Current Account sincerely hopes rumours last week that Elan is running the rule over British drug delivery group Skyepharma are wide of the mark. Buying Skyepharma would be a retrograde step for a company like Elan, which wants to be recognised as a fully fledged pharmaceuticals group.

In its formative years, Elan was what Skyepharma is now - a company that develops delivery systems for the drugs other companies manufacture.

That was a solid business for Elan as it built itself up but Elan's phenomenal growth in the past few years has been based on developing its own portfolio of drugs and bringing them through the regulatory process to market.

Elan has spent billions of dollars in recent years on acquisitions and alliances with other pharmaceutical manufacturers. Spending more than £500 million sterling (€784 million) would be seen as a retrograde move. Drug delivery is still a profitable business but Elan's future must be firmly rooted in developing its own products.

That view was reinforced by the most recent ratings report on Elan from Standard & Poor's, which assigned Elan a solid investment grade rating and hinted at a ratings upgrade in the near future. "The longterm goal of Elan to expand from its successful proprietary drug delivery franchise into the specialty pharmaceutical arena is coming to fruition," notes S&P in the course of assigning a "positive outlook" tag to the Irish company.

Drug delivery still contributes sizeable royalty income for Elan, but that is set to decline as the revenue stream from Elan's own product portfolio heads from last year's $1 billion (€1.1 billion) to $1.5 billion-plus in the current year, and more as Elan's own products get FDA approval.

This increasing shift in the revenue mix towards higher-margin, self-marketed pharmaceuticals should counter-balance the higher costs associated with bringing pharmaceuticals through the regulatory process to market.

Despite the growth in the past year, Elan is still trading at a discount to the US pharamceutical sector and on a hefty discount to Northern Ireland group Galen. Those ratings gaps will only be reduced or eliminated if Elan steers clear of any increased exposure to drug delivery.