Drugmaker Elan Corporation agreed to a $1 billion royalties deal that appeased the worries about its risky acquisition strategy and fend off a takeover attempt by Royalty Pharma. The company has been trying to be independent after it rejected Royalty’s $5.7 billion offer last month. Elan is purchasing 21 percent of the royalties that U.S. company Theravance gets from GlaxoSmithKline for its respiratory medicines.

Elan is trying to diversify is focus from neurological drugs after it sold 50 percent interest in multiple sclerosis drug Tysabri to its US partner Biogen Idec last February for $3.25 billion as well as the royalty rights. Royalty Pharma wants to get the rights to its royalty streams. The company questioned Elan’s lack of experience in getting big deals.

Elan Chief Executive Kelly Martin denied that the deal was made to frustrate Royalty’s takeover bid. Some analysts said the deal may bring concerns among investors that Elan would make high risk investments in drugs that are costly to the company.

Elan said that it has more deals planned for the future and it would give the shareholders a fifth of all royalties from the deal made by Theravance. It would match the 20 percent the company already gave to shareholders via the royalty stream Elan has in Tysabri.

The shareholders have also been rewarded via Elan’s $1 billion share buyback. They have until May 31 to act on Royalty Pharma’s $11.25 per share bid. Royalty needs 90 percent of Elan shareholders to approve the bid.

Elan shares closed at $11.78 Friday. The deal Monday was partly financed by a bond issue. It gives Elan a large part of Theravance’s interest in four drugs in late-stage development. One of them is Breo, which is a new drug for chronic obstructive pulmonary disease that has been approved by the US Food and Drug Administration on Friday.

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