Acquisitions Mark Pharmaceutical Industry

Drug development companies, whether they're pharmaceuticals like Pfizer (NYSE: PFE) or Merck (NYSE MRK), or biotechs like Amgen (Nasdaq: AMGN), need to continuously develop new drugs or go out and acquire them from others. The drug pipeline is extremely important to continuing generating sales and profits.

That's true both here in the U.S. and abroad, and Japan's Eisai (OTC BB: ESALY.PK) has added to its pipeline of cancer drugs with the announcement that it will acquire U.S.-based Morphotek in a $325 million deal. Morphotek develops monoclonal antibodies for the treatment of cancer. With patents expiring soon on its Alzheimer's treatment Aricept and heartburn remedy Aciphex, Eisai has been looking to expand into oncology for future growth. Last year, it bought four cancer drugs from Ligand Pharmaceuticals (Nasdaq: LGND) for $205 million.

The World Health Organization predicts a 50% increase in the incidence of cancer by 2020, largely because of lifestyle factors. The $36 billion global market for cancer therapies makes oncology the third-largest pharmaceutical market, behind cardiovascular and central nervous system therapies. Lehman Bros. recently said that global sales of branded prescription drugs for cancer will grow 15% a year through 2010, when the category will be worth an estimated $73.8 billion.

Along with the four marketed drugs acquired from Ligand, Eisai's most advanced cancer treatment is E7389, which seeks to treat breast, lung, prostate, ovarian, and sarcoma cancers; it's currently in phase 2 trials. The company also has four other cancer drugs in clinical development, rounding out a portfolio that could very well position the Japanese pharmaceutical among the leaders of the growing oncology field.

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Fool contributor Rich Duprey owns shares of Eisai and Merck but does not own any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy. Pfizer is an Inside Value recommendation. Merck is a former Income Investor pick.