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UPDATE 2-Elan puts sale of drug delivery unit on hold

* To retire up to $500 million of debt

* Still expects 2010 EBITDA exceeding $150 million

* Phase 2 ELND005 Alzheimer’s trial fails to meet goals

* Will launch pivotal-stage trial of the drug

* Shares rise 2 percent (Adds Alzheimer’s drug trial results, share price)

LOS ANGELES, Aug 9 (Reuters) - Irish drugmaker Elan Corp PLC ELN.I announced on Monday plans to restructure its debt and said it has temporarily shelved plans to spin off its drug delivery division due to unfavorable market conditions.

Elan, in which Johnson & Johnson JNJ.N has an 18 percent stake, reaffirmed its financial outlook for this year.

The company, along with development partner Transition Therapeutics Inc TTH.TO, also said it plans to launch a pivotal-stage trial of an experimental Alzheimer's drug, called ELND005, even though a mid-stage trial did not achieve its goals.

Elan said it still aims to eventually sell the drug delivery unit, Elan Drug Technologies, but said market conditions are not conductive to an appropriate valuation. The company first tried to sell the business in 2008, but failed after the economic crisis led to a financing drought.

The company, which makes the multiple sclerosis drug Tysabri in partnership with U.S. biotechnology company Biogen Idec Inc BIIB.O, said it plans in the near term to retire up to $500 million in debt due in November 2011 and November 2013 through a combination of cash on hand and refinancing.

For 2010, the company said it still expects year-over-year revenue growth and adjusted earnings before interest, taxes, depreciation and amortization of more than $150 million. It expects to end the year with close to $400 million in cash and investments, after the debt repayments.

For 2011, Elan said it expects positive cash flow with expenses similar to those seen in 2010.

ELND005 was not shown to have a significant impact on cognitive or functional scores for patients with moderate Alzheimer’s disease, but the Phase 2 trial did find that it had a biological effect on amyloid-beta protein in the cerebrospinal fluid of patients from whom such samples were available, Elan said.

Beta amyloid is a protein associated with the telltale plaques and tangles that form in the brains of patients with Alzheimer’s.

Elan and Transition said specifics of a Phase 3 study design would be finalized after discussions with regulatory authorities.

Elan said it will reduce gross debt by around 20 percent to about $1.24 billion from $1.54 billion reduce annual interest costs by $5 million to $10 million. It also said the $615 million due in November 2013 may be reduced by up to $190 million.

U.S.-listed shares of Elan ELN.N were up 11 cents at $5.54 in post-market trading after closing at $5.43 on the New York Stock Exchange. (Reporting by Deena Beasley; Editing by Phil Berlowitz and Carol Bishopric)

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