Elan shareholders approved a share buyback on Monday, meaning U.S.-based Royalty Pharma's hostile bid for the Irish drug firm will lapse unless it succeeds in a legal challenge. Royalty, hoping to convince Elan's owners to accept its bid in the face of opposition from its target's board, last month made its takeover offer conditional on shareholders voting down all resolutions at Monday's meeting.

Shareholders rejected the company's proposed $1 billion royalties deal with U.S company Theravance, the purchase of private drug firm AOP Orphan and a drug spin-off, in a major blow to Elan management's strategy. The company put itself up for sale on Friday.

However their approval of a $200 million share buyback could force Royalty to either join the sales process with an increased bid or walk away.
Desperate to stay in the fight, Royalty last week won an Irish court injunction against Ireland's regulator on takeover battles, allowing it to appeal against a ruling that it cannot change the conditions attached to its offer.

Royalty, whose current bid is worth a potential $8 billion, says it meant its conditionality to apply to only the two resolutions relating to acquisitions. The hearing to determine whether it can appeal is scheduled for Wednesday.

Royalty's current bid offers $13 in cash per share as well as a "contingent value right" that could add a further $2.50 per share if blockbuster drug Tysabri hits certain sales milestones.

Shareholders have a week to decide on whether to accept the offer, the investment firm's third in five months. It requires the backing of 50% plus one share to go through, as well as a successful appeal in the courts.