Elan's growing financial stability and increasingly positive prospects were recognised by Standard & Poor's (S&P) yesterday when the ratings agency raised its outlook on the pharmaceutical firm from stable to positive.

S&P has also affirmed its B- corporate credit and senior unsecured debt ratings on Elan, as well as its CCC subordinated debt rating.

The agency said the actions were a response to an easing of Elan's debt pressures, as well as the encouraging drug development news issued by the firm over the past few weeks. Elan's most promising near-term drug prospects are Antegren for Crohn's Disease and Multiple Sclerosis, and its Prialt painkiller.

S&P analyst Mr Arthur Wong said the "l ow-speculative-grade" ratings and outlook reflected Elan's "still-significant near-term debt maturities, its tight liquidity situation, and the company's expected losses and negative cash flows in the intermediate term".

Mr Wong added, however, that these factors were partially offset by some $1 billion (€0.8 billion) held by Elan in cash and investments. He also pointed to the progress on new product launches as a positive factor.

Elan has been making steady progress on bringing itself back to a position of financial strength since launching an ambitious recovery programme almost two years ago.

The company teetered close to failure at the start of 2002, when fears over its accounting practices prompted a mass shareholder exodus and progressive drops in its share price.

Since then, Elan has worked hard to regain investor confidence by steering attention away from past problems and towards its drug development programme.

The company's shares have almost doubled in value over the past 12 months, as investors have taken comfort from successful efforts to reduce debt liabilities by raising $1.6 billion in asset sales and terminating joint ventures. Shares in Elan fell 10 cents to €6.70 in Dublin yesterday on reasonably light volume.