Dear Mr. McLaughlin:

This is a follow-up to my letter dated December 11, 2008 in which I outlined investor concerns regarding the manner in which Elan’s Board of Directors is handling the Company’s mounting strategic crisis. At a time where foresight and responsible management are perhaps more important than ever, you and your fellow Directors appear to be flouting your obligation to shareholders not only by allowing a failed management to remain in place, but also by ignoring the need to nominate new Directors with relevant and outstanding pharmaceutical marketing experience, such as the ones I suggested to you, to the Elan Board.

Since his appointment, the path set upon by your current Chief Executive Officer has led to many harmful consequences. Your CEO’s mistakes cover the gamut of poor executive decision-making – from marketing to strategic direction to expense management. A small sample of these errors is listed below to demonstrate their pervasiveness.

-Your CEO has almost completely surrendered the promotion of Tysabri to Biogen, despite an inherent conflict with their drug Avonex, the current market leader in multiple sclerosis and the drug most threatened by Tysabri’s success.

-Last year your CEO announced with great fanfare the creation of an Elan sales force to promote Tysabri for the Crohn’s disease indication. Less than a year later, he disbanded this sales force after investors pointed out that it was a failure.

-Three years ago, your CEO indicated that Elan’s pain management drug, PRIALT, would achieve annual sales of $150 to $250 million. In our eyes, the promotion of PRIALT, an excellent drug, is an absolute failure. Currently, sales are less than $20 million annually, which clearly exemplifies your CEO’s lack of understanding of basic pharmaceutical marketing.

-Over the course of the past year, I have had two lengthy discussions with your CEO regarding this issue. During both conversations, he confidently boasted about his ability to manage the business and how quickly he had learned the intricacies of pharmaceutical marketing.

-Based on the above referenced facts and despite an obvious need for such knowledge, none of the CEO’s top 20 executives, whom your CEO personally hired, have any relevant pharmaceutical marketing experience. Last month, after pressure from shareholders and without a public announcement, he quietly removed the Executive Vice President and Chief Commercial Officer, his former colleague from Merrill Lynch. It is apparent from your CEO’s hiring decisions that he does not believe that pharmaceutical marketing should be a core competency of the Company.

-In early 2008, your CEO attempted to sell the EDT drug-technology division, expecting a sale price in excess of $1 billion. By mismanaging the process, the sale took too long and, with the ongoing credit crisis, is currently unachievable.

-In spring 2008, after seeing the clinical data on Bapineuzumab, your CEO signaled to investors that once these data were presented, the Company’s stock would trade well above $40 per share. Despite the reasonably positive data, the announcement and presentation of these results were so poorly handled that the stock price that day dropped to less than half, at $18 per share. Your CEO clearly does not know how to properly manage the disclosure of clinical data to the investment community.

-After your CEO and several of his Merrill Lynch colleagues were hired, he moved the Company’s headquarters to New York City, where they reside, simply for their convenience. This arrogant decision was recently reversed, only after numerous shareholder objections and a significant waste of shareholder money.

-The Company appears to continue to maintain the use of corporate jets for the CEO and Board, this being a completely inappropriate and excessive cost for an organization of Elan’s size. With Fortune 100 companies canceling their corporate jets, Elan has no place preserving them.

Beyond the financial excesses of the office of your CEO, which are particularly odious in the current environment, the lack of proper guidance on a management and Board level stands the chance to irreversibly destroy the remaining value of this Company.

Your CEO is now embarking on what could be his biggest mistake yet, hiring Citibank to review the Company’s strategic alternatives. With this decision, you, the CEO, and your fellow Board members have announced the limit of your ideas.

Now is NOT the time to put all or part of Elan up for sale. Your investors fear that, in acting from a position of weakness, your CEO will destroy even greater value:

-We fear that he will attempt to craft a partial sale of stock and/or pipeline products that will fall just below the threshold requiring shareholder approval, a vote he knows he would not receive.

-The sale of any Elan shares to a pharmaceutical company would not only dilute shareholders at a time when the stock is depressed, but would also greatly reduce the likelihood that other pharmaceutical companies may express interest in Elan in the future.

-Not only does the Company not have an immediate need to raise cash in the near-term, but investors lack the confidence that your CEO could negotiate a deal favorable to Elan, particularly at a depressed share price.

You have options:

-The Company’s $1.15 billion debt, due at the end of 2011, could be easily managed by reducing wasteful spending and insisting that Biogen fulfill its obligation to promote Tysabri with the same level of emphasis put on its own drug, Avonex. Elan’s general and administration expenses are running in excess of $300 million per year. For a biotech company, that today is essentially a research-based company, these expenses should be less than $100 million per year.

-The sale of the EDT drug-technology division should be revisited, starting now, in anticipation of a recovering credit market.

We realize that, at this point, your CEO may hope that any deal would save his job, but it will also surely limit the upside of all Elan shareholders and mark the evisceration of yet more long-term shareholder value. Instead, your CEO should focus on improving the marketing competency of Elan and reducing unessential expenses.

The Pfizer/Wyeth merger is a threat to Alzheimer patients and Elan, and this should be opposed by Elan:

-Pfizer currently has six Alzheimer drugs under development and one on the market, while Wyeth has four of Elan’s Alzheimer drugs and five Alzheimer drugs of its own in development. If this merger materializes, Pfizer will control 16 Alzheimer drugs, which represents a majority of all Alzheimer drugs currently in clinical development and on the market.

-In addition, Pfizer would control a great deal of the intellectual property in this area, creating a virtual monopoly for itself. If allowed to control all these drugs, Pfizer would undoubtedly be forced to determine which of these compounds would receive priority in clinical development and which would be slowed down. As a result, Pfizer would likely favor those drugs in which it holds a 100% interest rather than the Elan drugs in which it holds only a 50% interest. Once again, Elan would be in the same position with Pfizer as it is with Biogen.

-Ultimately, the biggest loser in this situation would be Alzheimer patients, along with their caregivers and physicians, who would have fewer treatment options available to them.

What plans does your CEO have to face this threat? Has the Company contacted the Federal Trade Commission regarding this matter? Can your shareholders trust the management team to properly handle this issue when they have little to no experience?

Three weeks ago, at my request, you assisted in arranging a meeting between seven of Elan’s largest shareholders, who represent 37% of the Company’s outstanding shares, and two of your Directors, Bill Rohn and Gary Kennedy. Formerly a Chief Operating Officer at IDEC and the only Director with previous pharmaceutical marketing experience, Mr. Rohn’s participation in the meeting was encouraging as we felt that our concerns were heard and taken into consideration. He clearly heard our views opposing the sale of any shares of Elan to a pharmaceutical company at this time, as well as our insistence that the Company’s management and Board be strengthened. He agreed to discuss our concerns with the entire Elan Board of Directors, and respond to us immediately after the next Board meeting. In addition, we requested that Mr. Rohn consider becoming Chairman of the Elan Board.

More than ten days have passed since this meeting took place. Most of the other shareholders at the meeting, including myself, still have not received any verbal feedback from Mr. Rohn, nor from any other member of the Elan Board. Indeed, it took until February 6 to obtain any response, and the brief letter I received is more an attempt to avert further publicity of shareholder concerns than an effort to address them. Worse yet, the points made in the letter of Messrs. Rohn and Kennedy mischaracterize these concerns and ignore two critical issues: the sale of Elan stock to a pharmaceutical and your CEO’s poor performance. This letter so clearly fails to reflect the goodwill Mr. Rohn expressed at our January meeting that I seriously doubt he could have been one of its author. It seems to add weight to my fear that the Board has been hand chosen by your CEO simply to preserve his position and silence dissenting views.

Mr. McLaughlin, you must acknowledge and respond honestly to the urgency expressed privately and publicly by the majority of your largest shareholders. We have remained long-standing owners of Elan shares because we have faith in your scientists and the drugs they are developing, and would very much like for Elan to succeed in the long-term. Our concern is that you allow this failed strategy to continue out of loyalty to your CEO rather than exercising your fiduciary duty to Elan shareholders and its employees, whose interests you are responsible for upholding.

Again, we ask that you quickly add two qualified Directors with relevant pharmaceutical marketing expertise to the Elan Board to help guide the Company through this challenging period. We ask that these individuals be truly outstanding leaders in industry and not just yes-men. We are aware that you are currently considering an executive, who has contacted us for our endorsement. He is not the sort of individual Elan’s Board needs at this time and we will ask him to withdraw his candidacy. If you nominate individuals that will take an active role in monitoring the Company, that are near the same level of experience as those individuals we suggested to you in August, we will enthusiastically endorse them. If you choose individuals of lesser qualification to serve an ulterior motive, we will vigorously oppose them.

Please take advantage of our offer of support to prevent any further loss of value to the Company. A protracted public battle with your shareholders is of benefit to no one, as is a further escalation of this dispute.

Sincerely,

Jack W. Schuler