Elan Corp. (ELN) Tuesday reported a narrower second quarter net loss due to cost cutting and increased demand for its multiple sclerosis drug Tysabri, and said it's on target to be profitable in 2009.

Net loss narrowed 4.6% to $68.2 million from $71.5 million a year ago, while basic and diluted loss per share narrowed to $0.14 from $0.15.

Revenue in the quarter rose 14.4% to $281 million from $245.6 million, helped by increased sales of Tysabri, as well as contract manufacturing revenues.

Elan has said it's confident that Tysabri - a joint venture with U.S. firm Biogen Idec (BIIB) - is a blockbuster drug and revenues and reaching $1 billion in revenue.

Elan Chief Executive Kelly Martin said, "During the first six months of 2009, we grew revenues, added an additional approach to Alzheimer's disease and successfully completed our strategic review with the announcement of a transformative transaction with Johnson & Johnson."

As part of the deal announced earlier this month, Johnson & Johnson (JNJ) will acquire the assets and rights of Elan's Alzheimer's program co-partnered with U.S. firm Wyeth (WYE) and invest $1 billion in Elan in exchange for new American Depositary Receipts of the Irish firm, representing 18.4% of its outstanding ordinary shares. Elan will retain a 49.9% interest in the new Johnson & Johnson subsidiary holding those assets.

Johnson & Johnson will assume and continue Elan's 50-50 joint venture Alzheimer's program with and will initially commit up to $500 million toward the development and launch of Alzheimer's treatment bapineuzumab, or AAB-001.

Analysts say the J&J deal has wiped a significant risk off the balance sheet, but volatility on the share price remains.

Last week, Biogen Idec reported worldwide Tysabri sales of $255 million with 42,700 patients on the drug at the end of the second quarter. The patient numbers imply an average acquisition rate of around 250 new patients per week, and some analysts see this increasing to 350 people per week by the third quarter.

Tysabri was in June 2006 approved for use primarily as a monotherapy for relapsing and remitting MS patients by the two regulatory agencies in the U.S. and E.U.

Elan's Chief Financial Officer Shane Cooke said the company has an arrangement where Johnson & Johnson will help Elan finance buy 50% of multiple sclerosis drug Tysabri from Biogen Idec - but only if that opportunity arises.

If there is a change of control in Biogen Idec, then Elan has the option to buy the other 50% of Tysabri, or sell its 50% stake in the MS drug, Cooke said.

Elan said it expects to be profitable in 2009, on an adjusted earnings before interest, tax, depreciation and amortization basis, and sees double-digit percentage growth in revenue. Adjusted Ebitda was $19 million in the second quarter versus a loss of $6 million a year ago.

Its net debt at the end of the second quarter was $1.48 billion, $19 million above forecast. Net cash burn in the second quarter was $77 million. Selling, General & Administrative expenses dropped to $69 million in the second quarter versus $77 million last year.

At 1150 GMT Tuesday, Elan stock was up 3% at EUR5.85 in Dublin, down from about EUR22 a year ago.

Given the recent J&J agreement and some comfort on recent Tysabri trends, Davy Research will upgrade its 2010 adjusted Ebitda to approximately $240 million from $187 million currently. Davy reiterates its "outperform" rating, saying "the growth story continues at the company."

Company Web site: www.elan.com

-By Quentin Fottrell, Dow Jones Newswires; +353-1-6762189; quentin.fottrell@dowjones.com