Carl Icahn didn't amass a net worth of an estimated $16.6 billion by making dumb moves. So when Dow Jones reported that the billionaire bought a stake in Bristol-Myers Squibb (NYSE:BMY), it captured the attention of the investment community.

What potential does Icahn see in the big pharma stock? And should you consider buying Bristol-Myers Squibb stock, too?  

Origami duck and ducklings made from money

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Takeover candidate?

Dow Jones reported that Icahn views Bristol-Myers Squibb as a potential acquisition target. This isn't the first time the possibility has been mentioned. In January, Bristol-Myers CEO Giovanni Caforio was bluntly asked at a Goldman Sachs conference if the company had plans to thwart a hostile takeover. He skirted the question.

If Caforio does have a plan in place, it might soon be scrapped -- depending on how big of a stake Icahn has in the company. Icahn would probably love nothing more than to see a bid for Bristol-Myers.

Chances of a takeover weren't considered to be all that high before the news broke about Icahn's position in Bristol-Myers. With its market cap of over $90 billion, there aren't too many potential suitors for the company.

However, that doesn't mean there couldn't be a megamerger just waiting to happen. Bristol-Myers might not be pursued by a larger big pharma company. There are several drugmakers nearly the same size as Bristol-Myers that could at least theoretically be in the hunt.   

Benefits of an impatient billionaire

Even if a takeover doesn't happen, there are some distinct benefits for ordinary shareholders with someone like Icahn to join their ranks. He's one of the most prominent activist shareholders in the world. Icahn is known for demanding that companies whose stocks he owns yield maximum shareholder value.

Bristol-Myers has already demonstrated its willingness to be responsive to activist shareholders. Jana Partners LLC bought a small stake in the drugmaker in the fourth quarter of 2016. After discussions with Jana, the company recently announced it was appointing three new independent directors.

Bristol-Myers also announced that it would repurchase $2 billion of its stock through an accelerated share-repurchase program. With Icahn on board, it could mean more buybacks might be on the way, even if a takeover isn't.

But is Bristol-Myers Squibb a stock to buy?

I wouldn't recommend buying Bristol-Myers just because Icahn did. The billionaire investor has owned shares of only one biopharmaceutical company in the past five years. In the second quarter of 2016, Icahn bought 3.4 million shares of Allergan. Within three months, he had sold most of his stake in the drugmaker. Who's to say history won't repeat itself?

That said, there are some reasons to like Bristol-Myers stock. It's true that the dynamics for this stock are much different from a few months ago. The company's late-stage disappointment with Opdivo as a first-line treatment for lung cancer seriously affected the outlook for the drug.

Merck (NYSE:MRK), on the other hand, enjoyed success with its phase 3 study of Keytruda as a first-line treatment for the indication. Keytruda appears to be poised to capture much of the market that Bristol-Myers had hoped it would win with Opdivo.

However, that doesn't mean Opdivo is a dud. The drug should still reach peak annual sales of more than $10 billion, thanks to other indications and the potential for Opdivo to be an anchor for combination therapies in the first-line lung cancer market.  

Since the disappointing Opdivo results were announced, Merck's shares are up over 10% while Bristol-Myers stock is down more than 25%. I think Merck's gains are well deserved, but the sell-off of Bristol-Myers was somewhat overdone, in my view.

Bristol-Myers should still grow earnings at a much higher rate over the next five years than it did during the past five years. The stock is trading at a lower earnings multiple than it did throughout much of that prior period. 

My take is that there are better alternatives for investors than buying Bristol-Myers Squibb. But that doesn't mean this big pharma stock is a terrible choice. Carl Icahn might make some bad moves, but he's right more than he's wrong. His billions of dollars prove it.