Merrill Lynch is recommending Elan as a long-term buy for investors. In its latest report on the pharmaceutical sector, the brokers highlight the group's strong second-quarter performance and point to the pipeline of products due to be launched.

During the last quarter of 2000, Elan improved its gross profit margins, decreased its royalty and fee income and made significant investments in research and development, which have helped to boost its bottom-line performance.

The company has been building its marketing infrastructure and conducting clinical trials that should drive demand for products to be launched over the next few quarters, according to Merrill Lynch. "We view this as a smart way to utilise the upside, as Elan is building a stronger company for the long-term."

The successful roll-out of the company's new drugs pipeline in the coming months should support further growth in the share price, according to Merrill Lynch.