Bristol-Myers Squibb (NYSE: BMY - News) offered on Thursday to buy the 83 per cent of ImClone it does not already own for $4.5bn, leavingCarl Icahn, the chairman of the biotechnology company, to decide whether to negotiate over a deal.

The $60 a share all-cash offer values ImClone at about $5.2bn and represents a 29 per cent premium to its closing share price on Wednesday.

Bristol-Myers is already ImClone's largest shareholder, with 16.6 per cent of its outstanding shares. The two companies have jointly produced Erbitux, the blockbuster cancer drug, since 2001, when Bristol-Myers agreed to pay $1bn, or $70 a share, for a 19.9 per cent stake in ImClone. The company's share price dropped below $7 a year later.

The offer handed Mr Icahn a financial boost, but his fund was later dealt a blow when Biogen Idec said two multiple sclerosis patients taking its key drug, Tysabri, had been diagnosed with an often fatal brain disorder linked to the drug. Shares of Biogen, which is 3.4 per cent owned by Mr Icahn's fund, plunged 20 per cent after hours, depleting his stake's value by $139m.

Erbitux is, similarly, Imclone's only significant product, and the companies have been testing the drug against lung and other types of tumour to broaden its use. Global sales of the drug rose by a third to $423.3m in the company's second quarter compared with the same period in 2007.

Bristol-Myers pays ImClone 39 per cent of its North American net sales of Erbitux. A merger would give Bristol-Myers full access to the Erbitux revenue stream. But ImClone's worth also lies in its pipeline of drugs in earlier-stage development.

James Cornelius, Bristol-Myers' chief, called Mr Icahn, who arrived at ImClone's helm after a bitter battle in 2006, and left a message on Thursday morning to confirm the offer. It was not clear whether the two had spoken, one insider said.

Icahn Associates, which owns 13.5 per cent of ImClone, had not responded publicly to the offer by last night. Shares in ImClone jumped 37 per cent to $63.93 as investors bet Mr Icahn would require an incremental boost to Bristol's bid before agreeing to a deal.

ImClone gained notoriety in 2002 when Sam Waksal, its former chief executive, was jailed for insider trading for selling shares in the company shortly before an announcement that the US Food and Drug Administration had rejected its initial application for Erbitux.

Martha Stewart, the founder of Martha Stewart Living Omnimedia, spent five months in prison for lying to federal investigators who were looking into her sale of ImClone stock.

Morgan Stanley, Citigroup Global Markets and Credit Suisse Securities are acting as financial advisers to Bristol-Myers Squibb. Cravath, Swaine & Moore is providing legal counsel.