U.S. investment firm Royalty Pharma is considering sweetening its $6.6 billion offer for Irish drugmaker Elan by paying Elan shareholders more if the multiple sclerosis drug Tysabri hits certain sales milestones, two people familiar with the matter said on Thursday.

Royalty made its indicative approach, worth $11 per Elan share, in February, hoping to add rights to royalty payments for Tysabri worth hundreds of millions of dollars.

Elan sold its 50% stake in Tysabri to partner Biogen in April but continues to receive royalty payments on sales of the drug.

Elan has rejected Royalty Pharma's proposal, calling it a "highly conditional indication of interest." An Irish takeover panel gave Royalty Pharma until May 10 to make a firm offer or walk away.

Now, Royalty Pharma is considering a formal offer at a slight premium to where it is trading now along with a contingent value right, or CVR, whose value will depend on Tysabri sales, said the sources, who asked not to be named because the conversations were private.

Royalty Pharma is "currently considering all our options with regards to Elan," a spokesman for the company said, adding that the firm does not confirm or deny market rumors. A spokesman for Elan declined to comment.

Under the Biogen deal, Elan's royalty payments will be 12% of Tysabri sales in the first year, 18 % after that, and 25% when annual sales rise above $2 billion. Sales of the drug rose 8% to $1.63 billion in 2012.

With a CVR, Royalty Pharma could offer Elan shareholders payouts if Tysabri passed certain sales milestones, according to the sources.

"It would allow Elan shareholders to gain more upside," one of the sources said.

On Friday, Elan will seek approval from shareholders to commence a $1 billion share buyback, announced in February after the Biogen offer was announced.

Royalty said in February that it reserved the right to reduce its indicative approach of $11 per share if Elan completed such a buyback.

Elan, which is determined to reinvent itself by using the cash from the Biogen deal in a series of acquisitions, has said it will give shareholders 20% of all future royalties from Tysabri.

Royalty Pharma would not be the first firm in the pharmaceutical space to use a CVR to seal a deal. In 2011, French drugmaker Sanofi finalized its long-sought deal for Genzyme in 2011 with a sweetened $20.1 billion cash offer plus CVR payments tied to the success of the U.S. biotech group's drugs.