Elan said today that it bought back $1 billion of its shares at $11.25 a share.
This price automatically reduces Royalty Pharma's $7.3 billion offer for the Dublin-based firm.
US drugmaker Johnson & Johnson, which bought an 18% stake in Elan at a premium price of $8.25 per share in 2009, tendered 92.3% of all shares Elan bought back today, a spokesman for Elan said.
Elan said in February that it would buy the shares in the range of between $11.25 and $13 a share after selling its 50% interest in its main drug, Tysabri, for $3.25 billion.
US investment firm Royalty, which this week made a firm offer for Elan, urged shareholders to "send a message to the Elan board" by tendering all of their stock at $11.75 or $12 to fully benefit from its $12 offer.
Royalty made its formal cash offer worth up to $7.3 billion, or $12 a share, ahead of a May 10 deadline to make a firm bid, improving on an initial approach worth $11 per share that Elan rejected in February for being "highly conditional".
However Elan, which has said it will assess the bid and advise shareholders in due course, said in a statement today that only 4.3% of the total shares in issue were tendered at the $11.75 to $12.00 range.
Instead the price for the buyback, which the company said was oversubscribed, was struck at $11.25, a level Royalty said on Monday would push its bid back to 11.25, including a net cash right worth up to $1.00.
The buyback retires 14.8% of Elan's current shares in issue.
Johnson & Johnson said in a statement that the sale of its shares would result in an after-tax gain of around $213m, which would be recorded in the second quarter. It expects to invest this in its business.
