Elan said yesterday it had signed a US marketing partner for Vernalis Plc's migraine drug Frova.

This eases fears about the British biotech's cash position.

Elan, which has lost more than two-thirds of its value this year largely due to an accounting controversy, said it had agreed a seven-year co-marketing deal with Belgian pharmaceutical and chemical group UCB Pharma.

The two will market the drug, developed by Vernalis, which will be introduced in the second quarter of this year.

Elan did not disclose financial terms of the deal. Fears that Elan might struggle to find a marketing partner, given its recent woes, had hit Vernalis's shares hard recently.

"We're really pleased with the deal, which will significantly improve our cash position," said Vernalis finance director Mr Peter Worrall. But analysts said Vernalis had paid a high price because they had needed a quick deal.

"UCB is a sub-optimal partner. It isn't a household name and doesn't have the necessary muscle to penetrate this competitive market," said Nick Staples, analyst at West LB Panmure. He said UCB had a primary care sales force of around 475 in the United States, compared with more than 3,000 for a major player. "This reaffirms our view that Frova will be a niche product," Mr Staples added, forecasting annual sales of $100 million (€115 million) by 2006.

Vernalis said it had restructured a loan agreement with Elan, under which Vernalis will not have to repay the principal and interest of a $10 million loan agreed in December 2000. It will also get an undisclosed milestone payment this year.