50,000 in 2011, 2010 and 2009.

Dr. Selkoe serves as a Company-nominated director of Janssen AI, a subsidiary of Johnson & Johnson in which Elan holds a 49.9% equity interest. In December 2010, Dr Selkoe entered into a consulting agreement with Johnson & Johnson Pharmaceutical Research & Development LLC. This agreement was amended in November 2011 to extend it until December 31, 2012. During 2011, Dr. Selkoe received a fee of $1,600 in respect of services provided under this agreement. On February 2, 2012, this consulting agreement was terminated.

Arrangements with Former Directors

Agreements with Mr. Schuler, Mr. Bryson and Crabtree Partners L.L.C.

On September 17, 2010, we entered into agreements with Mr. Schuler and Mr. Bryson whereby we agreed to pay to Mr. Schuler and Mr. Bryson the aggregate amount of $300,000 in settlement of all costs, fees and expenses incurred by them in respect of any and all matters relating to the Irish High Court litigation and the U.S. Securities and Exchange Commission (SEC) investigation of Mr. Schuler. Under the agreements, Mr. Schuler and Mr. Bryson agreed to resign from the board, and they subsequently resigned on October 29, 2010.

on the first date on which Mr. Schuler, Mr. Bryson and Crabtree Partners L.L.C. cease to beneficially own, in aggregate, at least 0.5% of the Company’s issued share capital. The Agreement also included a standstill provision providing that, until the later of December 31, 2009, amended to January 1, 2012, pursuant to the 2010 agreement, and the date that was three months after the date on which Mr. Schuler and Mr. Bryson cease to be directors of the Company, none of Mr. Schuler, Mr. Bryson, Crabtree Partners L.L.C. or any of their respective affiliates would, among other things, acquire any additional equity interest in the Company if, after giving effect to the acquisition, Mr. Schuler, Mr. Bryson, Crabtree Partners L.L.C. and their affiliates would own more than 3% of the Company’s issued share capital. Finally, we agreed to reimburse the Crabtree Group for $500,000 of documented out-of-pocket legal expenses incurred by their outside counsel in connection with the Agreement and the matters referenced in the Agreement.

Dr. Bloom

On July 17, 2009, EPI entered into a consultancy agreement with Dr. Bloom under which Dr. Bloom agreed to provide consultant services to Elan with respect to the treatment and/or prevention of neurodegenerative diseases and to act as an advisor to the science and technology committee. Effective July 17, 2011, this agreement was extended for a further year (“the Amended Agreement”) and we pay Dr. Bloom a fee of $12,500 per quarter under the Amended Agreement. This agreement can be terminated by either party upon 30 days written notice. Under the consultancy agreements, Dr. Bloom received $44,674 in 2011 (2010: $58,125, of which $18,152 related to services rendered during 2009).

Mr. Cooke

In connection with the EDT transaction, as described in note 5, and Mr. Cooke’s transfer of employment from the Company to Alkermes plc, the Company and Mr. Cooke agreed on September 16, 2011, that if his employment with Alkermes plc is terminated otherwise than for disciplinary reasons, and the date of expiry of notice of his termination of employment is not later than August 15, 2012, we will make up the shortfall, if any, between the severance amount payable to him by Alkermes plc, and the amount that he would have received under our current Elan severance plan had his employment continued and been terminated by us.

External Appointments and Retention of Fees

Executive directors may accept external appointments as non-executive directors of other companies and retain any related fees paid to them.

C.	Interest of Experts and Counsel

Not applicable.

Item 8.

Financial Information.

A.	Consolidated Statements and Other Financial Information

See Item 18 “Consolidated Financial Statements.”

B.	Significant Changes

None.

Item 9.

The Offer and Listing.

A.	Offer and Listing Details

See Item 9C “Markets.”

B.	Plan of Distribution

Not applicable.

C.	Markets

Our Ordinary Shares are traded on the ISE and our ADSs, each representing one Ordinary Share and evidenced by ADRs, are traded on the NYSE under the symbol “ELN.” The ADR depositary is Citibank, N.A.

The following table sets forth the high and low sales prices of the Ordinary Shares during the periods indicated, based upon mid-market prices at close of business on the ISE and the high and low sales prices of the ADSs, as reported in published financial sources:


	€0.05 Ordinary Shares				American Depositary Shares⁽¹⁾
	High		Low		High		Low
	(€)				($)
Year ended December 31
2007		16.89		9.04		24.52		11.98
2008		23.47		4.02		36.82		5.36
2009		6.37		3.42		8.70		5.00
2010		6.04		3.48		8.18		4.33
2011		10.72		4.33		13.85		5.83
Calendar Year
2010
Quarter 1		5.72		4.66		8.12		6.65
Quarter 2		6.04		3.70		8.18		4.50
Quarter 3		4.13		3.48		5.75		4.33
Quarter 4		4.71		3.88		6.15		5.08
2011
Quarter 1		5.38		4.33		7.11		5.83
Quarter 2		8.00		4.87		11.37		6.80
Quarter 3		8.80		6.19		12.48		9.20
Quarter 4		10.72		7.33		13.85		9.87
Month Ended
August 2011		8.02		6.19		11.22		9.20
September 2011		7.97		6.86		10.69		9.40
October 2011		8.52		7.53		12.14		9.87
November 2011		8.56		7.33		11.91		9.92
December 2011		10.72		8.16		13.85		10.75
January 2012		11.06		10.17		13.92		13.01

⁽¹⁾	An ADS represents one Ordinary Share, par value €0.05.

D.	Selling Shareholders

Not applicable.

E.	Dilution

Not applicable.

F.	Expenses of the Issue

Not applicable.

Item 10.

Additional Information.

A.	Share Capital

Not applicable.

B.	Memorandum and Articles of Association

Our objects, which are detailed in our Memorandum of Association include, but are not limited to, manufacturing, buying, selling and distributing pharmaceutical products.

Directors

Subject to certain limited exceptions, directors may not vote on matters in which they have a material interest. In the absence of an independent quorum, the directors may not vote compensation to themselves or any member of the board of directors. Directors are entitled to remuneration as shall, from time to time, be voted to them by ordinary resolution of the shareholders and to be paid such expenses as may be incurred by them in the course of the performance of their duties as directors. Directors who take on additional committee assignments or otherwise perform additional services for the Company, outside the scope of their ordinary duties as directors, shall be entitled to receive such additional remuneration as the board may determine. The directors may exercise all of the powers of Elan to borrow money. These powers may be amended by special resolution of the shareholders. There is no requirement for a director to hold shares.

The names of the directors are shown in Item 6A. “Directors and Senior Management”. Dr. Andrew von Eschenbach and Mr. Hans Peter Hasler were appointed as directors on September 15, 2011. Mr. Frick retired from the board on May 26, 2011 and Mr. Cooke retired from the board on September 15, 2011.

Under the terms of our Articles of Association, directors serve for a term of three years expiring at the AGM in the third year following their appointment at an AGM or as the case may be, their re-appointment at the AGM. Additionally, in line with the provisions of the Combined Code, non-executive directors who have served on the board for in excess of nine years are subject to annual re-election by shareholders. Directors are not required to retire at any set age and may, if recommended by the board of directors, offer themselves for re-election at any AGM where they are deemed to have retired by rotation. Following our adoption of the requirements of the U.K. Corporate Governance Code, all directors will stand for annual re-election with effect from the date of the 2012 AGM.

Meetings

The AGM shall be held in such place and at such time as shall be determined by the board, but no more than 15 months shall pass between the dates of consecutive AGMs. Directors may call Extraordinary General Meetings at any time. The members, in accordance with our Articles of Association and Irish company law, may also requisition Extraordinary General Meetings. Notice of an AGM (or any special resolution) must be given at least 21 clear days prior to the scheduled date and, in the case of any other general meeting, with not less than 14 clear days notice.

Rights, Preferences and Dividends Attaching to Shares

All unclaimed dividends may be invested or otherwise made use of by the directors for the benefit of Elan until claimed. All shareholders entitled to attend and vote at the AGM are likewise entitled to vote on the re-election of directors. We are permitted under our Memorandum and Articles of Association to issue redeemable shares on such terms and in such manner as the shareholders may determine by special resolution. The liability of the shareholders to further capital calls is limited to the amounts remaining unpaid on shares.

Liquidation Rights

In the event of the Company being wound up, the liquidator may, with the authority of a special resolution, divide among the holders of Ordinary Shares the whole or any part of the net assets of the Company (after the

return of capital on the non-voting Executive Shares), and may set such value as is deemed fair upon each kind of property to be so divided and determine how such division will be carried out.

Actions Necessary to Change the Rights of Shareholders

The rights attaching to the different classes of shares may be varied by special resolution passed at a class meeting of that class of shareholders. The additional issuance of further shares ranking pari passu with, or subordinate to, an existing class shall not, unless specified by the Articles or the conditions of issue of that class of shares, be deemed to be a variation of the special rights attaching to that class of shares.

Limitations on the Right to Own Shares

There are no limitations on the right to own shares in the Memorandum and Articles of Association. However, there are some restrictions on financial transfers between Ireland and other specified countries, more particularly described in the section on “Exchange Controls and Other Limitations Affecting Security Holders.”

Other Provisions of the Memorandum and Articles of Association

There are no provisions in the Memorandum and Articles of Association:

•

Delaying or prohibiting a change in control of Elan that operate only with respect to a merger, acquisition or corporate restructuring;

•

Discriminating against any existing or prospective holder of shares as a result of such shareholder owning a substantial number of shares; or

•

Governing changes in capital, where such provisions are more stringent than those required by law.

We incorporate by reference all other information concerning our Memorandum and Articles of Association from the section entitled “Description of Ordinary Shares” in the Registration Statement on Form 8-A/A3 (SEC File No. 001-13896) we filed with the SEC on December 6, 2004 and our Memorandum and Articles of Association filed with the SEC as Exhibit 1.1 to our Annual Report on Form 20-F for the fiscal year ended December 31, 2010.

C.	Material Contracts

Indentures

Indentures governing the 2016 Notes issued October 2009 and the 2016 Notes issued August 2010 contain covenants that restrict or prohibit our ability to engage in or enter into a variety of transactions. These restrictions and prohibitions could have a material and adverse effect on us. During 2011, as of December 31, 2011, and as of the date of filing of this Form 20-F, we were not in violation of any of our debt covenants. For additional information with respect to the restrictive covenants contained in our indentures, refer to Note 22 to the Consolidated Financial Statements.

Development and Marketing Collaboration Agreement with Biogen Idec

In August 2000, we entered into a development and marketing collaboration agreement with Biogen Idec, successor to Biogen, Inc., to collaborate in the development and commercialization of Tysabri for MS and Crohn’s disease, with Biogen Idec acting as the lead party for MS and Elan acting as the lead party for Crohn’s disease.

In November 2004, Tysabri received regulatory approval in the United States for the treatment of relapsing forms of MS. In February 2005, Elan and Biogen Idec voluntarily suspended the commercialization and dosing in clinical trials of Tysabri. This decision was based on reports of serious adverse events involving cases of PML, a rare and potentially fatal, demyelinating disease of the central nervous system.

In June 2006, the FDA approved the reintroduction of Tysabri for the treatment of relapsing forms of MS. Approval for the marketing of Tysabri in the European Union was also received in June 2006 and has subsequently been received in a number of other countries. The distribution of Tysabri in both the United States and the European Union commenced in July 2006. Global in-market net sales of Tysabri in 2011 were $1,510.6 million (2010: $1,230.0 million; 2009: $1,059.2 million), consisting of $746.5 million (2010: $593.2 million; 2009: $508.5 million) in the U.S. market and $764.1 million (2010: $636.8 million; 2009: $550.7 million) in the ROW.

In January 2008, the FDA approved the supplemental Biologics License Application (sBLA) for Tysabri for the treatment of patients with Crohn’s disease, and Tysabri was launched in this indication at the end of the first quarter of 2008. In December 2008, we announced a realignment of our commercial activities in Tysabri for Crohn’s disease, shifting our efforts from a traditional sales model to a model based on clinical support and education.

Tysabri was developed and is now being marketed in collaboration with Biogen Idec. In general, subject to certain limitations imposed by the parties, we share with Biogen Idec most development and commercialization costs. Biogen Idec is responsible for manufacturing the product. In the United States, we purchase Tysabri from Biogen Idec and are responsible for distribution. Consequently, we record as revenue the net sales of Tysabri in the U.S. market. We purchase product from Biogen Idec as required at a price, which includes the cost of manufacturing, plus Biogen Idec’s gross profit on Tysabri and this cost, together with royalties payable to other third parties, is included in cost of sales.

In the ROW markets, Biogen Idec is responsible for distribution and we record as revenue our share of the profit or loss on ROW sales of Tysabri, plus our directly incurred expenses on these sales. In 2011, we recorded revenue of $317.6 million (2010: $258.3 million; 2009: $215.8 million).

As a result of the strong growth in Tysabri sales, in July 2008, we made an optional payment of $75.0 million to Biogen Idec in order to maintain our approximate 50% share of Tysabri for annual global in-market net sales of Tysabri that are in excess of $700.0 million. In addition, in December 2008, we exercised our option to pay a further $50.0 million milestone to Biogen Idec 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. There are no further milestone payments required for us to retain our approximate 50% profit share.

The collaboration agreement will expire in November 2019, but may be extended by mutual agreement of the parties. If the agreement is not extended, then each of Biogen Idec and Elan has the option to buy the other party’s rights to Tysabri upon expiration of the term. Each party has a similar option to buy the other party’s rights to Tysabri if the other party undergoes a change of control (as defined in the collaboration agreement). In addition, each of Biogen Idec and Elan can terminate the agreement for convenience or material breach by the other party, in which case, among other things, certain licenses, regulatory approvals and other rights related to the manufacture, sale and development of Tysabri are required to be transferred to the party that is not terminating for convenience or is not in material breach of the agreement.

For additional information relating to Tysabri, refer to Note 3.

Johnson & Johnson AIP Agreements

respect of Janssen AI’s obligations under the AIP collaboration in excess of the initial $500.0 million funding commitment is required to be funded by Elan and Johnson & Johnson in proportion to their respective shareholdings up to a maximum additional commitment of $400.0 million in total. Based on current spend levels, we anticipate that we will be called upon to provide funding to Janssen AI commencing in the second quarter of 2012. In the event that further funding is required beyond the $400.0 million, such funding will be on terms determined by the board of Janssen AI, with Johnson & Johnson and Elan having a right of first offer to provide additional funding. If we fail to provide our share of the $400.0 million commitment or any additional funding that is required for the development of the AIP, and if Johnson & Johnson elects to fund such an amount, our interest in Janssen AI could, at the option of Johnson & Johnson, be commensurately reduced.

In consideration for the transfer of these assets and rights, we received a 49.9% equity interest in Janssen AI. In general, Elan is entitled to a 49.9% share of all net profits generated by Janssen AI beginning from the date Janssen AI becomes net profitable and certain royalty payments upon the commercialization of products under the AIP collaboration. The AIP represented our interest in that collaboration to research, develop and commercialize products for the treatment and/or prevention of neurodegenerative conditions, including Alzheimer’s disease. Janssen AI has assumed our activities with Pfizer under the AIP. Under the terms of the Johnson & Johnson Transaction, if we undergo a change of control, an affiliate of Johnson & Johnson will be entitled to purchase our 49.9% interest in Janssen AI at the then fair value.

Transition Therapeutics Collaboration Agreements

In September 2006, we entered into an exclusive, worldwide collaboration with Transition for the joint development and commercialization of a novel therapeutic agent for Alzheimer’s disease. The small molecule, ELND005, is a beta amyloid anti-aggregation agent that has been granted fast track designation by the FDA. In December 2007, the first patient was dosed in a Phase 2 clinical study. This 18-month, randomized, double-blind, placebo-controlled, dose-ranging study was designed to evaluate the safety and efficacy of ELND005 in approximately 340 patients with mild to moderate Alzheimer’s disease. In December 2009, we announced that patients would be withdrawn from the two highest dose groups due to safety concerns. In August 2010, Elan and Transition announced the top-line summary results of the Phase 2 clinical study and in September 2011, the Phase 2 clinical study data was published in the journal Neurology. The study’s cognitive and functional co-primary endpoints did not achieve statistical significance. The 250mg twice daily dose demonstrated a biological effect on amyloid-beta protein in the CSF, in a subgroup of patients who provided CSF samples. This dose achieved targeted drug levels in the CSF and showed some effects on clinical endpoints in an exploratory analysis.

In December 2010, we modified our Collaboration Agreement with Transition and, in connection with this modification, Transition elected to exercise its opt-out right under the original agreement. Under this amendment, we paid Transition $9.0 million and Transition will be eligible to receive a further $11.0 million payment from us upon the commencement of the next ELND005 clinical trial, and will no longer be eligible to receive a $25.0 million milestone that would have been due upon the commencement of a Phase 3 trial for ELND005 under the terms of the original agreement.

As a consequence of Transition’s decision to exercise its opt-out right, it will no longer fund the development or commercialization of ELND005 and has relinquished its 30% ownership of ELND005 to us. Consistent with the terms of the original agreement, following its opt-out decision, Transition will be entitled to receive milestone payments of up to $93.0 million (in addition to the $11.0 million described above), along with tiered royalty payments ranging in percentage from a high single digit to the mid teens (subject to offsets) based on net sales of ELND005 should the drug receive the necessary regulatory approvals for commercialization.

The term of the Collaboration Agreement runs until we are no longer developing or commercializing ELND005. We may terminate the Collaboration Agreement upon not less than 90 days notice to Transition and either party may terminate the Collaboration Agreement for material breach or because of insolvency of the other party. In addition, if we have not initiated a new ELND005 clinical trial by December 31, 2012, or otherwise paid Transition $11.0 million by January 31, 2013, the Collaboration Agreement will terminate.

We are continuing to explore pathways forward for the ELND005 asset.

See Item 4B. “Business Overview” for additional information regarding our collaboration activities and related clinical trials.

D.	Exchange Controls

Irish exchange control regulations ceased to apply from and after December 31, 1992. Except as indicated below, there are no restrictions on non-residents of Ireland dealing in domestic securities, which includes shares or depositary receipts of Irish companies such as us. Except as indicated below, dividends and redemption proceeds also continue to be freely transferable to non-resident holders of such securities. The Financial Transfers Act, 1992 gives power to the Minister for Finance of Ireland to make provision for the restriction of financial transfers between Ireland and other countries and persons. Financial transfers are broadly defined and include all transfers that would be movements of capital or payments within the meaning of the treaties governing the member states of the European Union. The acquisition or disposal of ADSs or ADRs representing shares issued by an Irish incorporated company and associated payments falls within this definition. In addition, dividends or payments on redemption or purchase of shares and payments on a liquidation of an Irish incorporated company would fall within this definition. At present the Financial Transfers Act, 1992 prohibits financial transfers involving the late Slobodan Milosevic and associated persons, Burma (Myanmar), Belarus, certain persons indicted by the International Criminal Tribunal for the former Yugoslavia, the late Usama bin Laden, Al-Qaida, the Taliban of Afghanistan, Democratic Republic of Congo, Democratic People’s Republic of Korea (North Korea), Iran, Iraq, Côte d’Ivoire, Lebanon, Liberia, Zimbabwe, Sudan, Somalia, Republic of Guinea, Afghanistan, Egypt, Eritrea, Libya, Syria, Tunisia, certain known terrorists and terrorist groups, and countries that harbor certain terrorist groups, without the prior permission of the Central Bank of Ireland.

Any transfer of, or payment in respect of, an ADS involving the government of any country that is currently the subject of United Nations sanctions, any person or body controlled by any of the foregoing, or by any person acting on behalf of the foregoing, may be subject to restrictions pursuant to such sanctions as implemented into Irish law. We do not anticipate that orders under the Financial Transfers Act, 1992 or United Nations sanctions implemented into Irish law will have a material effect on our business.

E.	Taxation

The following is a general description of Irish taxation inclusive of certain Irish tax consequences to U.S. Holders (as defined below) of the purchase, ownership and disposition of ADSs or Ordinary Shares. As used herein, references to the Ordinary Shares include ADSs representing such Ordinary Shares, unless the tax treatment of the ADSs and Ordinary Shares has been specifically differentiated. This description is for general information purposes only and does not purport to be a comprehensive description of all the Irish tax considerations that may be relevant in a U.S. Holder’s decision to purchase, hold or dispose of our Ordinary Shares. It is based on the various Irish Taxation Acts, all as in effect on February 17, 2012, and all of which are subject to change (possibly on a retroactive basis). The Irish tax treatment of a U.S. Holder of Ordinary Shares may vary depending upon such holder’s particular situation, and holders or prospective purchasers of Ordinary Shares are advised to consult their own tax advisors as to the Irish or other tax consequences of the purchase, ownership and disposition of Ordinary Shares.

For the purposes of this tax description, a “U.S. Holder” is a holder of Ordinary Shares that is: (i) a citizen or resident of the United States; (ii) a corporation or partnership created or organized in or under the laws of the United States or of any political subdivision thereof; (iii) an estate, the income of which is subject to U.S. federal income tax regardless of its source; or (iv) a trust, if a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of such trust.

Taxation of Corporate Income

We are a public limited company incorporated and resident for tax purposes in Ireland. Under current Irish legislation, a company is regarded as resident for tax purposes in Ireland if it is centrally managed and controlled

in Ireland, or, in certain circumstances, if it is incorporated in Ireland. Trading income of an Irish company is generally taxable at the Irish corporation tax rate of 12.5%. Non-trading income of an Irish company e.g. interest income, rental income or other passive income, is taxable at a rate of 25%. Previously, income from a qualifying patent was disregarded for Irish tax purposes up to a cap of €5 million per annum. A qualifying patent means a patent in relation to which the research, planning, processing, experimenting, testing, devising, designing, developing or similar activities leading to the invention that is the subject of the patent were carried out in an European Economic Area state. This relief was withdrawn on November 24, 2010. In addition, manufacturing profits of an Irish company were subject to a reduced tax rate of 10%; however this relief was withdrawn with effect from January 1, 2011. Any future manufacturing profits from an Irish trade will now be taxable at the 12.5% tax rate referred to above.

Taxation of Capital Gains and Dividends

A person who is neither resident nor ordinarily resident in Ireland and who does not carry on a trade in Ireland through a branch or agency will not be subject to Irish capital gains tax on the disposal of Ordinary Shares.

Unless exempted, all dividends paid will be subject to Irish withholding tax at the standard rate of income tax in force at the time the dividend is paid, currently 20%, and no additional Irish income tax liability or liability to the universal social charge in Ireland arises as the withholding tax deducted discharges such liability to Irish tax. An individual shareholder resident in a country with which Ireland has a double tax treaty, which includes the United States, or in a member state of the European Union, other than Ireland (together, a Relevant Territory), will be exempt from withholding tax, income tax and the universal social charge provided he or she makes the requisite declaration.

Corporate shareholders who: (i) are ultimately controlled by residents of a Relevant Territory; (ii) are resident in a Relevant Territory and are not controlled by Irish residents; (iii) have the principal class of their shares, or of a 75% parent, traded on a stock exchange in Ireland or in a Relevant Territory; or (iv) are wholly owned by two or more companies, each of whose principal class of shares is substantially and regularly traded on one or more recognized stock exchanges in Ireland or in a Relevant Territory or Territories, will be exempt from withholding tax on the production of the appropriate certificates and declarations.

Holders of our ADSs will be exempt from withholding tax and the universal social charge if they are beneficially entitled to the dividend and their address on the register of depositary shares maintained by the depositary is in the United States, provided that the depositary has been authorized by the Irish Revenue Commissioners as a qualifying intermediary and provided the appropriate declaration is made by the holders of the ADSs. Where such withholding is made, it will satisfy the liability to Irish tax and the universal social charge of the shareholder except in certain circumstances where an individual shareholder may have an additional liability. A charge to Irish social security taxes arise for individuals. However, under the Social Welfare Agreement between Ireland and the United States, an individual who is liable for U.S. social security contributions can normally claim exemption from these taxes and levies.

Irish Capital Acquisitions Tax

A gift or inheritance of Ordinary Shares will be and, in the case of our warrants or American Depositary Warrant Shares (ADWSs) representing such warrants, may be, within the charge to Irish capital acquisitions tax, notwithstanding that the person from whom the gift or inheritance is received is domiciled or resident outside Ireland. Capital acquisitions tax is charged at the rate of 30% above a tax-free threshold. This tax-free threshold is determined by the relationship between the donor and the successor or donee. It is also affected by the amount of the current benefit and previous benefits taken since December 5, 1991 from persons within the same capital acquisitions tax relationship category. Gifts and inheritances between spouses are not subject to capital acquisitions tax.

The Estate Tax Convention between Ireland and the United States generally provides for Irish capital acquisitions tax paid on inheritances in Ireland to be credited against tax payable in the United States and for tax

paid in the United States to be credited against tax payable in Ireland, based on priority rules set forth in the Estate Tax Convention, in a case where warrants, ADWSs, ADSs or Ordinary Shares are subject to both Irish capital acquisitions tax with respect to inheritance and U.S. federal estate tax. The Estate Tax Convention does not apply to Irish capital acquisitions tax paid on gifts.

Irish Stamp Duty

Under current Irish law, no stamp duty, currently at the rate and on the amount referred to below, will be payable by U.S. Holders on the issue of ADSs, Ordinary Shares or ADWSs of Elan. Under current Irish law, no stamp duty will be payable on the acquisition of ADWSs or ADSs by persons purchasing such ADWSs or ADSs, or on any subsequent transfer of an ADWS or ADS of Elan. A transfer of Ordinary Shares, whether on sale, in contemplation of a sale or by way of gift will attract duty at the rate of 1% on the consideration given or, where the purchase price is inadequate or unascertainable, on the market value of the shares. Similarly, any such transfer of a warrant may attract duty at the rate of 1%. Transfers of Ordinary Shares that are not liable to duty at the rate of 1% are exempt. The person accountable for payment of stamp duty is the transferee or, in the case of a transfer by way of gift or for a consideration less than the market value, all parties to the transfer. Stamp duty is normally payable within 30 days after the date of execution of the transfer. Late or inadequate payment of stamp duty will result in a liability to pay interest penalties and fines.

F.	Dividends and Paying Agents

Not applicable.

G.	Statement by Experts

Not applicable.

H.	Documents on Display

The Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act). In accordance with these requirements, the Company files Annual Reports on Form 20-F with, and furnishes Reports of Foreign Issuer on Form 6-K to, the SEC. These materials, including our Annual Report on Form 20-F for the fiscal year ended December 31, 2011 and the exhibits thereto, may be inspected and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington D.C. 20549. Copies of the materials may be obtained from the SEC’s Public Reference Room at prescribed rates. The public may obtain information on the operation of the SEC’s Public Reference Room by calling the SEC in the United States at 1-800-SEC-0330. As a foreign private issuer, all documents that we filed or submitted after November 4, 2002 on the SEC’s EDGAR system are available for retrieval on the website maintained by the SEC at http://www.sec.gov. These filings and submissions are also available from commercial document retrieval services.

Copies of our Memorandum and Articles of Association may be obtained at no cost by writing or telephoning the Company at our principal executive offices. Our Memorandum and Articles of Association were filed with the SEC as Exhibit 1.1 to our Annual Report on Form 20-F for the fiscal year ended December 31, 2010. You may also inspect or obtain a copy of our Memorandum and Articles of Association using the procedures prescribed above.

I.	Subsidiary Information

Not applicable.

Item 11.

Quantitative and Qualitative Disclosures about Market Risk.

Market risk is the risk of loss from adverse changes in market prices, interest rates and foreign exchange rates. Our future earnings and cash flows are dependent upon prevailing market rates. Accordingly, we manage our market risk by matching projected cash inflows from operating, investing and financing activities with projected cash outflows for debt service, capital expenditures and other cash requirements.

Inflation Risk

Inflation had no material impact on our operations during the year.

Exchange Rate Risk

We are a multinational business operating in a number of countries and the U.S. dollar is the primary currency in which we conduct business. The U.S. dollar is used for planning and budgetary purposes and is the functional currency for financial reporting. We do, however, have revenues, costs, assets and liabilities denominated in currencies other than U.S. dollars. Transactions in foreign currencies are recorded at the exchange rate prevailing at the date of the transaction. The resulting monetary assets and liabilities are translated into the appropriate functional currency at exchange rates prevailing at the balance sheet date and the resulting gains and losses are recognized in the income statement.

We actively manage our foreign exchange exposures to reduce the exchange rate volatility on our results of operations. The principal foreign currency risk to which we are exposed relates to movements in the exchange rate of the U.S. dollar against the euro. Our main exposure is the revenue received in euro arising from sales of Tysabri in the European Union and expenses denominated in euro from a corporate office in Dublin. We closely monitor expected euro cash flows to identify exposures and, if considered appropriate, enter into forward foreign exchange contracts or other derivative instruments to reduce our foreign currency risk.

During 2011, average exchange rates were $1.393 = €1.00. We had entered into a number of forward foreign exchange contracts at various rates of exchange that required us to sell euro for U.S. dollars on various dates during 2011. These forward contracts expired on various dates throughout 2011 and there were no forward contracts outstanding as of December 31, 2011.

Interest Rate Risk on Debt

Our long-term debt at December 31, 2011 is all at fixed rates, therefore we are not exposed to cash flow interest rate risk in relation to our debt.

As of December 31, 2011, the fair value of our debt was $665.1 million. For additional information on the fair values of debt instruments, refer to Note 27 to the Consolidated Financial Statements.

Interest Rate Risk on Investments

Our liquid funds are invested primarily in U.S. dollars, except for the working capital balances of subsidiaries operating outside of the United States. Interest rate changes affect the returns on our investment funds. Our exposure to interest rate risk on liquid funds is actively monitored and managed with an average duration of less than three months. By calculating an overall exposure to interest rate risk rather than a series of individual instrument cash flow exposures, we can more readily monitor and hedge these risks. Duration analysis recognizes the time value of money and, in particular, prevailing interest rates by discounting future cash flows.

The interest rate risk profile of our investments at December 31, 2011, was as follows (in millions):


	Fixed		Floating		No Interest		Total
Cash and cash equivalents	$	—	$	271.7	$	—	$	271.7
Restricted cash and cash equivalents — current	$	—	$	2.6	$	—	$	2.6
Restricted cash and cash equivalents — non-current	$	—	$	13.7	$	—	$	13.7
Investment securities — current	$	—	$	—	$	0.3	$	0.3
Investment securities — non-current	$	—	$	—	$	9.8	$	9.8

Variable interest rates on cash and liquid resources are generally based on the appropriate Euro Interbank Offered Rate, London Interbank Offer Rate (LIBOR) or bank rates dependent on principal amounts on deposit.

Credit Risk

Our treasury function transacts business with counterparties that are considered to be low investment risks. Credit limits are established commensurate with the credit rating of the financial institution that business is being transacted with. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet.

For customers, we have a credit policy in place that involves credit evaluation and ongoing account monitoring.

Our principal sovereign risk relates to investments in U.S. Treasuries funds; however, we consider this risk to be remote.

At the balance sheet date, we have a significant concentration of credit risk given that our main customer or collaborator, AmerisourceBergen and Biogen Idec account for all of our gross accounts receivable balance at December 31, 2011. However, we do not believe our credit risk in relation with these two customers is significant, as they each have an investment grade credit rating.

Equity Price and Commodity Risks

We do not have any material equity price or commodity risks.

Item 12.

Description of Securities Other than Equity Securities.

A.	Debt Securities

Not applicable.

B.	Warrants and Rights

Not applicable.

C.	Other Securities

Not applicable.

D.	American Depositary Shares.

In February 2011, Citibank, N.A. replaced the Bank of New York Mellon as our ADS depositary. According to our Depositary Agreement with the ADS depositary, Citibank, N.A., the depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductions from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.

Depositing or withdrawing shares must pay the following costs:


Service	Rate	By Whom Paid
(1) Issuance of ADSs upon deposit of Shares (excluding issuances as a result of distributions described in paragraph 4) below).	Up to U.S. $5.00 per 100 ADSs (or fraction thereof) issued.	Person depositing Shares or person receiving ADSs.

(2) Delivery of Deposited Securities against surrender of ADSs.	Up to U.S. $5.00 per 100 ADSs (or fraction thereof) surrendered.	Person surrendering ADSs for the purpose of withdrawal of Deposited Securities or person to whom Deposited Securities are delivered.

(3) Distribution of cash dividends or other cash distributions (i.e., sale of rights and other entitlements).	Up to U.S. $5.00 per 100 ADSs (or fraction thereof) held.	Person to whom distribution is made.

(4) Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) exercise of rights to purchase additional ADSs.	Up to U.S. $5.00 per 100 ADSs (or fraction thereof) held.	Person to whom distribution is made.

(5) Distribution of securities other than ADSs or rights to purchase additional ADSs (i.e., spin-off shares).	Up to U.S. $5.00 per 100 ADSs (or fraction thereof) held.	Person to whom distribution is made.

(6) Depositary Services.	Up to U.S. $5.00 per 100 ADSs (or fraction thereof) held on the applicable record date(s) established by the Depositary.	Person holding ADSs on the applicable record date(s) established by the Depositary.

From January 1, 2011, to February 17, 2012, we did not receive any money from the depositary or any reimbursement relating to the ADS facility.

In 2011, Bank of New York Mellon waived certain fees relating to products and services provided by the depositary which were repaid by the Company in February 2012. In 2010, the fees waived by Bank of New York Mellon amounted to $144,673. Citibank, N.A., was appointed as depositary on February 3, 2012 and has agreed to waive certain fees and make certain payments relating to products and services provided by them as depositary.

Part II

Item 13.

Defaults, Dividend Arrearages and Delinquencies.

None.

Item 14.

Material Modifications to the Rights of Security Holders and Use of Proceeds.

None.

Item 15.

Controls and Procedures.

Disclosure Controls and Procedures

We conducted an evaluation as of December 31, 2011 under the supervision and with the participation of management, including our CEO and chief financial officer (CFO), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on the evaluation conducted, our management, including our CEO and CFO, concluded that at December 31, 2011 such disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Our internal control system is designed to provide reasonable assurance regarding the preparation and fair presentation of financial statements for external purposes in accordance with U.S. GAAP. All internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable assurance that the objectives of the internal control system are met. It must be noted that even those systems that management deems to be effective can only provide reasonable assurance with respect to the preparation and presentation of our financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or the degree of compliance with the policies and procedures.

Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal controls over financial reporting, based on the criteria set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the evaluation conducted, our management, including our CEO and CFO, concluded that as of December 31, 2011, internal control over financial reporting was effective.

Our independent registered public accounting firm, KPMG, has issued an auditor’s report on the Company’s internal control over financial reporting as of December 31, 2011, which is included under Item 15 “Controls and Procedures” in this Annual Report on Form 20-F.

Changes in Internal Control over Financial Reporting

Changes that have materially affected, or are reasonably likely to material affect, our internal control over financial reporting during the period covered by the annual report, need to be identified and reported as required by paragraph (d) of Rule 13a-15.

During the year ended December 31, 2011, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Elan Corporation, plc:

We have audited Elan Corporation, plc’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Elan Corporation, plc’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, appearing under Item 15 in this Annual Report on Form 20-F. Our responsibility is to express an opinion on Elan Corporation, plc’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Elan Corporation, plc maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Elan Corporation, plc and subsidiaries, as of December 31, 2011 and 2010, and the related consolidated statements of operations, shareholders’ equity/(deficit) and comprehensive income/(loss) and cash flows for each of the years in the three-year period ended December 31, 2011, and the related financial statement schedule, and our report dated February 23, 2012 expressed an unqualified opinion on those consolidated financial statements and the related financial statement schedule.

/s/ KPMG

Dublin, Ireland

February 23, 2012

Item 16.

Reserved.

Item 16A.

Audit Committee Financial Expert.

The board of directors of Elan has determined that Mr. Gary Kennedy, Mr. Kerr and Mr. O’Connor qualify as Audit Committee financial experts and as independent directors within the meaning of the NYSE listing standards.

Item 16B.

Code of Ethics.

Our board of directors adopted a code of conduct that applies to our directors, officers and employees. The Code of Conduct was revised and updated in April 2011. There have been no material modifications to, or waivers from, the provisions of such Code. This Code is available on the corporate governance section of our website at the following address: www.elan.com.

Item 16C.

Principal Accountant Fees and Services.

Our principal accountants are KPMG. The table below summarizes the fees for professional services rendered by KPMG for the audit of our Consolidated Financial Statements and fees billed for other services rendered by KPMG (in millions):


	2011		2010
Auditors’ remuneration:
Audit fees⁽¹⁾	$	2.0	$	2.0
Audit-related fees⁽²⁾		—		—

Total audit and audit-related fees	$	2.0	$	2.0
Tax fees⁽³⁾		1.2		0.6
All other fees		—		—

Total auditors’ remuneration	$	3.2	$	2.6

⁽¹⁾

Audit services include audit of our Consolidated Financial Statements, as well as work that generally only the independent auditor can reasonably be expected to provide, including comfort letters, statutory audits, and discussions surrounding the proper application of financial accounting or reporting standards.

⁽²⁾	Audit-related services are for assurance and related services that are traditionally performed by the independent auditor, including due diligence related to mergers, acquisitions and disposals, employee benefit plan audits, and special procedures required to meet certain regulatory requirements.

⁽³⁾	Tax fees consist of fees for professional services for tax compliance, tax advice and tax planning. This category includes fees related to the preparation and review of tax returns.

Report of the Audit Committee

The Audit Committee held eight scheduled meetings in 2011. Details of meeting attendance by Audit Committee members are included in the table on page 71. In addition three further meetings were held to deal with specific matters.

Committee Membership


Name	Status During 2011
Gary Kennedy (Chairman)		Member for the whole period
Giles Kerr		Member for the whole period
Donal O’Connor		Member for the whole period

The current members of the Audit Committee are all non-executive directors of the Company. The board considers each member to be independent under the Guidelines, the Code and the criteria of the NYSE corporate governance listing standards concerning the composition of Audit Committee.

The board is satisfied that at least one member of the Audit Committee has recent and relevant financial experience. The board has determined that Mr. Kennedy, Mr. Kerr and Mr. O’Connor are Audit Committee financial experts for the purposes of the Sarbanes-Oxley Act of 2002.

Role and Focus

The Audit Committee helps the board in its general oversight of the Company’s accounting and financial reporting practices, internal controls and audit functions, and is directly responsible for the appointment, compensation and oversight of the work of our independent auditors.

The core responsibilities of the Audit Committee include reviewing and reporting to the board on:

•

Matters relating to the periodic financial reporting prepared by the Company;

•

The independent auditors’ qualifications and independence;

•

The performance of the internal auditor and the corporate compliance functions;

•

Compliance with legal and regulatory requirements including the operation of the Company’s Securities Trading Policy and Code of Conduct;

•

The Company’s overall framework for internal control over financial reporting and other internal controls and processes; and

•

The Company’s overall framework for risk management.

The Audit Committee oversees the maintenance and review of the Company’s Code of Conduct. It has established procedures for the receipt and handling of complaints concerning accounting or audit matters.

The Audit Committee appoints and agrees on the compensation for the independent external auditors subject, in each case, to the approval of the Company’s shareholders at general meeting. It maintains policies and procedures for the pre-approval of all audit services and permitted non-audit services undertaken by the independent external auditor. The principal purpose of these policies and procedures is to ensure that the independence of the independent external auditor is not impaired. The policies and procedures cover three categories of work: audit services, audit-related services and non-audit services. The pre-approval procedures permit certain audit, audit-related and non-audit services to be performed by the independent external auditor during the year subject to fee limits agreed with the Audit Committee in advance. Authority to approve, between Audit Committee meetings, work in excess of the pre-agreed fee limits is delegated to members of the Audit Committee if required. Regular reports to the full Audit Committee are also provided for and, in practice, are a standing agenda item at Audit Committee meetings.

Following the entering into of a Corporate Integrity Agreement between the Company and the Office of Inspector General of the U.S. Department of Health and Human Services, the Audit Committee, on behalf of the board of directors, is responsible for the review and oversight of matters related to compliance with federal healthcare program requirements, FDA requirements and the obligations of the Corporate Integrity Agreement.

Activities Undertaken During the Year

The Audit Committee held a number of private meetings without management present with the Company’s general counsel, chief compliance officer and head of internal audit and with the engagement partner from the Company’s independent external auditors. The purpose of these meetings was to facilitate free and open discussions between the Audit Committee members and those individuals separate from the main sessions of the Audit Committee, which were attended by the CFO, the group controller and the Company’s general counsel.

At each regularly scheduled board meeting, the chairman of the Audit Committee reported to the board on the principal matters covered at the preceding Audit Committee meetings. The minutes of all Audit Committee

100

meetings were also circulated to all board members. During 2011, the Audit Committee considered and reviewed various aspects of the Company and its business including, but not limited to the matters referred to below.

•

The Company’s financial reports and financial guidance were reviewed and various accounting matters and policies were considered.

•

Reports were received from the independent external auditors concerning their audit strategy, the planning and the results of their audit of the financial statements of the Company and from management, the internal audit function and chief compliance office on the effectiveness of the Company’s system of internal controls and, in particular, its internal control over financial reporting.

•

The Audit Committee reviewed the operations of the Company’s Code of Conduct, the employee helpline and email system. No material issues were reported through this route during the year. No waivers to the Code of Conduct were made in 2011.

•

The implementation of the measures required under the terms of the Corporate Integrity Agreement between the Company and the Inspector General of the U.S. Department of Health and Human Services.

•

Reviewed and approved, or recommended for approval to the board of directors, various aspects of the EDT/Alkermes transaction entered into in May 2011 and completed in September 2011.

•

Reviewed proposals for the restructuring of the Company’s debts.

•

Reviewed correspondences between the Company and the SEC.

•

The Audit Committee reviewed the further implementation of the comprehensive enterprise-wide risk management process in the Company, including the role of the Turnbull Guidance for Directors, other corporate governance measures and the utilization of the insurance function in the control and management Company wide risk.

•

Matters concerning the internal audit function, corporate compliance function and financial functions were reviewed. The Company’s continuing work to comply with the applicable provisions of the Sarbanes-Oxley Act of 2002 was monitored by the Audit Committee.

•

The Audit Committee charter, the Company’s Security Trading policy and the operation of the Audit Committee were reviewed during 2011.

•

The amount of audit and non-audit fees of the independent auditor was monitored throughout 2011. The Audit Committee was satisfied throughout the year that the objectivity and independence of the independent external auditor were not in any way impaired by either the nature of the non-audit work undertaken, the level of non-audit fees charged for such work or any other facts or circumstances.

On behalf of the Audit Committee,

Gary Kennedy

Chairman of the Audit Committee and

Non-Executive Director

February 23, 2012

Item 16D.

Exemptions from the Listing Standards for Audit Committees.

Not applicable.

Item 16E.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

Not applicable.

Item 16F.

Change in Registrant’s Certifying Accountant.

Not applicable.

101

Item 16G.

Corporate Governance.

We are required to disclose any significant ways in which our corporate governance practices differ from those required to be followed by domestic companies under NYSE listing standards.

Under Section 303A of the NYSE Listed Company Manual, we may, in general, follow Irish corporate governance practices in lieu of most of the NYSE corporate governance requirements. However, we are required to comply with NYSE Sections 303A.06, 303A.11, 303A.12(b) and 303A.12(c).

The following table contains a summary of our corporate governance practices and those required of domestic companies under NYSE listing standards. There are no significant differences between our corporate governance practices and those required of domestic companies under NYSE listing standards.


NYSE Standards for U.S. Listed Companies under Listed Company Manual Section 303A		Elan Corporate Governance Practices
NYSE Section 303A.01
A NYSE-listed company must have a majority of independent directors on its board of directors.		At minimum, two-thirds of the members of our board of directors are independent directors.

NYSE Section 303A.02
NYSE Section 303A.02 establishes general standards to evaluate directors’ independence.		We have adopted the definition of “independent director” under NYSE Section 303A.02, as described in Elan’s Corporate Governance Guidelines.

NYSE Section 303A.03
Non-management directors must meet at regularly scheduled executive meetings not attended by management.		Our Corporate Governance Guidelines provide that “the non-management directors of the board will meet without management at regularly scheduled executive sessions, and at such other times as they deem appropriate, under the chairmanship of the Lead Independent Director.”

NYSE Section 303A.04
U.S. listed companies must have a nominating/corporate governance committee comprised entirely of independent directors. The committee must have a written charter establishing certain minimum responsibilities as set forth in NYSE Section 303A.04(b)(i) and providing for an annual evaluation of the committee’s performance.		Our board of directors maintains a Nominating & Governance Committee composed entirely of independent directors. The Nominating & Governance Committee has a written charter which, among other things, meets the requirements set forth in NYSE Section 303A.04(b)(i) and provides for an annual evaluation of the Nominating & Governance Committee’s performance.

NYSE Section 303A.05
Listed companies must have a compensation committee comprised entirely of independent directors. The committee must have a written charter establishing certain minimum responsibilities as set forth in NYSE Section 303A.05(b)(i) and providing for an annual evaluation of the committee’s performance.		Our board of directors maintains a LDCC composed entirely of independent directors. The LDCC has a written charter which, among other things, meets the requirements set forth in NYSE Section 303A.05(b)(i) (except that the LDCC’s report set forth in Elan’s annual report is based on Irish rules and regulations rather than the SEC proxy rules) and provides for an annual evaluation of the LDCC’s performance.

NYSE Section 303A.06
U.S. listed companies must have an audit committee that satisfies the requirements of Rule 10A-3 under the Securities Exchange Act of 1934 (the Exchange Act).		Our board of directors maintains an Audit Committee that meets the requirements of Rule 10A-3 of the Exchange Act.

102


NYSE Standards for U.S. Listed Companies under Listed Company Manual Section 303A		Elan Corporate Governance Practices

NYSE Section 303A.07
The audit committee must consist of at least three members, all of whom must be independent under NYSE Section 303A.02 and be financially literate or must acquire such financial knowledge within a reasonable period. At least one member must have experience in accounting or financial administration. The committee must have a written charter establishing certain minimum responsibilities as set forth in NYSE Section 303A.07(b)(iii) and providing for an annual evaluation of the committee’s performance.		Our Audit Committee is comprised of no fewer than three directors, each of whom is an independent director under NYSE Section 303A.02 and each member of the Audit Committee meets all applicable financial literacy requirements. The Audit Committee has a written charter that meets the requirements set forth in NYSE Section 303A.07(b)(iii) and provides for an annual evaluation of the Audit Committee’s performance.

NYSE Section 303A.07(c)
Each U.S. listed company must have an internal audit function in order to provide to management and to the audit committee permanent assessments on the company’s risk management processes and internal control system.		To support our system of internal control, we have separate Corporate Compliance and Internal Audit departments. Each of these departments reports periodically to the Audit Committee.

NYSE Section 303A.08
Shareholders must be given the opportunity to vote on all equity-based compensation plans and material revisions thereto with certain exceptions.		Under Section 13.13 of the Listing Rules of the ISE, in general, all employee share plans that contemplate the issuance of new shares must, with certain limited exceptions, be approved by our shareholders prior to their adoption.

NYSE Section 303A.09
U.S. listed companies must adopt and disclose corporate governance guidelines, including several issues for which such reporting is mandatory, and include such information on the company’s website, which should also include the charters of the audit committee, the nominating committee, and the compensation committee. In addition, the board of directors must make a self-assessment of its performance at least once a year to determine if it or its committees function effectively and report thereon.		We have adopted Corporate Governance Guidelines that, together with the charters of the Audit Committee, the Nominating & Governance Committee and the LDCC, are published on our website. Our Corporate Governance Guidelines require that our board of directors conducts a self-assessment at least annually to determine whether the board of directors and its committees function effectively.

NYSE Section 303A.10
U.S. listed companies must adopt a Code of Business Conduct and Ethics for directors, officers and employees.		We have adopted a Code of Conduct for directors, officers and employees that is published on our website.

NYSE Section 303A.12
The CEO of each listed U.S. company must, on a yearly basis, certify to the NYSE that he or she knows of no violation by the company of NYSE rules relating to corporate governance. The CEO must notify the NYSE in writing whenever any executive officer of the company becomes aware of any non-fulfillment of any applicable provision under NYSE Section 303A. Finally, each U.S. listed company must submit an executed Written Affirmation annually to the NYSE and Interim Written Affirmation each time a change occurs in the board or any of the committees subject to NYSE Section 303A.		Our CEO will notify the NYSE in writing whenever any executive officer of Elan becomes aware of any non-fulfillment of any applicable provision under NYSE Section 303A. In addition, we will comply with the NYSE’s rules relating to the submission of annual and interim affirmations.

103

Part III

Item 17.

Consolidated Financial Statements.

Not applicable.

Item 18.

Consolidated Financial Statements.

Report of Independent Registered Public Accounting Firm

Consolidated Financial Statements of Elan Corporation, plc and subsidiaries

Notes to the Consolidated Financial Statements

104

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Elan Corporation, plc:

We have audited the accompanying consolidated balance sheets of Elan Corporation, plc and subsidiaries (the Company) as of December 31, 2011 and 2010, and the related consolidated statements of operations, shareholders’ equity/(deficit) and comprehensive income/(loss), and cash flows for each of the years in the three-year period ended December 31, 2011. In connection with our audits of the consolidated financial statements, we have also audited financial statement Schedule II. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Elan Corporation, plc and subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Elan Corporation plc’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 23, 2012 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG

Dublin, Ireland

February 23, 2012

105

Elan Corporation, plc

Consolidated Statements of Operations

For the Years Ended December 31, 2011, 2010 and 2009


	Notes	2011			2010			2009
		(In millions, except per share data)
Product revenue		$	1,236.1		$	1,156.0		$	1,094.3
Contract revenue			9.9			13.7			18.7

Total revenue	3		1,246.0			1,169.7			1,113.0
Cost of sales			639.7			583.3			560.7

Gross margin			606.3			586.4			552.3
Operating expenses:
Selling, general and administrative expenses			228.7			254.7			268.2
Research and development expenses			232.5			258.7			293.6
Net gain on divestment of business	5		(652.9	)		(1.0	)		(108.7	)
Other net (gains)/charges	6		(42.2	)		56.3			67.3
Settlement reserve charge	7		—			206.3			—

Total operating (gains)/expenses			(233.9	)		775.0			520.4

Operating income/(loss)			840.2			(188.6	)		31.9

Net interest and investment gains and losses:
Net interest expense	8		105.9			117.8			137.9
Net loss on equity method investments	9		81.8			26.0			—
Net charge on debt retirement	10		47.0			3.0			24.4
Net investment gains	15		(2.6	)		(12.8	)		(0.6	)

Net interest and investment gains and losses			232.1			134.0			161.7

Net income/(loss) before income taxes			608.1			(322.6	)		(129.8	)
Provision for income taxes	11		47.6			2.1			46.4

Net income/(loss)		$	560.5		$	(324.7	)	$	(176.2	)

Basic net income/(loss) per Ordinary Share	12	$	0.95		$	(0.56	)	$	(0.35	)

Basic weighted-average number of Ordinary Shares outstanding			587.6			584.9			506.8
Diluted net income/(loss) per Ordinary Share	12	$	0.94		$	(0.56	)	$	(0.35	)

Diluted weighted-average number of Ordinary Shares outstanding			593.5			584.9			506.8

The accompanying notes are an integral part of these Consolidated Financial Statements.

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Elan Corporation, plc

Consolidated Balance Sheets

As of December 31, 2011 and 2010


	Notes		2011			2010
	(In millions, except shares and par values)
ASSETS
Current Assets:
Cash and cash equivalents			$	271.7		$	422.5
Restricted cash and cash equivalents — current		13		2.6			208.2
Accounts receivable, net		14		167.7			191.6
Investment securities — current		15		0.3			2.0
Inventory		16		23.8			39.0
Deferred tax assets — current		11		26.2			41.8
Prepaid and other current assets		17		25.7			15.4

Total current assets				518.0			920.5
Property, plant and equipment, net		18		83.2			287.5
Goodwill and other intangible assets, net		19		309.9			376.5
Equity method investments		9		675.8			209.0
Investment securities — non-current		15		9.8			9.4
Restricted cash and cash equivalents — non-current		13		13.7			14.9
Deferred tax assets — non-current		11		118.9			154.3
Other assets		20		24.5			45.4

Total assets			$	1,753.8		$	2,017.5


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable			$	46.4		$	39.2
Accrued and other current liabilities		21		229.9			442.5

Total current liabilities				276.3			481.7
Long-term debt		22		615.0			1,270.4
Other liabilities		21		60.7			71.1

Total liabilities				952.0			1,823.2

Shareholders’ Equity:
Ordinary Shares, €0.05 par value, 810,000,000 shares authorized 589,346,275 and 585,201,576 shares issued and outstanding at December 31, 2011 and 2010, respectively		23		36.2			35.9
Executive Shares, €1.25 par value, 1,000 shares authorized, 1,000 shares issued and outstanding at December 31, 2011 and 2010		23		—			—
“B” Executive Shares, €0.05 par value, 25,000 shares authorized, 21,375 shares issued and outstanding at December 31, 2011 and 2010		23		—			—
Additional paid-in capital				6,485.9			6,444.9
Accumulated deficit				(5,682.9	)		(6,243.4	)
Accumulated other comprehensive loss		24		(37.4	)		(43.1	)

Shareholders’ equity				801.8			194.3

Total liabilities and shareholders’ equity			$	1,753.8		$	2,017.5

The accompanying notes are an integral part of these Consolidated Financial Statements.

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Elan Corporation, plc

Consolidated Statements of Shareholders’ Equity/(Deficit) and Comprehensive Income/(Loss)

For the Years Ended December 31, 2011, 2010 and 2009


	Number of Shares		Share Capital		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income/(Loss)			Total Shareholders’ Equity/ (Deficit)
	(In millions)
Balance at December 31, 2008		474.7	$	27.6	$	5,521.5		$	(5,742.5	)	$	(38.8	)	$	(232.2	)
Comprehensive loss:
Net loss		—		—		—			(176.2	)		—			(176.2	)
Unrealized gain on investment securities		—		—		—			—			4.0			4.0
Unrealized components of defined pension plans		—		—		—			—			(1.2	)		(1.2	)
Currency translation adjustments		—		—		—			—			(0.1	)		(0.1	)

Total comprehensive loss															(173.5	)

Net tax shortfalls related to equity awards		—		—		(3.6	)		—			—			(3.6	)
Stock issued, net of issuance costs		109.2		8.2		863.8			—			—			872.0
Share-based compensation		—		—		31.5			—			—			31.5

Balance at December 31, 2009		583.9		35.8		6,413.2			(5,918.7	)		(36.1	)		494.2
Comprehensive loss:
Net loss		—		—		—			(324.7	)		—			(324.7	)
Unrealized loss on investment securities		—		—		—			—			(2.8	)		(2.8	)
Unrealized components of defined pension plans		—		—		—			—			(4.1	)		(4.1	)
Currency translation adjustments		—		—		—			—			(0.1	)		(0.1	)

Total comprehensive loss															(331.7	)

Net tax shortfalls related to equity awards		—		—		(1.2	)		—			—			(1.2	)
Stock issued, net of issuance costs		1.3		0.1		1.7			—			—			1.8
Share-based compensation		—		—		31.2			—			—			31.2

Balance at December 31, 2010		585.2		35.9		6,444.9			(6,243.4	)		(43.1	)		194.3
Comprehensive income:
Net income		—		—		—			560.5			—			560.5
Unrealized loss on investment securities		—		—		—			—			(1.5	)		(1.5	)
Unrealized components of defined pension plans		—		—		—			—			(3.9	)		(3.9	)
Currency translation adjustments		—		—		—			—			11.1			11.1

Total comprehensive income															566.2

Stock issued, net of issuance costs		4.1		0.3		6.0			—			—			6.3
Share-based compensation		—		—		35.0			—			—			35.0

Balance at December 31, 2011		589.3	$	36.2	$	6,485.9		$	(5,682.9	)	$	(37.4	)	$	801.8

The accompanying notes are an integral part of these Consolidated Financial Statements.

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Elan Corporation, plc

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2011, 2010 and 2009


	2011			2010			2009
	(In millions)
Cash flows from operating activities:
Net income/(loss)	$	560.5		$	(324.7	)	$	(176.2	)
Adjustments to reconcile net income/(loss) to net cash (used in)/ provided by operating activities:
Amortization of deferred revenue		(0.5	)		(0.3	)		(0.2	)
Amortization of financing costs		5.3			5.4			5.5
Depreciation and amortization		35.8			63.3			75.0
Gain on sale of investment securities		(2.6	)		(12.8	)		(1.2	)
Impairment of property, plant and equipment		10.0			11.0			15.0
Impairment of intangible assets		0.3			0.9			30.6
Net gain on divestment of business		(654.5	)		—			(126.0	)
EDT divestment transaction costs		(34.1	)		—			—
Net loss on equity method investments		81.8			26.0			—
Settlement reserve charge		—			206.3			—
Share-based compensation		35.3			31.5			31.5
Excess tax benefit from share-based compensation		—			—			(2.3	)
Utilization/write-down of deferred tax asset		51.0			0.1			36.8
Net charge on debt retirement		47.0			3.0			24.4
Derivative fair value gain		—			(1.2	)		(0.3	)
Other		(1.1	)		1.7			4.3
Net changes in assets and liabilities:
Decrease in accounts receivable		23.9			0.8			3.7
(Increase)/decrease in prepaid and other assets		(2.2	)		10.7			(16.8	)
Decrease/(increase) in inventory		15.2			14.2			(24.3	)
(Decrease)/increase in debt interest accrual		(6.9	)		(0.7	)		4.3
(Decrease)/increase in accounts payable and accruals and other liabilities		(213.5	)		33.0			29.9
Decrease in working capital from divestment of EDT business		(70.9	)		—			—

Net cash (used in)/provided by operating activities		(120.2	)		68.2			(86.3	)

Cash flows from investing activities:
Decrease/(increase) in restricted cash		206.8			(191.4	)		3.5
Proceeds from disposal of property, plant and equipment		1.3			0.1			7.3
Purchase of property, plant and equipment		(27.3	)		(40.9	)		(43.5	)
Purchase of intangible assets		(2.5	)		(3.6	)		(52.4	)
Purchase of equity method investment		(20.0	)		—			—
Purchase of non-current investment securities		(0.6	)		(0.9	)		(0.6	)
Sale of non-current investment securities		2.5			7.9			—
Sale of current investment securities		0.3			8.5			28.9
Proceeds from business disposals		500.0			4.3			—

Net cash provided by/(used in) investing activities		660.5			(216.0	)		(56.8	)

Cash flows from financing activities:
Issue of share capital		—			—			868.0
Proceeds from share based compensation stock issuances		6.3			1.8			4.0
Repayment of loans		(697.3	)		(455.0	)		(867.8	)
Net proceeds from debt issuances		—			187.1			603.0
Excess tax benefit from share-based compensation		—			—			2.3
Repayment of government grants		—			—			(5.4	)

Net cash (used in)/provided by financing activities		(691.0	)		(266.1	)		604.1

Effect of exchange rate changes on cash		(0.1	)		(0.1	)		0.2

Net (decrease)/increase in cash and cash equivalents		(150.8	)		(414.0	)		461.2
Cash and cash equivalents at beginning of year		422.5			836.5			375.3

Cash and cash equivalents at end of year	$	271.7		$	422.5		$	836.5

Supplemental cash flow information:
Cash paid during the year for:
Interest	$	(108.1	)		(117.2	)	$	(126.1	)
Income taxes	$	(1.5	)		(0.4	)	$	(4.2	)
Non-cash investing activities:
Purchase of equity method investment	$	(528.6	)		—		$	(235.0	)

The accompanying notes are an integral part of these Consolidated Financial Statements.

109

Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business

Elan Corporation, plc, an Irish public limited company (also referred to hereafter as we, our, us, Elan or the Company), is a neuroscience-based biotechnology company headquartered in Dublin, Ireland. We were incorporated as a private limited company in Ireland in December 1969 and became a public limited company in January 1984. Our principal executive offices are located at Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland and our telephone number is 353-1-709-4000. Our principal research and development (R&D) facilities are located in the United States.

Our business engages in research, development and commercial activities primarily in the areas of Alzheimer’s disease, Parkinson’s disease and multiple sclerosis (MS).

2. Significant Accounting Policies

The following accounting policies have been applied in the preparation of our Consolidated Financial Statements.

(a) Basis of consolidation and presentation of financial information

The accompanying Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). In addition to the financial statements included in this Form 20-F, we also prepare separate Consolidated Financial Statements, included in our Annual Report, in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS), which differ in certain significant respects from U.S. GAAP. The Annual Report under IFRS is a separate document from this Form 20-F.

Unless otherwise indicated, our financial statements and other financial data contained in this Form 20-F are presented in U.S. dollars ($). The accompanying Consolidated Financial Statements include our financial position, results of operations and cash flows and those of our wholly-owned subsidiaries. All significant intercompany amounts have been eliminated. We use the equity method to account for equity investments in instances in which we own common stock and have the ability to exercise significant influence, but not control, over the investee.

Our directors believe that we have adequate resources to continue in operational existence for at least the next 12 months and that it is appropriate to continue to prepare our Consolidated Financial Statements on a going concern basis.

(b) Use of estimates

The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying amounts of assets and liabilities that are not readily apparent from other sources. Estimates are used in determining items such as the carrying amounts of intangible assets, property, plant and equipment and equity method investments, revenue recognition, sales rebates and discounts, the fair value of share-based compensation, the accounting for contingencies and income taxes, among other items. Because of the uncertainties inherent in such estimates, actual results may differ materially from these estimates.

(c) Fair value measurements

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.

We disclose our financial instruments that are measured at fair value on a recurring basis using the following fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels, which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:


Level 1:		Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2:		Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3:		Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

(d) Cash and cash equivalents

Cash and cash equivalents include cash and highly liquid investments with original maturities on acquisition of three months or less.

(e) Accounts receivable

Accounts receivable are initially recognized at fair value, which represents the invoiced amounts, less adjustments for estimated revenue deductions such as product returns, chargebacks and cash discounts. An allowance for doubtful accounts is established based upon the difference between the recognized value and the estimated net collectible amount with the estimated loss recognized within operating expenses in the Consolidated Statement of Operations. When an account receivable balance becomes uncollectible, it is written off against the allowance for doubtful accounts.

(f) Investment securities and impairment

Marketable equity securities and debt securities are classified into one of three categories including trading, held-to-maturity, or available-for-sale. The classification depends on the purpose for which the financial assets were acquired.

•

Marketable equity and debt securities are considered trading when purchased principally for the purpose of selling in the near term. These securities are recorded as current investments and are carried at fair value. Unrealized holding gains and losses on trading securities are included in other income. We did not hold any trading securities at December 31, 2011 and 2010.

•

Marketable debt securities are considered held-to-maturity when we have the positive intent and ability to hold the securities to maturity. These securities are carried at amortized cost, less any impairment. We did not hold any held-to-maturity securities at December 31, 2011 and 2010.

•

Marketable equity and debt securities not classified as trading or held-to-maturity are considered available-for-sale. These securities are recorded as either current or non-current investments and are carried at fair value, with unrealized gains and losses included in accumulated other comprehensive

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

income/(loss) (OCI) in shareholders’ equity. The assessment for impairment of marketable securities classified as available-for-sale is based on established financial methodologies, including quoted market prices for publicly traded equity and debt securities.

Non-marketable equity securities are carried at cost, less write-down-for-impairments, and are adjusted for impairment based on methodologies, including the Black-Scholes option-pricing model, the valuation achieved in the most recent private placement by an investee, an assessment of the impact of general private equity market conditions, and discounted projected future cash flows.

The factors affecting the assessment of impairments include both general financial market conditions and factors specific to a particular company. In the case of equity classified as available-for-sale, a significant and prolonged decline in the fair value of the security below its carrying amount is considered in determining whether the security is impaired. If any such evidence exists, an impairment loss is recognized.

(g) Inventory

Inventory is valued at the lower of cost or market value. In the case of raw materials and supplies, cost is calculated on a first-in, first-out basis and includes the purchase price, including import duties, transport and handling costs and any other directly attributable costs, less trade discounts. In the case of work-in-progress and finished goods, costs include direct labor, material costs and attributable overheads, based on normal operating capacity.

(h) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is computed using the straight-line method based on estimated useful lives as follows:


Buildings		15-40 years
Plant and equipment		3-10 years
Leasehold improvements		Shorter of expected useful life or lease term

Land is not depreciated as it is deemed to have an indefinite useful life.

Where events or circumstances indicate that the carrying amount of a property, plant and equipment may not be recoverable, we review the carrying value for impairment. The carrying amount of the asset is not deemed recoverable if its carrying amount exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of that asset. In such event, an impairment loss is recognized for the excess of the carrying amount over the asset’s fair value.

(i) Leasing

Property, plant and equipment acquired under a lease that transfers substantially all of the risks and rewards of ownership to us (a capital lease) are capitalized. Amounts payable under such leases, net of finance charges, are shown as current or non-current as appropriate. An asset acquired through capital lease is stated at an amount equal to the lower of its fair value or the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses, and is included in property, plant and equipment. Finance charges on capital leases are expensed over the term of the lease to give a constant periodic rate of interest charge in proportion to the capital balances outstanding.

All other leases that are not capital leases are considered operating leases. Rentals on operating leases are charged to expense on a straight-line basis over the period of the lease. Leased property, plant and equipment sub-let to third parties are classified according to their substance as either finance or operating leases. All such arrangements that we have entered into as lessor are operating leases. Income received as lessor is recognized on a straight-line basis over the period of the lease.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(j) Goodwill, other intangible assets and impairment

Goodwill is not amortized, but instead is tested for impairment at least annually.

We review our goodwill for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The goodwill impairment test is a two-step process and is performed at the reporting unit level. Following the divestment of our Elan Drug Technologies (EDT) business on September 16, 2011, Elan is comprised of a single reporting unit. Prior to the two-step process, we first assess qualitative factors to determine whether it is necessary to perform the two-step goodwill impairment test. The qualitative factors assessed include, but are not limited to, the macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant events affecting the reporting unit and the share price performance of the Company. If, after assessing the relevant qualitative factors, we determine that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill, then the first and second steps of the goodwill impairment test are not performed. If, after assessing the relevant qualitative factors, we determine that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill, then the first step of the goodwill impairment test is performed.

Under the first step, we compare the fair value of each reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired and step two does not need to be performed. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment charge, if any. The second step compares the implied fair value of the reporting-unit goodwill with the carrying amount of that goodwill, and any excess of the carrying amount over the implied fair value is recognized as an impairment charge. The implied fair value of goodwill is determined, by allocating the fair value of a reporting unit to individual assets and liabilities. The excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. In evaluating goodwill for impairment, we determine the fair values of the reporting units using the income approach, based on the present value of expected cash flows.

(k) Equity method investments

Janssen AI

As part of the transaction whereby Janssen Alzheimer Immunotherapy (Janssen AI), a subsidiary of Johnson & Johnson, acquired substantially all of our assets and rights related to our Alzheimer’s Immunotherapy Program (AIP) collaboration with Wyeth (which has been acquired by Pfizer Inc. (Pfizer)), we received a 49.9% equity investment in Janssen AI. Johnson & Johnson also committed to fund up to an initial $500.0 million towards the further development and commercialization of the AIP to the extent the funding is required by the collaboration. In the event that either an AIP product reaches market and Janssen AI is in a positive operating cash flow position, or the AIP is terminated before the initial $500.0 million funding commitment has been drawn down, Johnson & Johnson is not required to contribute the full $500.0 million. Any required additional

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

expenditures in respect of Janssen AI’s obligations under the AIP collaboration in excess of the initial $500.0 million funding commitment is required to be funded by Elan and Johnson & Johnson in proportion to their respective shareholdings up to a maximum additional commitment of $400.0 million in total. Based on current spend levels, we anticipate that we will be called upon to provide funding to Janssen AI commencing in the second quarter of 2012. In the event that further funding is required beyond the $400.0 million, such funding will be on terms determined by the board of Janssen AI, with Johnson & Johnson and Elan having a right of first offer to provide additional funding. If we fail to provide our share of the $400.0 million commitment or any additional funding that is required for the development of the AIP, and if Johnson & Johnson elects to fund such an amount, our interest in Janssen AI could, at the option of Johnson & Johnson, be commensurately reduced. We have recorded our investment in Janssen AI as an equity method investment on the Consolidated Balance Sheet as we have the ability to exercise significant influence, but not control, over the investee. The investment was initially recognized based on the estimated fair value of the investment acquired, representing the fair value of our proportionate 49.9% share of Janssen AI’s total net assets at inception, which were comprised of the AIP assets and the asset created by the Johnson & Johnson contingent funding commitment.

Under the equity method, investors are required to recognize their share of the earnings or losses of an investee in the periods for which they are reported in the financial statements of the investee as this is normally considered an appropriate means of recognizing increases or decreases in the economic resources underlying the investments. However, Johnson & Johnson has committed to wholly fund up to an initial $500.0 million of development and commercialization expenses incurred by Janssen AI so the recognition by Elan of a share of Janssen AI losses that are solely funded by Johnson & Johnson’s $500.0 million commitment would result in an inappropriate decrease in Elan’s share of the economic resources underlying the investment in Janssen AI. Accordingly, until the $500.0 million funding commitment is fully utilized, we have applied the hypothetical liquidation at book value (HLBV) method to determine how an increase or decrease in net assets of Janssen AI affects Elan’s interest in the net assets of Janssen AI on a period by period basis. Under the HLBV method, an investor determines its share of the earnings or losses of an investee by determining the difference between its claim on the investee’s book value at the end and beginning of the period.

The difference between the cost of our equity method investment and the amount of our underlying equity in Janssen AI’s reported net assets relates to the lower estimated value of Janssen AI’s AIP assets when the equity method investment was initially recorded, and the asset created by the Johnson & Johnson $500.0 million contingent funding commitment. In relation to the AIP assets, in the event that an AIP product reaches market, our proportionate share of Janssen AI’s reported results will be adjusted over the estimated remaining useful lives of those assets to recognize the difference in the carrying values. In relation to the asset created by the Johnson & Johnson contingent funding commitment, which is a limited life asset, the basis difference is amortized to the Consolidated Statement of Operations on a pro rata basis; based on the actual amount of Janssen AI losses that are solely funded by Johnson & Johnson in each period as compared to the total $500 million, which is the total amount we estimate will be solely funded by Johnson & Johnson.

Alkermes plc and Proteostasis Therapeutics, Inc.

We have recorded our investments in Alkermes plc and Proteostasis Therapeutics Inc. (Proteostasis) as equity method investments on the Consolidated Balance Sheet as we have the ability to exercise significant influence, but not control, over the investees. The investments were initially recognized based on the estimated fair value of the investment acquired. The carrying amount of the Alkermes plc equity method investment is approximately $300 million higher than our share of the book value of the net assets of Alkermes plc. Based on our preliminary assessment of the fair value of the net assets of Alkermes plc on the date of the transaction, this difference principally relates to identifiable intangible assets and goodwill attributable to the Alkermes Inc. business prior to its acquisition of the EDT business. Under the equity method, we recognize our share of the earnings or losses of our investees, adjusted for the amortization of the basis differences, in the Consolidated

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Statement of Operations with a corresponding increase or decrease in the carrying amount of the investments on the Consolidated Balance Sheet. We recognize our share of the earnings or losses of Proteostasis in the same periods for which they are reported in the financial statements of the investee; and we recognize our share of the earnings or losses of Alkermes plc on a one-quarter time lag as Alkermes plc’s financial information is generally not publicly available when our quarterly and annual results are reported.

(l) Financing costs

Debt financing costs are comprised of transaction costs and original issue discount on borrowings. Debt financing costs are allocated to financial reporting periods over the term of the related debt using the effective interest rate method.

The carrying amount of debt includes any related unamortized original issue discount. All other unamortized debt financing costs are presented as deferred financing costs in other assets.

(m) Derivative financial instruments

We enter into transactions in the normal course of business using various financial instruments in order to hedge against exposures to fluctuating exchange and interest rates. We use derivative financial instruments to reduce exposure to fluctuations in foreign exchange rates and interest rates. A derivative is a financial instrument or other contract whose value changes in response to some underlying variable, that has an initial net investment smaller than would be required for other instruments that have a similar response to the variable and that will be settled at a future date. We do not enter into derivative financial instruments for trading or speculative purposes. We did not hold any interest rate swap contracts or forward currency contracts at December 31, 2011 or 2010.

Our accounting policies for derivative financial instruments are based on whether they meet the criteria for designation as cash flow or fair value hedges. A designated hedge of the exposure to variability in the future cash flows of an asset or a liability, or of a forecasted transaction, is referred to as a cash flow hedge. A designated hedge of the exposure to changes in fair value of an asset or a liability is referred to as a fair value hedge. The criteria for designating a derivative as a hedge include the assessment of the instrument’s effectiveness in risk reduction, matching of the derivative instrument to its underlying transaction, and the probability that the underlying transaction will occur. For derivatives with cash flow hedge accounting designation, we report the gain or loss from the effective portion of the hedge as a component of accumulated OCI and reclassify it into earnings in the same period or periods in which the hedged transaction affects earnings, and within the same income statement line item as the impact of the hedged transaction. For derivatives with fair value hedge accounting designation, we recognize gains or losses from the change in fair value of these derivatives, as well as the offsetting change in the fair value of the underlying hedged item, in earnings. Fair value gains and losses arising on derivative financial instruments not qualifying for hedge accounting are reported in our Consolidated Statement of Operations. The carrying amount of derivative financial instruments is reported within current assets or other current liabilities.

(n) Revenue

We recognize revenue from the sale of our products, royalties earned and contract arrangements. Our revenues are classified into two categories: product revenue and contract revenue.

Product Revenue — Product revenue includes: (i) the sale of our products, (ii) royalties and (iii) manufacturing fees. We recognize revenue from product sales when there is persuasive evidence that an arrangement exists, title passes, the price is fixed or determinable, and collectability is reasonably assured. Revenue is recorded net of applicable sales tax and sales discounts and allowances, which are described below.

(i) The sale of our products consists of the sale of pharmaceutical drugs, primarily to wholesalers and physicians.

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(ii) We earn royalties on licensees’ sales of our products or third-party products that incorporate our technologies. Royalties are recognized as earned in accordance with the contract terms when royalties can be reliably measured and collectability is reasonably assured.

(iii) We received manufacturing fees for products that were manufactured by EDT on behalf of other third-party customers.

Tysabri^® (natalizumab) was developed and is now being marketed in collaboration with Biogen Idec, Inc (Biogen Idec). In general, subject to certain limitations imposed by the parties, we share with Biogen Idec most development and commercialization costs. Biogen Idec is responsible for manufacturing the product. In the United States, we purchase Tysabri from Biogen Idec and are responsible for distribution. Consequently, we record as revenue the net sales of Tysabri in the U.S. market. We purchase product from Biogen Idec as required at a price, which includes the cost of manufacturing, plus Biogen Idec’s gross profit 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 we record as revenue our share of the profit or loss on rest of world (ROW) sales of Tysabri, plus our directly incurred expenses on these sales, which are primarily comprised of royalties we incur and are payable by us to third parties and are reimbursed by the collaboration.

Contract Revenue — Contract revenue generally arose from EDT contracts to perform R&D services on behalf of clients, or from technology licensing. Contract revenue is recognized when earned and non-refundable, and when we have no future obligation with respect to the revenue, in accordance with the terms prescribed in the applicable contract. Contract research revenue consists of payments or milestones arising from R&D activities we perform on behalf of third parties. Our revenue arrangements with multiple elements are divided into separate units of accounting if certain criteria are met, including whether the delivered element has stand-alone value to the customer and whether there is objective and reliable evidence of the fair value of the undelivered items. The consideration we receive is allocated among the separate units based on their respective fair values, and the applicable revenue recognition criteria are applied to each of the separate units. Advance payments received in excess of amounts earned are classified as deferred revenue until earned.

Up-front fees received by us are deferred and amortized when there is a significant continuing involvement by us (such as an ongoing product manufacturing contract or joint development activities) after an asset disposal. We defer and amortize up-front license fees to income over the “performance period” as applicable. The performance period is the period over which we expect to provide services to the licensee as determined by the contract provisions.

Accounting for milestone payments depends on the facts and circumstances of each contract. We apply the milestone method in accounting for substantive milestone payments under contracts that include R&D deliverables. A milestone is considered substantive if consideration earned from achievement of the milestone (1) is commensurate with either the vendor’s performance to achieve the milestone or the enhancement of the value of the delivered item, (2) relates solely to past performance, and (3) is reasonable in comparison to all of the deliverables and payment terms in the arrangement. If a milestone is considered substantive the consideration is recognized as revenue in the period in which the milestone is achieved. It is expected that the substantive milestone method will be appropriate for most contracts. If we determine the milestone method is not appropriate, we apply the proportional performance method to the relevant contracts. This method recognizes as revenue the percentage of cumulative non-refundable cash payments earned under the contract, based on the percentage of costs incurred to date compared to the total costs expected under the contract.

(o) Sales discounts and allowances

We recognize revenue on a gross revenue basis (except for Tysabri revenue outside of the United States) and make various deductions to arrive at net revenue as reported in our Consolidated Statements of Operations. These adjustments are referred to as sales discounts and allowances and are described in detail below. Sales

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discounts and allowances include charge-backs, managed healthcare rebates and other contract discounts, Medicaid rebates, cash discounts, sales returns, and other adjustments. Estimating these sales discounts and allowances is complex and involves significant estimates and judgments, and we use information from both internal and external sources, including historical experience, to generate reasonable and reliable estimates.

We do not conduct our sales using the consignment model. All of our product sales transactions are based on normal and customary terms whereby title to the product and substantially all of the risks and rewards transfer to the customer upon either shipment or delivery. Furthermore, we do not have an incentive program that would compensate a wholesaler for the costs of holding inventory above normal inventory levels thereby encouraging wholesalers to hold excess inventory.

Charge-backs

In the United States, we participate in charge-back programs with a number of entities, principally the U.S. Department of Defense, the U.S. Department of Veterans Affairs, Group Purchasing Organizations and other parties whereby pricing on products is extended below wholesalers’ list prices to participating entities. These entities purchase products through wholesalers at the lower negotiated price, and the wholesalers charge the difference between these entities’ acquisition cost and the lower negotiated price back to us. We account for charge-backs by reducing accounts receivable in an amount equal to our estimate of charge-back claims attributable to a sale. We determine our estimate of the charge-backs primarily based on historical experience on a product-by-product and program basis, and current contract prices under the charge-back programs. We consider vendor payments, estimated levels of inventory in the wholesale distribution channel, and our claim processing time lag and adjust the accrual and revenue periodically throughout each year to reflect actual and future estimated experience.

Medicaid rebates

In the United States, we are required by law to participate in state government-managed Medicaid programs as well as certain other qualifying federal and state government programs whereby discounts and rebates are provided to participating state and local government entities. Discounts and rebates provided through these other qualifying federal and state government programs are included in our Medicaid rebate accrual and are considered Medicaid rebates for the purposes of this discussion. We account for Medicaid rebates by establishing an accrual in an amount equal to our estimate of Medicaid rebate claims attributable to a sale. We determine our estimate of the Medicaid rebates accrual primarily based on our estimates of Medicaid claims, Medicaid payments, claims processing time lag, inventory in the distribution channel, as well as legal interpretations of the applicable laws related to the Medicaid and qualifying federal and state government programs, and any new information regarding changes in the Medicaid programs’ regulations and guidelines that would impact the amount of the rebates on a product-by-product basis. We adjust the accrual and revenue periodically throughout each year to reflect actual and future estimated experience.

Cash and other discounts

Cash and other discounts include cash discounts, generally at 2% of the sales price, as an incentive for prompt payment by customers in the United States. We account for cash discounts by reducing accounts receivable by the full amount of the discounts. We consider payment performance of each customer and adjust the accrual and revenue periodically throughout each year to reflect actual experience and future estimates.

Managed healthcare rebates and other contract discounts

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products subject to managed healthcare rebates and other contract discounts, processing claim lag time and estimated levels of inventory in the distribution channel and adjust the accrual and revenue periodically throughout each year to reflect actual and future estimated experience.

Sales returns

We account for sales returns by reducing accounts receivable in an amount equal to our estimate of revenue recorded for which the related products are expected to be returned.

Our sales return accrual is estimated principally based on historical experience, the estimated shelf life of inventory in the distribution channel, price increases, and our return goods policy (goods may only be returned six months prior to expiration date and for up to 12 months after expiration date). We also take into account product recalls and introductions of generic products. All of these factors are used to adjust the accrual and revenue periodically throughout each year to reflect actual and future estimated experience.

Other adjustments

Use of information from external sources

We use information from external sources to identify prescription trends and patient demand, including inventory pipeline data from the three major drug wholesalers in the United States. The inventory information received from these wholesalers is a product of their record-keeping process and excludes inventory held by intermediaries to whom they sell, such as retailers and hospitals. We also receive information from IMS Health, a supplier of market research to the pharmaceutical industry, which we use to project the prescription demand-based sales for our pharmaceutical products. Our estimates are subject to inherent limitations of estimates that rely on third-party information, as certain third-party information is itself in the form of estimates, and reflect other limitations including lags between the date as of which third-party information is generated and the date on which we receive such information.

(p) Advertising expenses

We expense the costs of advertising as incurred. Advertising expenses were $0.6 million in 2011 (2010: $0.7 million; 2009: $1.7 million).

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(q) Research and development

R&D costs are expensed as incurred. Acquired in-process research and development (IPR&D) is expensed as incurred. Costs to acquire intellectual property, product rights and other similar intangible assets are capitalized and amortized on a straight-line basis over the estimated useful life of the asset. The method of amortization chosen best reflects the manner in which individual intangible assets are consumed.

(r) Taxation

We account for income tax expense based on income before taxes using the asset and liability method. Deferred tax assets (DTAs) and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using the enacted tax rates projected to be in effect for the year in which the differences are expected to reverse. DTAs are recognized for the expected future tax consequences, for all deductible temporary differences and operating loss and tax credit carryforwards. A valuation allowance is required for DTAs if, based on available evidence, it is more likely than not that all or some of the asset will not be realized due to the inability to generate sufficient future taxable income.

(s) Accumulated other comprehensive income/(loss)

Comprehensive income/(loss) is comprised of our net income or loss and OCI. OCI includes certain changes in shareholders’ equity that are excluded from net income. Specifically, we include in OCI changes in the fair value of unrealized gains and losses on our investment securities, certain foreign currency translation adjustments, and adjustments relating to our defined benefit pension plans.

Comprehensive income/(loss) for the years ended December 31, 2011, 2010 and 2009 has been reflected in the Consolidated Statements of Shareholders’ Equity/(Deficit) and Comprehensive Income/(Loss).

(t) Foreign operations

Transactions in foreign currencies are recorded at the exchange rate prevailing at the date of the transaction. The resulting monetary assets and liabilities are translated into U.S. dollars at exchange rates prevailing at subsequent balance sheet dates, and the resulting gains and losses are recognized in the Consolidated Statement of Operations and, where material, separately disclosed.

The functional currency of Elan and most of our subsidiaries is U.S. dollars. For those subsidiaries with a non-U.S. dollar functional currency, their assets and liabilities are translated using year-end rates and income and expenses are translated at average rates. The cumulative effect of exchange differences arising on consolidation of the net investment in overseas subsidiaries are recognized as OCI in the Consolidated Statements of Shareholders’ Equity/(Deficit) and Comprehensive Income/(Loss).

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(u) Share-based compensation

Share-based compensation expense for equity-settled awards made to employees and directors is measured and recognized based on estimated grant date fair values. These awards include employee stock options, restricted stock units (RSUs) and stock purchases related to our employee equity purchase plan (EEPP).

Share-based compensation cost for RSUs awarded to employees and directors is measured based on the closing fair market value of the Company’s shares on the date of grant. Share-based compensation cost for stock options awarded to employees and directors and shares issued under our EEPP is estimated at the grant date based on each option’s fair value as calculated using an option-pricing model. The value of awards expected to vest is recognized as an expense over the requisite service periods.

Share-based compensation expense for equity-settled awards to non-employees in exchange for goods or services is based on the fair value of the awards on the measurement date; which is the earlier of the date at which the commitment for performance by the non-employees to earn the awards is reached and the date at which the non-employees’ performance is complete. We have determined that the expected vest date is the measurement date for awards granted to non-employees.

Estimating the fair value of share-based awards as of the grant or vest date using an option-pricing model, such as the binomial model, is affected by our share price as well as assumptions regarding a number of complex variables. These variables include, but are not limited to, the expected share price volatility over the term of the awards, risk-free interest rates, and actual and projected employee exercise behaviors.

(v) Pensions and other employee benefit plans

We have two defined benefit pension plans covering employees based in Ireland. These plans were closed to new entrants from March 31, 2009. These plans are managed externally and the related pension costs and liabilities are assessed at least annually in accordance with the advice of a qualified professional actuary. Two significant assumptions, the discount rate and the expected rate of return on plan assets, are important elements of expense and/or liability measurement. We evaluate these assumptions at least semi-annually, with the assistance of an actuary. Other assumptions involve employee demographic factors such as retirement patterns, mortality, turnover and the rate of compensation increase. We use a December 31 measurement date and all plan assets and liabilities are reported as of that date. The cost or benefit of plan changes, which increase or decrease benefits for prior employee service, is included in expense on a straight-line basis over the period the employee is expected to receive the benefits.

We recognize actuarial gains and losses using the corridor method. Under the corridor method, to the extent that any cumulative unrecognized net actuarial gain or loss exceeds 10% of the greater of the present value of the defined benefit obligation and the fair value of the plan assets, that portion is recognized over the expected average remaining working lives of the plan participants. Otherwise, the net actuarial gain or loss is recorded in OCI.

We recognize the funded status of benefit plans in our Consolidated Balance Sheet. In addition, we recognize as a component of OCI the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic pension cost of the period.

An event that significantly reduces the expected years of future service of present employees or eliminates for a significant number of employees the accrual of defined benefits for some or all of their future services is a curtailment. A gain arising on a curtailment is recorded in the Consolidated Statement of Operations to the extent that such a gain exceeds any net loss included in OCI. A loss arising on a curtailment is recorded in the Consolidated Statement of Operations to the extent that such a loss exceeds any net gain included in OCI.

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We also have a number of other defined contribution benefit plans, primarily for employees outside of Ireland. The cost of providing these plans is expensed as incurred.

(w) Contingencies

We assess the likelihood of any adverse outcomes to contingencies, including legal matters, as well as the potential range of probable losses. We record accruals for such contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. If an unfavorable outcome is probable, but the amount of the loss cannot be reasonably estimated, we estimate the range of probable loss and accrue the most probable loss within the range. If no amount within the range is deemed more probable, we accrue the minimum amount within the range. If neither a range of loss nor a minimum amount of loss is estimable, then appropriate disclosure is provided, but no amounts are accrued.

(x) Recent accounting pronouncements

In September 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2011-08, “Intangibles – Goodwill and Other: Testing Goodwill for impairment (Topic 350)”, which gives entities the option to first assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 per cent) that the fair value of the reporting unit is less than its carrying amount, including goodwill. If, after assessing the relevant qualitative factors, we determine that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill, then the first and second steps of the goodwill impairment test are not performed. If, after assessing the relevant qualitative factors, we determine that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill, then the first step of the goodwill impairment test is performed. Previous guidance under Topic 350 required an entity to test goodwill for impairment, on at least an annual basis, by comparing the fair value of a reporting unit with its carrying amount, including goodwill (step one). If the fair value of a reporting unit is less than its carrying amount, then the second step of the test must be performed to measure the amount of the impairment loss, if any. The amendment in this update is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, but early adoption is permitted. We have early adopted the amendment for the 2011 fiscal year annual goodwill impairment review and after assessing the relevant qualitative factors, we determined that it was not more likely than not that the fair value of the reporting unit was less than its carrying amount, including goodwill, so the first and second steps of the goodwill impairment test were not performed.

In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, which results in common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. The amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. Some of the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements while other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments are effective for fiscal years beginning after December 15, 2011. We do not expect that the adoption of ASU 2011-04 will have an impact on our consolidated financial position, results of operations or cash flows.

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changes in shareholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total OCI, the components of OCI, and the total of comprehensive income. The amendments are effective for fiscal years beginning after December 15, 2011. We do not expect that the adoption of ASU 2011-05 will have an impact on our consolidated financial position, results of operations or cash flows.

3. Revenue

Revenue for the years ended December 31 consisted of the following (in millions):


	2011		2010		2009
Revenue from the BioNeurology business	$	1,068.1	$	895.6		$	837.1
Revenue from the EDT business⁽¹⁾		177.9		274.1			275.9

Total revenue	$	1,246.0	$	1,169.7		$	1,113.0

⁽¹⁾	The 2011 EDT revenue is for the period up to September 16, 2011, the date of divestment of the EDT business. For further information on the EDT divestment, refer to Note 5.

Revenue from the BioNeurology business for the years ended December 31 consisted of the following (in millions):


	2011		2010		2009
Product revenue:
Tysabri — U.S.	$	746.5	$	593.2	$	508.5
Tysabri — ROW		317.6		258.3		215.8

Total Tysabri		1,064.1		851.5		724.3
Azactam^®		0.9		27.2		81.4
Maxipime^®		0.4		8.2		13.2
Prialt^®		—		6.1		16.5
Royalties		2.7		1.6		1.7

Total product revenue from the BioNeurology business		1,068.1		894.6		837.1
Contract revenue from the BioNeurology business		—		1.0		—

Total revenue from BioNeurology business	$	1,068.1	$	895.6	$	837.1

Tysabri was developed and is now being marketed in collaboration with Biogen Idec. In general, subject to certain limitations imposed by the parties, we share with Biogen Idec most of the development and commercialization costs for Tysabri. Biogen Idec is responsible for manufacturing the product. In the United States, we purchase Tysabri from Biogen Idec and are responsible for distribution. Consequently, we record as revenue the net sales of Tysabri in the U.S. market. We purchase product from Biogen Idec at a price that includes the cost of manufacturing, plus Biogen Idec’s gross profit on Tysabri, and this cost, together with royalties payable to other third parties, is included in cost of sales.

Global in-market net sales of Tysabri for the years ended December 31 consisted of the following (in millions):


	2011		2010		2009
United States	$	746.5	$	593.2	$	508.5
ROW		764.1		636.8		550.7

Total Tysabri global in-market net sales	$	1,510.6	$	1,230.0	$	1,059.2

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Outside of the United States, Biogen Idec is responsible for distribution and we record as revenue our share of the profit or loss on these sales of Tysabri, plus our directly incurred expenses on these sales, which are primarily comprised of royalties, that we incur and are payable by us to third parties and are reimbursed by the collaboration.

In 2011, we recorded net Tysabri ROW revenue of $317.6 million (2010: $258.3 million; 2009: $215.8 million), which was calculated as follows (in millions):


	2011			2010			2009
ROW in-market sales by Biogen Idec	$	764.1		$	636.8		$	550.7
ROW operating expenses incurred by Elan and Biogen Idec		(349.3	)		(303.8	)		(280.6	)

ROW operating profit generated by Elan and Biogen Idec		414.8			333.0			270.1

Elan’s 50% share of Tysabri ROW collaboration operating profit		207.4			166.5			135.0
Elan’s directly incurred costs		110.2			91.8			80.8

Net Tysabri ROW revenue	$	317.6		$	258.3		$	215.8

We ceased distributing Azactam as of March 31, 2010, and Maxipime as of September 30, 2010. The revenue for these products in 2011 relates to adjustments to discounts and allowances associated with sales prior to the cessation of distribution. We divested our Prialt assets and rights in May 2010.

Revenue from the EDT business for the period up to September 16, 2011, the date of divestment of the EDT business, and for the years ended December 31, 2010 and 2009 consisted of the following (in millions):


	2011		2010		2009
Product revenue:
Manufacturing revenue and royalties:
TriCor^® 145	$	35.5	$	54.5	$	61.6
Focalin^® XR/Ritalin^® LA		25.9		33.0		32.6
Ampyra^®		22.6		56.8		—
Verelan^®		18.1		21.8		22.1
Naprelan^®		5.9		12.6		16.0
Skelaxin^®		—		5.9		34.9
Other		60.0		76.8		90.0

Total product revenue from the EDT business		168.0		261.4		257.2

Contract revenue:
Research revenue		6.0		8.2		8.2
Milestone payments		3.9		4.5		10.5

Total contract revenue from the EDT business		9.9		12.7		18.7

Total revenue from the EDT business	$	177.9	$	274.1	$	275.9

4. Segment Information

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker (CODM). Our CODM has been identified as Mr. G. Kelly Martin, chief executive officer (CEO). On September 16, 2011, we announced the completion of the merger between Alkermes, Inc. and

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EDT. Prior to the divestment of the EDT business, our business was organized into two business units: BioNeurology and EDT, and our CEO reviewed the business from this perspective. BioNeurology engages in research, development and commercial activities primarily in the areas of Alzheimer’s disease, Parkinson’s disease and MS. EDT developed and manufactured innovative pharmaceutical products that deliver clinically meaningful benefits to patients, using its extensive experience and proprietary drug technologies in collaboration with pharmaceutical companies. Following the divestment of EDT, we are organized in a single operating segment structure.

Segment performance is evaluated based on operating income/(loss) and Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA). The same accounting principles used for the Group as a whole are applied to segment reporting. Inter-segment pricing is determined on an arm’s length basis.

Our segment results of operations and revenue for the years ended December 31, 2011, 2010 and 2009 for our BioNeurology business unit are disclosed below. The segment results of operations and revenue for the EDT business for the period beginning on January 1, 2011 and ending on September 16, 2011, the date of divestment of the EDT business, and for the years ended December 31, 2010 and 2009 are also disclosed below.

Analysis of results of operations by segment (in millions):


	BioNeurology									EDT									Total
	2011			2010			2009			2011			2010			2009			2011			2010			2009
Segment Revenue	$	1,068.1		$	895.6		$	837.1		$	178.1		$	275.4		$	277.7		$	1,246.2		$	1,171.0		$	1,114.8
Less intersegment sales		—			—			—			(0.2	)		(1.3	)		(1.8	)		(0.2	)		(1.3	)		(1.8	)

Total revenue from external customers		1,068.1			895.6			837.1			177.9			274.1			275.9			1,246.0			1,169.7			1,113.0
Cost of sales		572.7			464.9			444.4			67.0			118.4			116.3			639.7			583.3			560.7

Gross margin		495.4			430.7			392.7			110.9			155.7			159.6			606.3			586.4			552.3
Operating expenses:
Selling, general and administrative expenses		204.9			215.8			232.3			23.8			38.9			35.9			228.7			254.7			268.2
Research and development expenses		198.2			205.0			246.1			34.3			53.7			47.5			232.5			258.7			293.6
Net gain on divestment of business		(652.9	)		(1.0	)		(108.7	)		—			—			—			(652.9	)		(1.0	)		(108.7	)
Other net (gains)/charges		25.9			54.0			61.6			(68.1	)		2.3			5.7			(42.2	)		56.3			67.3
Settlement reserve charge		—			206.3			—			—			—			—			—			206.3			—

Total operating (gains)/expenses		(223.9	)		680.1			431.3			(10.0	)		94.9			89.1			(233.9	)		775.0			520.4

Segment operating income/(loss)	$	719.3		$	(249.4	)	$	(38.6	)	$	120.9		$	60.8		$	70.5		$	840.2		$	(188.6	)	$	31.9

Segment Adjusted EBITDA	$	146.7		$	62.7		$	(20.9	)	$	66.3		$	103.8		$	117.2		$	213.0		$	166.5		$	96.3

Equity method investments	$	675.8		$	209.0		$	235.0		$	—		$	—		$	—		$	675.8		$	209.0		$	235.0
Depreciation and amortization	$	28.0		$	30.3		$	41.2		$	7.8		$	33.0		$	33.8		$	35.8		$	63.3		$	75.0
Capital expenditures	$	23.8		$	28.8		$	34.8		$	7.6		$	15.4		$	8.9		$	31.4		$	44.2		$	43.7
Share-based compensation expense	$	29.1		$	23.6		$	24.3		$	6.2		$	7.9		$	7.2		$	35.3		$	31.5		$	31.5
Intangible asset impairment charges	$	0.3		$	0.9		$	30.6		$	—		$	—		$	—		$	0.3		$	0.9		$	30.6
Property, plant and equipment impairment charges	$	10.0		$	11.0		$	56.2		$	—		$	—		$	—		$	10.0		$	11.0		$	56.2

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Reconciliation of segment operating income/(loss) to segment Adjusted EBITDA (in millions):


	BioNeurology									EDT								Total
	2011			2010			2009			2011			2010			2009		2011			2010			2009
Segment operating income/(loss)	$	719.3		$	(249.4	)	$	(38.6	)	$	120.9		$	60.8		$	70.5	$	840.2		$	(188.6	)	$	31.9
Depreciation and amortization		28.0			30.3			41.2			7.8			33.0			33.8		35.8			63.3			75.0
Amortized fees, net		(0.5	)		(0.1	)		(0.2	)		—			(0.2	)		—		(0.5	)		(0.3	)		(0.2	)
Share-based compensation expense ⁽¹⁾		26.9			22.6			23.8			5.7			7.9			7.2		32.6			30.5			31.0
Net gain on divestment of business		(652.9	)		(1.0	)		(108.7	)		—			—			—		(652.9	)		(1.0	)		(108.7	)
Other net charges		25.9			54.0			61.6			(68.1	)		2.3			5.7		(42.2	)		56.3			67.3
Settlement reserve charge		—			206.3			—			—			—			—		—			206.3			—

Segment Adjusted EBITDA	$	146.7		$	62.7		$	(20.9	)	$	66.3		$	103.8		$	117.2	$	213.0		$	166.5		$	96.3

⁽¹⁾	Share-based compensation expense excludes share-based compensation included in other charges of $1.1 million (2010: $1.0 million; 2009: $1.7 million) and share-based compensation expense of $1.6 million (2010: Nil; 2009: $1.2 million credit) included in the net gain on divestment of business.

Reconciliation of operating income/(loss) to net income/(loss) (in millions):


	2011		2010			2009
Operating income/(loss)	$	840.2	$	(188.6	)	$	31.9
Net interest and investment losses		232.1		134.0			161.7
Provision for income taxes		47.6		2.1			46.4

Net income/(loss)	$	560.5	$	(324.7	)	$	(176.2	)

Revenue analysis by segment:

For an analysis of revenue by segment, please refer to Note 3.

Goodwill (in millions):


	2011		2010
BioNeurology	$	207.4	$	207.4
EDT		—		49.7

Total goodwill	$	207.4	$	257.1

As part of the EDT transaction with Alkermes, Inc., we disposed of goodwill of $49.7 million which had been allocated to the EDT business. For additional information on this transaction, refer to Note 5.

Total assets (in millions):


	2011		2010
BioNeurology	$	1,753.8	$	1,595.2
EDT		—		422.3

Total assets	$	1,753.8	$	2,017.5

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For fiscal years 2011, 2010 and 2009, our revenue is presented below by geographical area. Similarly, total assets, property, plant and equipment, and goodwill and intangible assets are presented below on a geographical basis at December 31, 2011 and 2010.

Revenue by region (by destination of customers) (in millions):


	2011		2010		2009
United States	$	867.8	$	822.8	$	791.0
Ireland		37.7		56.0		65.8
Rest of world		340.5		290.9		256.2

Total revenue	$	1,246.0	$	1,169.7	$	1,113.0

Total assets by region (in millions):


	2011		2010
Ireland	$	920.0	$	852.6
United States		753.8		1,081.7
Bermuda		41.9		56.9
Rest of world		38.1		26.3

Total assets	$	1,753.8	$	2,017.5

Property, plant and equipment by region (in millions):


	2011		2010
United States	$	78.4	$	116.5
Ireland		4.8		171.0

Total property, plant and equipment	$	83.2	$	287.5

Goodwill and other intangible assets by region (in millions):


	2011		2010
United States	$	192.1	$	242.9
Ireland		109.1		124.9
Rest of world		8.7		8.7

Total goodwill and other intangible assets	$	309.9	$	376.5

Major customers

The following customer or collaborator contributed to 10% or more of our total revenue in 2011, 2010 and 2009:


	2011			2010			2009
AmerisourceBergen Corporation		60	%		52	%		49	%
Biogen Idec		25	%		22	%		19	%

No other customer or collaborator accounted for more than 10% of our total revenue in 2011, 2010 or 2009.

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5. Net Gain on Divestment of Business

Disposal of the EDT business

The net gain recorded on divestment of the EDT business amounted to $652.9 million, and was calculated as follows (in millions):


Cash consideration	$	500.0
Investment in Alkermes plc		528.6

Total consideration	$	1,028.6
Property, plant and equipment		(202.0	)
Goodwill and other intangible assets⁽¹⁾		(53.0	)
Working capital and other net assets		(84.5	)
Transaction and other costs		(36.2	)

Net gain on divestment of business	$	652.9

⁽¹⁾	Includes goodwill of $49.7 million allocated to the EDT business.

Disposal of the AIP business

The net gain of $108.7 million recorded in 2009 was calculated as follows (in millions):


Investment in Janssen AI	$	235.0
Intangible assets⁽¹⁾		(68.0	)
Biologics and fill-finish impairment⁽²⁾		(41.2	)
Transaction costs		(16.8	)
Share based compensation		1.2
Other		(1.5	)

Net gain on divestment of business	$	108.7

⁽¹⁾	Includes goodwill of $10.3 million allocated to the AIP business.

⁽²⁾	As a result of the disposal of the AIP business, we re-evaluated the longer term biologics manufacturing and fill-finish requirements, and consequently recorded a non-cash asset impairment charge related to these activities of $41.2 million.

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For additional information relating to our equity method investments in Alkermes plc and Janssen AI, refer to Note 9 to the Consolidated Financial Statements.

6. Other Net (Gains)/Charges

The principal items classified as other net gains and charges include severance, restructuring and other costs, facilities and other asset impairment charges, legal settlements and awards, IPR&D costs, a net loss on divestment of the Prialt business and intangible asset impairment charges. These items have been treated consistently from period to period. We believe that disclosure of significant other charges is meaningful because it provides additional information in relation to analyzing certain items.

Other net (gains)/charges for the years ended December 31 consisted of (in millions):


		2011			2010		2009
(a)	Severance, restructuring and other costs	$	20.4		$	19.6	$	29.0
(b)	Facilities and other asset impairment charges		21.9			16.7		16.1
(c)	Legal settlements and awards		(84.5	)		12.5		(13.4	)
(d)	In-process research and development costs		—			6.0		5.0
(e)	Divestment of Prialt business		—			1.5		—
(f)	Intangible asset impairment charges		—			—		30.6

Total other net (gains)/charges		$	(42.2	)	$	56.3	$	67.3

(a) Severance, restructuring and other costs

During 2011, we incurred severance and restructuring charges of $20.4 million, principally relating to the closure of EDT’s King of Prussia, Pennsylvania site, and charges relating to the reduction in our general and administrative (G&A) and other support activities following the divestment of the EDT business.

During 2010 and 2009, we incurred severance and restructuring charges of $19.6 million and $29.0 million, respectively, principally associated with a realignment and restructuring of our R&D organization within our BioNeurology business, and reduction of related support activities.

(b) Facilities and other asset impairment charges

During 2011, we incurred facilities and other asset impairment charges of $21.9 million, which is comprised of asset impairment charges of $10.0 million and lease charges of $11.9 million relating to the consolidation of our facilities in South San Francisco and the costs associated with the closure of EDT’s King of Prussia, Pennsylvania site.

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(c) Legal settlement gains and awards

During 2011, we entered into an agreement with Alcon Laboratories, Inc. (Alcon) to settle litigation in relation to the application of EDT’s NanoCrystal technology. As part of the settlement agreement with Alcon, we received $6.5 million in full and final settlement.

In 2009, the net legal awards and settlement amount of $13.4 million was comprised of a legal award of $18.0 million received from Watson Pharmaceuticals, Inc. (Watson) and a legal settlement amount of $4.6 million in December 2009 relating to nifedipine antitrust litigation. The $18.0 million legal award primarily related to an agreement with Watson to settle litigation with respect to Watson’s marketing of a generic version of Naprelan. As part of the settlement, Watson stipulated that EDT’s patent at issue is valid and enforceable and that Watson’s generic formulations of Naprelan infringed our patent.

(d) In-process research and development costs

In December 2010, we modified our Collaboration Agreement with Transition Therapeutics, Inc. (Transition) and, in connection with this modification, Transition elected to exercise its opt-out right under the original agreement. Under this amendment, we agreed to pay Transition $9.0 million, which is included in IPR&D charges in 2010. The $9.0 million payment was made in January 2011. Under the modified Collaboration Agreement, Transition will be eligible to receive a further $11.0 million payment from us upon the commencement of the next ELND005 clinical trial, and will no longer be eligible to receive a $25.0 million milestone payment that would have been due upon the commencement of a Phase 3 trial for ELND005 under the terms of the original agreement.

IPR&D charges in 2010 also include a credit of $3.0 million associated with the termination of the License Agreement with PharmatrophiX Inc. (PharmatrophiX). We recorded a $5.0 million IPR&D charge in 2009 upon entering into this agreement with PharmatrophiX.

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(e) Divestment of Prialt business

We divested our Prialt assets and rights to Azur Pharma International Limited (Azur) in May 2010 and recorded a net loss on divestment of $1.5 million, which is comprised of total consideration of $14.6 million less the net book value of Prialt assets and transaction costs. Total consideration comprises cash proceeds received in 2010 of $5.0 million and the present value of deferred non-contingent consideration at the close of the transaction of $9.6 million, which is expected to be received during 2012. We are also entitled to receive additional performance-related milestones and royalties.

(f) Intangible asset impairment charges

7. Settlement Reserve Charge

In December 2010, we finalized the agreement-in-principle with the U.S. Attorney’s Office for the District of Massachusetts to resolve all aspects of the U.S. Department of Justice’s investigation of sales and marketing practices for Zonegran^® (zonisamide), an antiepileptic prescription medicine that we divested in 2004. During 2010, we recorded a $206.3 million reserve charge for the settlement, interest and related costs and the settlement was paid in March 2011.

This resolution of the Zonegran investigation could give rise to other investigations or litigation by state government entities or private parties.

8. Net Interest Expense

Net interest expense for the years ended December 31 consisted of the following (in millions):


	2011			2010			2009
Interest expense:
2016 Notes issued October 2009	$	52.3		$	54.5		$	13.5
2013 Fixed Rate Notes		31.8			40.9			41.3
2011 Floating Rate Notes		—			9.4			15.0
2016 Notes issued August 2010		16.7			6.5			—
2013 Floating Rate Notes		0.4			5.2			7.7
2011 Fixed Rate Notes		—			—			52.9
Amortization of deferred financing costs		5.3			5.4			5.5
Foreign exchange (gain)/loss		(1.0	)		(3.1	)		2.4
Other		1.3			0.2			0.9

Interest expense	$	106.8		$	119.0		$	139.2

Interest income:
Cash and cash equivalents interest	$	(0.7	)	$	(1.2	)	$	(1.1	)
Investment interest		(0.2	)		—			(0.2	)

Interest income	$	(0.9	)	$	(1.2	)	$	(1.3	)

Net interest expense	$	105.9		$	117.8		$	137.9

For additional information on our debt, refer to Note 22.

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9. Equity Method Investments

The carrying amount of equity method investments at December 31 of each year consisted of the following (in millions):


	Janssen AI			Proteostasis			Alkermes plc			Total
January 1, 2010	$	235.0		$	—		$	—		$	235.0
Net loss on equity method investments		(26.0	)		—			—			(26.0	)

December 31, 2010		209.0			—			—			209.0
Addition		—			20.0			528.6			548.6
Net loss on equity method investments		(78.4	)		(2.7	)		(0.7	)		(81.8	)

December 31, 2011	$	130.6		$	17.3		$	527.9		$	675.8

Janssen AI

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Under the equity method, investors are required to recognize their share of the earnings or losses of an investee in the periods for which they are reported in the financial statements of the investee as this is normally considered an appropriate means of recognizing increases or decreases in the economic resources underlying the investments. However, Johnson & Johnson has committed to wholly fund up to an initial $500.0 million of development and commercialization expenses incurred by Janssen AI so the recognition by Elan of a share of Janssen AI losses that are solely funded by Johnson & Johnson’s $500.0 million commitment would result in an inappropriate decrease in Elan’s share of the economic resources underlying the investment in Janssen AI. Accordingly, until the $500.0 million funding commitment is fully utilized, we have applied the HLBV method to determine how an increase or decrease in net assets of Janssen AI affects Elan’s interest in the net assets of Janssen AI on a period by period basis. Under the HLBV method, an investor determines its share of the earnings or losses of an investee by determining the difference between its claim on the investee’s book value at the end and beginning of the period. After adjusting for the basis differences described above, Elan’s claim on Janssen AI’s book value as of December 31, 2011 was $117.3 million (2010: $117.3 million).

As of December 31, 2011, the remaining unspent amount of the initial $500.0 million funding commitment was $57.6 million (2010: $272.0 million).

Summarized balance sheet amounts of Janssen AI are presented below at December 31 of each year (in millions):


	2011		2010
Current assets	$	12.9	$	14.3
Non-current assets	$	688.6	$	688.7
Current liabilities	$	60.2	$	34.5
Non-current liabilities	$	8.9	$	9.0

Summarized income statement amounts of Janssen AI is presented below for the years to December 31, 2011 and 2010 and for the period from September 17, 2009 (the date we acquired the equity interest in Janssen AI) to December 31, 2009 (in millions):


	2011		2010		2009
R&D expenses for the year/period	$	185.3	$	141.2		$	36.0
Net loss for the year/period	$	216.3	$	173.6		$	47.0

Alkermes plc

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fair value of the net assets of Alkermes plc on the date of the transaction, this difference principally relates to identifiable intangible assets and goodwill attributable to the Alkermes, Inc. business prior to its acquisition of EDT. We recognize our share of the earnings or losses of Alkermes plc on a one-quarter time lag as Alkermes plc’s financial information is generally not publicly available when we report our quarterly and annual results.

For the year ended December 31, 2011, we recorded a net loss on the equity method investment of $0.7 million on a one- quarter time lag basis, representing our share of the net losses of Alkermes plc from the date of acquisition of the equity interest on September 16, 2011 through September 30, 2011.

Summarized financial information of Alkermes plc (as reported by Alkermes plc) as of September 30, 2011 is presented below (in millions).


	2011
Current assets	$	355.7
Non-current assets	$	1,148.4
Current liabilities	$	0.9
Non-current liabilities	$	504.1

For additional information on the EDT transaction with Alkermes, Inc. refer to Note 5.

Proteostasis

In May 2011, we entered into a strategic business relationship with Proteostasis to advance Proteostasis’ platform for the discovery and development of disease-modifying, small molecule drugs and diagnostics for the treatment of neurodegenerative disorders such as Parkinson’s disease, Huntington’s disease, MS, amyotrophic lateral sclerosis, and a broad array of dementia-related diseases including Alzheimer’s.

Under terms of the agreement, we invested $20.0 million into equity capital of Proteostasis and became a 24% shareholder. We have the opportunity to invest an additional $30 million in collaboration funding over five years and obtained a right of first negotiation to exclusively license potential compounds. Elan CEO, Kelly Martin, has joined the Board of Directors of Proteostasis and Elan Chief Scientific Officer, Dale Schenk, has joined its Scientific Advisory Board.

10. Net Charge on Debt Retirement

2011

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2010

During 2010, we redeemed the $300.0 million in aggregate principal amount of the Senior Floating Rate Notes due November 15, 2011 (2011 Floating Rate Notes). We also redeemed $15.5 million of the outstanding aggregate principal amount of the 2013 Fixed Rate Notes and $139.5 million of the outstanding aggregate principal amount of the 2013 Floating Rate Notes. Refer to Note 22 for additional information on the 2010 debt redemptions.

2009

For additional information related to our debt, please refer to Note 22.

11. Income Taxes

Provision for income taxes for the years ended December 31 consisted of the following (in millions):


	2011			2010			2009
Irish corporation tax — current	$	—		$	0.5		$	0.3
Irish corporation tax — deferred		(0.1	)		0.3			1.0
Foreign taxes — current		(3.4	)		1.5			9.3
Foreign taxes — deferred		51.1			(0.2	)		35.8

Provision for income taxes	$	47.6		$	2.1		$	46.4

Tax expense reported in shareholders’ equity related to equity awards		—			2.4			3.6

Current tax, including Irish corporation tax and foreign taxes, is provided on our taxable profits, using the tax rates and laws that have been enacted by the balance sheet date. In each of the three years ended December 31, 2011, 2010 and 2009, substantially all of our income in Ireland was not subject to tax due to the availability of tax losses or other tax reliefs.

The overall tax provision for 2011 was $47.6 million (2010: $4.5 million; 2009: $50.0 million). There has been no amounts (2010: $2.4 million expense; 2009: $3.6 million expense) debited to shareholders’ equity to reflect net shortfalls related to equity awards. The entire $47.6 million provision (2010: $2.1 million; 2009: $46.4 million) is allocated to ordinary activities.

The total tax expense of $47.6 million for 2011 reflects federal and state taxes at standard rates in the jurisdictions in which we operate, foreign withholding tax and includes a deferred tax expense of $51.0 million for 2011 (2010: $0.1 million; 2009: $36.8 million).

Of the $51.0 million deferred tax expense, $40.0 million arises due to the application of new state tax income attribution rules. Following the introduction of these new rules, we no longer expect to benefit from certain state tax loss and credit carry forwards and have reduced our state DTAs by this amount. The tax benefits had been recognized in 2008 when it was considered more likely than not that the Company would be able to utilize these tax benefits. This is a non-cash deferred tax charge and we expect that both our future cash taxes and

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our future effective tax rates will be lower as a result of the application of the new rules, which became effective for tax years commencing on or after January 1, 2011.

The effective tax rate differs from the Irish tax rate of 12.5% as follows:


	2011			2010			2009
Irish standard tax rate		12.5	%		12.5	%		12.5	%
Taxes at the Irish standard rate	$	76.0		$	(40.3	)	$	(16.2	)
Irish income at rates other than Irish standard rate		(50.2	)		(0.6	)		0.5
Foreign income at rates other than the Irish standard rate		(29.4	)		(68.0	)		2.1
Deferred tax impact of new state tax rules		40.0			—			—
Adjustments to non U.S. valuation allowance		2.6			47.7			72.1
Zonegran settlement⁽¹⁾		—			59.2			—
Permanent differences		7.7			3.4			(6.6	)
R&D tax credit		(0.4	)		(2.3	)		(3.0	)
Other		1.3			3.0			(2.5	)

Income tax expense	$	47.6		$	2.1		$	46.4

⁽¹⁾	In 2010, $169.2 million of the $206.3 million settlement reserve charge related to the Zonegran global settlement resolving all U.S. federal and related state Medicaid claims will not be deductible for tax purposes, thus creating a $59.2 million difference in the 2010 tax rate reconciliation.

The Irish income rate differential reconciling item of $50.2 million for the year ended December 31, 2011, primarily relates to an Irish capital gains tax participation exemption following the sale of EDT.

The foreign rate differential reconciling item of $29.4 million for the year ended December 31, 2011, was comprised of a $33.2 million tax reduction related to the Bermudian income, partially offset by an increase in tax of $2.4 million related to U.S. income and an increase of $1.4 million related to ROW income.

The foreign rate differential reconciling item of $68.0 million for the year ended December 31, 2010, was comprised of a $46.4 million tax reduction related to the Zonegran settlement charge of $206.3 million, and a $33.5 million tax reduction related to Bermudian income, partially offset by an increase in tax of $11.9 million related to U.S. income.

The foreign rate differential reconciling item of $2.1 million for the year ended December 31, 2009 was comprised of an increase in tax of $34.2 million related to U.S. income and $2.9 million related to ROW income, partially offset by a $35.0 million tax reduction related to Bermudian income.

Distribution of income/(loss) before provision for income taxes by geographical area for the years ended December 31 consisted of the following (in millions):


	2011		2010			2009
Ireland	$	327.6	$	(405.9	)		$	(519.7	)
Foreign		280.5		83.3				389.9

Income/(loss) before provision for income taxes	$	608.1	$	(322.6	)		$	(129.8	)

135

Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Deferred Tax

The full potential amounts of deferred tax at December 31 of each year consisted of the following deferred tax assets and liabilities (in millions):


	2011			2010
Deferred tax liabilities:

Property, plant and equipment	$	(0.3	)	$	(4.4	)

Total deferred tax liabilities	$	(0.3	)	$	(4.4	)

Deferred tax assets:
Net operating losses	$	327.5		$	420.5
Deferred interest		236.4			215.4
Intangibles/capitalized items		8.2			13.4
Tax credits		84.8			84.1
Reserves/provisions		41.1			56.8
Property, plant and equipment		6.8			3.8
Share-based compensation expense		30.8			34.7
Other		16.4			4.8

Total deferred tax assets	$	752.0		$	833.5

Valuation allowance	$	(606.6	)	$	(633.0	)

Net deferred tax asset	$	145.1		$	196.1

The valuation allowance recorded against the DTAs as of December 31, 2011, was $606.6 million. The net change in the valuation allowance for 2011 was a reduction of $26.4 million (2010: $46.7 million increase; 2009: $97.5 million increase). The reduction in the valuation allowance includes the disposal of approximately $60 million of EDT DTAs following the sale of EDT to Alkermes. A full valuation allowance was previously recorded against these DTAs.

We have adjusted the above DTAs in relation to net operating losses to exclude stock option deductions. In 2011, we did not record any adjustment to shareholders’ equity (2010: $2.4 million reduction; 2009: $3.6 million reduction) to reflect tax shortfalls or windfalls related to equity awards.

The gross amounts of unused tax loss carryforwards with their expiration dates after adjusting for uncertain tax positions are as follows (in millions):


	At December 31, 2011
	Ireland		U.S. State		U.S. Federal		Rest of World		Total
One year	$	—	$	2.3	$	—	$	8.6	$	10.9
Two years		—		—		—		5.5		5.5
Three years		—		—		—		—		—
Four years		—		41.0		—		—		41.0
Five years		—		83.3		—		—		83.3
More than five years		2,477.0		74.8		494.6		0.7		3,047.1

Total	$	2,477.0	$	201.4	$	494.6	$	14.8	$	3,187.8

At December 31, 2011, certain of our Irish subsidiaries had net operating loss carryovers for income tax purposes of $2,477.0 million. These can be carried forward indefinitely but are limited to the same trade/trades.

136

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At December 31, 2011, certain U.S. subsidiaries had net operating loss carryovers for federal income tax purposes of approximately $494.6 million and for state income tax purposes of approximately $201.4 million. These net operating losses include stock option deductions. The federal net operating losses expire from 2018 to 2031. Due to changes in state tax attribution rules, we have increased the valuation allowance against certain state tax loss carryovers to $4.1 million. The state net operating losses expire from 2012 to 2031. In addition, at December 31, 2011, certain U.S. subsidiaries had federal research and orphan drug credit carryovers of $52.3 million and alternative minimum tax (AMT) credits of $6.0 million. $38.2 million of research credits will expire from 2018 through 2030 and $14.1 million of orphan drug credits (against which a $4.4 million valuation allowance has been established) will expire from 2013 through 2020. The AMT credits will not expire. Certain U.S. subsidiaries also had state credit carryovers of $45.9 million, mostly research credits, which can be carried to subsequent tax years indefinitely. Due to changes to state tax attribution rules the U.S. subsidiaries will be unlikely to benefit from its state research credit carryovers. Accordingly we have established a full valuation allowance against the state research credit carryovers of $45.9 million. We may have had “changes in ownership” as described in the U.S. Internal Revenue Code (IRC) Section 382 in 2011. Consequently, utilization of federal and state net operating losses and credits may be subject to certain annual limitations. We do not expect the effects from potential IRC Section 382 limitations will have a significant impact on the utilization of net operating losses.

The remaining loss carryovers of $14.8 million have arisen in The Netherlands and are subject to time limits and other local rules. No taxes have been provided for the unremitted earnings of our overseas subsidiaries as any tax basis differences relating to investments in these overseas subsidiaries are considered to be permanent in duration. Cumulative unremitted earnings of overseas subsidiaries totaled approximately $2,973.9 million at December 31, 2011 (2010: $2,708.9 million). Unremitted earnings may be liable to overseas taxes or Irish taxation if they were to be distributed as dividends. It is impracticable to determine at this time the potential amount of additional tax due upon remittance of such earnings.

At December 31, 2011 approximately $553.2 million of net operating losses are derived from equity awards ($472.0 million of federal losses and $81.2 million of state losses) and we may record a credit of up to $165.7 million to shareholder’s equity to the extent that these losses are utilized in the future.

Our gross unrecognized tax benefits at December 31, 2011, were $61.5 million (2010: $73.4 million; 2009: $71.3 million), of which $48.4 million (2010: $72.2 million; 2009: $60.4 million), if recognized, would affect the tax charge and as such would impact the effective tax rate. We report accrued interest and penalties related to unrecognized tax benefits in income tax expense. During 2011, there was a $0.1 million decrease in the interest related to unrecognized tax benefits and in total, as of December 31, 2011, we have recorded a liability for potential penalties and interest of $0.5 million and $1.7 million, respectively.

We do not expect our unrecognized tax benefits to change significantly over the next 12 months.

Activity related to our unrecognized tax benefits for the years ended December 31 consisted of the following (in millions):


	2011			2010			2009
Balance at January 1	$	73.4		$	71.3		$	68.9
Tax positions related to current year:
Additions		3.3			3.2			3.0
Tax positions related to prior years:
Additions		—			—			2.7
Reduction		(13.1	)		(1.0	)		(0.8	)
Settlements		(2.1	)		—			(1.2	)
Expiration of statutes of limitations		—			(0.1	)		(1.3	)

Balance at December 31	$	61.5		$	73.4		$	71.3

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Internal Revenue Service completed an examination of our U.S. income tax returns for 2006 to 2009 in the fourth quarter of 2011. This examination resulted in a $15.2 million reduction in our unrecognized tax benefits.

Our major taxing jurisdictions include Ireland and the United States (federal and state). These jurisdictions have varying statutes of limitations. In the United States, the 2007 through 2011 tax years generally remain subject to examination by the respective tax authorities. Additionally, because of our U.S. loss carryforwards, years from 1995 through 2006 may be adjusted. These years generally remain open for three to four years after the loss carryforwards have been utilized. In Ireland, the tax years 2007 to 2011 remain subject to examination by the Irish tax authorities.

12. Net Income/(Loss) Per Share

Basic income/(loss) per share is computed by dividing the net income/(loss) for the period available to ordinary shareholders by the sum of the weighted-average number of Ordinary Shares outstanding during the period. Diluted net income/(loss) per share is computed by dividing the net income/(loss) for the period by the weighted-average number of Ordinary Shares outstanding and, when dilutive, adjusted for the effect of all dilutive potential Ordinary Shares, including stock options and RSUs.

Basic and diluted net income/(loss) per share for the years ended December 31 is as follows:


	2011		2010			2009
Net income/(loss) (in millions)	$	560.5	$	(324.7	)	$	(176.2	)

Basic weighted-average number of Ordinary Shares outstanding (in millions)		587.6		584.9			506.8
Basic net income/(loss) per Ordinary Share	$	0.95	$	(0.56	)	$	(0.35	)

Diluted weighted-average number of Ordinary Shares outstanding (in millions)		593.5		584.9			506.8
Diluted net income/(loss) per Ordinary Share	$	0.94	$	(0.56	)	$	(0.35	)

As of December 31, 2011, there were stock options and RSUs outstanding of 23.4 million shares (2010: 22.9 million shares; 2009: 21.3 million shares), which could potentially have a dilutive impact in the future, but which were anti-dilutive in 2011, 2010 and 2009.

13. Restricted Cash

We had total restricted cash (current and non-current) of $16.3 million at December 31, 2011 (2010: $223.1 million), which relates to amounts pledged to secure certain letters of credit. As of December 31, 2010, $203.7 million of the total restricted cash balance related to an amount placed in an escrow account to cover the proposed Zonegran settlement amount. The Zonegran settlement was paid in March 2011. For additional information on the Zonegran settlement, refer to Note 7.

14. Accounts Receivable, Net

Accounts receivable at December 31 of each year consisted of the following (in millions):


	2011		2010
Accounts receivable	$	167.7	$	192.0
Less amounts provided for doubtful accounts		—		(0.4	)

Accounts receivable, net	$	167.7	$	191.6

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The decrease in the accounts receivable balance is principally due to the divestment of the EDT business. For additional information, refer to Note 5.

Allowance for doubtful accounts activity at December 31 of each year consisted of the following (in millions):


	2011			2010
Allowance for doubtful accounts:
Balance at 1 January	$	(0.4	)	$	(0.4	)
Income statement charge		—			(0.4	)
Reversal of prior year allowance		0.4			—
Amounts utilized		—			0.4

Balance at 31 December	$	—		$	(0.4	)

The following customer or collaborator accounts for more than 10% of our accounts receivable at December 31, 2011 and/or 2010:


	2011			2010
AmerisourceBergen Corp.		65	%		44	%
Biogen Idec		35	%		25	%

No other customer and collaborator accounted for more than 10% of our accounts receivable balance at either December 31, 2011 or 2010.

As of December 31, 2011, trade receivables of $Nil (2010: $0.6 million) were past due but not impaired. The ageing analysis of these trade receivables at December 31 of each year consisted of the following (in millions):


	2011		2010
Up to 3 months	$	—	$	0.6

At December 31, 2011, trade receivables of $Nil (2010: $0.4 million) were impaired and provided for.

15. Investment Securities

Current investment securities

Current investment securities at December 31 of each year consisted of the following (in millions):


	2011			2010
Equity securities — current, at cost	$	0.3		$	0.4
Unrealized gains on equity securities		0.1			1.7
Unrealized losses on equity securities		(0.1	)		(0.1	)

Total investment securities — current	$	0.3		$	2.0

Equity securities — current

Marketable equity securities primarily consists of investments in emerging pharmaceutical and biotechnology companies. The fair market value of these securities was $0.3 million at December 31, 2011 (2010: $2.0 million).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Non-current investment securities

Non-current investment securities at December 31 of each year consisted of the following (in millions):


	2011		2010
Equity securities — non-current, at cost less impairments	$	9.8	$	9.2
Debt securities — non-current, at cost less impairments		—		0.3
Unrealized (losses)/gains on debt securities		—		(0.1	)

Total investment securities — non-current	$	9.8	$	9.4

Equity securities — non-current

Non-current equity securities are comprised of investments held in privately held biotech companies recorded at cost, less impairments.

Debt securities — non-current

During 2011, we disposed of our non-current debt securities. At December 31, 2010, the non-current debt securities balance consisted of an investment in auction rate securities (ARS), which had a fair market value of $0.2 million, including an unrealized loss of $0.1 million.

Net Investment Gains (in millions)


	2011			2010			2009
Net gains on sale of current investment securities	$	(0.1	)	$	(4.9	)	$	(1.2	)
Derivative fair value gains		—			(1.2	)		(0.3	)
Net gains on sale of non-current investment securities		(2.3	)		(7.9	)		—

Net investment gains on investment securities		(2.4	)		(14.0	)		(1.5	)
Other		(0.2	)		1.2			0.9

Net investment gains	$	(2.6	)	$	(12.8	)	$	(0.6	)

The framework used for measuring the fair value of our investment securities is described in Note 27.

16. Inventory

Product inventories at December 31 of each year consisted of the following (in millions):


	2011		2010
Raw materials	$	—	$	10.0
Work-in-process		—		6.0
Finished goods		23.8		23.0

Total inventory	$	23.8	$	39.0

The decrease in the inventory balance is principally due to the divestment of the EDT business.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

17. Prepaid and Other Current Assets

Prepaid and other current assets at December 31 of each year consisted of the following (in millions):


	2011		2010
Deferred consideration	$	11.4	$	—
Prepayments		10.8		11.6
Other current assets		3.5		3.8

Total prepaid and other current assets	$	25.7	$	15.4

The deferred consideration balance relates to the present value of deferred non-contingent consideration receivable from Azur in respect of the divestment of the Prialt assets and rights in May 2010. The deferred non-contingent consideration receivable balance has been reclassified from other non-current assets as we expect to receive this consideration during 2012. For additional information on this transaction, refer to Note 6.

18. Property, Plant and Equipment


	Land & Buildings			Plant & Equipment			Total
	Land & Buildings			Plant & Equipment			Total
	(In millions)
Cost:
At January 1, 2010	$	353.0		$	304.5		$	657.5
Additions		24.3			16.5			40.8
Disposals		(1.4	)		(1.1	)		(2.5	)

At December 31, 2010	$	375.9		$	319.9		$	695.8

Additions		19.4			9.4			28.8
Impairment		(29.8	)		(14.6	)		(44.4	)
Disposals		(283.3	)		(250.8	)		(534.1	)

At December 31, 2011	$	82.2		$	63.9		$	146.1

Accumulated depreciation and impairment:
At January 1, 2010	$	(143.1	)	$	(221.6	)	$	(364.7	)
Charged in year		(13.4	)		(21.5	)		(34.9	)
Impairment		(10.7	)		(0.3	)		(11.0	)
Disposals		—			2.3			2.3

At December 31, 2010	$	(167.2	)	$	(241.1	)	$	(408.3	)

Charged in year		(8.6	)		(11.3	)		(19.9	)
Impairment		21.5			12.9			34.4
Disposals		132.6			198.3			330.9

At December 31, 2011		(21.7	)		(41.2	)		(62.9	)

Net book value: December 31, 2011	$	60.5		$	22.7		$	83.2

Net book value: December 31, 2010	$	208.7		$	78.8		$	287.5

On September 16, 2011, we announced the completion of the merger between Alkermes, Inc. and EDT. In connection with this transaction, we disposed of land and buildings with a net book value of $150.7 million and plant and equipment with a net book value of $51.3 million related to EDT. For additional information on this transaction, refer to Note 5.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During 2011, we recorded an asset impairment charge of $10.0 million within other net charges in the Consolidated Statement of Operations relating to a consolidation of facilities in South San Francisco and the closure of EDT’s King of Prussia, Pennsylvania site. In 2010, the asset impairment charge of $11.0 million related to the consolidation of facilities in South San Francisco.

The net book value of assets acquired under capital leases at December 31, 2011 amounted to $Nil (2010: $1.5 million). Depreciation expense for these assets for the year ended December 31, 2011 amounted to $0.3 million (2010: $1.4 million; 2009: $2.1 million).

19. Goodwill and Other Intangible Assets


	Goodwill			Other Intangible Assets			Total
	(In millions)
Cost:
At January 1, 2010	$	257.7		$	783.6		$	1,041.3
Additions		—			3.4			3.4
Disposals		(0.6	)		(361.0	)		(361.6	)

At December 31, 2010	$	257.1		$	426.0		$	683.1

Additions		—			2.6			2.6
Disposals		(49.7	)		(173.0	)		(222.7	)
Impairment		—			(0.3	)		(0.3	)

At December 31, 2011	$	207.4		$	255.3		$	462.7

Accumulated amortization:
At January 1, 2010	$	—		$	(623.9	)	$	(623.9	)
Charged in year		—			(28.4	)		(28.4	)
Disposals		—			346.6			346.6
Impairment		—			(0.9	)		(0.9	)

At December 31, 2010	$	—		$	(306.6	)	$	(306.6	)

Charged in year		—			(15.9	)		(15.9	)
Disposals		—			169.7			169.7

At December 31, 2011		—			(152.8	)		(152.8	)

Net book value: December 31, 2011	$	207.4		$	102.5		$	309.9

Net book value: December 31, 2010	$	257.1		$	119.4		$	376.5

Other intangible assets consist primarily of patents, licenses, intellectual property and computer software as follows (in millions):


	2011		2010
Tysabri	$	96.9	$	109.5
Other intangible assets		5.6		9.9

Total other intangible assets	$	102.5	$	119.4

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Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On September 16, 2011, we announced the completion of the merger between Alkermes, Inc. and EDT. As part of this transaction, we disposed of patents, licenses, intellectual property and other intangible assets related to EDT with a net book value of $3.3 million. We also disposed of goodwill of $49.7 million which was allocated to the EDT business. For additional information on this transaction, refer to Note 5. In 2011, we also recorded an impairment charge of $0.3 million (2010: $0.9 million) in respect of computer software which will no longer be utilized.

We divested our Prialt assets and rights to Azur in May 2010. As part of the Prialt divestment, we disposed of patents, licenses and intellectual property with a net book value of $14.3 million (comprised of cost of $88.2 million net of accumulated amortization of $73.9 million). We also disposed of $0.6 million of goodwill which was allocated to the Prialt business. For additional information relating to the net loss on Prialt divestment, please refer to Note 6. Other disposals during 2010 include the write-off of the fully amortized Maxipime and Azactam intangible assets as we ceased distribution of both products in 2010 (comprised of cost of $258.4 million net of accumulated amortization of $258.4 million).

The weighted-average remaining useful life for other intangible assets at December 31, 2011 was 7.6 years (2010: 8.4 years).

Amortization expense for the year ended December 31, 2011 amounted to $15.9 million (2010: $28.4 million; 2009: $40.5 million) and is recorded as cost of sales, selling, general and administrative (SG&A) expenses and R&D expenses in the Consolidated Statements of Operations, as it relates to the respective functions.

As of December 31, 2011, our expected future amortization expense of currently held other intangible assets is as follows (in millions):


Year ending December 31, 2012	$	14.7
2013		14.3
2014		13.5
2015		12.6
2016		12.1
2017 and thereafter		35.3

Total	$	102.5

20. Other Assets

Non-current other assets at December 31 of each year consisted of the following (in millions):


	2011		2010
Deferred financing costs	$	11.1	$	21.3
Deferred consideration		—		10.2
Other		13.4		13.9

Total other assets	$	24.5	$	45.4

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Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

21. Accrued and Other Current Liabilities, and Other Long-Term Liabilities

Accrued and other current liabilities at December 31 of each year consisted of the following (in millions):


	2011		2010
Accrued royalties payable	$	73.3	$	63.3
Payroll and related taxes		32.5		40.9
Accrued rebates		31.7		22.6
Sales and marketing accruals		23.4		22.0
Clinical trial accruals		15.2		13.8
Accrued interest		11.4		18.3
Restructuring accruals		9.7		12.9
Deferred rent		1.9		3.5
Litigation accruals		0.7		207.0
Deferred revenue		0.3		1.0
Transition Collaboration Agreement modification payment		—		9.0
Other accruals		29.8		28.2

Total accrued and other current liabilities	$	229.9	$	442.5

The litigation accruals balance at December 31, 2010 included a $206.3 million settlement reserve relating to Zonegran. For further information on the Zonegran settlement, please refer to Notes 7 and 30. For further information on the Transition Therapeutics payment, please refer to Note 6.

Other long-term liabilities at December 31 of each year consisted of the following (in millions):


	2011		2010
Deferred rent	$	17.0	$	18.8
Unfunded pension liability		12.2		19.9
Accrued income tax payable		6.2		11.1
Deferred revenue		0.4		0.7
Other		24.9		20.6

Total other long-term liabilities	$	60.7	$	71.1

The unfunded pension liability at December 31, 2011 and 2010 relates to two defined benefit pension plans. For additional information, refer to Note 25.

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Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Severance, restructuring and other charges accrual

The following table provides a rollforward of the severance, restructuring and other charges accrual (in millions):


Balance at December 31, 2008	$	10.9
Restructuring and other charges		30.3
Reversal of prior year accrual		(0.6	)
Cash payments		(34.8	)
Non-cash charges		(1.7	)

Balance at December 31, 2009	$	4.1
Restructuring and other charges		19.4
Reversal of prior year accrual		(0.5	)
Cash payments		(9.1	)
Non-cash charges		(1.0	)

Balance at December 31, 2010	$	12.9
Restructuring and other charges		20.4
Reversal of prior year accrual		(1.0	)
Cash payments		(21.5	)
Non-cash charges		(1.1	)

Balance at December 31, 2011	$	9.7

22. Long-Term Debt

Long-term debt at December 31, 2011 consisted of the following (in millions):


	Original Maturity		Principal Amount		Original Issue Discount			Carrying Value
	Original Maturity		Principal Amount		Original Issue Discount			Carrying Value
2016 Notes issued October 2009		October 2016		472.1		(4.5	)		467.6
2016 Notes issued August 2010		October 2016		152.4		(5.0	)		147.4

Total debt			$	624.5	$	(9.5	)	$	615.0

Long-term debt at December 31, 2010 consisted of the following (in millions):


	Original Maturity		Principal Amount		Original Issue Discount			Carrying Value
	Original Maturity		Principal Amount		Original Issue Discount			Carrying Value
2013 Fixed Rate Notes		December 2013		449.5		—			449.5
2013 Floating Rate Notes		December 2013		10.5		—			10.5
2016 Notes issued October 2009		October 2016		625.0		(7.0	)		618.0
2016 Notes issued August 2010		October 2016		200.0		(7.6	)		192.4

Total debt			$	1,285.0	$	(14.6	)	$	1,270.4

2016 Notes issued October 2009

In October 2009, we completed the offering and sale of $625.0 million in aggregate principal amount of the 2016 Notes issued October 2009, issued by Elan Finance plc and guaranteed by Elan Corporation, plc and certain

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of our subsidiaries. The 2016 Notes issued October 2009 bear interest at an annual rate of 8.75%. On September 16, 2011, we issued an offer (the Asset Sale Offer) to purchase up to $721.2 million in aggregate principal amount of the Senior Notes consisting of the 2013 Fixed Rate Notes, the 2013 Floating Rate Notes, the 2016 Notes issued October 2009 and the 2016 Notes issued August 2010, in accordance with the terms of the indenture governing these notes, at a purchase price of 100% of the aggregate principal amount thereof, plus accrued and unpaid interest to the date of payment. The Asset Sale Offer expired on October 14, 2011 and holders of $0.5 million of the 2016 Notes issued October 2009 tendered their notes. On October 20, 2011, we repurchased $152.4 million in aggregate principal amount of the 2016 Notes issued October 2009 in a separate private transaction.

At any time prior to October 15, 2012, we may redeem the outstanding 2016 Notes issued October 2009, in whole, but not in part, at a price equal to 100% of their principal amount, plus a make-whole premium and accrued but unpaid interest. We may redeem the 2016 Notes issued October 2009, in whole or in part, beginning on October 15, 2012 at an initial redemption price of 108.75% of their principal amount, which decreases to par over time, plus accrued and unpaid interest. In addition, at any time prior to October 15, 2012, we may redeem up to 35% of the 2016 Notes issued October 2009, using the proceeds of certain equity offerings at a redemption price of 108.75% of the principal, plus accrued and unpaid interest. Interest is paid in cash semi-annually. For additional information, refer to Note 33.

The outstanding $472.1 million principal amount of the 2016 Notes issued October 2009 at December 31, 2011 (2010: $625.0 million) is recorded net of the unamortized original issue discount of $4.5 million (2010: $7.0 million).

2016 Notes issued August 2010

In August 2010, we completed the offering and sale of $200.0 million in aggregate principal amount of the 2016 Notes issued August 2010, issued by Elan Finance plc and guaranteed by Elan Corporation, plc and certain of our subsidiaries. The 2016 Notes issued August 2010 bear interest at an annual rate of 8.75%. On October 20, 2011, we repurchased $47.6 million in aggregate principal amount of the 2016 Notes issued August 2010 in a private transaction.

At any time prior to October 15, 2012, we may redeem the outstanding 2016 Notes issued August 2010, in whole, but not in part, at a price equal to 100% of their principal amount, plus a make-whole premium and accrued but unpaid interest. We may redeem the outstanding 2016 Notes issued August 2010, in whole or in part, beginning on October 15, 2012 at an initial redemption price of 108.75% of their principal amount, which decreases to par over time, plus accrued and unpaid interest. In addition, at any time prior to October 15, 2012, we may redeem up to 35% of the 2016 Notes issued August 2010, using the proceeds of certain equity offerings at a redemption price of 108.75% of the principal, plus accrued and unpaid interest. Interest is paid in cash semi-annually. For additional information, refer to Note 33.

The outstanding $152.4 million principal amount of the 2016 Notes issued August 2010 at December 31, 2011 (2010: $200.0 million) is recorded net of the unamortized original issue discount of $5.0 million (2010: $7.6 million).

2013 Fixed Rate Notes

In November 2006, we completed the offering and sale of $465.0 million in aggregate principal amount of the 2013 Fixed Rate Notes, issued by Elan Finance plc. Elan Corporation, plc and certain of our subsidiaries have guaranteed the 2013 Fixed Rate Notes. The 2013 Fixed Rate Notes bear interest at an annual rate of 8.875%. Under the terms of our debt covenants, we were required to apply some of the proceeds received from the September 17, 2009 transaction with Johnson & Johnson to make a pro-rata offer to repurchase a portion of our debt at par. Accordingly, on August 30, 2010, we issued an offer to purchase up to $186.0 million in aggregate principal amount

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of 2013 Floating Rate Notes and the 2013 Fixed Rate Notes in accordance with the terms of the indenture governing these notes, at a purchase price of 100% of the principal amount thereof, plus accrued and unpaid interest to the date of payment. The offer closed on September 30, 2010 and we received tenders in respect of $15.5 million in principal amount of the 2013 Fixed Rate Notes.

Under the Asset Sale Offer discussed above, holders of $4.0 million in aggregate principal amount of the 2013 Fixed Rate Notes tendered their notes on October 14, 2011. On September 16, 2011, we also announced a cash tender offer (the Tender Offer) for the outstanding $449.5 million in aggregate principal amount of the 2013 Fixed Rate Notes. The total consideration for the Tender Offer was $1,032.39 per $1,000 principal amount of the 2013 Fixed Rate Notes, plus accrued and unpaid interest to the date of payment. The Tender Offer expired on October 14, 2011 and holders of $443.7 million in aggregate principal amount of the 2013 Fixed Rate Notes tendered their notes. On December 1, 2011, we repurchased the remaining $1.8 million in aggregate principal amount of the 2013 Fixed Rate Notes.

2013 Floating Rate Notes

In November 2006, we also completed the offering and sale of $150.0 million in aggregate principal amount of the 2013 Floating Rate Notes, also issued by Elan Finance plc. The 2013 Floating Rate Notes bear interest at an annual rate, adjusted quarterly, equal to the three-month London Interbank Offer Rate (LIBOR) plus 4.125%. Elan Corporation, plc and certain of our subsidiaries have guaranteed the 2013 Floating Rate Notes. As described above, we issued an offer to purchase up to $186.0 million in aggregate principal amount of 2013 Floating Rate Notes and the 2013 Fixed Rate Notes in accordance with the terms of the indenture governing these notes. The offer closed on September 30, 2010 and we received tenders in respect of $139.5 million in principal amount of the 2013 Floating Rate Notes. As described above, on September 16, 2011 we also issued an Asset Sale Offer to purchase up to $721.2 million in aggregate principal amount of the Senior Notes consisting of the 2013 Fixed Rate Notes, the 2013 Floating Rate Notes, the 2016 Notes issued October 2009 and the 2016 Notes issued August 2010 in accordance with the terms of the indenture governing these notes, at a purchase price of 100% of the aggregate principal amount thereof, plus accrued and unpaid interest to the date of payment. The Asset Sale Offer expired on October 14, 2011 and holders of $7.3 million in aggregate principal amount of the 2013 Floating Rate Notes tendered their notes. On September 16, 2011, we also announced the election to redeem all of the 2013 Floating Rate Notes not purchased in the Asset Sale Offer. Pursuant to this redemption, $3.2 million in aggregate principal amount of the 2013 Floating Rate Notes were redeemed at a redemption price of 100% of the aggregate principal amount thereof, plus accrued but unpaid interest thereon to the date of payment.

Covenants

The agreements governing some of our outstanding long-term indebtedness contain various restrictive covenants that limit our financial and operating flexibility. The covenants do not require us to maintain or adhere to any specific financial ratios, however, they do restrict within certain limits our ability to, among other things:

•

Incur additional debt;

•

Create liens;

•

Enter into certain transactions with related parties;

•

Enter into certain types of investment transactions;

•

Engage in certain asset sales or sale and leaseback transactions;

•

Pay dividends or buy back our Ordinary Shares; and

•

Consolidate, merge with, or sell substantially all our assets to another entity.

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Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

23. Share Capital

Share capital at December 31 of each year consisted of the following:


	No. of Ordinary Shares
Authorized Share Capital	2011		2010
Ordinary Shares (par value €0.05)		810,000,000		810,000,000
Executive Shares (par value €1.25) (the Executive Shares)		1,000		1,000
“B” Executive Shares (par value €0.05) (the “B” Executive Shares)		25,000		25,000


	At December 31, 2011				At December 31, 2010
Issued and Fully Paid Share Capital	Number		$000s		Number		$000s
Ordinary Shares		589,346,275		36,158		585,201,576		35,850
Executive Shares		1,000		2		1,000		2
“B” Executive Shares		21,375		2		21,375		2

The holders of Executive Shares do not have the right to receive notice of, attend or vote at any of our meetings, or the right to be paid a dividend out of our profits, except for such dividends as the directors may from time to time determine.

The holders of “B” Executive Shares have the same voting rights as the holders of Ordinary Shares. The holders of “B” Executive Shares do not have the right to be paid a dividend out of our profits except for such dividends as the directors may from time to time determine.

24. Accumulated Other Comprehensive Income/(Loss)

Accumulated OCI net of $Nil taxes at December 31 of each year consisted of the following (in millions):


	2011			2010
Net unrealized gains on investment securities	$	—		$	1.5
Currency translation adjustments		(0.1	)		(11.2	)
Unamortized net actuarial loss on pension plans		(37.0	)		(32.8	)
Unamortized prior service cost on pension plans		(0.3	)		(0.6	)

Accumulated other comprehensive loss	$	(37.4	)	$	(43.1	)

In connection with the EDT transaction, we released $11.2 million of the currency translation reserve relating to non-U.S. dollar functional currency companies that were part of the EDT business. For additional information on the divestment of the EDT business, refer to Note 5.

25. Pension and Other Employee Benefit Plans

Pension

We fund the pensions of certain employees based in Ireland through two defined benefit plans. These plans were closed to new entrants from March 31, 2009, and a defined contribution plan was established for employees in Ireland hired after this date.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In general, on retirement, eligible employees in the staff scheme are entitled to a pension calculated at 1/60th (1/52nd for the executive scheme) of their final salary for each year of service, subject to a maximum of 40 years. These plans are managed externally and the related pension costs and liabilities are assessed in accordance with the advice of a qualified professional actuary. The investments of the plans at December 31, 2011 consisted of units held in independently administered funds.

The change in projected benefit obligation at December 31 of each year consisted of the following (in millions):


	2011			2010
Projected benefit obligation at January 1	$	97.3		$	87.5
Service cost		3.4			3.2
Interest cost		4.6			4.2
Plan participants’ contributions		1.5			1.7
Actuarial loss		6.7			7.8
Benefits paid and other disbursements		(1.6	)		(1.3	)
Curtailment gain		(8.8	)		—
Foreign currency exchange rate changes		(3.4	)		(5.8	)

Projected benefit obligation at December 31	$	99.7		$	97.3

The changes in plan assets at December 31 of each year consisted of the following (in millions):


	2011			2010
Fair value of plan assets at beginning of year	$	77.4		$	71.3
Actual (loss)/gain on plan assets		(2.7	)		7.4
Employer contribution		16.2			3.0
Plan participants’ contributions		1.5			1.7
Benefits paid and other disbursements		(1.6	)		(1.4	)
Foreign currency exchange rate changes		(3.3	)		(4.6	)

Fair value of plan assets at end of year	$	87.5		$	77.4

Unfunded status at end of year	$	(12.2	)	$	(19.9	)
Unamortized net actuarial loss in accumulated OCI		37.0			32.8
Unamortized prior service cost in accumulated OCI		0.3			0.6

Net amount recognized	$	25.1		$	13.5

Amounts recognized in the Consolidated Balance Sheet at December 31 of each year consisted of the following (in millions):


	2011			2010
Unfunded status — non-current liability	$	(12.2	)	$	(19.9	)
Accumulated OCI		37.3			33.4

Net amount recognized	$	25.1		$	13.5

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Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Net periodic pension cost for the years ended December 31 of each year consisted of the following (in millions):


	2011			2010			2009
Service cost	$	3.4		$	3.2		$	3.1
Interest cost		4.6			4.2			3.7
Expected return on plan assets		(5.0	)		(4.9	)		(3.5	)
Amortization of net actuarial loss		1.4			1.2			1.3
Amortization of prior service cost		0.2			—			0.1

Net periodic pension cost	$	4.6		$	3.7		$	4.7

The divestment of the EDT business on September 16, 2011 resulted in the cessation of the pension accrual for the EDT active members of the plans. This resulted in a reduction in the actuarial present value of the projected benefit obligation and a resultant curtailment gain as the link to future pensionable salary increases was broken for these active members. The curtailment gain of $8.8 million has been recorded against the unamortized net actuarial loss in OCI.

The weighted-average assumptions used to determine net periodic pension cost and benefit obligation at December 31 of each year were:


	2011			2010
Discount rate		4.3	%		4.7	%
Expected return on plan assets		5.5	%		6.2	%
Rate of compensation increase		3.4	%		3.5	%

The discount rate of 4.3% at December 31, 2011, was determined by reference to yields on high-quality fixed-income investments, having regard to the duration of the plans’ liabilities. The average duration of both defined benefit plans is greater than 20 years. Since no significant market exists for high-quality fixed income investments in Ireland and, following the crisis in the credit markets, the number of AA-rated corporate bonds with long durations is limited, the assumed discount rate of 4.3% per annum at December 31, 2011, was determined based on a yield curve derived by reference to government bonds with an added corporate bond spread derived from the Merrill Lynch 10+ AA corporate bond index.

In Ireland, post-retirement mortality rates are calculated using 62% of the mortality rates of the PNML00 mortality tables for males and 70% of the mortality rates of the PNFL00 mortality tables for females. To make an allowance for expected future increases in average life expectancy, plan benefit obligations for each plan member are increased by 0.39% per annum to retirement age. This approach to post-retirement mortality is used in the standard transfer value basis set out in Actuarial Standard of Practice ASP Pen-2, issued by the Society of Actuaries in Ireland.

The average life expectancy in years of a current pensioner retiring at the age of 65:


	2011		2010
Females		23.4		23.3
Males		21.7		21.6

The average life expectancy in years of a pensioner retiring at the age of 65 in 10 years:


	2011		2010
Females		24.4		24.3
Males		22.6		22.5

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Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The average life expectancy in years of a pensioner retiring at the age of 65 in 20 years:


	2011		2010
Females		25.3		25.2
Males		23.5		23.4

At December 31, 2011, the impact of certain changes in the principal assumptions on the projected benefit obligation, service cost and net periodic pension cost is as follows (in millions):


	Increase/(decrease) in Projected Benefit Obligation			Increase/(decrease) in Service Cost			Increase/(decrease) in Net Periodic Pension Cost
Increase of 0.25% in discount rate	$	(6.8	)	$	(0.1	)	$	(0.6	)
Decrease of 0.25% in discount rate		7.4			0.1			0.6
Increase of 0.25% in salary and inflation rates		7.0			0.1			0.9
Decrease of 0.25% in salary and inflation rates		(6.5	)		(0.1	)		(0.9	)
Increase of one year in life expectancy		2.8			—			0.4
Decrease of one year in life expectancy		(2.8	)		—			(0.4	)
Increase of 0.25% in pension increase assumption		2.7			—			0.3
Decrease of 0.25% in pension increase assumption		(2.5	)		—			(0.3	)

The weighted-average asset allocations at December 31 of each year by asset category consisted of the following:


	2011			2010
Equities		47.1	%		60.2	%
Bonds		18.5	%		20.7	%
Property		0.7	%		0.9	%
Cash		13.3	%		0.0	%
Absolute return fund		20.4	%		18.2	%

Total		100.0	%		100.0	%

The investment mix of the pension plans’ assets is biased towards equities, with a diversified domestic and international portfolio of shares listed and traded on recognized exchanges.

The long-term asset allocation ranges of the trusts are as follows:


Equities		60%-80%
Bonds		10%-40%
Property		0%-10%
Other		0%-10%

A portion of the assets are allocated to low-risk investments, which are expected to move in a manner consistent with that of the liabilities. The balances of the assets are allocated to performance-seeking investments designed to provide returns in excess of the growth in liabilities over the long term. The key risks relating to the plan assets are as follows:

•

Interest rate risk — the risk that changes in interest rates result in a change in value of the liabilities not reflected in the changes in the asset values. This risk is managed by allocating a portion of the trusts’ assets to assets that are expected to behave in a manner similar to the liabilities.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

•

Inflation risk — the risk that the inflation-linked liabilities of salary growth and pension increases increase at a faster rate than the assets held. This risk is managed by allocating a portion of the plans’ to investments with returns that are expected to exceed inflation.

•

Market risk — the risk that the return from assets is not sufficient to meet liabilities. This risk is managed by monitoring the performance of the assets and requesting regular valuations of the liabilities. A professionally qualified actuary performs regular valuations of the plans and the progress of the assets is examined against the plans’ funding target. Further, the assets of the plans are invested in a range of asset classes in order to limit exposure to any particular asset class or security.

•

Manager risk — the risk that the chosen manager does not meet its investment objectives, or deviates from its intended risk profile. This risk is managed by regularly monitoring the managers responsible for the investment of the assets relative to the agreed objectives and risk profile.

•

Cash flow risk — the risk that the cash flow needs of the plan requires a disinvestment of assets at an inopportune time. As part of the asset allocation strategy, the proportion of assets held by the plans in liability matching assets will explicitly consider the cash flows expected to arise in the near term.

As of December 31, 2011, the expected long-term rate of return on assets of 5.5% (2010: 6.2%) was calculated based on the assumptions of the following returns for each asset class:


	2011			2010
Equities		7.0	%		7.3	%
Property		6.0	%		6.3	%
Bonds		3.5	%		3.8	%
Cash		2.0	%		2.1	%
Absolute return fund		6.0	%		5.5	%

As of December 31, 2011, the assumed return on equities has been derived as the assumed return on bonds plus an assumed equity risk premium of 3.5% (2010: 3.5%).

As of December 31, 2011, the expected return on property has been chosen by allowing for a property risk premium of 2.5% (2010: 2.5%) above the expected return on bonds.

The expected government bond returns are set equal to the yield on the government bonds of appropriate duration as at the date of measurement.

The investment in an absolute return fund aims to provide an absolute return with a lower volatility than the target returns.

The following table sets forth the fair value of our pension plan assets, as of December 31, 2011 (in millions):


	Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)		Total
Equities	$	41.2	$	—	$	—	$	41.2
Bonds		16.2		—		—		16.2
Property		—		—		0.6		0.6
Cash		11.6		—		—		11.6
Absolute return fund		17.9		—		—		17.9

Total	$	86.9	$	—	$	0.6	$	87.5

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth a summary of the changes in the fair value of our Level 3 pension plan assets, which were measured at fair value on a recurring basis for the year ended December 31, 2011 (in millions).


	Total
Beginning balance at January 1, 2011	$	0.7
Unrealized loss on property assets		(0.1	)

Ending balance at December 31, 2011	$	0.6

All properties in the fund are valued by independent valuers in accordance with the Royal Institute of Chartered Surveyors Valuation Standards by forecasting the returns of the market at regular intervals. These forecasts have regard to the output from a proprietary quantitative model, the inputs to which include gross national product growth, interest rates and inflation.

The total accumulated benefit obligation for the defined benefit pension plans was $95.0 million at December 31, 2011 (2010: $82.2 million).

At December 31, 2011, the total estimated future benefit payments to be paid in respect of the plans for the period of 2012-2016 is approximately $1.6 million per annum. The total estimated future benefit payments to be paid in the period of 2017-2021 is approximately $4.1 million per annum. We expect to contribute approximately $2.7 million to our defined benefit plans in 2012.

The expected benefits to be paid are based on the same assumptions used to measure our benefit obligation at December 31, 2011, including the expected future employee service.

As of December 31, 2011, we expect to recognize $1.6 million of the unamortized net actuarial loss that is included in accumulated OCI at December 31, 2011, during 2012.

Defined Contribution Retirement Plans

We operate a number of defined contribution retirement plans. The costs of these plans are charged to the Consolidated Statement of Operations in the period they are incurred. For 2011, total expense related to the defined contribution plans was $3.6 million (2010: $4.5 million; 2009: $5.0 million).

Employee Savings and Retirement Plan 401(k)

We maintain a 401(k) retirement savings plan for our employees based in the United States. Participants in the 401(k) plan may contribute up to 80% of their annual compensation (prior to January 1, 2010, participants could contribute up to 100% of their annual compensation), limited by the maximum amount allowed by the IRC. We match 3% of each participating employee’s annual compensation on a quarterly basis and may contribute additional discretionary matching up to another 3% of the employee’s annual qualified compensation. Our matching contributions vest immediately. For 2011, we recorded $3.2 million (2010: $4.0 million; 2009: $4.7 million) of expense in connection with the matching contributions under the 401(k) plan.

Irish Defined Contribution Plan

We operate a defined contribution plan for employees based in Ireland who joined the Company on or after April 1, 2009. Under the plan, we contribute up to 15% of each participating employee’s annual eligible income on a monthly basis. For 2011, we recorded $0.4 million (2010: $0.5 million; 2009: $0.l million) of expense in connection with the matching contributions under the Irish defined contribution plans.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

26. Share-based Compensation

We grant equity awards from the Long Term Incentive Plan (2006 LTIP), which provides for the issuance of stock options, RSUs and other equity awards. Our equity award program is a long-term retention program that is intended to attract, retain and motivate employees, directors and consultants of Elan and our affiliates, and to align the interests of these parties with those of shareholders.

We consider our equity award program critical to our operation and productivity. Equity awards are settled through the issuance of new shares.

In May 2008, our shareholders approved an amendment to the 2006 LTIP that provided for an additional 18,000,000 shares to be made available for issuance under the 2006 LTIP. As of December 31, 2011, there were 6,082,810 shares available for issuance under the 2006 LTIP (2010: 11,662,210 shares).

Stock Options

Stock options are granted at the price equal to the market value at the date of grant and will expire on a date not later than 10 years after their grant. Options generally vest between one and four years from the grant date.

Options outstanding at December 31 of each year consisted of the following (in thousands):


	2011		2010
1996 Plan		3,663		4,231
1998 Plan		123		472
1999 Plan		3,364		4,073
2006 LTIP		12,301		9,432

Total		19,451		18,208

The total employee and non-employee stock options outstanding, vested and expected to vest, and exercisable are summarized as follows:


	No. of Options			WAEP⁽¹⁾		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
	(In thousands)					(In years)		(In millions)
Outstanding at December 31, 2009		18,227		$	15.57
Exercised		(163	)		2.54
Granted		2,422			6.74
Forfeited		(440	)		9.28
Expired		(1,838	)		30.71

Outstanding at December 31, 2010		18,208		$	13.14
Exercised		(713	)		6.22
Granted		4,241			7.62
Forfeited		(489	)		8.84
Expired		(1,796	)		32.01

Outstanding at December 31, 2011		19,451		$	10.55		5.7	$	87.2


Vested and expected to vest at December 31, 2011		18,821		$	10.66		5.6	$	83.2

Exercisable at December 31, 2011		13,891		$	11.51		4.4	$	53.7

⁽¹⁾	Weighted-average exercise price

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between our closing stock price on the last trading day of 2011 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2011. This amount changes based on the fair market value of our stock. The total intrinsic value of options exercised in 2011 was $2.9 million (2010: $0.7 million; 2009: $1.6 million). The total fair value expensed over the vesting terms of options that vested in 2011 was $21.6 million (2010: $13.4 million; 2009: $20.0 million).

At December 31, 2011, the range of exercise prices and weighted-average remaining contractual life of outstanding and exercisable options were as follows:


	Options Outstanding						Options Exercisable
	Options Outstanding		Weighted- Average Remaining Contractual Life		WAEP		Options Outstanding		Weighted- Average Remaining Contractual Life		WAEP
	(In thousands)		(In years)				(In thousands)		(In years)
$1.93-$10.00		11,907		6.4	$	6.65		6,791		4.6	$	6.17
$10.01-$25.00		6,094		4.4		14.47		5,845		4.2		14.59
$25.01-$35.80		1,450		5.1		26.12		1,255		4.9		26.10

$1.93-$35.80		19,451		5.7	$	10.55		13,891		4.4	$	11.51

Equity-settled share-based payments made to employees have been recognized in the financial statements based on the fair value of the awards measured at the date of grant. We use the graded-vesting attribution method for recognizing share-based compensation expense over the requisite service period for each separately vesting tranche of award as though the awards were, in substance, multiple awards.

Equity-settled share-based payments made to non-employees have been recognized in the financial statements based on the fair value of the awards on the vest date; which is the date at which the commitment for performance by the non-employees to earn the awards is reached and also the date at which the non-employees’ performance is complete.

The fair value of stock options is calculated using a binomial option-pricing model and the fair value of options issued under our EEPP is calculated using the Black-Scholes option-pricing model, taking into account the relevant terms and conditions. The binomial option-pricing model is used to estimate the fair value of our stock options because it better reflects the possibility of exercise before the end of the options’ life. The binomial option-pricing model also integrates possible variations in model inputs, such as risk-free interest rates and other inputs, which may change over the life of the options. Options issued under our EEPP have relatively short contractual lives, or must be exercised within a short period of time after the vesting date, and the input factors identified above do not apply. Therefore, the Black-Scholes option-pricing model produces a fair value that is substantially the same as a more complex binomial option-pricing model for our EEPP. The amount recognized as an expense is adjusted each period to reflect actual and estimated future levels of vesting.

We use the implied volatility for traded options on our stock with remaining maturities of at least one year to determine the expected volatility assumption required in the binomial model. The risk-free interest rate assumption is based upon observed interest rates appropriate for the term of our stock option awards. The dividend yield assumption is based on the history and expectation of dividend payouts.

As share-based compensation expense recognized in the Consolidated Statement of Operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from estimates. Forfeitures were estimated based on historical experience and our estimate of future turnover.

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Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The estimated weighted-average grant date fair values of the individual options granted during the years ended December 31, 2011, 2010 and 2009 were $3.53, $3.73 and $5.27, respectively. The fair value of options granted during these years was estimated using the binomial option-pricing model with the following weighted-average assumptions:


	2011			2010			2009
Risk-free interest rate		1.56	%		2.04	%		1.55	%
Expected volatility		52.4	%		65.4	%		92.0	%
Expected dividend yield		—			—			—
Expected life ⁽¹⁾		—			—			—

⁽¹⁾

The expected lives of options granted in 2011, as derived from the output of the binomial model, ranged from 4.8 years to 7.5 years (2010: 4.8 years to 7.5 years; 2009: 4.5 years to 7.3 years). The contractual life of the options, which is not later than 10 years from the date of grant, is used as an input into the binomial model.

Restricted Stock Units

RSUs generally vest between one and three years from the grant date, and shares are issued to RSU holders as soon as practicable following vesting. The fair value of services received in return for the RSUs is measured by reference to the fair value of the underlying shares at grant date, for directors and employees, and as services are rendered for non-employees. The total fair value expensed over the vesting terms of RSUs that vested in 2011 was $28.8 million (2010: $10.8 million; 2009: $15.6 million).

The non-vested RSUs are summarized as follows:


	No. of RSUs			Weighted-Average Grant Date Fair Value
	(In thousands)
Non-vested at December 31, 2009		3,020		$	14.06
Granted		2,957			6.87
Vested		(781	)		17.81
Forfeited		(554	)		9.65

Non-vested at December 31, 2010		4,642		$	9.38
Granted		3,312			6.82
Vested		(3,052	)		9.47
Forfeited		(1,000	)		7.45

Non-vested at December 31, 2011		3,902		$	7.63

Employee Equity Purchase Plan

We operate an EEPP for eligible employees based in the United States and, from January 1, 2012 for eligible employees based in Ireland. The EEPP for U.S. based employees is a qualified plan under Sections 421 and 423 of the IRC. The EEPP allows eligible employees to purchase shares at 85% of the lower of the fair market value at the beginning of the offering period or the fair market value on the last trading day of the offering period. Purchases are limited to $25,000 (fair market value) per calendar year; 2,000 shares per six-month offering period (changed from 1,000 shares per three-month offering period, beginning January 1, 2010); and, for U.S. based employees, subject to certain IRC restrictions.

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In total, 3,000,000 shares have been made available for issuance under the EEPP. In 2011, 237,631 shares (2010: 470,412 shares; 2009: 528,411 shares) were issued under the EEPP. As of December 31, 2011, 143,761 shares (2010: 381,392 shares) were available for future issuance under the EEPP.

The weighted-average fair value of options granted under the EEPP during the 12 months ended December 31, 2011 was $2.30 (2010: $1.84; 2009: $2.07). The estimated fair values of these options were charged to expense over the respective six-month offering periods. The estimated fair values of options granted under the EEPP in the years ended December 31, were calculated using the following inputs into the Black-Scholes option-pricing model:


	2011			2010			2009
Weighted-average share price	$	8.00		$	5.61		$	6.57
Weighted-average exercise price	$	6.80		$	4.77		$	5.58
Expected volatility⁽¹⁾		49.7	%		63.9	%		84.6	%
Expected life		6 months			6 months			3 months
Expected dividend yield		—			—			—
Risk-free interest rate		0.16	%		0.21	%		0.15	%

⁽¹⁾	The expected volatility was determined based on the implied volatility of traded options on our stock.

Share-based Compensation Expense

As part of the transaction on September 17, 2009, under which Janssen AI acquired substantially all of our assets and rights related to the AIP and we received a 49.9% equity interest in Janssen AI, a number of Elan employees transferred employment to Janssen AI. The outstanding equity awards held by the transferred employees as of September 17, 2009, were modified such that the transfer would not trigger the termination provisions of the awards. The impact of the modification for all applicable outstanding awards amounted to a net credit of $1.2 million, which was included in the net gain on the divestment of business in the 2009 Consolidated Statement of Operations. The net credit was primarily due to the change in status of the award holders from employees to non-employees and the resulting change in measurement date.

In addition, as part of the transaction described above, we continue to grant annual equity and equity-based compensation awards under the 2006 LTIP (and any successor or replacement or additional plan) to each transferred employee. Beginning in 2010, these awards are granted at the same time as such awards are granted to Elan employees; on terms and conditions, including vesting, that are no less favorable than those granted to similarly situated Elan employees; and with a grant date fair value that is equal to similarly situated Elan employees who received the same performance rating from Elan as the transferred employees received from Janssen AI. The total amount of expense in 2011 relating to equity-settled share-based awards held by former Elan employees that transferred to Janssen AI was $2.4 million (2010: $0.4 million; 2009: less than $0.1 million). This expense has been recognized in the R&D expense line item in the Consolidated Statement of Operations.

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The total net expense of $35.3 million relating to equity-settled share-based compensation has been recognized in the following line items in the Consolidated Statement of Operations at December 31 of each year (in millions):


	2011		2010		2009
Cost of sales	$	1.1	$	1.6	$	2.2
Selling, general and administrative expenses		16.6		17.4		17.0
Research and development expenses		14.9		11.5		11.8
Other net charges		1.1		1.0		1.7
Net gain/(loss) on divestment of business		1.6		—		(1.2	)

Total	$	35.3	$	31.5	$	31.5

Share-based compensation arose under the following awards at December 31 of each year (in millions):


	2011		2010		2009
Stock options	$	14.0	$	13.4	$	16.8
RSUs		20.7		17.2		13.6
EEPP		0.6		0.9		1.1

Total	$	35.3	$	31.5	$	31.5

The total equity-settled share-based compensation expense related to unvested awards not yet recognized, adjusted for estimated forfeitures, is $13.3 million at December 31, 2011. This expense is expected to be recognized over a weighted-average of 1.2 years.

27. Fair Value Measurements

Assets Measured at Fair Value on a Recurring Basis

As of December 31, 2011, we did not hold any financial liabilities that are recognized at fair value in the financial statements on a recurring or non-recurring basis. The following tables set forth the fair value of our financial assets measured at fair value on a recurring basis, as of December 31, of each year (in millions):


2011	Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)		Total
Cash and cash equivalents	$	271.7	$	—	$	—	$	271.7
Restricted cash and cash equivalents— current		2.6		—		—		2.6
Restricted cash and cash equivalents— non-current		13.7		—		—		13.7
Available-for-sale equity securities — current		0.3		—		—		0.3

Total	$	288.3	$	—	$	—	$	288.3

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2010	Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)		Total
Cash and cash equivalents	$	422.5	$	—	$	—	$	422.5
Restricted cash — current		208.2		—		—		208.2
Restricted cash — non-current		14.9		—		—		14.9
Available-for-sale equity securities — current		2.0		—		—		2.0
Available-for-sale debt securities — non-current		—		—		0.2		0.2

Total	$	647.6	$	—	$	0.2	$	647.8

As of December 31, 2011, the fair value of our Level 1 assets was $288.3 million (2010: $647.6 million), primarily consisting of bank deposits, holdings in U.S. Treasuries funds, restricted cash, and marketable equity securities in emerging pharmaceutical and biotechnology companies. Included in this amount were net unrealized gains of $Nil (2010: $1.6 million) related to marketable equity securities.

The following table sets forth a summary of the changes in the fair value of our Level 3 financial assets, which were measured at fair value on a recurring basis, as of December 31, of each year (in millions).


2011	Auction Rate Securities
Beginning balance at January 1, 2011	$	0.2
Realized gains included in net investment gains		—
Unrealized losses included in other comprehensive income		—
Disposals		(0.2	)

Ending balance at December 31, 2011	$	—


2010	Auction Rate Securities			Warrants			Total
Beginning balance at January 1, 2010	$	0.4		$	0.4		$	0.8
Realized gains included in net investment gains		—			1.2			1.2
Unrealized losses included in other comprehensive income		(0.2	)		—			(0.2	)
Redemptions		—			(1.6	)		(1.6	)

Ending balance at December 31, 2010	$	0.2		$	—		$	0.2

As of December 31, 2011, we held $Nil (2010: $0.2 million) investments, which were measured using unobservable (Level 3) inputs. At December 31, 2010, our investments, which were measured using unobservable (Level 3) inputs, consisted entirely of investments in ARS.

We disposed of the ARS during 2011. Prior to disposal, ARS were valued by a third-party valuation firm, which primarily used a discounted cash flow model (expected cash flows of the ARS were discounted using a yield that incorporates compensation for illiquidity) in combination with a market comparables method, where the ARS were valued based on indications (from the secondary market) of what discounts buyers demand when purchasing similar collateral debt obligations. The secondary market indications were given less weight in this approach due to the lack of data on trades in securities that are substantially similar to the ARS.

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Assets Measured at Fair Value on a Non-recurring Basis

We measure certain assets, including equity investments in privately held companies, at fair value on a nonrecurring basis. These assets are recognized at fair value when they are deemed to be other-than-temporarily impaired. We did not recognize any impairment charges relating to these assets during 2011 (2010: $Nil).

Debt Instruments

Principal amounts and fair values (based on unadjusted quoted prices) of our debt instruments at December 31 consisted of the following (in millions):


	2011				2010
	Principal Amount		Fair Value		Principal Amount		Fair Value
2016 Notes issued October 2009	$	472.1	$	503.4	$	625.0	$	624.2
2016 Notes issued August 2010		152.4		161.7		200.0		193.4
2013 Fixed Rate Notes		—		—		449.5		458.5
2013 Floating Rate Notes		—		—		10.5		10.5

Total debt instruments	$	624.5	$	665.1	$	1,285.0	$	1,286.6

Refer to Note 22 for a reconciliation of the aggregate principal amount of the debt to the carrying amount.

28. Leases

Operating Leases

We lease certain of our facilities under non-cancelable operating lease agreements that expire at various dates through 2025. The major components of our operating leases that were in effect at December 31, 2011 are as described below.

In August 1998, we entered into an agreement for the lease of four buildings located in South San Francisco, California. These buildings are utilized for R&D, administration and other corporate functions. The leases expire between December 2012 and December 2014. Thereafter, we have an option to renew for two additional five-year periods.

In June 2007, we entered into a lease agreement for a building in South San Francisco, California. The lease term for this building commenced in March 2009, and the building is utilized for R&D, sales and administrative functions. The lease term is 15 years, with an option to renew for one additional five-year period.

In December 2007, we entered into a lease agreement for a building in South San Francisco, California. The lease term commenced in January 2010, and the building is utilized for R&D, sales and administrative functions. The lease term is 15 years, with an option to renew for one additional five-year period.

In September 2004, we entered into a lease agreement for our corporate headquarters located in the Treasury Building, Dublin, Ireland. This lease expires in July 2014, with an option to renew for two additional 10-year periods. In April 2008, we entered into another lease agreement for additional space at the Treasury Building. This lease expires in July 2014, with an option to renew for two additional 10-year periods.

We closed the New York office in March 2009. The lease period expires in February 2015. The future rental commitments relating to this lease are included in the table below.

In September 2009, we entered into sub-leasing agreements with Janssen AI for laboratory and office space in South San Francisco which was no longer being utilized by our R&D, sales and administrative functions. In

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May 2010, we amended one of the agreements with Janssen AI, and added additional space in South San Francisco. One of the agreements expired in December 2011, with the remaining agreements due to expire between December 2012 and November 2014.

In January 2010, we entered into a subleasing agreement with Janssen AI for office space at the Treasury Building, Dublin, Ireland. The lease period will expire in June 2014.

In March 2010, we entered into a lease agreement for another building in South San Francisco, California with a commencement date in November 2010. The building is being utilized by our Neotope R&D function. The lease term is 10 years.

In December 2011, we closed the facility located in King of Prussia, Pennsylvania. The two leases expire between April 2019 and May 2020. The future rental commitments relating to the leases are included in the table below. Approximately 25,000 square feet of this space was sublet in February 2012.

In addition, we also have various operating leases for equipment and vehicles, with lease terms that range from three to five years.

We recorded expense under operating leases of $23.8 million in 2011 (2010: $27.9 million; 2009: $23.8 million). We recorded income under our operating subleasing agreement of $2.8 million in 2011 (2010: $2.3 million; 2009: $0.6 million).

As of December 31, 2011, our future minimum rental commitments for operating leases with non-cancelable terms in excess of one year are as follows (in millions):


Due in:
2012	$	32.4
2013		21.6
2014		20.8
2015		14.5
2016		14.8
2017 and thereafter		112.6

Total	$	216.7	⁽¹⁾

⁽¹⁾	The future minimum rental commitments include the commitments in respect of lease contracts where the future lease commitments exceeds the future expected economic benefit that we expect to derive from the leased asset which has resulted in the recognition of an onerous lease accrual.

Capital Leases

There were no capital leases in place at December 31, 2011. In 2010, the net book value of assets acquired under capital leases was $1.5 million, which included $71.8 million of accumulated depreciation. The depreciation expense related to assets under capital leases for 2011, 2010 and 2009 was $0.3 million, $1.4 million and $2.1 million, respectively.

In prior years, we disposed of plant and equipment and subsequently leased them back and also entered into an arrangement with a third-party bank, the substance of which allows us a legal right to require a net settlement of our obligations under the leases. The cash and borrowings relating to the previous sale and leaseback transactions were offset in the 2010 Consolidated Financial Statements in the amount of $31.2 million. These arrangements were terminated during 2011. We incurred a charge of $0.1 million in the termination of the leases.

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29. Commitments and Contingencies

As of December 31, 2011, the directors had authorized capital commitments for the purchase of property, plant and equipment of $3.0 million (2010: $8.0 million).

At December 31, 2011, we had commitments to invest $2.6 million (2010: $3.4 million) in healthcare managed funds.

For information on lease commitments, refer to Note 28. For litigation and administrative proceedings related to contingencies, refer to Note 30. For information on commitments in relation to our collaboration arrangements, where applicable, refer to Note 32.

30. Litigation

We are involved in legal and administrative proceedings that could have a material adverse effect on us.

Zonegran matter

In January 2006, we received a subpoena from the U.S. Department of Justice and the Department of Health and Human Services, Office of Inspector General, asking for documents and materials primarily related to our marketing practices for Zonegran, an antiepileptic prescription medicine that we divested to Eisai Inc. in April 2004.

In December 2010, we finalized our agreement with the U.S. Attorney’s Office for the District of Massachusetts to resolve all aspects of the U.S. Department of Justice’s investigation of sales and marketing practices for Zonegran. In addition, we pleaded guilty to a misdemeanor violation of the Federal Food, Drug, and Cosmetic (FD&C) Act and entered into a Corporate Integrity Agreement with the Office of Inspector General of the Department of Health and Human Services to promote our compliance with the requirements of U.S. federal healthcare programs and the Food and Drug Administration (FDA). If we materially fail to comply with the requirements of U.S. federal healthcare programs or the FDA, or otherwise materially breach the terms of the Corporate Integrity Agreement, such as by a material breach of the compliance program or reporting obligations of the Corporate Integrity Agreement, severe sanctions could be imposed upon us.

In March 2011, we paid $203.5 million pursuant to the terms of a global settlement resolving all U.S. federal and related state Medicaid claims. During 2010, we recorded a $206.3 million charge for the settlement, interest and related costs.

This resolution of the Zonegran investigation could give rise to other investigations or litigation by state government entities or private parties.

Patent matter

In June 2008, a jury ruled in the U.S. District Court for the District of Delaware that Abraxis (since acquired by Celgene Corporation) had infringed a patent owned by us in relation to the application of NanoCrystal technology (the NanoCrystal technology was transferred to Alkermes in connection with the sale of our EDT business in September 2011) to Abraxane. The judge awarded us $55 million, applying a royalty rate of 6% to sales of Abraxane from January 1, 2005 through June 13, 2008 (the date of the verdict). This award and damages associated with the continuing sales of the Abraxane product were subject to interest.

In February 2011, we entered into an agreement with Abraxis to settle this litigation. As part of the settlement agreement with Abraxis, we received $78.0 million in full and final settlement. No continuing royalties will be received by us in respect of Abraxane.

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In May 2011, we entered into an agreement with Alcon to settle litigation also in relation to the application of NanoCrystal technology in connection with Alcon’s marketing of particular products. As part of the settlement agreement with Alcon, we received $6.5 million in May 2011 in full and final settlement.

Securities matters

In March 2005, we received a letter from the U.S. Securities and Exchange Commission (SEC) stating that the SEC’s Division of Enforcement was conducting an informal inquiry into actions and securities trading relating to Tysabri events. The SEC’s inquiry primarily relates to events surrounding the February 28, 2005 announcement of the decision to voluntarily suspend the marketing and clinical dosing of Tysabri. We have provided materials to the SEC in connection with the inquiry but have not received any additional requests for information or interviews relating to the inquiry.

The SEC notified us in January 2009 that the SEC was conducting an informal inquiry primarily relating to the July 31, 2008 announcement concerning the initial two Tysabri-related progressive multifocal leukoencephalopathy (PML) cases that occurred subsequent to the resumption of marketing Tysabri in 2006. We have provided the SEC with materials in connection with the inquiry.

On September 24, 2009, we received a subpoena from the SEC’s New York Regional Office requesting records relating to an investigation captioned In the Matter of Elan Corporation, plc. The subpoena requested records and information relating to the July 31, 2008 announcement of the two Tysabri-related PML cases as well as records and information relating to the July 29, 2008 announcement at the International Conference of Alzheimer’s Disease concerning the Phase 2 trial data for bapineuzumab. In July 2011, we received a supplemental request for documents from the SEC related to this matter. We have provided the SEC with materials in connection with the investigation.

We and some of our officers and directors were named as defendants in five putative class action lawsuits filed in the U.S. District Court for the Southern District of New York in 2008. The cases were consolidated as In Re: Elan Corporation Securities Litigation. The plaintiffs’ Consolidated Amended Complaint was filed on August 17, 2009, and alleged claims under the U.S. federal securities laws and sought damages on behalf of all purchasers of our stock during periods ranging between May 21, 2007 and October 21, 2008. The complaints alleged that we issued false and misleading public statements concerning the safety and efficacy of bapineuzumab. On July 23, 2010, a securities case was filed in the U.S. District Court for the Southern District of New York. This case was accepted by the court as a “related case” to the existing 2008 matter. The 2010 case purported to be filed on behalf of all purchasers of Elan call options during the period from June 17, 2008 to July 29, 2008. On August 10, 2011, the court dismissed the class action lawsuits with prejudice. The “related case” plaintiffs have appealed the dismissal to the U.S. Court of Appeals for the Second Circuit.

We and some of our officers and directors were named as defendants in a securities case filed June 24, 2010 in the U.S. District Court in the Northern District of California. The complaint alleged that during the June/July 2008 timeframe we disseminated materially false and misleading statements/omissions related to Tysabri and bapineuzumab. Plaintiffs alleged that they lost collectively approximately $4.5 million. On October 4, 2011 the court dismissed the lawsuit with prejudice. The plaintiffs have appealed the dismissal to the U.S. Court of Appeals for the Ninth Circuit.

We and some of our officers were named as defendants in a putative class action lawsuit filed in the U.S. District Court for the Southern District of New York on February 23, 2011. The plaintiffs’ complaint alleged claims under U.S. federal securities laws and sought damages on behalf of all purchasers of our stock during the period between July 2, 2009 and August 5, 2009. The complaint alleged that we issued false and misleading public statements concerning the Johnson & Johnson Transaction. On November 10, 2011, the court dismissed the lawsuit with prejudice.

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Antitrust matters

In 2002 and 2003, 10 actions were filed in the U.S. District Courts (seven in the District of Columbia and three in the Southern District of New York) claiming that we (and others) violated federal and state antitrust laws based on licensing and manufacturing arrangements between Elan, Teva Pharmaceuticals Inc. and Biovail Corporation (Biovail) relating to nifedipine. The complaints sought various forms of remedy, including damages and injunctive relief. The actions were brought by putative classes of direct purchasers, individual direct purchasers, and putative classes of indirect purchasers. On May 29, 2003, the Judicial Panel for Multidistrict Litigation coordinated and consolidated for pre-trial proceedings all pending cases in the U.S. District Court for the District of Columbia. In late 2007, we entered into a settlement agreement with the indirect purchaser class resulting in a dismissal of that segment of the lawsuit. In December 2009, we entered into a separate settlement agreement with the individual “opt-out” direct purchasers and agreed to pay $4.6 million to this opt-out direct purchaser class resulting in a dismissal of the second segment of the litigation. In October 2010, we agreed to pay $12.5 million to settle the third and final piece of this litigation. In January 2011, the U.S. District Court for the District of Columbia approved the settlement and dismissed the case.

Tysabri product liability lawsuits

We and our collaborator Biogen Idec are co-defendants in product liability lawsuits arising out of the occurrence of PML and other serious adverse events, including deaths, which occurred in patients taking Tysabri. We expect additional product liability lawsuits related to Tysabri to be filed. While we intend to vigorously defend these lawsuits, we cannot predict how these cases will be resolved. Adverse results in one or more of these lawsuits could result in substantial monetary judgments against us.

31. Related Parties

Janssen AI

Janssen AI, a newly formed subsidiary of Johnson & Johnson, acquired substantially all of the assets and rights related to the AIP with Wyeth (which has been acquired by Pfizer) in September 2009. In consideration for the transfer of these assets and rights, we received a 49.9% equity interest in Janssen AI which has been recorded as an equity method investment on the Consolidated Balance Sheet at December 31, 2011. For additional information relating to the AIP divestment, refer to Note 5. For additional information relating to our equity method investment, refer to Note 9.

Following the divestment of the AIP business to Janssen AI in September 2009, we provided administrative, I.T., and R&D transition services to Janssen AI, and recorded fees of $3.7 million in 2010 and $2.9 million in 2009 related to these transition services. These activities ceased in December 2010, with the exception of I.T. related services. We recorded fees of $0.3 million in 2011 related to I.T. services. We also received sublease rental income of $2.2 million in 2011 (2010: $2.3 million; 2009: $0.6 million) from Janssen AI in respect of agreements for office and laboratory space in South San Francisco and office space in Dublin. The total expense in 2011 relating to equity-settled share based awards held by former Elan employees that transferred to Janssen AI was $2.4 million (2010: $0.4 million; 2009: less than $0.1 million). At December 31, 2011, we had a balance owing to us from Janssen AI of $Nil (2010: $0.2 million).

Alkermes plc

In connection with the divestment of our EDT business on September 16, 2011, we received $500.0 million in cash consideration and 31.9 million ordinary shares of Alkermes plc, which represented approximately 25% of the equity of Alkermes plc at the close of the transaction. Our equity interest in Alkermes plc was recorded as an equity method investment on the Consolidated Balance Sheet at a carrying amount of $528.6 million, based on the closing share price of $16.57 of Alkermes, Inc. shares on the date of the transaction.

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Following the divestment of the EDT business to Alkermes plc, we provided administrative and I.T. transition services to Alkermes plc, and recorded fees of $1.1 million in 2011 related to these transition services. At December 31, 2011, we had a balance owing to us from Alkermes plc of $1.9 million; which includes an amount of $1.2 million owed to us in respect of the EDT divestment transaction working capital adjustment.

Transactions with Directors

Except as set out below, there are no service contracts in existence between any of the directors and Elan:

Non-Executive Directors’ Terms of Appointment


Period	Three-year term which can be extended by mutual consent, contingent on satisfactory performance and re-election at the Annual General Meeting (AGM).
Termination	By the director or the Company at each party’s discretion without compensation.
Fees	Board Membership Fees
	Chairman’s Fee	$	150,000	⁽¹⁾
	Director’s Fee	$	55,000	⁽²⁾

	Additional Board/Committee Fees
	Lead Independent Director’s Fee	$	20,000
	Audit Committee Chairman’s Fee	$	25,000	⁽³⁾
	Audit Committee Member’s Fee	$	15,000
	Other Committee Chairman’s Fee	$	20,000	⁽³⁾
	Other Committee Member’s Fee	$	12,500
Equity	Non-executive directors are entitled to be considered for an annual equity award, based on the recommendation of the Leadership, Development and Compensation Committee (LDCC) and supported by the advice of the LDCC’s compensation consultants. Such equity awards are normally granted in February of each year and are currently made in the form of RSUs. The awards made in February 2012 had the following grant date fair values:
	Chairman	$	400,000	⁽¹⁾
	Other non-executive directors	$	200,000	⁽²⁾
Expenses	Reimbursement of travel and other expenses reasonably incurred in the performance of their duties.
Time commitment	Five scheduled in-person board meetings, the AGM and relevant committee meetings depending upon board/committee requirements and general corporate activity.
	Non-executive board members are also expected to be available for a number of unscheduled board and committee meetings, where applicable, as well as to devote appropriate preparation time ahead of each meeting.
Confidentiality	Information acquired by each director in carrying out their duties is deemed confidential and cannot be publicly released without prior clearance from the chairman of the board.

⁽¹⁾

The chairman’s compensation for 2012 consists of a fee of $150,000 (2011: $250,000) and RSUs with a grant date fair value of $400,000 (2011: $200,000), amounting to a total value of $550,000 in 2012 (2011:$450,000). The chairman does not receive additional compensation for sitting on board committees.

⁽²⁾	Non-executive directors can elect to receive their fee payments in the form of RSUs, which will vest on the earlier of 90 days after their retirement from the Board or 10 years. In 2011, Dr. Ekman, Mr. McGowan and Mr. McLaughlin elected to receive their fee payments in the form of RSUs.

⁽³⁾	Inclusive of committee membership fee.

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Dr. Ekman

Effective December 31, 2007, Dr. Lars Ekman resigned from his operational role as president of R&D and has continued to serve as a member of the board of directors of Elan.

Mr. Martin

On January 7, 2003, we and Elan Pharmaceuticals, Inc. (EPI) entered into an agreement with Mr. G. Kelly Martin such that Mr. Martin was appointed president and CEO effective February 3, 2003.

Effective December 7, 2005, we and EPI entered into a new employment agreement with Mr. Martin, under which Mr. Martin continues to serve as our CEO with an initial base annual salary of $798,000. Mr. Martin is eligible to participate in our annual bonus plan, performance-based stock awards and merit award plans. Under the new agreement, Mr. Martin was granted an option to purchase 750,000 Ordinary Shares with an exercise price per share of $12.03, vesting in three equal annual installments (the 2005 Options). Mr. Martin’s employment agreement was amended on December 19, 2008 to comply with the requirements of Section 409A of the IRC.

On June 2, 2010, Elan and Mr. Martin agreed to amend his 2005 employment contract from an open-ended agreement to a fixed term agreement. Under this 2010 agreement, Mr. Martin committed to remain in his current roles as CEO and director of the Company through to May 1, 2012. It was agreed that upon the completion of this fixed term Mr. Martin will then serve the board as executive adviser through to January 31, 2013. Under this amendment, Mr. Martin’s base salary was increased from $800,000 to $1,000,000 per year effective June 1, 2010 and when Mr. Martin moves to the role of executive adviser, his base salary will be reduced to $750,000 per year, he will not be eligible for a bonus and he will resign from the board.

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No other director has an employment contract extending beyond 12 months or pre-determined compensation on termination which exceeds one year’s salary.

Mr. McLaughlin

In 2011 and 2010, Davy, an Irish based stockbroking, wealth management and financial advisory firm, of which Mr. McLaughlin is deputy chairman, provided advisory services to the company. The total invoiced value of these services in 2011 was $0.2 million (2010: $0.3 million). Services rendered in 2011 included work in relation to the EDT divestment.

In November 2011, the Company engaged an adult son of Kyran McLaughlin as a consultant in relation to the Company’s investor relations programmes for a six month period. The amount invoiced for these services in 2011 was €11,800. Mr. McLaughlin’s son is not an executive officer and does not have a key strategic role within Elan.

Mr. Pilnik

In 2009, prior to his joining the board of directors of Elan, Mr. Pilnik was paid a fee of $15,230 for consultancy services provided to Elan.

Dr. Selkoe

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Arrangements with Former Directors

Agreements with Mr. Schuler, Mr. Bryson and Crabtree Partners L.L.C.

On September 17, 2010, we entered into agreements with Mr. Schuler and Mr. Bryson whereby we agreed to pay to Mr. Schuler and Mr. Bryson the aggregate amount of $300,000 in settlement of all costs, fees and expenses incurred by them in respect of any and all matters relating to the Irish High Court litigation and the SEC investigation of Mr. Schuler. Under the agreements, Mr. Schuler and Mr. Bryson agreed to resign from the board, and they subsequently resigned on October 29, 2010.

On June 8, 2009, we entered into an agreement with Mr. Schuler, Mr. Bryson and Crabtree Partners L.L.C. (an affiliate of Mr. Schuler and a shareholder of the Company) (collectively “the Crabtree Group”). Pursuant to this Agreement, we agreed to nominate Mr. Schuler and Mr. Bryson for election as directors of the Company at the 2009 AGM. Mr. Schuler and Mr. Bryson irrevocably agreed to resign as directors of the Company effective on the first date on which Mr. Schuler, Mr. Bryson and Crabtree Partners L.L.C. cease to beneficially own, in aggregate, at least 0.5% of the Company’s issued share capital. The Agreement also included a standstill provision providing that, until the later of December 31, 2009, amended to January 1, 2012, pursuant to the 2010 agreement, and the date that was three months after the date on which Mr. Schuler and Mr. Bryson cease to be directors of the Company, none of Mr. Schuler, Mr. Bryson, Crabtree Partners L.L.C. or any of their respective affiliates would, among other things, acquire any additional equity interest in the Company if, after giving effect to the acquisition, Mr. Schuler, Mr. Bryson, Crabtree Partners L.L.C. and their affiliates would own more than 3% of the Company’s issued share capital. Finally, we agreed to reimburse the Crabtree Group for $500,000 of documented out-of-pocket legal expenses incurred by their outside counsel in connection with the Agreement and the matters referenced in the Agreement.

Dr. Bloom

Mr. Cooke

In connection with the EDT transaction, as described in Note 5, and Mr. Cooke’s transfer of employment from the Company to Alkermes plc, the Company and Mr. Cooke agreed on September 16, 2011, that if his employment with Alkermes plc is terminated otherwise than for disciplinary reasons, and the date of expiry of notice of his termination of employment is not later than August 15, 2012, we will make up the shortfall, if any, between the severance amount payable to him by Alkermes plc, and the amount that he would have received under our current Elan severance plan had his employment continued and been terminated by us.

External Appointments and Retention of Fees

Executive directors may accept external appointments as non-executive directors of other companies and retain any related fees paid to them.

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Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

32. Development and Marketing Collaboration Agreements

Biogen Idec

169

Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the manufacture, sale and development of Tysabri are required to be transferred to the party that is not terminating for convenience or is not in material breach of the agreement.

For additional information relating to Tysabri, refer to Note 3.

Johnson & Johnson AIP Agreements

On September 17, 2009, Janssen AI, a newly formed subsidiary of Johnson & Johnson, completed the acquisition of substantially all of our assets and rights related to the AIP. In addition, Johnson & Johnson, through its affiliate Janssen Pharmaceutical, invested $885.0 million in exchange for newly issued American Depositary Receipts (ADRs) of Elan, representing 18.4% of our outstanding Ordinary Shares at the time. Johnson & Johnson also committed to fund up to $500.0 million towards the further development and commercialization of the AIP. As of December 31, 2011, the remaining unspent amount of the Johnson & Johnson $500.0 million funding commitment was $57.6 million (2010: $272.0 million), which reflects the $214.4 million utilized in 2011 (2010: $179.0 million). Any required additional expenditures in respect of Janssen AI’s obligations under the AIP collaboration in excess of the initial $500.0 million funding commitment is required to be funded by Elan and Johnson & Johnson in proportion to their respective shareholdings up to a maximum additional commitment of $400.0 million in total. Based on current spend levels, we anticipate that we will be called upon to provide funding to Janssen AI commencing in the second quarter of 2012. In the event that further funding is required beyond the $400.0 million, such funding will be on terms determined by the board of Janssen AI, with Johnson & Johnson and Elan having a right of first offer to provide additional funding. If we fail to provide our share of the $400.0 million commitment or any additional funding that is required for the development of the AIP, and if Johnson & Johnson elects to fund such an amount, our interest in Janssen AI could, at the option of Johnson & Johnson, be commensurately reduced.

Transition Therapeutics Collaboration Agreements

In September 2006, we entered into an exclusive, worldwide collaboration with Transition for the joint development and commercialization of a novel therapeutic agent for Alzheimer’s disease. The small molecule, ELND005, is a beta amyloid anti-aggregation agent that has been granted fast track designation by the FDA. In December 2007, the first patient was dosed in a Phase 2 clinical study. This 18-month, randomized, double-blind, placebo-controlled, dose-ranging study was designed to evaluate the safety and efficacy of ELND005 in approximately 340 patients with mild to moderate Alzheimer’s disease. In December 2009, we announced that patients would be withdrawn from the two highest dose groups due to safety concerns. In August 2010, Elan and Transition announced the top-line summary results of the Phase 2 clinical study and in September 2011, the Phase 2 clinical study data was published in the journal Neurology. The study’s cognitive and functional co-primary endpoints did not achieve statistical significance. The 250mg twice daily dose demonstrated a biological effect on amyloid-beta protein in the cerebrospinal fluid (CSF), in a subgroup of patients who provided CSF samples. This dose achieved targeted drug levels in the CSF and showed some effects on clinical endpoints in an exploratory analysis.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In December 2010, we modified our Collaboration Agreement with Transition and, in connection with this modification, Transition elected to exercise its opt-out right under the original agreement. Under this amendment, we paid Transition $9.0 million and Transition will be eligible to receive a further $11.0 million payment upon the commencement of the next ELND005 clinical trial, and will no longer be eligible to receive a $25.0 million milestone that would have been due upon the commencement of a Phase 3 trial for ELND005 under the terms of the original agreement.

As a consequence of Transition’s decision to exercise its opt-out right, it will no longer fund the development or commercialization of ELND005 and has relinquished its 30% ownership of ELND005 to us. Consistent with the terms of the original agreement, following its opt-out decision, Transition will be entitled to receive milestone payments of up to $93.0 million (in addition to the $11.0 million described above), along with tiered royalty payments ranging in percentage from a high single digit to the mid teens (subject to offsets) based on net sales of ELND005 should the drug receive the necessary regulatory approvals for commercialization.

We are continuing to explore pathways forward for the ELND005 asset.

33. Supplemental Guarantor Information

As part of the offering and sale of the 2016 Notes issued October 2009 and the 2016 Notes issued August 2010, Elan Corporation, plc and certain of its subsidiaries have guaranteed these notes.

Each subsidiary that has guaranteed our outstanding Notes will be released from its guarantee in the event:

•

there is a legal defeasance of the Notes;

•

there is a sale or other disposition of the shares or assets of the subsidiary if, after such sale or disposition, the subsidiary is no longer “restricted” for debt covenant purposes; or

•

the subsidiary is designated as “unrestricted” for debt covenant purposes;

provided that any transaction is carried out in accordance with the provisions of the indentures governing the Notes.

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Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Presented below is condensed consolidating information for Elan Finance plc, the issuer of the debt, Elan Corporation, plc, the parent guarantor of the debt, the guarantor subsidiaries of Elan Corporation, plc, and the non-guarantor subsidiaries of Elan Corporation, plc. All of the subsidiary guarantors are wholly owned subsidiaries of Elan Corporation, plc.

Condensed Consolidating Statements of Operations

For the Year Ended December 31, 2011


	Elan Finance plc			Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Elimination Adjustments			Consolidated
	(In millions)
Revenue	$	—		$	—		$	2,083.4		$	—		$	(837.4	)	$	1,246.0
Cost of sales		—			—			1,277.8			—			(638.1	)		639.7

Gross margin		—			—			805.6			—			(199.3	)		606.3
Operating expenses:														—
Selling, general and administrative expenses		—			43.5			235.3			5.1			(55.2	)		228.7
Research and development expenses		—			—			352.6			22.8			(142.9	)		232.5
Net gain on divestment of businesses		—			—			(585.9	)		(67.0	)		—			(652.9	)
Other net (gains)/charges		—			—			(41.0	)		—			(1.2	)		(42.2	)

Total operating expenses		—			43.5			(39.0	)		(39.1	)		(199.3	)		(233.9	)


Operating income/(loss)		—			(43.5	)		844.6			39.1			—			840.2

Share of net gains/(losses) of subsidiaries		—			604.0			—			—			(604.0	)		—
Net interest and investment (gains)/losses		0.1			—			243.0			(11.0	)		—			232.1

Income/(loss) before provision for income taxes		(0.1	)		560.5			601.6			50.1			(604.0	)		608.1
Provision/(benefit from) for income taxes		(0.1	)		—			47.7			—			—			47.6

Net income/(loss)	$	—		$	560.5		$	553.9		$	50.1		$	(604.0	)	$	560.5

172

Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Consolidating Statements of Operations

For the Year Ended December 31, 2010


	Elan Finance plc			Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Elimination Adjustments			Consolidated
	(In millions)
Revenue	$	—		$	—		$	1,891.8		$	—		$	(722.1	)	$	1,169.7
Cost of sales		—			—			1,071.6			—			(488.3	)		583.3

Gross margin		—			—			820.2			—			(233.8	)		586.4
Operating expenses:
Selling, general and administrative expenses		—			62.8			239.8			5.2			(53.1	)		254.7
Research and development expenses		—			—			429.8			9.1			(180.2	)		258.7
Settlement reserve charge		—			—			206.3			—			—			206.3
Net gain on divestment of businesses		—			—			(1.0	)		—			—			(1.0	)
Other net charges		—			0.9			56.4			(0.5	)		(0.5	)		56.3

Total operating expenses		—			63.7			931.3			13.8			(233.8	)		775.0


Operating income/(loss)		—			(63.7	)		(111.1	)		(13.8	)		—			(188.6	)

Share of net gains/(losses) of subsidiaries		—			(261.0	)		—			—			261.0			—
Net interest and investment (gains)/losses		(1.2	)		—			141.0			(5.8	)		—			134.0

Income/(loss) before provision for income taxes		1.2			(324.7	)		(252.1	)		(8.0	)		261.0			(322.6	)
Provision for income taxes		0.3			—			1.8			—			—			2.1

Net income/(loss)	$	0.9		$	(324.7	)	$	(253.9	)	$	(8.0	)	$	261.0		$	(324.7	)

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Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Consolidating Statements of Operations

For the Year Ended December 31, 2009


	Elan Finance plc			Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Elimination Adjustments			Consolidated
	(In millions)
Revenue	$	—		$	0.8		$	1,932.1		$	0.5		$	(820.4	)	$	1,113.0
Cost of sales		—			—			993.9			—			(433.2	)		560.7

Gross margin		—			0.8			938.2			0.5			(387.2	)		552.3
Operating expenses:
Selling, general and administrative expenses		—			57.0			286.4			—			(75.2	)		268.2
Research and development expenses		—			—			595.7			0.2			(302.3	)		293.6
Net gain on divestment of businesses								(108.7	)		—			—			(108.7	)
Other net charges		—			—			67.0			0.3			—			67.3

Total operating expenses		—			57.0			840.4			0.5			(377.5	)		520.4


Operating income/(loss)		—			(56.2	)		97.8			—			(9.7	)		31.9

Share of net gains/(losses) of subsidiaries		—			(120.1	)		—			—			120.1			—
Net interest and investment (gains)/losses		(1.6	)		(0.1	)		183.7			(0.2	)		(20.1	)		161.7

Income/(loss) before provision for/(benefit from) income taxes		1.6			(176.2	)		(85.9	)		0.2			130.5			(129.8	)
Provision for/(benefit from) income taxes		0.4			—			46.0			—			—			46.4

Net income/(loss)	$	1.2		$	(176.2	)	$	(131.9	)	$	0.2		$	130.5		$	(176.2	)

174

Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Consolidating Balance Sheets

For the Year Ended December 31, 2011


	Elan Finance plc			Parent Company		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Elimination Adjustments			Consolidated
	(In millions)
		ASSETS
Current Assets:
Cash and cash equivalents	$	1.8		$	0.8	$	265.7	$	3.4	$	—		$	271.7
Restricted cash — current		—			—		2.6		—		—			2.6
Accounts receivable, net		—			—		167.7		—		—			167.7
Investment securities — current		—			—		0.3		—		—			0.3
Inventory		—			—		42.2		—		(18.4	)		23.8
Intercompany receivables		22.8			2,964.0		3,646.3		140.3		(6,773.4	)		—
Deferred tax assets — current		0.1			—		26.1		—		—			26.2
Prepaid and other current assets		—			—		25.7		—		—			25.7

Total current assets		24.7			2,964.8		4,176.6		143.7		(6,791.8	)		518.0
Property, plant and equipment, net		—			—		83.2		—		—			83.2
Goodwill and other intangible assets, net		—			—		107.0		—		202.9			309.9
Equity method investment		—			—		130.6		545.2		—			675.8
Investment securities — non-current		—			—		9.8		—		—			9.8
Investments in subsidiaries		—			—		12,545.6		—		(12,545.6	)		—
Restricted cash — non-current		—			—		13.7		—		—			13.7
Intercompany receivables		588.4			—		7,021.6		1.1		(7,611.1	)		—
Deferred tax assets — non-current		0.6			—		123.5		—		(5.2	)		118.9
Other assets		11.1			—		13.3		—		0.1			24.5

Total assets	$	624.8		$	2,964.8	$	24,224.9	$	690.0	$	(26,750.7	)	$	1,753.8


LIABILITIES AND SHAREHOLDERS’ EQUITY/(DEFICIT)
Current Liabilities:
Accounts payable	$	—		$	—	$	46.4	$	—	$	—		$	46.4
Accrued and other current liabilities		11.4			0.1		210.6		—		7.8			229.9
Intercompany payables		0.2			1,975.4		5,446.6		261.8		(7,684.0	)		—

Total current liabilities		11.6			1,975.5		5,703.6		261.8		(7,676.2	)		276.3
Long term debts		615.0			—		—		—		—			615.0
Intercompany payables		—			175.3		11,614.9		—		(11,790.2	)		—
Other liabilities		—			12.2		53.7		—		(5.2	)		60.7

Total liabilities		626.6			2,163.0		17,372.2		261.8		(19,471.6	)		952.0
Shareholders’ equity/(deficit)		(1.8	)		801.8		6,852.7		686.1		(7,537.0	)		801.8

Total liabilities and shareholders’ equity/(deficit)	$	624.8		$	2,964.8	$	24,224.9	$	947.9	$	(27,008.6	)	$	1,753.8

175

Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Consolidating Balance Sheets

For the Year Ended December 31, 2010


	Elan Finance plc			Parent Company		Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Elimination Adjustments			Consolidated
	(In millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	1.7		$	0.3	$	279.4	$	141.1		$	—		$	422.5
Restricted cash — current		—			—		208.2		—			—			208.2
Accounts receivable, net		—			—		191.6		—			—			191.6
Investment securities — current		—			—		2.0		—			—			2.0
Inventory		—			—		56.6		—			(17.6	)		39.0
Intercompany receivables		16.3			2,432.1		4,088.0		79.1			(6,615.5	)		—
Deferred tax assets — current		0.2			—		41.6		—			—			41.8
Prepaid and other current assets		—			—		15.4		—			—			15.4

Total current assets		18.2			2,432.4		4,882.8		220.2			(6,633.1	)		920.5
Property, plant and equipment, net		—			—		287.5		—			—			287.5
Goodwill and other intangible assets, net		—			—		123.9		—			252.6			376.5
Equity method investment		—			—		209.0		—			—			209.0
Investment securities — non-current		—			—		9.4		—			—			9.4
Investments in subsidiaries		—			—		12,306.7		1.8			(12,308.5	)		—
Restricted cash — non-current		—			—		14.9		—			—			14.9
Intercompany receivables		1,247.0			8.1		7,118.3		186.1			(8,559.5	)		—
Deferred tax assets — non-current		0.4			—		153.9		—			—			154.3
Other assets		21.3			—		24.1		—			—			45.4

Total assets	$	1,286.9		$	2,440.5	$	25,130.5	$	408.1		$	(27,248.5	)	$	2,017.5


LIABILITIES AND SHAREHOLDERS’ EQUITY/(DEFICIT)
Current Liabilities:
Accounts payable	$	—		$	—	$	39.2	$	—		$	—		$	39.2
Accrued and other current liabilities		18.3			4.8		416.9		(0.4	)		2.9			442.5
Intercompany payables		—			2,088.0		5,693.1		12.5			(7,793.6	)		—

Total current liabilities		18.3			2,092.8		6,149.2		12.1			(7,790.7	)		481.7
Long term debts		1,270.4			—		—		—			—			1,270.4
Intercompany payables		—			133.5		12,628.5		4.4			(12,766.4	)		—
Other liabilities		—			19.9		55.8		—			(4.6	)		71.1

Total liabilities		1,288.7			2,246.2		18,833.5		16.5			(20,561.7	)		1,823.2
Shareholders’ equity/(deficit)		(1.8	)		194.3		6,297.0		391.6			(6,686.8	)		194.3
Total liabilities and shareholders’ equity/(deficit)	$	1,286.9		$	2,440.5	$	25,130.5	$	408.1		$	(27,248.5	)	$	2,017.5

176

Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Consolidating Statements of Cash Flows

For the Year Ended December 31, 2011


	Elan Finance plc			Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Elimination Adjustments		Consolidated
	(In millions)
Cash flows from operating activities:
Net cash provided by/(used in) operating activities	$	697.4		$	(5.8	)	$	(826.2	)	$	14.4		$	—	$	(120.2	)

Cash flows from investing activities:
Decrease in restricted cash		—			—			206.8			—			—		206.8
Proceeds from disposal of property, plant and equipment		—			—			1.3			—			—		1.3
Purchase of property, plant and equipment		—			—			(27.3	)		—			—		(27.3	)
Purchase of intangible assets		—			—			(2.5	)		—			—		(2.5	)
Purchase of equity method investment		—			—			—			(20.0	)		—		(20.0	)
Purchase of non-current investment securities		—			—			(0.6	)		—			—		(0.6	)
Sale of non-current investment securities		—			—			2.5			—			—		2.5
Sale of current investment securities		—			—			0.3			—			—		0.3
Proceeds from business disposals		—			—			500.0			—			—		500.0

Net cash used in investing activities		—			—			680.5			(20.0	)		—		660.5

Cash flows from financing activities:																—
Proceeds from employee stock issuances		—			6.3			—			—			—		6.3
Repayment of loans		(697.3	)		—			—			—			—		(697.3	)
Net proceeds from debt issuances		—			—			—			—			—		—
Intercompany investments/capital contributions		—			—			—			—			—		—
Loans to group undertakings		—			—			132.1			(132.1	)		—		—
Repayment of government grants		—			—			—			—			—		—

Net cash provided by/(used in) financing activities		(697.3	)		6.3			132.1			(132.1	)		—		(691.0	)

Effect of exchange rate changes on cash		—			—			(0.1	)		—			—		(0.1	)

Net increase/(decrease) in cash and cash equivalents		0.1			0.5			(13.7	)		(137.7	)		—		(150.8	)
Cash and cash equivalents at beginning of year		1.7			0.3			279.4			141.1			—		422.5

Cash and cash equivalents at end of year	$	1.8		$	0.8		$	265.7		$	3.4		$	—	$	271.7

177

Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Consolidating Statements of Cash Flows

For the Year Ended December 31, 2010


	Elan Finance plc			Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Elimination Adjustments		Consolidated
	(In millions)
Cash flows from operating activities:
Net cash provided by/(used in)	$	259.8		$	(5.0	)	$	(176.2	)	$	(10.4	)	$	—	$	68.2

operating activities
Cash flows from investing activities:																—
Decrease in restricted cash		—			—			(191.4	)		—			—		(191.4	)
Proceeds from disposal of property, plant and equipment		—			—			0.1			—			—		0.1
Purchase of property, plant and equipment		—			—			(40.9	)		—			—		(40.9	)
Purchase of intangible assets		—			—			(3.6	)		—			—		(3.6	)
Purchase of non-current investment securities		—			—			(0.9	)		—			—		(0.9	)
Sale of non-current investment securities		—			—			7.9			—			—		7.9
Sale of current investment securities		—			—			8.5			—			—		8.5
Proceeds from business disposals		—			—			4.3			—			—		4.3

Net cash used in investing activities		—			—			(216.0	)		—			—		(216.0	)

Cash flows from financing activities:																—
Proceeds from employee stock issuances		—			1.8			—			—			—		1.8
Repayment of loans		(455.0	)		—			—			—			—		(455.0	)
Net proceeds from debt issuances		187.1			—			—			—			—		187.1
Intercompany investments/capital contributions		—			—			(0.9	)		0.9			—		—
Loans to group undertakings		—			—			251.0			(251.0	)		—		—
Repayment of government grants		—			—			—			—			—		—

Net cash provided by/(used in) financing activities		(267.9	)		1.8			250.1			(250.1	)		—		(266.1	)

Effect of exchange rate changes on cash		—			—			(0.1	)		—			—		(0.1	)

Net increase/(decrease) in cash and cash equivalents		(8.1	)		(3.2	)		(142.2	)		(260.5	)		—		(414.0	)
Cash and cash equivalents at beginning of year		9.8			3.5			421.6			401.6			—		836.5

Cash and cash equivalents at end of year	$	1.7		$	0.3		$	279.4		$	141.1		$	—	$	422.5

178

Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Consolidating Statements of Cash Flows

For the Year Ended December 31, 2009


	Elan Finance plc			Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Elimination Adjustments		Consolidated
	(In millions)
Cash flows from operating activities:
Net cash provided by/(used in) operating activities	$	264.4		$	(869.9	)	$	519.3		$	(0.1	)	$	—	$	(86.3	)

Cash flows from investing activities:
Decrease in restricted cash		—			—			3.5			—			—		3.5
Proceeds from disposal of property, plant and equipment		—			—			7.3			—			—		7.3
Purchase of property, plant and equipment		—			—			(43.5	)		—			—		(43.5	)
Purchase of intangible assets		—			—			(52.4	)		—			—		(52.4	)
Purchase of non-current investment securities		—			—			(0.6	)		—			—		(0.6	)
Sale of current investment securities		—			—			28.9			—			—		28.9

Net cash used in investing activities		—			—			(56.8	)		—			—		(56.8	)

Cash flows from financing activities:
Issue of share capital		—			868.0			—			—			—		868.0
Proceeds from employee stock issuances		—			4.0			—			—			—		4.0
Repayment of loans		(867.8	)		—			—			—			—		(867.8	)
Net proceeds from debt issuances		603.0			—			—			—			—		603.0
Intercompany investments/capital contributions		—			—			(399.7	)		399.7			—		—
Repayment of government grants		—			—			(5.4	)		—			—		(5.4	)
Excess tax benefit from share-based compensation		—			—			2.3			—			—		2.3

Net cash provided by/(used in) financing activities		(264.8	)		872.0			(402.8	)		399.7			—		604.1

Effect of exchange rate changes on cash		—			—			0.2			—			—		0.2

Net increase/(decrease) in cash and cash equivalents		(0.4	)		2.1			59.9			399.6			—		461.2
Cash and cash equivalents at beginning of year		10.2			1.4			361.7			2.0			—		375.3

Cash and cash equivalents at end of year	$	9.8		$	3.5		$	421.6		$	401.6		$	—	$	836.5

179

Item 19.

Exhibits.


Exhibit Number		Description

1.1		Memorandum and Articles of Association of Elan Corporation, plc. (incorporated by reference to Exhibit 1.1 of Elan Corporation plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2010 (Securities and Exchange Commission (Commission) File No. 001-13896)).

2(b)(1)		Indenture dated as of August 17, 2010, among Elan Finance public limited company, Elan Finance Corp., Elan Corporation, plc, the Subsidiary Note Guarantors party thereto and The Bank of New York Mellon, as Trustee (incorporated by reference to Exhibit 99.1 of the Report of Foreign Issuer on Form 6-K of Elan Corporation, plc filed with the Commission on December 13, 2010).

2(b)(2)		Indenture dated as of October 2, 2009, among Elan Finance public limited company, Elan Finance Corp., Elan Corporation, plc, the Subsidiary Note Guarantors party thereto and The Bank of New York, as Trustee (including Forms of Global Exchange Notes) (incorporated by reference to Exhibit 99.1 of the Report of Foreign Issuer on Form 6-K of Elan Corporation, plc filed with the Commission on October 27, 2009).

4(a)(1)		Antegren Development and Marketing Collaboration Agreement, dated as of August 15, 2000, by and between Biogen, Inc. and Elan Pharma International Limited (incorporated by reference to Exhibit 4(a)(1) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2002 — confidential treatment has been granted for portions of this exhibit).

4(a)(2)		Asset Purchase Agreement, dated as of July 2, 2009, among Janssen Pharmaceutical, Juno Neurosciences, Elan Corporation, plc and the other Parties identified therein (incorporated by reference to Exhibit 4(a)(3) of Elan Corporation, plc’s Annual Report on Form 20-F for the year ended December 31, 2009).

4(a)(3)		Subscription and Transfer Agreement, dated as of July 2, 2009, among Elan Corporation, plc, Keavy Holdings plc and Janssen Pharmaceutical (incorporated by reference to Exhibit 4(a)(4) of Elan Corporation, plc’s Annual Report on Form 20-F for the year ended December 31, 2009).

4(a)(4)		Letter Agreement dated September 14, 2009 among Elan Corporation, plc, Athena Neurosciences, Inc., Crimagua Limited, Elan Pharmaceuticals, Inc., Elan Pharma International Limited, Keavy Finance plc, Janssen Pharmaceutical and Janssen Alzheimer Immunotherapy (incorporated by reference to Exhibit 4(a)(5) of Elan Corporation, plc’s Annual Report on Form 20-F for the year ended December 31, 2009).

4(a)(5)		Investment Agreement, dated as of September 17, 2009, between Elan Corporation, plc and Janssen Pharmaceutical (incorporated by reference to Exhibit 4(a)(6) of Elan Corporation, plc’s Annual Report on Form 20-F for the year ended December 31, 2009).

4(a)(6)		Shareholders’ Agreement, dated as of September 17, 2009 by and among Janssen Pharmaceutical, Janssen Alzheimer Immunotherapy (Holding) Limited, Latam Properties Holdings, JNJ Irish Investments ULC, Elan Corporation, plc, Crimagua Limited, Elan Pharma International Limited and Janssen Alzheimer Immunotherapy (incorporated by reference to Exhibit 4(a)(6) of Elan Corporation, plc’s Annual Report on Form 20-F for the year ended December 31, 2010).

4(a)(7)		Royalty Agreement dated as of September 17, 2009 among Janssen Alzheimer Immunotherapy, Janssen Alzheimer Immunotherapy (Holding) Limited and Elan Pharma International Limited (incorporated by reference to Exhibit 4(a)(8) of Elan Corporation, plc’s Annual Report on Form 20-F for the year ended December 31, 2009).

4(a)(8)		Corporate Integrity Agreement between the Office of Inspector General of the Department of Health and Human Services and Elan Corporation, plc (incorporated by reference to Exhibit 4(a)(8) of Elan Corporation, plc’s Annual Report on Form 20-F for the year ended December 31, 2010).

180


Exhibit Number		Description

4(a)(9)		Plea Agreement, dated December 8, 2010, between the United States Attorney for the District of Massachusetts, the United States Department of Justice and Elan Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.1 of the Report of Foreign Issuer on Form 6-K of Elan Corporation, plc filed with the Commission on February 28, 2011).

4(a)(10)		Settlement Agreement, effective December 15, 2010, among the United States of America, acting through the United States Department of Justice and on behalf of the Office of Inspector General of the Department of Health and Human Services, the TRICARE Management Activity, and the United States Office of Personnel Management; Elan Corporation, plc; and Lee R. Chartock, M.D. (incorporated by reference to Exhibit 10.2 of the Report of Foreign Issuer on Form 6-K of Elan Corporation, plc filed with the Commission on February 28, 2011).

4(a)(11)		Business Combination Agreement And Plan Of Merger, dated as of May 9, 2011, by and among Elan Corporation, plc, Antler Science Two Limited, Elan Science Four Limited, EDT Pharma Holdings Limited, EDT US Holdco Inc., Antler Acquisition Corp. and Alkermes, Inc. (incorporated by reference to Exhibit 2.1 of the Report of Foreign Issuer on Form 6-K of Elan Corporation, plc filed with the Commission on May 9, 2011).

4(a)(12)		Shareholder’s Agreement, dated as of September 16, 2011, by and among Alkermes, plc, Elan Corporation, plc, and Elan Science Three Limited.

4(b)(1)		Lease dated as of June 1, 2007 between Chamberlin Associates 180 Oyster Point Blvd., LLC and Elan Pharmaceuticals, Inc. (incorporated by reference to Exhibit 4(b)(1) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2007).

4(b)(2)		Lease dated as of December 17, 2007 between Chamberlin Associates 200 Oyster Point, L.P. and Elan Pharmaceuticals, Inc. (incorporated by reference to Exhibit 4(b)(2) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2007).

4(c)(1)		Elan Corporation, plc 1999 Stock Option Plan (2001 Amendment) (incorporated by reference to Exhibit 4(c)(1) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2001).

4(c)(2)		Elan Corporation, plc 1998 Long-Term Incentive Plan (2001 Restatement) (incorporated by reference to Exhibit 4(c)(2) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2001).

4(c)(3)		Elan Corporation, plc 1996 Long-Term Incentive Plan (2001 Restatement) (incorporated by reference to Exhibit 4(c)(3) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2001).

4(c)(4)		Elan Corporation, plc 1996 Consultant Option Plan (2001 Restatement) (incorporated by reference to Exhibit 4(c)(4) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2001).

4(c)(5)		Elan Corporation, plc Employee Equity Purchase Plan, (2009 Restatement) (incorporated by reference to Exhibit 4(c)(5) of Elan Corporation, plc’s Annual Report on Form 20-F for the year ended December 31, 2009).

4(c)(6)		Elan Corporation, plc 2004 Restricted Stock Unit Plan (incorporated by reference to Exhibit 4(c)(8) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2005).

4(c)(7)		Letter Agreement, dated as of June 8, 2009, among Elan Corporation, plc, Jack W. Schuler, Vaughn D. Bryson and Crabtree Partners L.C.C. (incorporated by reference to Exhibit 10.3 of the Report of Foreign Issuer on Form 6-K of Elan Corporation, plc filed with the Commission on September 29, 2009).

4(c)(8)		Consulting Agreement, dated as of July 1, 2009, between Dr. Dennis J. Selkoe and Elan Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.4 of the Report of Foreign Issuer on Form 6-K of Elan Corporation, plc filed with the Commission on September 29, 2009).

181


Exhibit Number		Description
4(c)(9)		Employment Agreement, dated as of December 7, 2005, as amended by Amendment 2008-1 dated as of December 19, 2008, among Elan Pharmaceuticals, Inc., Elan Corporation, plc and G. Kelly Martin. (incorporated by reference to Exhibit 4(c)(11) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2008).
4(c)(10)		July 18, 2007 Letter Agreement between Dr. Lars Ekman and Elan Pharmaceuticals, Inc. (incorporated by reference to Exhibit 4(c)(12) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2007).
4(c)(11)		Elan Corporation, plc Cash Bonus Plan effective January 1, 2006, and revised as of January 1, 2009. (incorporated by reference to Exhibit 4(c)(13) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2008).
4(c)(12)		Elan Corporation, plc Profit Sharing Scheme 2006 (incorporated by reference to Exhibit 4(c)(16) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2005).
4(c)(13)		Elan Corporation, plc 2006 Long Term Incentive Plan (2009 Amendment and Restatement). (incorporated by reference to Exhibit 4(c)(15) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2008).
4(c)(14)		Letter Agreement dated as of September 16, 2011 between Elan Corporation, plc and Shane Cooke (incorporated by reference to Exhibit 2.3 of the Report of Foreign Issuer of Elan Corporation, plc filed with the Commission on September 16, 2011).
4(c)(15)		Form of Deed of Indemnity between Elan Corporation, plc and directors and certain officers of Elan Corporation, plc (incorporated by reference to Exhibit 99.2 of the Report of Foreign Issuer on Form 6-K of Elan Corporation, plc filed with the Commission on November 15, 2006).
4(c)(16)		Elan U.S. Severance Plan, amended and restated effective as of April 1, 2011 (incorporated by reference to Exhibit 99.1 of the Report of Foreign Issuer of Elan Corporation, plc filed with the Commission on April 19, 2011).
4(c)(17)		Form of Memo Agreement dated May 17, 2007 amending certain outstanding grant agreements for restricted stock units and stock option agreements held by senior officers who are members of the Operating Committee of Elan Corporation, plc. (incorporated by reference to Exhibit 4(c)(19) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2007).
4(c)(18)		Form of Restricted Stock Unit Agreement under the Elan Corporation, plc 2006 Long Term Incentive Plan (2009 Amendment and Restatement) for certain senior officers who are members of the Operating Committee of Elan Corporation, plc. (incorporated by reference to Exhibit 4(c)(20) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2008).
4(c)(19)		Form of Nonstatutory Stock Option Agreement under the Elan Corporation, plc 2006 Long Term Incentive Plan (2009 Amendment and Restatement) for certain senior officers who are members of the Operating Committee of Elan Corporation, plc. (incorporated by reference to Exhibit 4(c)(21) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2008).
4(c)(20)		Form of Nonstatutory Stock Option Agreement under the Elan Corporation, plc 2006 Long Term Incentive Plan (2009 Amendment and Restatement) for new members of the Board of Directors of Elan Corporation, plc. (incorporated by reference to Exhibit 4(c)(22) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2008).
4(c)(21)		Form of Nonstatutory Stock Option Agreement under the Elan Corporation, plc 2006 Long Term Incentive Plan (2009 Amendment and Restatement) for members of the Board of Directors of Elan Corporation, plc. (incorporated by reference to Exhibit 4(c)(23) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2008).

182


Exhibit Number		Description
4(c)(22)		Form of Restricted Stock Unit Agreement under the Elan Corporation, plc 2006 Long Term Incentive Plan (2009 Amendment and Restatement) for non-executive members of the Board of Directors of Elan Corporation, plc. (incorporated by reference to Exhibit 4(c)(24) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2008).
4(c)(23)		Letter Agreement dated as of March 10, 2011 between Elan Pharmaceuticals, Inc. and Dr. Carlos Paya (incorporated by reference to Exhibit 10.1 of the Report of Foreign Issuer on Form 6-K of Elan Corporation, plc filed with the Commission on March 15, 2011).
4(c)(24)		Amendment to Employment Agreement entered into as of June 2, 2010 between Elan Pharmaceuticals, Inc. and G. Kelly Martin serving as an amendment to an employment agreement dated December 7, 2005, as amended effective December 19, 2008 among the parties and Elan Corporation, plc (incorporated by reference to Exhibit 99.1 of the Report of Foreign Issuer on Form 6-K of Elan Corporation, plc filed with the Commission on August 10, 2010).
4(c)(25)		Memorandum of Understanding dated 17 September 2010 among Elan Corporation, plc, Jack Schuler and Vaughn Bryson (incorporated by reference to Exhibit 4(c)(27) of Elan Corporation plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2010).
4(c)(26)		Binding Fee Letter Dated 17 September 2010 among Elan Corporation, plc, Jack Schuler and Vaughn Bryson (incorporated by reference to Exhibit 4(c)(28) of Elan Corporation plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2010).
4(c)(27)		Amendment 2011-1 to Elan U.S. Severance Plan effective as of July 14, 2011.
4(c)(28)		Chairman’s Letter of Appointment dated February 9, 2011 (incorporated by reference to Exhibit 99.1 of the Report of Foreign Issuer on Form 6-K of Elan Corporation, plc filed with the Commission on February 10, 2011).
8.1		Subsidiaries of Elan Corporation, plc.
12.1		Certification of G. Kelly Martin pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2		Certification of Nigel Clerkin pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1		Certification of G. Kelly Martin pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13.2		Certification of Nigel Clerkin pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
15.1		Consent of Independent Registered Public Accounting Firm, KPMG.
101		XBRL (Extensible Business Reporting Language) The following materials from Elan’s Annual Report on Form 20-F for the fiscal year-ended December 31, 2011, formatted in XBRL: (i) Consolidated Statements of Operations, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Shareholders’ Equity/(Deficit) and Comprehensive Income/(Loss) (iv) Consolidated Statements of Cash Flows, (v) Notes to the Consolidated Financial Statements, and (vi) Schedule II — Valuation and Qualifying Accounts and Reserves.

183

SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

Elan Corporation, plc

/s/ NIGEL CLERKIN

Nigel Clerkin

Executive Vice President and Chief Financial Officer

Date: February 23, 2012

184

Schedule II

Valuation and Qualifying Accounts and Reserves

Years ended December 31, 2011, 2010 and 2009


Description	Balance at Beginning of Year		Additions⁽¹⁾		Deductions⁽²⁾			Balance at End of Year


	(In millions)
Allowance for doubtful accounts:
Year ended December 31, 2011	$	0.4	$	—	$	(0.4	)	$	—
Year ended December 31, 2010	$	0.4	$	0.4	$	(0.4	)	$	0.4
Year ended December 31, 2009	$	0.9	$	0.7	$	(1.2	)	$	0.4
Sales returns and allowances, discounts, chargebacks and rebates:⁽³⁾
Year ended December 31, 2011	$	37.9	$	188.8	$	(181.2	)	$	45.5
Year ended December 31, 2010	$	26.5	$	127.5	$	(116.1	)	$	37.9
Year ended December 31, 2009	$	19.2	$	79.3	$	(72.0	)	$	26.5

⁽¹⁾	Additions to allowance for doubtful accounts are recorded as an expense.

⁽²⁾	Represents amounts written off or returned against the allowance or reserves, or returned against earnings. Deductions to sales discounts and allowances relate to sales returns and payments.

⁽³⁾	Additions to sales discounts and allowances are recorded as a reduction of revenue.

185