ELANgating Payment Terms May Pressure Future Revenue

We believe ELAN’s future revenues are likely to come under pressure because ELAN appears to have recently extended payment terms and 3Q19 revenues benefited from the initial stocking for a new customer agreement. Additionally, the provision for sales discounts and rebates was lower than payouts in 3Q19 which could provide an unsustainable boost to revenue. We are also concerned by continued significant adjustments to Non-GAAP earnings and a shift to adjusted EBITDA from adjusted EBIT as a KPI. Thus, we are adding ELAN to our Biggest Concerns list.