Shares in Dublin-based pharmaceuticals group Elan jumped by 4 per cent - or #2.75 - to #71.50 on the Dublin Stock Exchange. This followed its announcement that it will begin a second phase in its trials of an experimental vaccine for Alzheimer's disease in conjunction with US pharmaceutical and biotech company American Home Products (AHP).

The drug AN-1792, also known as AIP-001, is the first of a series being developed under collaboration between the two companies.

"Elan and AHP plan to initiate a multi-centre exploratory phase 2A clinical study with approximately 375 patients to moderate Alzheimer's disease at sites in the US and Europe," the two companies said in a joint statement.

This phase is expected to start in the third quarter of this year and take two years to complete.

It follows phase one safety studies in which AN-1792 was administered to more than 100 patients.

In an unusual move, the US Alzheimer's Association issued a statement welcoming what it called an "exciting development" in the search for an effective treatment for the disease.

"The drug itself has the potential if it gets through the system to be a blockbuster," said Mr Ian Hunter, pharmaceuticals analyst with Goodbody Stockbrokers.

"So you can expect that there will be some positive reaction that it has got through phase 1.

"There will be some lift for the company but you're still dealing with something that is three years down the line. For long-term pipeline news flow, it's very good."

On the New York Stock Exchange shares in Elan, due to report second-quarter earnings today, were up $2.06 at $62.15 on foot of the news.

The arrangement with AHP involves the development of a vaccine against the disease that uses an amino acid developed by Elan. This vaccine has been shown in mice to reduce pre-existing plaque on brain tissues and to inhibit further plaque formation.

"There are four products on the market but none cure or prevent - they're all basically mitigating the circumstances.

"This chemical looks as if it could reverse Alzheimer's in mild to moderate stages. This is what the excitement is about," said Mr Hunter.

AHP made an initial payment to Elan as part of the alliance, which involves a five-year research programme.

Further payments to Elan are planned if development benchmarks and regulatory milestones are passed.

The value of AHP's investment has not been revealed but is understood to be significant.