Bristol Myers/Imclone

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Time to beef up that revenue stream. Bristol-Myers Squibb on Thursday became the latest big pharma company to bid for a smaller rival. It offered $60 per share for ImClone Systems, the New York biotech company chaired by activist investor Carl Icahn. Bristol-Myers already owns 17 per cent of ImClone and shares the US marketing rights for its colon cancer drug, Erbitux, so the all-cash offer amounts to $4.5bn for the remaining shares.

Bristol-Myers says the offer is part of its “string of pearls” strategy to sell off its non-drug assets and buy companies and licences that strengthen its offerings in higher-priced speciality drugs. ImClone’s attraction lies in Erbitux’s potential to treat other cancers. It also has several other compounds in early testing. Bristol-Myers, like most of its competitors, is facing a “patent cliff”. Drugs representing about 30 per cent of its 2007 pharma revenue will lose patent protection by the end of 2012, according to Lehman Brothers.

There was no immediate response from Mr Icahn. But ImClone shareholders, who have seen a spate of recent drug company deals, may want more than the 29 per cent premium Bristol-Myers is offering over Wednesday’s close. Mr Icahn, after all, is known for driving a hard bargain, and rival drug company Sanofi-Aventis just agreed to pay a 64 per cent premium for Acambis, its vaccine partner.

But Mr Icahn is not infallible, particularly in the biotech sector. When he pressured the management of Biogen Idec to put itself up for sale last autumn, the company failed to find a buyer. Shareholders then rejected Mr Icahn’s bid to put three supporters on Biogen’s board.

ImClone’s share price rose 38 per cent on Thursday, to $64, above the Bristol-Myers bid. Investors should be wary of overreaching. Mr Icahn, who appears to have bought in when ImClone was priced below $30 a share, has already doubled his money.

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