Elan shareholders have voted overwhelmingly in favour of a $1 billion share buyback scheme announced in February.
Elan recently sold its 50% stake in Tysabri to partner Biogen Idec, but continues to receive royalty payments on sales of the drug.
It intends to give shareholders a portion of all future royalties from Tysabri.
99% of shareholders voted for the share buyback scheme this morning which comes after Elan rejected a takeover deal from Royalty Pharma in recent months.
Royalty is now believed to be considering sweetening its $6.6 billion offer for Elan by paying the company's shareholders more if the multiple sclerosis drug Tysabri hits certain sales milestones.
This is according to two people familiar with the matter, reports Reuters.
Royalty made its indicative approach, worth $11 per Elan share, in February, hoping to add rights to royalty payments for Tysabri worth hundreds of millions of dollars.
Elan has rejected Royalty Pharma's proposal, calling it a "highly conditional indication of interest." The Takeover Panel has given Royalty Pharma until May 10 to make a firm offer or walk away.
Now, Royalty Pharma is considering a formal offer at a slight premium to where it is trading now along with a contingent value right, or CVR, whose value will depend on Tysabri sales, said the sources, who asked not to be named because the conversations were private.
Royalty Pharma is "currently considering all our options with regards to Elan," a spokesman for the company said, adding that the firm does not confirm or deny market rumours. A spokesman for Elan declined to comment.
Under the Biogen deal, Elan's royalty payments will be 12% of Tysabri sales in the first year, 18% after that, and 25% when annual sales rise above $2 billion. Sales of the drug rose 8% to $1.63 billion last year.
With a CVR, Royalty Pharma could offer Elan shareholders payouts if Tysabri passed certain sales milestones, according to the sources.
"It would allow Elan shareholders to gain more upside," one of the sources said.