The deal – expected to close in the second quarter – effectively turns Elan into a virtual drug business, with no substantial directly owned pharmaceutical assets. The firm, headed by chief executive Kelly Martin, plans to invest the cash from US-based Biogen Idec in established and commercial products or companies, and in some "cutting-edge" science.
A portion of the cash will also be returned to shareholders. But Elan hasn't yet specified either the amount, the form it will take, or when it might happen. Asked by the Irish Independent if that meant a possibility that the firm might ultimately decide not to return funds to shareholders, Mr Martin insisted that it "seems logical" that some would be returned.
Chief financial officer Nigel Clerkin said that while the primary focus for the cash will be to deploy it to diversify Elan's activities, the company is "philosophically" committed towards returning some cash to shareholders.
Shares in Elan soared more than 11pc at one stage yesterday in Dublin.
Biogen Idec and Elan each own 50pc of Tysabri, a blockbuster treatment that after a chequered start a decade ago has become a major revenue earner for the Irish company.
Each firm had a clause that gave them first refusal to buy the other's stake. Mr Martin said that at no time had there been a discussion about Biogen buying Elan outright.
Elan will continue to receive royalties from Tysabri. In the first 12 months after the deal closing, Biogen will pay the Irish firm 12pc of global net sales of Tysabri. After 12 months, Elan will receive 18pc on up to $2bn of global net Tysabri sales and 25pc on sales of over $2bn.
The drug generated $1.6bn in sales last year, up 8pc on the previous year.
The sale of its stake in Tysabri marks the latest transformational move at Elan within the space of just less than two years. In 2011 it agreed to sell its drug technology business to Alkermes for nearly $1bn. That deal included nearly $500m in cash and a 25pc stake in Alkermes, which Elan has already sold.
Late last year, Elan hived off its cash-hungry drug development business into a new separately-listed US firm called Prothena. It retains an 18pc stake in that firm.
Mr Martin said that the Elan board had not considered winding down the company following the Tysabri sale.
"There are no plans to wind down the company," said Mr Martin. "We've worked very hard over the last number of years to position the company for opportunities," he added.
He said that focusing on one drug and one collaborator had not been ideal for Elan.