Elan Corporation PLC’s (Elan) stock price declined on 30 July 2008 due to the poor Phase II clinical results of the company’s Alzheimer’s drug, Bapineuzumab. According to the information provided by Elan and Wyeth Pharmaceuticals (Wyeth), most Alzheimer’s patients treated with Bapineuzumab reported no clinical benefit from the drug treatment. In addition, incidence of serious side effects such as brain swelling were reported in patients treated with the drug. We believe the negative outcome of the Phase II clinical trial for the drug, the pace of regulatory approval and commercial launch may be slow. Consequently, we are likely to exclude Bapineuzumab from our revenue forecasts and, consequently, may revise downwards our estimates, going forward. Hence, although the current price no longer supports our HOLD rating, we reiterate our HOLD rating for the ADR. We are likely to revert to a 6-24 month investment horizon as we no longer anticipate a significant currency impact on the European stock over the medium term.We upgrade the European stock from a SELL to HOLD on fundamental grounds and our expectation of a significant positive currency impact on the European stock over the medium term.

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