Elan will receive $89.5 million in cash from its investment in Xcel Pharmaceuticals as it tries to reduce its debts.
The proceeds from the transaction will be added to those already raised from Elan's asset-disposal programme as part of its recovery plan.
The deal forms part of Elan's asset sale to raise $1.5 billion by the end of 2003. To date, the total cash received by Elan through asset divestitures is over $825 million.
During 2001 and 2002, Elan purchased three million Xcel preference shares and $109 million in Xcel loan notes. But the value of these investments have been written down to reflect the weakness in the pharmaceutical sector.
Under the agreement, Xcel has purchased all of Elan's shareholding in Xcel. A pre-tax loss of $2.1 million is expected to be charged to Elan's first-quarter results.