Shareholders of both Biogen Idec and Elan suffered a sharp blow yesterday as both stocks plunged on news that Tysabari, a multiple sclerosis drug that was seen as a potential huge revenue generator, was pulled from the market after the companies disclosed that a patient died after taking Tysabari in conjunction with another drug.

Moreover, another patient on the drug has apparently developed a rare and frequently fatal nervous system disease. It is the first biotech drug to be removed from the market.

The shares of Cambridge, Mass.-based Biogen Idec dropped to $38.65 from $67.28, a decline of $28.63. The company’s previous 52-week low had been $50.87. Dublin, Ireland-based Elan skidded to $8.00 from $26.90, a drop of 70.26%.

Tysabari, which was jointly marketed by the companies, had received Food and Drug Administration approval for release in November. In a two-year trial that was only partially completed, the initial results were considered promising, with reported incidents of worsening neurological functioning in relapsing-remitting MS sufferers dropping nearly 67%. The results of the clinical trials – involving 942 patients in 99 different clinics – will be released in April.

A Deutsche Bank analyst, Jennifer Chao, described the drug as having been “next to the holy grail,” according to Bloomberg. She then called yesterday’s news “one of the biggest disappointments in biotech of the decade.” She placed a “sell” rating on the company’s stock, still a relatively rare occurrence at firms that have full-scale investment banking divisions.

In a conference call announcing Tysabari’s suspension, the chief executive officer of Elan, Kelly Martin, said that if a detailed review of the drug proves that this was an isolated incident, they hope to have it back in the pipeline by “late summer or fall.” However, his timeline is reliant upon the FDA approving its re-release. The companies did not provide revenues to date, nor would they discuss potential layoffs. Biogen Idec’s CEO Jim Mullen did note, however, that the company had hired about 450 people to help with all phases of the drug’s launch.

Wall Street’s equity analysts reacted swiftly, with four different firms lowering their ratings on the companies. Morningstar, which does not maintain any banking or advisory relationships with the companies it follows, said the withdrawal would hit Elan especially hard. “The firm’s pipeline, aside from Tysabari, is relatively weak,” it wrote.

Another consideration in the fallout is the loss of potential sales from other applications for Tysabari, including Crohn’s disease and rheumatoid arthritis. The companies were in stage II trials for rheumatoid arthritis and had applied to the European Union for trials to begin testing on Crohn’s.