Croesus/The Investor's View:There are a few bright spots amidst the gloom that has pervaded the Irish equity market during 2007. By far the brightest is Elan Corporation whose share price has risen by more than 50 per cent so far this year.

Some other notable strong performers include Paddy Power (+68 per cent) and Glanbia (+50 per cent).

Measured by market capitalisation, Elan is by far the largest of these companies and, with a current market capitalisation of €8.6 billion, is the fourth largest stock on the Irish market.

A biopharmaceutical company with a therapeutic focus on neurology, pain management and auto-immune disease, Elan has four products available in the US - Maxipime, Azactam, Tysabri and Prialt. The multiple sclerosis drug, Tysabri, is by far the most important of these.

Elan's R&D programme into treatments for Alzheimer's disease offers the potential for significant new drug development. Elan has seven Alzheimer's programmes ongoing, either internally or in partnership with companies such as Wyeth.

Good news on the roll-out of Tysabri in the US and Europe, combined with some positive developments on its R&D programme, have contributed to the steady gains in the Elan share price all year.

In the past week the shares received a further fillip when Biogen Idec - Elan's 50 per cent partner in Tysabri - announced it was effectively putting itself up for sale. Biogen is one of the largest quoted biotechnology companies. The bulk of its revenues are derived from four products - Avonex, Rituxan, Amevive and Zevalin - and the company is profitable.

Biogen's share price has also been performing well this year and, in the six months to early September when it issued a trading statement to the market, the shares had appreciated by over 50 per cent. In its statement, Biogen said it aimed to double its profits per share by 2010. If this target became a reality, profits in 2010 would be roughly $1.1 billion (€774.5 million), five times 2006 profits.

Regarding Tysabri, 14,000 patients are now taking the drug and Biogen forecasts this will increase to 100,000 by end 2010. Additionally, Biogen said it expected to have four new drugs on the market by 2010.

In a statement issued late on October 12th, Biogen management stated that it was exploring the possible sale of the company. The activist US investor, Carl Icahn, is already a shareholder and he has expressed an interest in acquiring the company.

In after-hours trading the shares rose by 18 per cent and are now trading above $80. This compares with a market price of just over $50 in January of this year. At the current price Biogen is valued at just over $23 billion and market speculation is that it will eventually be taken over at a valuation of approximately $25 billion.

Elan has a number of options should a deal materialise. (It appointed Lehman Brothers to advise it on possible options.) Elan has the option to acquire Biogen's 50 per cent interest in Tysabri. This is thought unlikely given the financial cost involved and the increased risk associated with having the fortunes of the company even more concentrated on one drug. Additionally, untangling the partnership would be very complicated.

A second option would be for Elan to sell its stake, although the most likely outcome is that it would continue with a prospective new owner under the existing or a restructured collaboration.

It is likely to be some time before we know the outcome of the current corporate activity surrounding Biogen. In the short term, this activity should continue to be a positive for Elan's share price. It is due to announce results on October 25th and expectations are for an improvement in both revenues, which are expected to grow to $167 million, and earnings before interest tax depreciation and amortisation (Ebitda).

Elan has still not reached profitability although operating losses are expected to contract to $32 million. Improvement in its revenues and its return to profitability remain crucially dependent on the continued successful roll-out of Tysabri. While a successful takeover of Biogen would put a valuation floor on Elan, the shares would remain a high-risk investment heavily dependent on one drug.