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Eli Lilly & Co. (LLY), Merck & Co., Inc. (MRK): Three Ways Big Pharma Is Seizing This Rare Opportunity

3. Thinking small
While Merck struck a big deal with Endocyte, smaller arrangements are more common. Pfizer Inc. (NYSE:PFE), for example, licensed small biotech Repligen‘s spinal muscular atrophy program earlier this year. Under the terms of the agreement, Pfizer Inc. (NYSE:PFE) paid $5 million upfront with potential future milestone payments up to $65 million. Repligen’s RG3039 drug has received orphan designations in both the U.S. and Europe.

Pfizer took the “thinking small” approach back in 2009 also. The big drugmaker inked a deal then with Protalix BioTherapeutics Inc. (NYSEAMEX:PLX) for rights to Gaucher disease drug Elelyso for $60 million upfront and up to $55 million in milestone payments. Pfizer and Protalix BioTherapeutics Inc. (NYSEAMEX:PLX) gained FDA approval for the drug in May 2012.

Just a few weeks ago, AbbVie Inc (NYSE:ABBV) threw a twist into this approach. Rather than buy rights for an orphan drug from a small biotech, the big pharma did the opposite. In March, small biotech Receptos licensed an experimental drug targeting orphan disease eosinophilic esophagitis from AbbVie Inc (NYSE:ABBV).

Rare opportunity
Big pharma companies appear likely to continue scaling up investments in drugs targeting orphan diseases. This hopefully will translate to better care for patients suffering from these rare diseases. Shareholders of the large pharmaceutical companies should profit from this focus. Investors in smaller biotechs that attract the interest of these bigger companies benefit also. The orphan drug market presents a win/win/win proposition. That’s rare.

The article 3 Ways Big Pharma Is Seizing This Rare Opportunity originally appeared on and is written by Keith Speights.

Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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