July 31 (Bloomberg) -- Bristol-Myers Squibb Co. offered to buy the portion of ImClone Systems Inc. it doesn't already own for $4.33 billion, or $60 a share, seeking a return to prominence as a maker of cancer drugs.

ImClone shares rose the most in 13 years, eclipsing the bid and suggesting investors expect the purchase price to jump more. Bristol-Myers, which already owns 16.6 percent of ImClone, delivered the offer to the biotechnology company's chairman, Carl C. Icahn, in a letter today, the company said in a U.S. regulatory filing. The deal offers a 29 percent premium over yesterday's closing share price.

Bristol-Myers, based in New York, was the world's biggest seller of cancer medicine before its drug Taxol faced competition from cheaper copies in 2001. The same year, Bristol-Myers joined with ImClone, also of New York, to market the colon-cancer drug Erbitux. Bristol's offer follows Roche Holding AG's $43.7 billion bid on July 21 for all of Genentech Inc., as big drugmakers seek to boost profits and gain products from biotechnology partners.

``We saw this before with Roche and Genentech, and it looks like we're starting to see more of these deals as companies look around and see their competitors are buying too,'' said Les Funtleyder, an analyst with Miller Tabak & Co. in New York, in a telephone interview. ``Erbitux may have reached a point now where it's finally worth it to Bristol to make an offer.''

Morgan Stanley, Citigroup Inc., and Credit Suisse Group AG are advising Bristol-Myers, along with Cravath Swaine & Moore LLP.

Martha Stewart

ImClone, whose insider trading scandal in 2001 sent founder Samuel Waksal and his friend Martha Stewart to prison, rose 37 percent to $63.68 at 2:49 p.m. New York time in Nasdaq Stock Market composite trading. Bristol shares fell 22 cents, or 1 percent, to $21.29 on the New York Stock Exchange.

``Any one of the large-cap pharmaceutical companies could step up'' with a competing offer, said Jeffrey Kraws, chief executive officer of Crystal Research Associates in New York, in an interview with Bloomberg television. ``But it would have to be something done with Icahn's blessing. He's getting a pretty good price right now.''

Icahn is the biggest ImClone shareholder after Bristol- Myers, with a 13 percent stake as of March 31, according to Bloomberg data. The billionaire investor didn't immediately return telephone calls for comment. Icahn paid an average of $33.45 a share for his stake, according to a September 2006 filing with the U.S. Securities and Exchange Commission. He stands to pocket $390.4 million if he sells his 11.67 million shares at Bristol's offer price.

Yahoo!, Biotechnology

Icahn is known for activist investing. He's joining Yahoo! Inc.'s board after dropping a campaign to oust its directors, who rejected a buyout offer of $47.3 billion from Microsoft Corp.

He also made big bets on pharmaceutical and biotechnology companies this year, adding shares to his stakes in both Biogen Idec Inc. and Amylin Pharmaceuticals Inc. He succeeded in forcing the sale of MedImmune Inc. to AstraZeneca Plc in June 2007.

Amylin, based in San Diego, California, rose $3.77, or 14 percent, to $31.25 in Nasdaq Stock Exchange composite trading.

``Icahn will sharpen his pencil and probably come up with a higher number he wants and then do what he does best,'' said Michael King, an analyst with Rodman & Renshaw in New York, in a telephone interview today. ``I don't see another bidder because anybody else who comes in would still have Bristol as a partner on Erbitux and that would be like divorcing your wife and not moving out of the house.''

More Than $65

ImClone might ultimately sell for more than $65 a share, King said. The final price may be higher if the companies factor in rising sales of Erbitux, which King estimates will bring the market value of ImClone to $8 billion next year. The value was $5.5 billion today.

``Buying ImClone makes Bristol-Myers a more sellable company itself,'' said Tim Anderson, an analyst at Sanford C. Bernstein & Co. in New York, in a note to investors today. ``It strengthens the company's overall cancer franchise by having full control of Erbitux in the U.S. and by gaining access to ImClone's'' drugs in development.

Bristol's bid for ImClone shows the increasing appetite for biotechnology purchases among big drugmakers seeking to shore up sales as top products face cheaper generic competitors, analysts said.

`Running Dry'

``This could be a big year for biotech acquisitions, because big pharma pipelines are running dry and they are all running out of cash as blockbuster drugs lose patents,'' said Hanzhong Li, an analyst with Stanford Group in New York, in a telephone interview.

Biotechnology drugs, unlike traditional pills made from chemicals, are engineered from living human cells. Pills, often less expensive to develop and produce, also face competition from cheaper generic copycats when patents expire. Generics of biotechnology drugs haven't been allowed by U.S. regulators.

ImClone's partners in Erbitux, Bristol and the German drugmaker Merck KGaA, said their agreements to sell the cancer drug will be unchanged by a potential deal.

Bristol-Myers has a goal of cutting $2.5 billion in costs by 2012 as it prepares for generic competition to its bestselling drug, the blood-thinner Plavix. Its $4.1 billion sale of its wound-products division, ConvaTec, is expected to close ``in the next day or two,'' James Cornelius, Bristol's chief executive officer, in a telephone interview.

``We believe this is a full and fair offer and a positive development of the shareholders for both companies,'' Cornelius said. ``It's a very interesting pipeline. We probably know more about ImClone and its people and pipeline than anybody in the world. We took that into account.''

Icahn Mum

The acquisition will add to earnings by 2013 and ``drive growth'' beyond then, Cornelius said. Neither ImClone nor Icahn has responded to the offer, he said.

Erbitux, which had more than $1.3 billion in worldwide sales last year, is a man-made antibody, a substance naturally produced by the immune system in response to infection. It costs up to $10,000 a month. The drug works by latching onto cancerous cells and blocking replication. It has been approved for colon cancer and head and neck tumors. Studies presented in May showed the drug also helped some lung cancer patients.

Bristol-Myers and ImClone have also been testing the drug against lung and other types of tumors to expand its use.

Besides Erbitux, ImClone has five experimental drugs in development for cancer. Three of the medicines are in the second of three stages of testing needed to win regulatory approval, while the other two are in initial human trials.

Erbitux was central to the scandal that sent Stewart to prison. At her trial, Stewert's broker, Peter Bacanovic, testified that he told her ImClone founder Waksal was dumping his family's shares. Stewart sold her stake and she and the broker claimed they had a prior agreement to sell ImClone at $60.

Waksal is in the fifth year of a seven-year prison sentence for insider trading. Stewart served five months in prison and five months confined to one of her homes.

To contact the reporter on this story: Kurt Heine in New York at kheine1@bloomberg.net.

Last Updated: July 31, 2008 14:55 EDT