Pharmaceuticals giant Elan Corporation may be gearing up for a major acquisition after the group raised $325 million (£215 million) in a convertible bond issue.

Elan is already awash with cash on its balance sheet - an expected $185 million net cash at the end of 1997 - and has enormous cash flow, so has no immediate need for a cash injection from the bond issue.

"This fund-raising has to be leading to something big," commented one industry analyst.

All Elan said in relation to the latest fund-raising exercise was that the cash would be used for various corporate purposes which might include acquisitions, as well as research and development and working capital.

Elan raised the latest $325 million through its Athena Neurosciences subsidiary, the company that Elan acquired last year for more than $600 million.

Elan raised the $325 million in a seven-year convertible bond issue, with the bonds converting into Elan shares at a price of $71.04. This will mean that the bonds will convert into just under 5 per cent of Elan when they mature.

Elan is currently trading at $51.25, some way short of the $56.63 all-time high of earlier this year but well above the $30.38 at the beginning of 1997.

Elan's biggest acquisition, the $638 million paid for Athena Neurosciences in 1996, was paid for through a share issue to Elan shareholders. Smaller acquisitions by the pharmaceuticals group have tended to be paid for in cash. The decision to raise $325 million - on top of the estimated existing resources of $185 million - suggests Elan is planning a major cash acquisition.

"Elan has absolutely no requirement for this sort of money unless it has something very big in the pipeline. If it was any modest acquisition, existing cash resources would have easily sufficed," said one analyst.

Elan's financial year ends in December and company broker Davy is expecting strong growth, with forecast full-year profits of more than $166 million and earnings per share of $1.61.

Turnover for the year is forecast by Davy to rise from $309 million to $399 million with net cash of more than $185 million compared to cash of $66.5 million at the end of 1996.