The same day Bristol-Myers Squibb Co. shook up its board to satisfy one activist investor, the drugmaker was faced with another: Carl Icahn, whose interest is fueling speculation the company could soon be put on the auction block.
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The appearance of Mr. Icahn, an investor with a history of pushing for deals among pharmaceutical companies, surprised Bristol-Myers executives, who had just avoided a potential fight with activist hedge fund Jana Partners LLC and are still reeling from a costly stumble in the company's effort to develop the next big cancer treatment.
It isn't clear how big a stake Mr. Icahn has bought, but the investor sees a valuable drug portfolio that could attract a takeover, according to people familiar with the matter. Still, the shares rose 0.4%, reversing earlier declines, after the purchase was reported by The Wall Street Journal. The report came just hours after Bristol-Myers announced it would add three directors to its board and repurchase $2 billion in stock, moves it negotiated with Jana Partners.
Should Mr. Icahn help spur a sale of the company, the purchase would reshape the landscape among a group of companies racing to develop new science for attacking cancer, a market that could be worth billions. It's far from guaranteed there will be any sale of Bristol-Myers; the potential obstacles are formidable. For one thing, it isn't clear whether Bristol-Myers is a willing seller, and there's only a small handful of companies that could afford a price tag likely to exceed $100 billion. Bristol-Myers currently has a market value of more than $90 billion.
Bristol-Myers pioneered the development of so-called immunotherapies, which use the body's immune system to fight cancers, and it dominates the lucrative category. Rivals, including Roche Holding AG, Pfizer Inc. and Merck & Co., have been trying to catch up, since analysts estimate the treatments could ring up $20 billion in yearly sales.
But Bristol-Myers has lost $37 billion in stock-market value, dropping from its all-time highs, since results of an important clinical study for its lung-cancer immunotherapy Opdivo were announced in August. Opdivo failed to outperform chemotherapy in a trial involving newly diagnosed patients, an unexpected result that analysts say gives the advantage to a competing drug from Merck in the lucrative market. That was followed by a delay in the expected approval of the treatment and reduced earnings forecasts for Bristol-Myers.
Bristol-Myers management has said that its treatments, including Opdivo, have a bright future. Yet the company also has been trying to build other franchises, treating different diseases, so that it doesn't rely too heavily on the cancer treatments.
Jana started building a stake last year that is now valued at between $500 million and $1 billion, according to a person familiar with the matter. The hedge fund began pushing for board changes to improve management oversight after Bristol-Myers announced in January it wasn't seeking, as had been expected, a faster approval process for Opdivo, the person said.
Mr. Icahn has a history of successfully pushing for deals among pharmaceutical companies, and his presence on Bristol-Myers's shareholder register will likely add to recent speculation that a bidder could swoop in following the company's struggles. Such a possibility has helped boost Bristol-Myers shares since January.
Any deal for Bristol-Myers could help reignite merger activity in an industry famous for it. After breaking records in 2015 with more than half a trillion in announced deals, health-care merger activity dipped in 2016 amid heightened scrutiny from regulators. There were $298 billion in announced health-care deals globally last year, according to Dealogic. And unlike 2015, which had a number of deals in the $10-billion-plus range, there were only two last year, the largest being a $24 billion deal by Abbott Laboratories to buy medical-products maker St. Jude Medical Inc.
But the oncology sector has remained a hot area for consolidation.
Mr. Icahn, who just turned 81 years old, has a history with Bristol-Myers. In 2008, he was a large shareholder in ImClone Systems Inc. and helped rebuff Bristol-Myers's attempt to buy the company, its partner on an important cancer drug.
In 2012, Mr. Icahn took a stake in Amylin Pharmaceuticals Inc. and called on the company to explore a sale after it had rebuffed a bid from Bristol-Myers. After the diabetes-treatment maker ran a sales process, it agreed to a higher bid from Bristol-Myers worth $5.3 billion.
In Jana's pact with Bristol-Myers, the company recruited former senior executives from Bausch & Lomb and Vertex Pharmaceuticals Inc. -- Robert Bertolini and Matthew Emmens, respectively -- along with Theodore Samuels, who currently sits on the boards of Perrigo Co. and Stamps.com.
The Bristol-Myers board will be temporarily expanded to 14 seats, but only 11 directors will stand for election at the company's annual meeting in May.
Mr. Icahn and other big activists had a relatively quiet 2016 after years of campaigning at the biggest companies with increasing regularity. This year's activist moves have been off to a faster start and show the investors aren't retreating from challenging megacap companies.
But even for Mr. Icahn, a $90 billion company is big: Bristol-Myers would rank as the second-largest he has ever publicly targeted after Apple Inc., the world's most valuable public company, according to FactSet.
Last week, Trian Fund Management LP disclosed a new bet on Procter & Gamble Co., which is worth more than $230 billion, and activists are trying to place new chief executives into railroad company CSX Corp. and aerospace parts company Arconic Inc., the former Alcoa Inc.
On Tuesday, Jana was part of another settlement with Tiffany & Co., helping shaking up the jeweler's board.
--Imani Moise contributed to this article.