Shares in Elan rode a rollercoaster yesterday after reports emerged of a new link between its flagship multiple sclerosis (MS) treatment, Tysabri, and a potentially fatal brain disease.

The stock declined sharply in early trade as investors reacted to the possibility that a fourth Tysabri patient could have contracted the rare and generally fatal neurological condition, progressive multifocal leukoencephalopathy (PML).

Shares recovered as the day progressed, however, with the market taking some reassurance from indications that, while a fourth patient may have shown symptoms of PML, no diagnosis of the disease had yet been made.

The catalyst for the early share-price decline was a report in the Boston Globe that Biogen Idec, Elan's partner in Tysabri, had informed the US regulator of another possible case of PML linked to the drug.

Elan declined to comment on the report yesterday but market sources said that if another case of PML had been confirmed, Elan would have had to make it public because it would be a "material event".

The absence of a statement from the company suggests that no new case of the disease has been diagnosed at this stage.

Elan's shares touched a low of €4.60 in morning trade in Dublin yesterday, a €1.70 drop on Wednesday's close.

It has been confirmed that Biogen Idec has been in contact with the US drugs regulator, the Food and Drug Administration (FDA), on the matter. Lenore Gelb, spokeswoman for the FDA said yesterday that the authority was aware of three confirmed cases of PML and a possible fourth instance.

"Biogen has notified us a fourth case of person with symptoms related to a possible case of PML," Ms Gelb said. She said the FDA was "in communication" with Biogen on the matter and would receive further information when it became available.

"We continue to review the overall safety of the drug," she said.

The FDA launched a review of Tysabri in late February when it emerged that a patient taking the drug in conjunction with another Biogen Idec treatment for MS, Avonex, had died. A second patient was diagnosed as having contracted PML.

Sales of Tysabri were halted at that stage, although Biogen has continued to manufacture the drug.

Elan's shares closed at €5.47 in Dublin, down 83 cent on the day