DUBLIN (Reuters) - U.S.-based Royalty Pharma received a blow in its battle to take over Irish drug firm Elan (>> Elan Corporation, plc) on Thursday after a ruling on conditions attached to its hostile bid threatened to scupper the deal.

Royalty increased its cash bid to ?6.4 billion (5.4 billion pounds) last month and made it conditional on Elan shareholders rejecting resolutions at a June 17 meeting, in a bid to stop the Dublin-based firm pushing through a series of defensive transactions.

However after Elan said only two of the four resolutions to be put to the meeting concerned the deals, Royalty sought a ruling from the Irish Takeover Panel confirming that it would not be obliged to drop out if all four votes were carried.

The panel decided on Thursday that Royalty could not revise its terms, meaning its bid will lapse if Elan shareholders back either of the other two uncontentious resolutions - a share buyback and a drug spin-off aimed at cutting operating costs.

"In the event that Elan shareholders vote in favour of the Theravance transaction or any of the other transactions, Royalty Pharma will be obliged to lapse its revised offer," the takeover panel said in a statement, referring to one of the recent deals Elan has struck.

Elan says Royalty's bid undervalues its future revenue stream from royalties it holds in multiple sclerosis drug Tysabri and is trying to convince shareholders that the deals it has struck will add more value.

Elan agreed last month to buy 21 percent of the royalties U.S. company Theravance (>> Theravance Inc) receives from GlaxoSmithKline (GSK) (>> GlaxoSmithKline plc) and a week later announced it would buy two private drug firms. Elan's chairman admitted shareholders' opinions differed on the Theravance deal but that there was unanimous support for the drug spin-off.

Elan also won temporary relief from a U.S. District Court on Monday, stopping Royalty from closing its tender offer after Elan argued the New York-based investment firm's disclosures in its increased bid were "materially inadequate".

The court will meet again on June 11 to decide whether or not to grant a preliminary injunction against Royalty.

(Reporting by Padraic Halpin; Editing by Sophie Walker)

Stocks treated in this article : Theravance Inc, Elan Corporation, plc, GlaxoSmithKline plc