Elan shares soared yesterday, closing at $11.80, up 34 per cent, after the company surprised the market with plans to fast-track US approval of a key multiple sclerosis treatment and held out the prospect of a return to profitability in the second half of 2005.

The Irish pharmaceutical company said it would submit a filing for Antegren by mid-2004 on the basis of just one-year of trial data. If it wins approval, the drug will come on the market by mid-2005.

No current treatment has won approval with less than two years of data but Elan said it had made its decision following meetings with the US Food and Drugs Administration (FDA), which regulates new drugs.

"This is hugely positive news as it indicates that the FDA found one-year data compelling enough to begin a review process," said Mr Jack Gorman, an analyst with company broker Davy.

Elan shares opened 24.5 per cent higher in New York on the news, breaking the $10 barrier for the first time since mid-2002.

Elan refused to disclose the one-year data that triggered the decision to accelerate the filing process as it intends to complete the two-year trial.

The company announced the decision to file just hours after meeting the FDA on Tuesday.

Elan, in association with Biogen Idec, is testing the potential of Antegren in treating a variety of inflammatory diseases. These include multiple sclerosis, Crohn's and rheumatoid arthritis.

The decision to proceed with an early application for approval will see Elan shouldering additional costs this year.

"We will invest what is required to capture the maximum proportion of the market that we can," said chief financial officer Mr Shane Cooke during a conference call yesterday following the release of Elan's figures for the fourth quarter of 2003.

Chief executive Mr Kelly Martin said the current market for multiple sclerosis treatments was worth more than $4 billion (€3.116 billion) a year.

Goodbody analyst Dr Ian Hunter said the Antegren announcement overshadowed results that were slightly below expectations. "This is a highly significant boost to the stock, given the importance of Antegren in bringing the company back to profitability," he said.

Fourth-quarter and full-year results showed a decline in sales and gross margins but showed strong momentum in sales from retained products. These rose 45 per cent in the quarter and 41 per cent year-on-year. Costs associated with retained products fell by a similar amount.

Overall, full-year revenue fell to $746 million from $1.13 billion in 2002 but the company halved its operating loss to $418.3 million from $830 million. The loss per share on continuing operations fell to $1.57 from $6.84 in 2002.

While the company expects the rate of growth in sales of continuing operations to slow somewhat, it still projects growth of 20-30 per cent.

Some analysts raised concerns about cash flow. The company currently had more than €1 billion in hand but costs this year will eat into this by about €300 million.

It also faces additional costs, which have not yet been budgeted for in relation to a launch of Antegren. In addition, the group has an exposure of $450 million to holders of EPIL 2 bonds this year and $390 million to EPIL 3 debt-holders early in 2005.

On its own best projections, the company does not anticipate moving into profit on an operating level until sometime in the second half of 2005.

While the company has formally concluded its programme of asset disposals, however, it has embarked on a programme of gradually encashing investments valued at more than $500 million.

Mr Martin said the group's Athlone facility, one of two manufacturing plants run by the group, had been under-utilised during the year.

But he announced the merging of Elan's nanotechnology and manufacturing divisions, a move he said should improve the profitability of both.

A spokeswoman for Elan said Athlone remained a pivotal part of the group, having been the subject of a €200 million investment. The group is looking at marketing its services in areas such as drug delivery.

Mr Martin said Elan had yet to hear from the US Securities and Exchange Commission regarding its inquiry into the company but he expected to have word some time towards the end of the first quarter or the beginning of the second quarter.