Elan shares plummet after withdrawal of new MS drug

Ireland's Largest drug company, Elan, lost more than two-thirds of its stock market value yesterday after it was forced to pull its multiple sclerosis drug from the US market after just three months.

The company revealed that two people taking Tysabri may have contracted a serious disease of the nervous system. One of the patients has died and the company said it was stopping marketing the drug while it examines whether it can be linked to the incident.

Elan is the fourth largest company on the Irish stock market, which posted its biggest one-day drop in seven years as a result of the news. Elan's shares, which are also traded in London, fell from €20.44 (£14.09) to €6.35.

Biogen Idec, the giant US biotech company which helped to develop and now markets Tysabri (previously known as Antegren), lost more than 40 per cent of its value. The pair said they believed the drug could return to market later this year after a safety investigation. Analysts were doubtful, and most agreed there was now little chance Tysabri will meet hopes of up to $3bn (£1.6bn) in annual sales. It could return with stronger safety warnings on the label.

Daniel Mahony, of Morgan Stanley, said: "Tysabri had been approved in the US on the back of some impressive efficacy data and we had expected the agent to take significant market share. However, these new safety issues raise significant questions on its potential."

About 2,600 people are in clinical trials for the drug, taken via injection, and a further 3,000 are now taking it on a commercial basis after its approval by the US Food & Drug Administration in November. It has not yet been approved for launch in Europe.

Multiple sclerosis targets the central nervous system and can cause blurred vision, weakness, poor muscle co-ordination and loss of memory. Tysabri's US approval came earlier than usual because the drug appeared so effective in early trials. Its withdrawal yesterday turns it from one of the biotech industry's most exciting prospects to potentially one of its most disappointing failures.

Trials showed it can improve the effectiveness of older drugs for MS, including Biogen's Avonex. After two years of using the two drugs in combination, one patient died of a rare and often fatal nervous system disorder known as progressive multifocal leukoencephalopathy and another is suspected of contracting it.

All clinical trials of Tysabri, including some aimed at proving it can also treat rheumatoid arthritis, have been suspended.

The problems with Tysabri come amid rising concern over the risks of major drugs, and follow the withdrawal of the widely prescribed painkiller Vioxx, which has been linked to increased risks of heart attacks and became the biggest-ever drug withdrawal last September. Regulators, particularly in the US, have been accused of not paying enough attention to the potential side effects of new drugs.

Yesterday's news is also the latest extraordinary twist in the story of Elan. At the height of the biotech bubble in 2000, it was Ireland's largest company, but it was partly a financial construct, recycling the company's own money via collaborations with small, experimental drug developers, to give the illusion of higher revenues and assets.

It recently paid $100m in fines and legal settlements over allegations of misleading accounting.