Shares in Elan tumbled by 20 per cent in Dublin yesterday, hit by concerns over plans to seek approval for a new share issue. The shares are expected to come under further pressure today following a statement from the company last night that it has been subpoenaed by a US Federal Trade Commission (FTC) investigation into price fixing.

The shares lost 69 cents to €2.70 on the Dublin market, following Wednesday's 11 per cent fall in New York, where the stock mainly trades. The shares closed unchanged in the US last night at $3.05, as the market had little time to digest the price fixing allegations.

The December 26th subpoena from the FTC ordered the company to turn over documents related to Naprelan, Elan said in documents filed with the Securities and Exchange Commission (SEC).

FTC officials told Elan in a June 2001 letter that it was investigating "whether Brightstone Pharma Inc, Elan Corporation or others may have engaged in an effort to restrain trade by entering into an agreement which may restrict the ability of Brightstone or others to market a ... generic version of Naprelan," Elan said in the filing. Elan said it was complying with the subpoena.

Wednesday's share price fall in New York followed a Dow Jones report that said Elan could enter a so-called "death spiral" if it issued additional shares to meet a looming $817 million (€759 million) debt obligation.

The creation of new stock could spark a fall in the share price, forcing Elan to offer bondholders more equity to meet their obligation, leading to further declines, the report said.

Quoting unnamed hedge fund managers, it also raised doubts over Elan's ability to redeem the debt in cash.

An Elan spokesman dismissed the report, saying the company was "looking into all our options, including legal action against Dow Jones in London".

Elan had enough cash from its asset disposal programme to meet its obligations and was working on raising more money from further disposals, he said.

The recent concerns about Elan, and the state of its balance sheet, were triggered by Monday's announcement that the company would seek shareholder approval to issue up to 120 million new shares, equivalent to around a third of its existing share capital, at an extraordinary meeting on March 18th.

The company failed to win approval for a similar motion, which would have allowed it to issue up to 200 million shares, at its annual meeting last summer.

Elan has said it is putting the resolution to shareholders to increase its financial flexibility but has no imminent plans to issue shares.