UPDATE 1-Elan to pay $200 mln fine after U.S. probe

* Reaches agreement in principle following investigation

* Has established reserve for expected settlement

(Adds more details, changes dateline, PVS LONDON)

DUBLIN, July 16 (Reuters) - Irish drugmaker Elan Corp ELN.I said it expects to pay just over $200 million as part of a settlement following an investigation in the United States into how it marketed one of its drugs.

Elan has reached an agreement in principle with the U.S. Attorney’s Office for the District of Massachusetts after a U.S. Department of Justice investigation into sales and marketing practices for Zonegran, an anti-epileptic prescription medicine that it divested in 2004. If the agreement in principle is finalised, Elan expects to pay $203.5 million as part of a comprehensive settlement, it said in a statement on Friday. It had established a reserve of $206.3 million for the expected settlement and related costs.

As part of the agreement in principle, its U.S. subsidiary, Elan Pharmaceuticals, Inc., expects to plead guilty to a misdemeanour violation of the U.S. Federal Food, Drug and Cosmetic Act. It will enter into a Corporate Integrity Agreement with the Office of Inspector General of the U.S. Department of Health and Human Services.

Further details about the misdemeanour were not immediately available.

“While Elan expects to negotiate and enter into final settlement and Corporate Integrity Agreements, there can be no assurance as to when or if any settlement will be finalised or, if a settlement is finalised, what the final terms of the settlement might be,” it said.

“Additionally, the proposed resolution of the Zonegran investigation could give rise to other litigation by state government entities or private parties.”