Elan bonds rise on Tysabri return hopes; Federal-Mogul loan trades around

By Paul Deckelman and Sara Rosenberg

New York, June 9 - Elan Corp. plc, its bonds and shares recently battered by news linking the Irish pharmaceuticals maker and its important Tysabri drug with a rare and potentially fatal brain malady, got a badly needed tonic Thursday, when articles in a prestigious medical journal suggested that certain people might be genetically predisposed to come down with that particular illness - a development seen as holding out the hope that Tysabri might once again be on drugstore shelves nationwide at some time in the future.

Elsewhere, the bonds of bankrupt United Airlines parent UAL Corp. continued to wing their way upward, although little movement was seen in other airline issues.

And Federal-Mogul Corp.'s bank debt was one of the more active names this week as it tried to trade up but then settled back down by Thursday evening.

Traders saw Elan's 7¼% notes due 2008 and 7¾% notes due 2011 "significantly better," in the words of one of them, with each issue up two points on the session, to 93 bid, 95 offered, and to 87 bid, 89 offered, respectively.

A trader also saw Elan's floating-rate notes due 2011 firm a point to that same 87 bid, 89 offered level.

Elan's New York Stock Exchange-traded shares jumped 77 cents (11.67%) to $7.37 Thursday, on volume of 37 million, about double the usual turnover.

The bonds and shares got a boost after the New England Journal of Medicine published comments online that could offer a way for Tysabri to eventually return to the market.

The drug - jointly developed by Elan and by Biogen Idec Inc. of Cambridge, Mass. - had been used to treat multiple sclerosis and Crohn's disease. However, the companies voluntarily pulled it from the market earlier this year after reports surfaced that showed three patients taking Tysabri in clinical trials - two with MS and one with Crohns - had come down with progressive multifocal leukoencephalopathy, or PML, a debilitating and often deadly brain infection. One of the MS patients died as did the Crohn's patient. Recent reports that a fourth patient taking Tysabri had also come down with PML were seen as a setback to the companies' efforts to return the drug to the marketplace.

But doctors at Biogen said in the medical journal that it may be possible to make an early diagnosis of the infection - and stop Tysabri treatment in time to allow patients to recover.

That protocol could be a way for the drug to be used again, although it would have to carry warnings.

Two editorials, three articles and one letter to the editor in the Journal spoke of a little-known virus, termed the JC virus, which may be present in 50% to 86% of healthy adults, making them susceptible to PML. Biogen executives wrote in the Journal that testing for the virus could permit early diagnosis of PML, allowing doctors to stop any treatments using Tysabri, which apparently aggravates the condition to severe levels,

However, before any decision is made about bringing the drug back to the market, Elan and Biogen will continue their consultations and reviews of patient data with the Food and Drug Administration and the National Institutes of Health.

UAL rally goes on

In other areas, UAL "continues to trade up," a trader in distressed bonds said, quoting the bankrupt Elk Grove Village,. Ill.-based airline operator's notes half a point better at 13 bid, 14 offered.

The company's bonds have recently been rising on published comments from its chief executive officer, Glen Tilton, who last week told the Chicago Tribune that the company should have no trouble lining up exit funding, would likely emerge from bankruptcy later this year, and would return to profitability in 2006.

While UAL was up, Delta Air Lines Inc. - struggling to keep from joining its larger rival in the bankruptcy courts - "didn't see much change," the trader said, quoting its benchmark 7.70% notes due 2005 around 85 bid, and its 8.30% notes due 2029 at 27 bid.

The trader also saw ATA Holdings a point lower at 38 bid, 40 offered, though there was no news out on the troubled Indianapolis-based carrier.

Salton gains

And he saw Salton Inc.'s bonds better, with its 10¾% notes scheduled to mature in December four points better at 52 bid, 54 offered, while its 12¾% notes due 2008 gained two points to 46 bid, 48 offered, despite no fresh news having been seen about the struggling Lake Forest, Ill.-based small appliance maker.

Federal-Mogul loans jump, fall back

In the bank debt market, Federal-Mogul's paper "went from 87.5 to 89.5 and then came back down to 88.5," the trader added.

He saw no real news out on the Southfield, Mich., supplier of vehicular parts, components, modules and systems.

Also active in Thursday's market was Mirant Corp.'s MAGI paper, which traded around 107.5, unchanged on the day, according to a trader.

"It's big, so it's active," the trader said about the Atlanta-based energy company's bank debt.

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