Implications: Irish pension funds took a hit yesterday as drug company Elan shed almost 70 per cent of its value.

The sudden collapse of the stock following the suspension of sales and trials of its blockbuster drug Tysabri was unwelcome to pension funds that are struggling to match asset performance with rising liabilities.

Sources in Dublin said some pension fund managers would see the total value of their funds fall by 1.25 per cent or more yesterday simply on the collapse in the Elan share price.

Elan accounted for about 10 per cent of the Dublin market ahead of its latest slide. Investment consultants Mercer said that Irish fund managers would typically have around 18 per cent of their funds invested in Elan.

On that basis, the 68 per cent fall in the stock yesterday would knock a 1.2 per cent hole in a pension fund's assets.

However, opinions among Dublin managers towards Elan have varied widely. At one extreme, Bank of Ireland Asset Managers escaped unscathed yesterday as it has no exposure to the company.

Most Irish managers are underweight in the stock given its volatile history and the risky nature of the sector in which it trades. However, industry sources last night said a number of funds had a full weighting in the stock and at least one was overweight.

And the news could get worse. Elan stock closed last night in New York at $8.02 (€6.06). Investment managers said the price reflected market uncertainty over the prospects for Tysabri.

"The best case scenario is that the drug will be off the market for about 12 months," said one industry insider. "However, if the FDA [ the US regulator] says it is all over for Tysabri, it is a different story. Without Tysabri, Elan is worth about $3 or $4 a share."

Mr Tom Geraghty, senior investment consultant with Mercer, did not think it likely that Elan's troubles would have knock-on effects on the Irish market or the pharmaceuticals sector.

"This is largely stock specific as you have a company that has a heavy reliance on one drug," he said.

Bank of Ireland Asset Managers head of business development Mr John Conway said it would be a while before the full impact of Elan's latest troubles on pension funds would become apparent. "In general, though, the reason you employ a professional manager is that you get a diversified portfolio and that should reduce the pain."

Mr James Forbes, senior investment strategist at Hibernian Investment Managers, said the suspension raised questions about whether the FDA moved too fast to approve Tysabri last year. He said the approval and an upbeat statement from the company had lulled some people into believing that Tysabri sales were "100 per cent achievable".