When considering any stock for your portfolio, don't be swayed by just the positives. Examine its pros and cons, and decide whether its possible upside outweighs its risks. Let's look at Elan (NYSE: ELN) today and see why you might want to buy, sell, or hold it.

Founded in 1969 and based in Ireland, Elan is a biotech company focusing on neuroscience and primarily targeting Alzheimer's disease, Parkinson's disease, and multiple sclerosis.

Buy
Elan is appealing for many reasons. Like other biotech companies, it's developing treatments to fight diseases, and its successes will both better the world and enrich its shareholders. But unlike many biotechs, it actually has an approved, and profitable, treatment on the market.

Tysabri primarily treats MS, and not only is it on the market, but it's also reached "blockbuster" status, with sales topping $1 billion. That helped Elan report a net gain for 2011, versus a net loss in earlier years. Tysabri sales have been growing at a good clip as well, recently rising 23%.

In collaboration with Biogen Idec (Nasdaq: BIIB), Elan is addressing Tysabri for Crohn's disease as well. Its pipeline features Alzheimer's treatments such as ELND005, which has completed its phase 2 trials, and bapineuzumab, with Johnson & Johnson (NYSE: JNJ), a rather deep-pocketed partner, in phase 3 trials. Other drugs in development target diabetes, cancer, bipolar disorder, and Parkinson's.

Many bulls like the company's strategic thinking. In 2011, it sold its extended-release drug-delivery technology to Alkermes (Nasdaq: ALKS). That helped Elan focus more on its drug development and also provided a significant inflow of cash, which can be used to pay down debt. The deal included a lot of stock in Alkermes shares, and that stock has risen about 30% over the past year, serving Elan well. (Elan plans to sell off the shares over time, generating further inflows -- it recently sold 76% of its shares, netting $381 million.)

Also auspicious is that President Obama has pledged to boost spending on Alzheimer's research considerably.

Finally, you might like Elan for its resilience. Its Tysabri hit a roadblock a few years ago, when it was discovered that some patients were developing a rare and potentially lethal brain infection. Its scope of use was thus narrowed. But things are looking brighter for the drug (and patients) now, as it has been approved for wider use among those who have been tested to see whether they have a lower risk of developing the condition.

Sell
Of course, investing in Elan is not a surefire road to riches. Its upsides are accompanied by downsides. The boost in spending on Alzheimer's research is a plus, of course, but so far a lot of money has been spent developing treatments for the disease with relatively meager results. In fact, the history of some would-be treatments for the disease serves as a good reminder of how risky biotech companies can be: Eli Lilly (NYSE: LLY), for example, got its semagacestat drug all the way to phase 3 trials but then discovered that it made patients worse, not better. Yikes. That's not the only example, either.

You might also want to avoid Elan if you're not sufficiently impressed with its financials. Its revenue growth has recently been slowing, free cash flow is negative, and gross margins have shrunk some. (Many other measures look good, though. Net margins are up, as are returns on equity and invested capital.)

Hold
You might also just want to wait. You could wait for Elan to have more successes emerge from phase 3 trials. You could wait for it to post more quarters or years of net gains instead of losses, establishing more reliability. You could wait to see whether Elan emerges as an Alzheimer's powerhouse.

Or, you might just decide that the benefits outweigh the risks.

The verdict
I'm going to hold off on Elan for now. There's a lot to like about it, and it holds a lot of promise, but there are plenty of compelling stocks out there.