The US Securities and Exchange Commission announced last night it was starting an investigation into Elan's accounts.
The firm's shares have tumbled on international markets amid allegations the firm had artificially inflated earnings by failing to disclose off-balance sheet vehicles.
Elan has vigorously denied any wrongdoing and said yesterday it welcomed the opportunity to resolve matters raised by the SEC.
But investors are in no mood to give it the benefit of the doubt after the collapse of US energy trader Enron amidaccusations of deceptive accounting practices.
In another blow today, dealers said US investment house Goldman Sachs had removed Elan from its list of private client top-picks.
Elan's shares in Dublin this morning were down one euro, or 6.25 per cent, at €15.00. In London shares were 85 pence, or 8.7 per cent, lower at 895p in early trade.
In New York, the shares closed down 51 cents, or 3.6 per cent, at $13.49. "Trading's very light both here and in Dublin. But the SEC decision hasn't helped," said one market maker.