Aug. 14 (Bloomberg) -- Elan Corp. is likely to triple annual sales of its multiple sclerosis medicine Tysabri to $3 billion by 2010, reviving the Irish drugmaker's stock that plunged 65 percent two weeks ago.

The shares sank 6.15 euros ($9.17) to 7.35 euros Aug. 1, after Elan reported a deadly brain infection in two patients taking Tysabri. That was on top of a 6.54-euro drop two days earlier when the Dublin-based drugmaker said a study identified a brain-swelling side effect in a patient study of another of its drugs, an experimental medicine for Alzheimer's disease.

Ian Hunter, a Goodbody Stockbrokers analyst, says shares are likely to recover again by year's end. The company bounced back from a similar 68 percent decline in February 2005, when Tysabri sales were suspended for 17 months after three patients developed the lethal infection, he said. Elan and U.S. partner Biogen Idec Inc. say the drug will reach the $3 billion-a-year target because it helps patients when other therapies fail.

``Tysabri is still a strong product,'' Gervais Williams, who manages 1 billion pounds ($1.92 billion) in U.K. and Irish equities, said in an interview.

``I certainly am looking into it,'' said Williams, who doesn't hold Elan shares. ``We've made very handy returns on the company in the past. Now is a lot better time than it was a couple of weeks ago.''

Elan shares gained 52 cents, or 7.3 percent, to 7.60 euros in Dublin. The London-based European Medicines Agency said yesterday it is reviewing the two new cases of the brain infection.

Infection Rate

Tysabri was reintroduced in June 2006 after Elan and Cambridge, Massachusetts-based Biogen created a plan to limit the side effect. The product's label warns that 1 in 1,000 users can be expected to develop the disorder, called progressive multifocal leukoencephalopathy, or PML.

With five cases among the 36,000 patients who've taken Tysabri, the infection rate so far is lower than the anticipated occurrence, Gordon Francis, who helps oversee clinical development at Elan, said in an interview from San Francisco.

About 2.5 million people worldwide have MS, a neurological disorder that erodes muscle coordination and balance, leading to paralysis and impaired vision in some patients. The disease is the result of the body's immune system attacking the myelin coating of nerve fibers.

In studies, Tysabri cut the number of MS episodes by two- thirds with few reported side effects. The drug is designed to suppress the immune system. In doing so, Tysabri may subdue disease defenses that protect the brain from the PML virus.

Brain Infections

PML has no treatment and no cure. In patients with the condition, the sheath that protects the nerves in the brain is stripped away, eventually leading to paralysis and coma. Patients typically die one to four months after being diagnosed.

In the latest cases, one patient had been using the drug for 17 months and the other had been taking it for 14 months. Neither was taking another MS medication, unlike two earlier PML patients who had also used Biogen's Avonex, another treatment for the disorder.

It's too soon to know whether the length of time a patient is on Tysabri is related to the risk of the brain infection, Francis said. Elan and Biogen said on Aug. 1 that one PML patient was clinically stable and at home and the other was hospitalized.

``This affects the brain, so it always is a special topic for some people and the reaction is just as much emotional as rational,'' Francis said. ``The perception of patients and physicians is not as alarmist as the market.''

Unfazed Patients

Francis said he doesn't expect Tysabri prescription rates to fall. Prescription data since the new PML cases were reported won't be available for two months, said Clive Savage, a spokesman for Norwalk, Connecticut-based research firm IMS Health Inc.

Patients seem unfazed, said Arney Rosenblat, a spokesman for the National Multiple Sclerosis Society in New York. The group's telephone information line gets about 800 calls a day, and only received three inquiries about Tysabri safety in the week after the announcement, Rosenblat said.

Jeffery Davis, 41, who has had MS for 18 years, started taking Tysabri a year ago because the side effects of his previous treatments were worse than MS symptoms. After two months, tremors in his hands and arms stopped and he was no longer burdened by constant fatigue.

`Worth the Dangers'

``This was the first time I felt like I got on top of it,'' said Davis, a computer consultant from Macon, Georgia. ``Right now, it's worth the dangers for me. With MS you're rolling the dice anyway. The MS can take me out, the drug can take me out -- you figure it's the lesser of two evils.''

Sales growth in Tysabri may not be enough to outweigh investors' concerns about Elan's experimental Alzheimer's drug, bapineuzumab. On July 30, shares of Elan plummeted 33 percent and those of its U.S. partner Wyeth fell 12 percent after a study showed the medicine didn't benefit most patients and was linked to a brain-swelling side effect.

``I don't think Tysabri is the problem; it's more the Alzheimer's drug,'' said Andrew Ramsbottom, who helps manage 400 million euros ($596 million) of Irish stocks at Tilney Investment Management in Liverpool. ``I'm holding on to see what happens. It's too late to sell but I'm not brave enough to buy yet.''

To contact the reporters on this story: Trista Kelley in London at tkelley2@bloomberg.net.

Last Updated: August 14, 2008 12:49 EDT