Lilly Targets a Tiny Prize

SGX Pharmaceuticals (Nasdaq: SGXP  ) , we hardly knew ye.

On Tuesday, Eli Lilly (NYSE: LLY  ) announced its purchase of the development-stage drugmaker, which IPOed in 2006 in a bid to bolster its anti-cancer drug pipeline.

In exchange for $64 million in cash, Lilly will be getting access to SGX's very early stage pipeline of oncology drug candidates. Even though this purchase price represents a more than 100% premium to where SGX shares were trading earlier in the week, Lilly is still getting SXG much cheaper than it would have earlier in the year, after SGX's lead drug underperformed in a phase 1 study as a potential cancer treatment.

The cash Lilly is ponying up in this deal isn't much by big pharma standards, but buying a drugmaker working on targeted cancer therapies like SGX seems slightly outside any of Lilly's main therapeutic focuses. Lilly already markets the wildly successful chemotherapy treatments Gemzar and Alimta, but the targeted therapies that SGX is working on are another beast all together. They'd generally fall more under the purview of drugmakers like GlaxoSmithKline (NYSE: GSK  ) , Bristol-Myers Squibb (NYSE: BMY  ) , or OSI Pharmaceuticals (Nasdaq: OSIP  ) .

In the past two years, Lilly has been what I like to describe as "opportunistically acquisitive," with multiple buyouts and partnership deals that actually make sense. In 2006, it purchased ICOS to regain full control over the erectile dysfunction drug Cialis, and last year, it acquired the rights to a late-stage multiple sclerosis drug candidate from BioMS Medical. None of these deals are game-changing events for Lilly, and it's hardly an acquisition monster, like other big pharmas such as Novartis (NYSE: NVS  ) . However, this SGX deal does show that Lilly is willing to pay up a little if the price is right.