* Shareholders overwhelmingly back share buyback
* Royalty Pharma may sweeten offer ahead of deadline
DUBLIN, April 12 (Reuters) - Irish drugmaker Elan got strong approval from shareholders for a $1 billion share buyback as it seeks to keep them on side and stave off a takeover approach from U.S. investment firm Royalty Pharma
The buyback, priced between $11.25 and $13.00 per share, was backed by 99.2 percent of shareholders at a special meeting on Friday.
It is part of plans to return cash to investors after the $3.2 billion sale of Elan's interest in multiple sclerosis drug Tysabri.
Royalty has said it reserved the right to reduce its indicative approach of $11 per share if the buyback went through. But it may also sweeten its proposal by paying more if Tysabri, which Elan still receive royalties for, hits certain sales milestones, two people familiar with the matter told Reuters.
Elan has rejected Royalty Pharma's proposal, calling it a "highly conditional indication of interest", and hopes instead to reinvent itself in a series of acquisitions after the Tysabri deal left it with just one experimental drug in its pipeline.
An Irish takeover panel has given Royalty Pharma until May 10 to make a firm offer or walk away.
Royalty is considering a formal offer at a slight premium to where it is trading now along with offering shareholders upside if blockbuster treatment Tysabri sells well, the sources said, who asked not to be named because the talks were private.
Elan's shares trading on the New York Stock Exchange closed on Thursday at $12.00 a share.
The Dublin-based company, which last month sweetened its own proposition by agreeing to hand shareholders 20 percent of all future royalties from Tysabri, will announce the final price of the share buyback offer next Thursday.
The buyback represents almost 15 percent of Elan's existing issued share capital.