Given its size, when you think of Amgen (Nasdaq: AMGN), you usually think of a licensee, rather than licensor, but the big biotech was the latter times five yesterday when it struck a deal with AstraZeneca (NYSE: AZN).

The deal makes the two companies 50-50 partners on five Amgen-developed drugs to treat different types of inflammation -- well, almost 50-50. AstraZeneca has to pay $50 million and 65% of the development costs through 2014 to get in on the deal, but after that it will go down to an evenly split cost structure. Profits will be shared 50-50, but only after Amgen takes a royalty cut in the low single digits for one drug and mid-single digits for the other drugs.

The five drugs are all antibody-based drugs targeting different proteins involved in inflammation, which affects everything from psoriasis to asthma to Crohn's disease. The furthest along, brodalumab, is battling it out with Eli Lilly's (NYSE: LLY) ixekizumab, and Amgen plans to start a phase-three trial in psoriasis shortly. The other four are all in phase-one development.

Why would Amgen want to give up the upside from five drugs? Because it doesn't have to pay for the full downside should one or more of the drugs fail. By reducing its costs, Amgen can diversify, spending the money elsewhere on its pipeline. It's not that much different from an investor owning more than one drugmaker.  A Foolish (note the capital 'F') move, for sure.

And because AstraZeneca has expertise in respiratory and gastroenterology, there could be some cost savings if sales reps can hock AstraZeneca's products alongside the duo's drugs being developed for asthma and ulcerative colitis, a type of inflammatory bowel disease.

The combination of lower costs and sharing of risk seems to be what drove Pfizer (NYSE: PFE) and GlaxoSmithKline (NYSE: GSK) to combine forces with their HIV drugs. And ditto for Eli Lilly and Boehringer Ingelheim, which teamed up in the diabetes space.

For AstraZeneca, the reason for the move is pretty clear. The $50 million payment is a small price to pay to help boost its paltry pipeline. Sure the profits aren't as high as if it had gone out and bought a small biotech with five drugs, but the cost and risks aren't as high, either.

Whether the move turns out to be a good one for Amgen depends largely on the success rate for the five drugs. If they all succeed -- unlikely, but certainly possible -- the deal will look like a waste of resources. But then, that's true of all unnecessary hedges, and doesn't necessarily make them bad moves.

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