Shares in Elan lost more than two-thirds of their value yesterday after the death of a patient forced the drug company to suspend sales of its much-vaunted new multiple sclerosis treatment in the US, writes Jane O'Sullivan, Markets Correspondent.
Up to 20 Irish patients are thought to have received the drug, known as Tysabri and hailed as a breakthrough in the treatment of MS as part of ongoing research.
But although the drug has been on the market in the US since November, it has not yet received approval in the European Union and has not been licensed for general use by the Irish Medicines Board.
The US patient, who died from a rare infection of the central nervous system, was one of 3,000 involved in clinical trials of the drug over the last three years.
In addition to the death, another patient is suspected to have contracted the rare disease, having been treated with a combination of Tysabri and another drug Avonex.
About $7 billion was wiped off the value of Elan following news of the drug's suspension, as its shares lost 70 per cent of their value.
Chief executive Kelly Martin described the decision to voluntarily suspend the drug as a "cautious, prudent and patient-focused step".
He said the move was taken following talks with the Food and Drug Administration, the US watchdog which gave the drug fast-track approval allowing its launch late last year.
The collapse in Elan's share price comes just three years after the company shocked investors by losing more than 90 per cent of its value after questions about its accounting practices and problems with an Alzheimer's drug hit confidence in the company.
Elan's long road back to recovery has involved job losses, disposals and a far-reaching financial restructuring. But much of its hopes for the future were pinned on Tysabri which was expected to generate sales of up to $3 billion for Elan, and its US partner in the development of the drug, Biogen Idec.
Yesterday's development also dashes the hopes of MS sufferers. These had been raised by studies that showed the drug, which can also be used to treat Crohn's disease and rheumatoid arthritis, was highly effective and very safe.
Since its launch in the US in November, about 3,000 patients had been prescribed Tysabri by their doctors.
It also puts a question mark over the company's plans to create 120 new jobs at its facility in Athlone over the next five years.
The company employs about 400 people there.
The fall in Elan, which makes up about 10 per cent of the ISEQ index of Irish shares, hit the stock market which lost nearly 6 per cent of its value yesterday.
As well as hitting private investors, the share price fall will take its toll on pension funds, most of which had some shareholding in the company. Estimates suggest that yesterday's fall could knock more than 1 per cent off the value of some funds.
"It was a big shock," said one fund manager. "Given all the regulatory processes they had to go through, to get this sort of news at this stage is very disheartening."
Although Mr Martin believes Tysabri could be back on the market by the autumn, provided Elan's investigations do not throw up any more bad news, market watchers believe it could take up to a year before the company is in a position to relaunch the drug.
Even then, it is likely to be overshadowed by greater caution among both doctors and patients, while the company may have to put a warning on its labels. The suspension is also likely to delay approval of the drug in Europe.