UPDATE 6-Biogen, Elan shares plummet on new Tysabri review

* European regulators to review risk, benefit of Tysabri

* Review follows reports of 23 cases of PML worldwide

* Shares of Biogen down 7 pct; Elan shares off 17 pct (Add FDA confirming 23 cases)

By Toni Clarke

BOSTON, Oct 23 (Reuters) - European regulators said they have begun a review of the multiple sclerosis drug Tysabri after reports of 23 cases of a potentially deadly brain infection.

Tysabri, made by U.S. biotechnology company Biogen Idec Inc (BIIB.O) and Ireland's Elan Corp Plc (ELN.I), was temporarily withdrawn from the market in 2005 after being linked with progressive multifocal leukoencephalopathy, or PML. It was reintroduced in July 2006 with stricter safety warnings.

Tysabri is considered the most important driver of growth for both companies. Shares of Biogen fell 7.2 percent to close at $43.81 on Nasdaq. Elan shares dropped nearly 17.6 percent to close at $5.31 on the New York Stock Exchange.

The U.S. Food and Drug Administration confirmed there had been 23 confirmed PML cases since 2006. In September, the FDA said it had confirmed 13 cases.

"These new cases are likely to alarm physicians whose comfort with the product had been increasing in recent months," said Sanford Bernstein analyst Geoffrey Porges.

The risks and uncertainties surrounding Tysabri have worked to dissuade buyers from acquiring Biogen, but according to Porges, the latest disclosure could make it easier to place a value on the company.

"If this increased risk becomes accepted by the company, physicians and regulators, and they all take appropriate action, the risk of Tysabri becomes defined rather than uncertain," he said. "With that defined risk, the revenue potential, and the associated liability, for an acquirer becomes more knowable."

Biogen and Elan sell Tysabri in a 50-50 partnership. Each has the exclusive right to acquire full ownership of Tysabri if the other is acquired.

Biogen last provided an update on the number of PML cases in July, when it said 11 cases had been reported.

Investors have speculated for some time that the risk of PML increases with the length of time a patient is on the drug. On Tuesday, Biogen said it has determined that the risk of PML does indeed increase with time.

The company said it was in discussions with the FDA to change the drug's label to reflect that conclusion. Currently the label says it is unclear whether there is a link between the risk of PML and duration of treatment.

It is possible the FDA will require Biogen to spell out that risk more definitively.