In what the firm calls its "best and last offer," Eli Lilly says it is now prepared to pay $2.3 billion to buy Icos Corp, a $200 million increase from its previous bid.

The timing of the offer is particularly interesting as it was made just a day before Icos shareholders were due to vote on the proposed takeover and it comes days after the Bothell, Washington-based firm released a very much upwardly-revised earnings forecast.

Under the new terms, Lilly will pay $34 per share instead of $32 and chief executive Sidney Taurel said "we are confident that ICOS shareholders will recognise the substantial value and the certainty that Lilly is offering," before repeating that "it is our final offer."

The boards of directors of both companies have unanimously approved the revised agreement and the date for Icos shareholders to vote on the proposal has been moved from December 19 to January 25. The board at Icos has set a new record date, December 26, for shareholders entitled to vote on the offer.

How they will vote is not so clear-cut given that one major investor, HealthCor Management, had been unhappy with the $32 offer and believed the company was worth more than $40 per share. It is by no means certain that Lilly's sweetened bid will be convincing and the recent news that the Indianopolis-headquartered group intends to lay off all Icos'

700 employees if the acquisition goes through may not endear it to some stockholders.

Icos' improved forecast was based on continued growth for Cialis (tadalafil), the erectile dysfunction drug that both the companies currently market and which Lilly is desperate to get full control of. Icos said that sales of the drug are likely to reach at least $1.1 billion next year.

Fresh allegations over Zyprexa

Meantime, the spate between Lilly and the New York Times has continued with the newspaper claiming that Lilly told its sales representatives to suggest that doctors prescribe its schizophrenia drug Zyprexa (olanzapine), to older patients with symptoms of dementia, a condition for which the drug is not approved.

Lilly said it "vigorously objects to the characterisation of company practice" in a New York Times article based upon selective documents illegally leaked by plaintiffs' lawyers," and Steven Paul, executive vice president, science and technology, stated that "at Lilly, we do not engage in off-label."

Earlier, the newspaper had also claimed that Lilly executives kept important information from doctors about links between Zyprexa and its tendency to raise blood sugar levels, an allegation the company roundly condemned.