Ask biotech investors what's the most important event for a development-stage drugmaker, and you'll get a variety of answers: Some will say proof-of-concept phase 2 trials, others will cite phase 3 data that seems likely for approval, while still others will claim Food and Drug Administration approval is most important. And they're all right in some way, because those events are value inflection points for biotechs.

But that value is only real if the company can actually make a profit. Having an approved drug where the revenue isn't covering costs is a losing proposition no matter how novel, exciting, or efficacious the drug is.

So while Elan's (NYSE: ELN) multiple sclerosis drug Tysabri became a blockbuster in 2009, it's really the 2011 transformation that should have investors excited.

Elan completed the sale of its drug-formulation business, Elan Drug Technologies, to Alkermes (Nasdaq: ALKS) this quarter, netting the company $657 million. But even excluding that gain, the biotech was still in the black and looks like it'll be able to keep cranking out profitable quarters.

The newly focused Elan is really firing on all cylinders. Sales of Tysabri, which it markets with Biogen Idec (Nasdaq: BIIB), were up 28%, while expenses were down 10%. More with less -- who can argue with that?

Cash from the sale of EDT helped retire 50% of the company's debt, which will add to the bottom line through lower interest expenses. The company still owns 31.9 million shares in Alkermes as part of the transaction, but plans to sell its stake next year. That cash -- about $566 million at today's price -- could help retire the $626 million in debt still remaining on the books.

The next major inflection point for Elan will come in the middle of next year with the release of phase 3 data for the company's Alzheimer's disease drug, bapineuzumab, which it shares with Pfizer (NYSE: PFE) and Johnson & Johnson (NYSE: JNJ). I think it's a long shot -- most Alzheimer's drugs are -- and investors would be best off focusing on Tysabri and looking at bapineuzumab as an upside surprise if it happens to be successful.