Elan shareholders gave the Irish drugmaker a boost in its hopes of fending off a $7.3 billion bid from Royalty Pharma when they ignored a plea from the US investment firm to tender stock at a high price at a buyback yesterday.

Royalty, which sweetened its offer for Elan this week, urged shareholders to "send a message to the Elan board" by tendering all of their stock at $11.75 or $12 to fully benefit from its $12 per share offer.

However, Elan said only 4 per cent of shares were tendered at Royalty's preferred mark and that it bought back the targeted $1 billion of stock at the bottom of the $11.25 to $13 range.

The bulk of the shares tendered – 92.3 per cent – came from Johnson & Johnson, which reduced its holding in the company from 18 per cent to 4.9 per cent.

The results of the tender offer appear to indicate that Elan shareholders believe either that Elan chief executive Kelly Martin can rebuild the company through acquisitions or that Royalty Pharma will come back with a higher bid, analysts said.

Excluding J&J, 73.1 per cent of all shares weren't tendered, suggesting that about 60 per cent of the shareholding did not tender, UBS analyst Guillaume van Renterghem said in a note.

"The fact that 60 per cent of shares were not tendered makes us believe that the likelihood of Royalty Pharma being successful in its attempt to buy Elan has significantly reduced," Mr van Renterghem said. "A significant downside risk exists if the deal does not go through and the offer expires."

Institutional shareholders holding on to their stakes indicates a vote of confidence in Elan, prompting the positive reaction in the market, Mr van Renterghem said. – (Reuters/Bloomberg)