By Padraic Halpin

DUBLIN, Feb 6 (Reuters) - Irish drugmaker Elan will raise more than $3.25 billion by selling its interests in its main drug to partner Biogen Idec and effectively reinvent itself by splashing most of the cash on acquisitions.

Under a deal announced on Wednesday, Massachusetts-based Biogen will take full ownership of blockbuster multiple sclerosis (MS) treatment Tysabri and will make an upfront payment to the Irish group plus royalties on future sales.

While the deal gives Elan scope to return some cash to shareholders as well as strategic flexibility to buy new assets, it leaves its future shape unclear since Tysabri was by far its most important product, responsible for almost all its revenue.

Elan has already spoken to several companies about potential deals and can move quickly over the next 12-18 months once the sale is completed, Chief Executive Kelly Martin told Reuters.

"You can do a lot of things with $3 billion, you can buy companies, molecules, you can partner, you can share risk. The world is our oyster," Martin said in a telephone interview.

"We are not necessarily restricting ourselves to one therapeutic area or one type of clinical asset. We will not be restricted to our past, which was by and large neurological."

Martin said there were hundreds of small- to medium-sized drug companies with capital or capability needs, meaning there was an "enormous amount of transactions" Elan could do.

Shares in Elan, which fell sharply last year after the failure of a highly anticipated experimental Alzheimer's drug, were 8 percent higher at 8.30 euros by 1220 GMT. The stock rose as high as 8.595 euros, its highest since mid November.

The Irish drugmaker has co-marketed Tysabri with the larger U.S. company for 12 years and said it would receive a royalty of 12 percent of Tysabri global net sales for the first 12 months after the deal is completed.

A tiered royalty structure will kick in after that, with Elan, in which U.S. group Johnson & Johnson is an 18 percent shareholder, receiving 18 percent on up to $2 billion of global net sales and 25 percent on any sales over that level.

Sales of Tysabri rose 8 percent to $1.6 billion last year. A filing last month for approval to sell the drug as a first-line treatment for multiple sclerosis could boost sales further.

CRUCIAL TIME

The companies have long aimed to increase patient numbers over time to 100,000 from the 72,700 at the end of last year, a level that would make Tysabri a $2 billion drug, Martin said.

For Biogen, the deal boosts its MS business at a crucial time for the U.S. company, which hopes to win approval soon for a new pill to treat the debilitating neurological disease.

Its oral drug BG-12, to be sold under the brand name Tecfidera, is expected to become a leading treatment for MS after its planned second-quarter introduction.

It said the Tysabri deal, which will be paid for using existing cash reserves, will add around $0.20 to $0.30 to 2013 earnings per share and continue to be accretive thereafter.

"This is a natural next step for Biogen and Tysabri. Full ownership will improve our ability to navigate its role as part of our leadership in MS," chief executive George Scangos said.

Biogen will be able to offer BG-12 alongside Tysabri and another MS treatment called Avonex, both of which are given by injection, providing a range of treatment options for patients.

Rival providers of MS treatments include Novartis, Teva, Merck KGaA and Bayer.

There had been speculation in 2012 that Biogen might try to acquire Elan outright, following the failure of the Irish company's Alzheimer's drug bapineuzumab, which it was working on with Johnson & Johnson and Pfizer.

That setback left Elan heavily reliant on Tysabri, which accounted for all but 200,000 euros ($270,600) of the group's 1.2 billion euro full-year revenue reported on Wednesday.

As part of earlier plans to refocus its operations, Elan said last August it was spinning off its Neotope drug discovery business. It also sold its drug delivery business to U.S. firm Alkermes for $960 million in 2011.

Martin, who said he will continue as CEO for the foreseeable future after agreeing early last year to stay on longer than his scheduled retirement, added that the situation of relying on one asset and a single collaborator had not been ideal.

"The strategic direction can actually be shaped because we have freed ourselves up from just having Tysabri to having the ability to add a multitude of assets, which we think over time will be a more balanced opportunity for shareholders," he said.

Citi and Ondra Partners are acting as financial advisors to Elan on the deal, with Centerview Partners exclusively advising Biogen. Cadwalader, Wickersham & Taft and A&L Goodbody are acting as legal counsel to Elan, Ropes & Gray for Biogen.

($1=0.7392 euros)

(Additional reporting by Ben Hirschler)

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