US fund managers Wellington and Fidelity, two of the largest shareholders in Elan, have sharply reduced their stakes in the drugmaker, it emerged yesterday.

Boston-based Wellington Management, which held a 10 per cent stake in Elan prior to last week's crash, has reduced its stake to less than 2 per cent.

In a notice issued to the Irish Stock Exchange on Friday, it said its stake had fallen to 5.36 per cent. In a further notice released yesterday, it said it had cut its stake to just 1.88 per cent.

Wellington is one of the oldest asset managers in the US, dating back to 1928, and is known for advising a number of Vanguard Group mutual funds.

The firm, which manages more than $300 billion (€224.9 billion) in equities, is likely to be holding Elan in Vanguard's Health Care Fund, one of the best-performing funds over the long-term in the US.

Meanwhile, US-based Fidelity, the largest fund manager in the world, has nearly halved its stake in Elan. It said yesterday that it now holds 4.98 per cent of Elan, down from 9 per cent before last Monday's share price collapse.

This was triggered by the move by Elan and its partner Biogen Idec to suspend sales and trials of multiple sclerosis drug Tysabri following the death of a patient involved in trials.

Shares in Elan have remained volatile as investors consider the odds on Tysabri making it back to the market.

But on Monday, the share price rallied on positive comments by a US hedge fund manager Larry Feinberg and continued to gain ground yesterday.

In Dublin, it closed 44 cent or 8.8 per cent higher at €5.44, while in New York, its main market, it gained more than 12 per cent at one stage to take it back above the $7 mark.