Elan today stepped up its bid to keep its independence by agreeing a $1 billion deal to buy 21% of the royalties that US company Theravance receives from GlaxoSmithKline for its respiratory drugs.

The Dublin-based firm last month rejected a $5.7 billion bid from Royalty Pharma.

It has made a number of moves to counter the bid, contingent on 90% acceptance, since the US investment firm declared its interest in February.

The latest move sees Elan spend some of the $2 billion it has at its disposal following the sale to US firm Biogen Idec of its 50% share in multiple sclerosis drug Tysabri. 

Elan has maintained royalty rights of up to 25% in Tysabri, which Royalty Pharma wants to get its hands on.

See how Elan shares performed in Dublin trade today

Elan's chief executive Kelly Martin denied that today's deal was designed to frustrate the Royalty bid.

"This deal was not done because of Royalty whatsoever. Royalty to myself, to the board, to pretty much every shareholder that we can talk to frankly is utterly irrelevant," Martin said

"I can say unequivocally that I haven't spoken to one shareholder who thinks Royalty Pharma's offer is either credible or of any substance whatsoever. We haven't talked to anybody that is on the fence,'' he added.

The Theravance deal, part of which will be financed by an imminent bond deal, hands Elan a chunk of Theravance's interest in four drugs in late-stage development, including Breo, a new chronic obstructive pulmonary disease (COPD) treatment that was approved by the US Food and Drug Administration last week.

Anoro, a potentially more profitable COPD drug Theravance is developing with Britain's Glaxo, is also part of the deal along with another experimental drug awaiting approval, Vilanterol VI, and MABA ‘081, which has completed phase II trials.

The approval of Breo, which will compete with Glaxo's twice-daily asthma and COPD drug Advair, a roughly $8 billion-a-year drug, means the deal will be earnings' accretive for Elan from next year, Elan said.

Theravance, in which Glaxo has a 27% shareholding, has separate royalty agreements in place for each molecule. It will receive 15% of the first $3 billion sales of Breo and up to 10% of Anoro, if is approved.

Analysts expect Breo, or Relvar as it would be called if approved outside the US, to generate annual sales of $559m by 2015, according to Thomson Reuters data. Anoro is expected to generate peak annual sales of nearly $1.4 billion.

Elan's chief executive Kelly Martin said the deal was ''a truly unique opportunity'' for the company.

''This investment enables our shareholders to gain exposure to four high quality, late stage assets within the large and growing global respiratory market. The commercial and marketing execution for these assets will be driven by GSK, the dominant global leader in this therapeutic area with a current market share of more than 40%,'' he added.

Elan said it would pass on one-fifth of all royalties from the Theravance deal to its shareholders, matching the dividend they are already set to receive through the royalty stream Elan maintains in Tysabri following its $3.25 billion sale to former US partner Biogen Idec.

Elan shareholders, whom the company have already rewarded through a $1 billion share buyback, have until May 31 to make up their minds on Royalty Pharma's $11.25 per share bid and CEO Kelly Martin reiterated that more deals would be done in the near term.

"We have other transactions that we'll do that will have us involved more directly with other assets and those assets could give us footprint geographically, could give us pipeline and mid-to-late stage assets, or a combination of both," he said.

"We're not just a royalty company alone but what this transaction does is it unbelievably diversifies us, gives us long-term income and will allow us to use that to invest in different assets, molecules or businesses etc,'' he added.