Royalty made its formal cash offer worth up to $7.3bn (£4.76bn), or $12 a share, ahead of a 10 May deadline for a firm bid, improving on an initial approach worth $11 per share that was rejected by Elan in February for being “highly conditional”.
Elan wants to reinvent itself through a series of acquisitions and reward shareholders with cash after selling its 50 per cent interest in Tysabri for $3.25bn plus future royalties to US partner Biogen Idec.
The company, in which US group Johnson & Johnson holds an 18 percent stake, secured strong approval from shareholders last week for the $1bn buyback priced at between $11.25 and $13 a share.
However, Elan has little track record in making acquisitions and Royalty has questioned its ability to pull off such a plan.
Elan’s share price, hit hard last year when its main experimental drug hope failed, has been pushed 16 per cent higher by Royalty’s offer.
Royalty urged shareholders, many of whom it has met in recent weeks, to pressure Elan’s board to accept its bid.
“I think it’s a good start,” said Elan investor Matt Strobeck, a former partner at Westfield Capital Management, who met with Royalty execs in March.
“Elan’s board should now open up its books to Royalty Pharma so they can justify why they think the company should get a higher price... The board would be breaching its fiduciary duty to shareholders if it does not allow Royalty to examine its financials.”