A safety study for Elan Corp's multiple sclerosis drug Tysabri has found no new confirmed cases of the brain disease that prompted the Irish company to pull the drug, it said on Tuesday, boosting its shares as much as 39 percent.
In February, Elan and US partner Biogen Idec withdrew Tysabri from the US market following reports of PML, a rare and potentially fatal disease of the central nervous system, in some patients taking the drug.
Shares in Elan, which had been counting on Tysabri to revive its fortunes following a brush with bankruptcy in 2002, plunged 90 percent after the withdrawal, but have since recovered some ground on management confidence the drug will make a comeback.
At midmorning the shares were up 26.2 percent at 7.70 euros in Dublin, after earlier rising as high as 8.52 euros, but still well off a year high of 22.40 euros.
On the New York Stock Exchange, Elan's shares climbed $1.42, or 76.75 percent, to $9.42, while shares of Biogen rose $3.19, or 8.38 percent, to $41.66 on Nasdaq.
"This progress report and the move to initiate further trials gives us increased confidence that, given its undoubted efficacy, Tysabri will make it back onto the market for the treatment of MS," Goodbody Stockbrokers' analyst Ian Hunter said in a research note.
Swiss biotech company Serono, which has benefited from Tysabri's woes, slipped 1.5 percent to 843.00 Swiss francs. The stock has gained 14 percent so far this year on expectations its Rebif multiple sclerosis drug would benefit from the withdrawal of Tysabri.
"Although sales would almost certainly not be as strong as first assumed, Tysabri might still become an important therapy for MS," Denise Anderson at Kepler Equities in Zurich said.
Merrill Lynch analyst Erica Whittaker said in a research note that she believes Tysabri will return to the market in early 2006, but only in a limited clinical setting, restricted to MS patients with no other treatment options.
She expects peak global sales of less than $500 million, which would make it tough for Elan to repay its roughly $2 billion in debt due in 2008 and 2011.
Whittaker said Tysabri would have to generate peak sales of more than $1.2 billion for Elan to make its debt repayments. She maintains a "sell" rating on Elan.
Biogen and Elan said on Tuesday a safety evaluation for Tysabri's use for Crohn's Disease and rheumatoid arthritis was on track to be completed by the end of the summer and they anticipated making submissions to the regulatory authorities in early autumn 2005.
"The companies are taking preliminary steps to restart clinical trials in MS," they added.
Presenting quarterly results last month, Elan said it continued to invest prudently in Tysabri - formerly known as Antegren - and remained committed to reintroducing it.
The company posted a net loss for the three months to the end of June of 35 cents per share, worse than the 30-cent loss in the same period last year, but slightly better than the median forecast of a Reuters poll for a 37-cents loss.
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