Carl Icahn revealed a "large position" in Ireland-based Allergan on Tuesday, almost two months after the U.S. government blocked its $160 billion merger with Pfizer by issuing new rules against tax inversions.
Allergan's stock price initially jumped 3 percent after the premarket announcement, but was up about 1.25 percent in early trading.
Icahn expressed support for Allergan CEO Brent Saunders.
"We were instrumental in bringing Brent on board as the new CEO of Forest Labs a few years ago and worked cooperatively and constructively with him to help increase value for all Forest shareholders," the activist investor said on his website. "Less than a year later Forest was acquired by Actavis (which subsequently merged with Allergan) resulting in massive gains for Forest shareholders. While we at that time disposed of our position in Forest, we still have always maintained great respect for Brent."
Allergan, which makes drugs like Botox and Juvederm, said it did not believe Icahn's investment was made to influence the actions of management of the drug company.
"We welcome all investors who recognize the value of our business," spokesman Mark Marmur told CNBC. "[Allergan] is grateful for the confidence of our investors, whether they are new holders or have been long-term investors."
Allergan shares have lost 23.5 percent this year amid a failed merger agreement with New York-based rival Pfizer. The $160 billion deal was blocked by the Obama administration after it issued stricter rules against inversions, in which a U.S. company merges with a foreign company and moves its headquarters abroad to take advantage of lower corporate tax rates.
— Reporting by CNBC's Steven Kopack and Jim Forkin.