Elan Corporation (ELN)

24   Collaboration Agreement with Biogen Idec

In August 2000, we entered into a development and marketing collaboration agreement with Biogen Idec Inc. (“Biogen Idec”) to collaborate in the development and commercialisation of Tysabri. Along with Biogen Idec, we are developing Tysabri for MS, Crohn’s disease and rheumatoid arthritis, with Biogen Idec acting as the lead party for MS and Elan acting as the lead party for Crohn’s disease and rheumatoid arthritis.

In November 2004, Tysabri received regulatory approval in the U.S. for the treatment of relapsing forms of MS. Biogen Idec paid us a $7.0 million approval-based milestone. The approval milestone payment, together with other milestone payments related to the collaboration agreement of $45.0 million, are recorded as revenue as they are earned, non-refundable and not subject to future legal obligation.

Biogen Idec manufactures Tysabri. We purchase Tysabri from Biogen Idec for distribution to third parties in the U.S. We recorded $6.4 million in product revenue from Tysabri in 2004. In general, we share with Biogen Idec most development and commercialisation costs. At 31 December 2004, we owed Biogen Idec $34.4 million for the reimbursement of costs related to development and commercialisation.

On 28 February 2005, we and Biogen Idec announced the voluntary suspension of the marketing and dosing in clinical trials of Tysabri. This decision was based on reports of two serious adverse events in patients treated with Tysabri in combination with Avonex in clinical trials. These events involved two cases of progressive multifocal leukoencephalopathy (“PML”), a rare and frequently fatal demyelinating disease of the central nervous system. Both patients received more than two years of Tysabri therapy in combination with Avonex. On 30 March 2005, we and Biogen Idec announced that our ongoing safety evaluation of Tysabri led to a previously diagnosed case of malignant astrocytoma being reassessed as PML, in a patient in an open label Crohn’s disease clinical trial. The patient had received eight doses of Tysabri over an 18 month period. The patient died in December 2003.

We are working with leading experts, regulatory authorities and the clinical investigators to investigate these serious adverse events and to determine the appropriate path forward.