Last week was a pretty bleak one for anybody who has put money into Elan Corporation in the past year.

The share might have bounced a little since it hit bottom at $37 last Friday, but the short-term prospects for the share are not good and investors should just sit tight and try not to panic.

That said, it's hard to disagree with the view of many analysts that last Friday's 14 per cent fall during huge trading (Elan's volume was the fifth biggest on the big board) was a gross over-reaction to what may end up as a short-term hiccup for the company.

To knock over $2 billion (€2.25 billion) off the value of a company on the basis of a suspension of patient testing on a drug that will not reach market until 2006 at the earliest is hard to justify on the basis of the fundamentals.

But markets don't like unpleasant surprises, and the announcement that testing of the Alzheimer's treatment has been suspended was very much at the upper end of the unpleasantness scale.

The fact that more than 5 per cent of Elan's shares changed hands in a single session on the NYSE shows that the selling was not just confined to punters. Some heavy-hitters were dumping the stock.

Most Irish brokers rushed to Elan's defence, although they did claw back their price targets for the share. But with most Elan shares held by US investors, more attention is usually paid to what Wall Street analysts have to say about the stock, and there were some distinctly negative responses to the suspension of the Alzheimer's testing. The chief bear was DB Alex Brown's David Steinberg, who described the suspension announcement as "the final straw" and who questioned the viability of the testing programme.

According to Steinberg, the Alzheimer's drug is one of the reasons why people own Elan stock and was a basis for his maintaining a "buy" rating until now.

He said delays and disappointments in four separate products, worries about generic competition for the company's two largest-selling products and questions about the quality of the company's earnings were also factors.

Elan's defenders pointed out that, whatever about the Alzheimer's treatment, the stock's earnings multiple of 20 puts it on a 50 per cent discount to the speciality pharma sector.

That sort of discount is difficult to justify.

Whether that means the share should be rated a "buy" is open to question, and anybody buying into Elan at its current 12-month low should be thinking long-term.