Shares of Elan, Ireland’s biggest drug company rose on the Irish Stock Exchange yesterday as rumours circulated that its multiple sclerosis drug Tysabri (natalizumab) could be returned to the marketplace.

Elan’s stock had risen as much as 26% on the day, although there appeared to be no newsflow behind the surge and the shares fell back to close up 13% at 4.73 euros. In the US, however, the optimistic view was resisted and the firm’s American Depositary Receipts closed down more than 6% at $6.29.

Tysabri was taken off the market in February after two patients treated with the drug developed a rare brain infection, one of which was fatal, just weeks after it was launched in the USA by Elan’s development partner Biogen Idec. The two companies have always said that they remain hopeful that Tysabri could return to the market, although the chances of this were deemed much diminished when a third patient succumbed to the infection [[31/03/05a]].

JP Morgan analyst Corey Davis said in an investment note that the share price increase was the result of a shift in sentiment and expectations that Tysabri might be able to return to the market in the next 12 to 18 months, perhaps stemming from the fact that no new cases of the infection, called progressive multifocal leukoencephalopathy or PML, have been reported since the end of March.

Tysabri is seen as a crucial element in Elan’s bid to bring its finances back into line after hovering on the brink of bankruptcy in 2002, and to allow the firm to service debt commitments due to emerge in 2008 and 2011. Elan said last week it will cut its cash burn rate by $100 to $250 million, or around 29%, to allow it to break even on an operating basis this year [[28/04/05b]].