Royalty Pharma has raised its hostile bid for Irish drug firm Elan to a potential $8 billion. The move came after just 7.5 per cent of the target company's shareholders accepted its previous offer.

The US investment firm, seeking to get its hands on Elan's lucrative royalties from multiple sclerosis drug Tysabri, has already had two bids rejected by Elan's board in a battle that has turned increasingly bitter.

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 that could be worth up to $2.50 per share, it said in a statement.

The CVR payment means Royalty would offer Elan shareholders payouts if Tysabri passed certain sales milestones. This is a similar mechanism to that used by French drugmaker Sanofi to finalize 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 per cent plus one share. Its bid also remains conditional on Elan shareholders rejecting a series of recent transactions that Elan has made to counter Royalty’s bid. That vote will be held at a June 17th meeting.

Elan believed Royalty’s previous bid undervalued its future revenue stream from Tysabri - which it puts at a potential $17.15 per share - and is trying to convince shareholders that the deals it has struck in recent weeks will add more value.

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 11th to decide whether or not to grant a preliminary injunction against Royalty.

Reuters