Royalty Pharma today raised its hostile bid for Elan to a potential $8 billion, coming back for the third time after just 7.5% of shareholders accepted the last offer.
Elan shares jumped 5.3% in Dublin trade on the news to close at €9.97.
The US investment firm is seeking to get its hands on Elan's lucrative royalties from multiple sclerosis drug Tysabri.
It had its first two bids rejected by Elan's board in a battle that has turned increasingly bitter since it began in February.
Royalty is now offering $13 in cash per share - compared with a previous $12.50 - and added a clause known as a contingent value right (CVR) that could add a further $2.50 per share if blockbuster drug Tysabri hits certain sales milestones.
In a statement Elan said its board would assess the revised bid, in line with its obligations under Irish takeover law.
Elan saw Royalty's previous bids as undervaluing the company - which it believes commands a value of between $15.50 and $20.80 - and is trying to convince shareholders that deals it has struck in recent weeks will add more value.
"Royalty Pharma believes the further increased offer is a far superior alternative to what Royalty regards as a high risk strategy of hastily arranged and value destructive acquisitions," the New York-based firm said in a statement.
Royalty said the CVR clause, which Reuters reported it was considering in April, would first be triggered if Tysabri owner Biogen Idec gains approval for using the treatment in secondary progressive MS before the end 2017.
A second payment would be made if annual sales of the drug hit $2.6 billion by the end of 2015, with a third kicking in if they rise to $3.1 billion within the following two years. Tysabri sales rose by 8% to $1.63 billion in 2012.
This is a similar mechanism to that used by French drugmaker Sanofi to finalise its $20.1 billion deal for Genzyme Corp in 2011, and competes with a promise from Elan to its shareholders that it would hand over a fifth of its royalty stream from the blockbuster drug to them.
Royalty kept the acceptance threshold for its offer at 50% plus one share. Its bid also remains conditional on Elan shareholders rejecting a series of recent transactions conducted by Elan to counter Royalty's bid. That would have to happen at a key June 17 meeting.
The US firm received a blow in the heated battle yesterday when a ruling relating to that meeting threatened to scupper the deal. In an attempt to stop the Dublin-based firm pushing through its defensive acquisitions, Royalty last month made its second offer conditional on Elan shareholders rejecting "any transaction" they would be asked to back.
However, after Elan said only two of the four transaction to be put to the meeting concerned the acquisitions, Royalty sought a ruling from the Irish Takeover Panel confirming that it would not be obliged to drop out if all four votes were carried.
The panel decided that Royalty could not revise its terms, meaning its bid will lapse if Elan shareholders back either of the other two uncontentious resolutions - a share buyback and a drug spin-off aimed at cutting operating costs.
In a further twist, Elan has also won temporary relief from a USDistrict Court stopping Royalty from closing its tender offer after Elan argued the New York-based investment firm's disclosures in its increased bid were "materially inadequate."
The court will meet again on June 11 to decide whether or not to grant a preliminary injunction against Royalty.
