Shares in the British pharmaceutical group Medeva rose sharply for the second successive day on the London market as speculation intensified that Elan Corporation was gearing up for a €1.05 billion (£828 million) agreed cash bid for the group.

After rising 32p to 164p sterling on Wednesday, Medeva shares rose again in huge volumes in London yesterday, closing up 11 1/2p on 175 1/2p sterling. Analysts believe Elan, or another bidder, will have to pay at least 200p sterling per Medeva share, valuing the company at almost £695 million sterling or €1.05 billion.

There was little reaction in either the Dublin or New York markets to Elan's reported links with a Medeva bid and Elan shares were only marginally changed from their overnight $34.44 (€32.65).

All Medeva has said so far is that it is involved in discussions that may or may not lead to a bid and Elan has refused to comment on the market rumours. Industry analysts said that an Elan bid for Medeva had a compelling logic as, at a stroke, it would give Elan access to Medeva's extensive marketing network in Europe. Elan is notably absent from many European countries and Medeva's presence in Britain, France, Spain and Belgium would complement the Irish group's strong presence in the US market.

"Medeva would reinforce its marketing sales network and a foothold in Europe makes sense," said one industry source.

Another of Medeva's attractions is a recently-opened state-of-the-art vaccine plant near Liverpool as well as its Hepagene vaccine for hepatitis, which is awaiting regulatory approval.

Elan is particularly strong in drugs affecting the central nervous system including Alzheimer's Disease, a strength acquired through its $537 million acquisition of Athena Neurosciences last year.

There are also synergies between the two groups With huge amounts of cash sitting in its balance sheet, a bid by Elan at the levels suggested in the market would not present any financial difficulty.

But, while there is general unanimity in the market that Elan is the party involved in the talks with Medeva, analysts warned that a positive outcome to the discussions was not guaranteed. They cited Medeva's discussions on a bid from Shire Pharmaceuticals earlier this year when failure to agree a price lead Shire to withdraw and instead buy an US pharmaceutical group.