Who's Going to Buy This Orphan Drugmaker?

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Protalix BioTherapeutics (NYSEMKT: PLX  ) is considering its options. What those options are depends on who you listen to.

The company says it's considering "a broad array of product partnering, technology sharing and other strategic alternatives," so basically anything from a partnership to a sale of the company. It's hired Citigroup to help figure it out.

According to Israeli newspaper Calcalist, Pfizer (NYSE: PFE  ) has expressed interest in buying the biotech. The companies are partners on Elelyso, which treats a rare disease called Gaucher disease.

Investors believe something is up. They sent shares up 15% on Tuesday. Shares are still trading well below the $1 billion that Calcalist said Pfizer is offering. The newspaper added that Protalix's management was hoping for a higher offer, so investors are rightfully a little worried that the deal might not go through.

Even with the bump, shares are still trading below its 2012 highs after Elelyso was approved. Shares sank later in the year after EU regulators said they couldn't approve the drug because Shire Pharmaceuticals (Nasdaq: SHPG) holds a 10-year exclusivity on Gaucher disease treatments in the EU for its 2010 approval of Vpriv. Shire appears safe from competition, although France sidestepped the European Medicines Agency, allowing patients to receive treatment with Elelyso based on a public health need.

Pfizer is the most obvious suitor for Protalix, but any of the orphan drugmakers -- BioMarin Pharmaceuticals or Alexion Pharmaceuticals, for instance -- would make a good fit. In addition to Elelyso, Protalix is also working on a treatment for another rare disease called Fabry disease. Elan (UNKNOWN: ELN.DL2  ) , which just got a few billion in cash for selling its rights to Tysabri, would also make sense. Protalix also has drugs in the pipeline for CNS and autoimmune treatments, which are in Elan's wheelhouse.

It's usually not a good idea to jump in after buyout rumors have begun. By that point, the risk-reward has usually tipped in favor of the reward not justifying the risk. If you like Protalix as an independent company, go ahead and buy, just realize the company is still years away from being profitable.

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