Drugmaker Elan and its research partner Biogen Idec have reported two confirmed cases of a deadly brain infection in patients taking their multiple sclerosis drug treatment Tysabri, the first reported cases since the drug was reintroduced in the US in 2006.

The report sent shares of both companies tumbling and Elan's performance caused the worst daily session on the Irish stock market since the Asian financial crisis in 1997.

Elan's share price halved yesterday and pulled the Iseq down 6.4pc to close at 4,087.7. On a weekly performance, the Irish market fell the most since the 'Black Monday' crash in 1987. It fell more than 16pc.

Elan shares finished the day down 45.5pc at €7.35 having shed 32pc on Wednesday, the day after the company disppointed with results from Phase II research on its Alzheimer's treatment called AAB-001. Elan shares, which are also traded in the US, took the same track.

Yesterday Elan and Biogen insisted that Tysabri would not be pulled from the market as happened in 2005 when the companies voluntarily removed the treatment after three patients contracted the disease called progressive multifocal leukoencephalopathy or PML.

Tysabri was reintroduced in July 2006 and sold for the first time in the European market at the same time. Biogen said yesterday that the two new cases were in the European Union and that one patient is stable at home while the other is in hospital. More than 31,800 multiple sclerosis patients use Tysbri.

In an analysts' conference call yesterday, Elan or Biogen would not disclose how many suspected cases turned out not to be PML.

"We're not going to comment on the number of suspected cases that get reported to us [between suspected cases being confirmed]... clinical vigilance led to the rapid diagnosis of PML. This speaks for the [physician] educational programmes that are going on in Europe ... and the United States," an executive said.

Another added that the companies would not comment on any more suspected cases over the coming months. "I'd rather not say ... but the risk of PML is clearly stated in our label ... they sign something that they understand that risk.

"Clinical vigilance is clearly working, as we've seen in these cases."

Earlier this week Elan also reported disappointing results from its Alzheimer's treatment AAB-001, which resulted in a share slump. While much of the drop came on Wednesday, the day after Elan disclosed the results along with its Alzheimer's research partner Wyeth, the shares continued to drop on Thursday, although it is not clear whether the slide may have been affected by the Tysabri news earlier.

Prior to the Tysabri news, a number of brokers had already dropped their share price recommendations after the Phase II treatment showed that while it slowed memory loss better than existing treatments, it didn't help those with a gene known as ApoE4, and was also linked to a brain swelling side effect.