UPDATE 2-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 fall 5.6 pct; Elan shares plunge 21 pct (Updates with analyst comment, background)

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

Tysabri, which is made by U.S. biotechnology company Biogen Idec Inc and Elan Corp Plc of Ireland, was temporarily withdrawn from the market in 2005 after being linked with progressive multifocal leukoencephalopathy, or PML.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 both companies crashed on the news.

The last time Biogen provided an update on the number of PML cases was in July, when it said 11 cases had been reported. Later, a presentation by a researcher at a medical conference revealed two more cases, bringing the total to 13.

Biogen stopped updating investors on the number of PML cases at the end of July, saying it wanted to focus on the drug's benefits, and would update the medical community at scientific meetings.

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

The European Medicines Agency, Europe's top pharmaceuticals watchdog, said on its website it is has initiated the review to discuss any additional measures necessary to ensure the safe use of Tysabri.

"If the 23 PML cases is accurate, which we suspect it is as a European regulator cited it, then that would imply an additional 10 cases since early September," said Geoffrey Meacham, an analyst at J.P. Morgan.

Biogen did not immediately return calls seeking comment.

It is unclear what action, if any, the Europeans will take as a result of their review.

"At worst, we anticipate (the agency) may recommend a drug holiday after an extended period on therapy," said Christopher Raymond, an analyst at Robert W. Baird. "But it is unlikely to suspend Tysabri's marketing authorization."

Investors have speculated for some time that the risk of PML increases with the length of time a patient is on the drug. As recently as last month, Biogen said it would be premature to draw such a conclusion.

But on its quarterly conference call on Tuesday, the company said it has now determined that the risk of PML does indeed increase with time, and it is in discussions with the U.S. Food and Drug Administration to change the label on the drug's prescribing information to reflect the conclusion.

The company declined to say whether the label change was requested by the FDA, or offered voluntarily.

Biogen's shares fell 5.6 percent to $44.56 in late-morning trading while shares of Elan fell 21 percent to $5.09.