Drug royalties group Elan has urged shareholders to reject the hostile takeover offer from Royalty Pharma.

In a formal defence document published yesterday, company chairman Robert Ingram said Royalty's bid failed to properly value the high margin cash flow from the company's former multiple sclerosis drug Tysabri.

He said Tysabri, on which Elan retains a royalty interest after selling its ownership of the drug to partner Biogen Idec for $3.25 billion, could be used for a wider range of patients depending on the outcome of current trials.

“In addition, given the unique regulatory construct around both the marketing and medical education and the efficacy and safety dynamics for patients, it is our view that the Tysabri asset will exist far beyond its patent life, thus further increasing, potentially dramatically, the embedded cash flow value of the asset,” Mr Ingram wrote of the Royal Pharma bid in a note to shareholders.