Biotech group Elan still has high hopes for its breakthrough multiple sclerosis (MS) drug Tysabri but it's not waiting around for it to deliver.

The Irish group has been through a torrid time in the months since it withdrew the drug from the market after two patients fell ill with a generally fatal brain disease.

At the time, Elan was looking forward to a period of stability after more than two years of turmoil driven by a failed Alzheimer's programme, a Securities and Exchange Commission (SEC) inquiry into accounting practices, wholesale management changes and a drastic rescue programme that saw it sell assets worth $2.7 billion (€2.2 billion) in an effort to stay afloat long enough to profit from what was seen as a "blockbuster" MS drug.

Tysabri had only been on the shelves a few months after winning fast-track approval from the US regulator, the Food and Drugs Administration (FDA), on the basis of just one-year's data.

Elan is still bullish about the prospects for the drug. Speaking to The Irish Times this week, chief executive Kelly Martin said the experience of the drug in the short time it was available was that it had attracted heavier demand than even the most optimistic analysts had projected.

In the meantime though, it is concentrating on developing other sides of the business. In particular, it is working to expand both the drug technology business run from Athlone by Paul Breen and the specialty business in the US that is built around selling Elan and other products into 900 hospitals around the United States - over 600 of them university or teaching hospitals.

These businesses are growing strongly, notably the drug technology side which recorded 99 per cent year-on-year growth in the third quarter and is now the largest operating unit in Elan.

"You have over $50 billion of drug revenue that is going to go off patent in the next four years," says Martin, "and that is our market.

"We can take existing drugs and change the chemical composition to improve efficacy and safety or to alter dosage levels, regularity of dosage or how they are taken. These are not our drugs but those of other companies."

Martin characterises the business as a technology operation rather than a contract manufacturing unit.

And he has switched its revenue model from one where it operated as a service to other companies for a fee to one where it is a partner in modifying drugs to improve them and/or extend their lifetime under patent in return for royalty fees.

"The way to think of our drug technology business is like Intel - they have technology (the chips) and they put it into hardware," says Martin. "They don't care whose hardware."

"Elan drug technology is like 'Intel Inside'. We can use our technology to change and improve a product. It is good for patients, and the potential partner."

Already, six products from the drug technology pipeline have been launched in the United States and the company is currently in discussions in relation to around two dozen others.

Elan reckons the drug technology programme indirectly touches between two and 2.5 million patients.

Martin uses Elan's experience with a drug used to treat psychiatric patients, who have schizophrenia, as an example of what Elan's drug technology can do.

Compliance is an obvious and serious problem for schizophrenic patients and the requirement to take this particular drug once a day means that up to 80 per cent of patients abandon their therapy. Elan is reformulating the drug so that it need only be taken four times a year, allowing it to be administered to patients during visits to doctors.

"If you can get compliance to go from 20 per cent to 90-plus per cent, that's an incredible change."

The business, together with the specialty hospital sales operation, has the added advantage of giving Elan a better balance, offsetting some of the higher risk intrinsic in the biotechnology operations for which it is better known.

Back on the biotech side, the company has high hopes for its Alzheimer's programme - from which Tysabri first emerged - and which is being developed with Wyeth. The company currently has one programme in Phase II trials and another entering Phase I.

"The neurologists in the centres we are using in the Phase II trial are exceptionally positive about progressing and we will have data from that in the second half of next year," says Martin.

"There is no therapy doing what we are trying to do. Alzheimer's is probably the biggest disease with no therapy in the world and it is growing at double-digit rates."

Martin says the past three years have been a steep learning curve for someone who moved to the group from bankers Merrill Lynch, but some things don't change from sector to sector. "Our job is to reduce risk and increase shareholder value and, as a company we spend a lot of time looking at our strategic future."

However, the sector in which Elan operates does provide its own unique challenges. "The objective of biotech companies is to be innovative - we want to find, discover, develop and then make available to patients drugs or therapies that are fundamentally going to stop the progression of the disease. That's the Holy Grail. If you can do that, it's an enormous win for the patients, it's an enormous win for the company and it's an enormous win over time for the shareholders. That's what we try to do."

Elan says it has exceptionally good dialogue with the FDA before and since the removal of Tysabri. "It's fair to say the agency is being as responsive and flexible and thorough as they can be with us to work through the Tysabri opportunity for patients, that what we do," says Martin.

"Since the drug was pulled off the market, we now have the two- year data and it tells us the drug is better than earlier data on which the initial approval was based - in terms of safety, efficacy and EDSS quality of life scores.

"Over 50 per cent of the patients on the drug for more than six months show complete stoppage of signs of progression of MS.

The company accepts that it is going to be a monotherapy drug but, as Elan research chief Lars Eckman noted yesterday, investigation since the suspension of Tysabri indicates that it is only a minority of MS patients that will be at risk to the neurological disease that led to the drug's suspension.

"At the end of the day, it is going to be a patient demand product. I believe patient demand is as high or higher than it was a year ago. I also think Tysabri now, perversely, is now the best understood drug in the history of the pharmaceutical business. So I see no reason from a medical point of view why Tysabri won't be the dominant MS therapy until there is one that is better than it."