Elan sees sales of prized Tysabri drug rise sharply DUBLIN (Reuters) - Elan said sales of the multiple sclerosis drug Royalty Pharma wants to get its hands on through its bid for the Irish drugmaker rose by 14 percent year-on-year to $456 million in the first quarter. Elan, involved in a convoluted takeover saga with Royalty for the past two months, rejected a reduced $11.25 per share bid from the U.S. investment company on Monday, saying it grossly undervalued its future prospects. While shareholders wait to see if Royalty values lucrative revenues tied to the blockbuster drug Tysabri enough to come back with a higher bid, Elan said it had $2 billion at its disposal to fund an alternative plan to rebuild the company. Elan sold its 50 percent interest in Tysabri for $3.25 billion plus royalty rights to U.S. partner Biogen Idec in February and has already spoken to several companies about spending the bulk of that windfall on acquisitions. "We are confident that these discussions will deliver significant value-creating opportunities for Elan and our shareholders," Elan chief executive Kelly Martin said in a statement on Wednesday. Under the Tysabri deal, Elan's royalty payments will be 12 percent of sales in the first year, 18 percent after that, and 25 percent when annual sales rise above $2 billion. One fifth of the royalty stream will be paid out to shareholders under a dividend plan outlined shortly after the Royalty approach. Elan also returned $1 billion to shareholders last week in a share buyback that resulted in U.S. healthcare firm Johnson & Johnson cutting its stake in the company to 4.9 percent from 18 percent. Sales of Tysabri rose to $1.6 billion last year and Biogen has long aimed to increase patient numbers over time to 100,000 from 72,700 at the end of last year, a level that Elan says would hand it the maximum percentage of royalty shares. It said on Wednesday that sales of the drug, which competes with oral drugs such as Novartis AG's Gilenya and Biogen's new Tecfidera pill, rose by 28 percent in the United States but by just 0.3 percent elsewhere after a further $13.9 million of revenue was deferred in Italy. Elan's $72.8 million first-quarter net loss from continuing operations did not include any revenues associated with Tysabri, the Dublin-based company said. Reporting by Padraic Halpin; Editing by Helen Massy-Beresford