The FDA has granted priority review status to Bristol-Myers Squibb's (NYSE:BMY) New Drug Application (NDA) for its breast cancer drug ixabepilone, the company announced Tuesday.

This compound is a great example of the strong oncology pipeline the company has built. The potential of these cancer-fighting drugs is one of several factors giving shareholders reason to be optimistic, although I'm not sure I would recommend buying the stock at this point. Despite rumors of a buyout, investors need to consider the stock's current valuation.

One of the factors fueling optimism is that the reign of Peter Dolan has ended. Over the course of his tumultuous tenure, the company's stock price deteriorated 56%. The stock is now up 35% in the nine months since Dolan departed. Another compelling reason to own this stock -- which my colleague Brian Lawler examined in greater depth -- is the legal victory that Bristol and Sanofi-Aventis (NYSE:SNY) achieved on Tuesday regarding blood-thinner Plavix. The ruling will prevent Canadian drugmaker Apotex from launching a generic version prior to its patent expiring in 2011.

The blockbuster drug achieved roughly $6 billion in global sales last year and was the fourth-biggest selling drug in the world. A loss in this case would undoubtedly have spelled trouble for the stock.

Ixabepilone would be used to treat patients suffering from advanced breast cancer and those who haven't responded to prior treatment with chemotherapies.

There have been takeover rumors swirling this week, a scenario that would be very profitable to Bristols' investors. One possible suitor mentioned is Sanofi-Aventis, given the relationship it has with Bristol on Plavix. Other possibilities include GlaxoSmithKline (NYSE:GSK) and Pfizer (NYSE:PFE). Takeover rumors surfaced when Dolan left the company in the fall and resurfaced in late January. I don't think I would recommend buying the stock merely on these rumors, although there are other positive aspects to owning it, such as a 3.7% dividend yield.

A risk for Fools considering a purchase of Bristol-Myers shares would be its valuation. The stock is not particularly cheap when compared to some of the other big pharmaceuticals. Its forward P/E of 19.8 makes it considerably more expensive than Pfizer or Glaxo, both of which trade at a forward P/E of 11. It is also reasonably possible that Bristol-Myers may not be taken over at all.

Regardless of whether the company is ultimately taken over, shareholders are definitely in a better position than they have been in recent years. The NDA for ixabepilone helps to shore up the prospects for future growth and the Plavix ruling safeguards the company's current market position. All in all it hasn't been a bad year for shareholders thus far.

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Fool contributor Billy Fisher owns shares of Bristol-Myers Squibb. Pfizer is an Inside Value recommendation. GlaxoSmithKline is an Income Investor selection. The Fool has a disclosure policy.