Pfizer (NYSE:PFE) took in an orphan today. Or, more accurately, stole it from its parent.
Don't go calling the department of children and family services quite yet; this is an orphan drug, which means it treats a small patient population. But steal is still a pretty accurate term for the price Pfizer paid for Protalix BioTherapeutics' (NYSE:PLX) taliglucerase alfa, which the company has tentatively named Uplyso. The drug treats Gaucher's disease, a genetic condition in which people are unable to break down a certain type of fat, which causes enlarged spleens and livers.
Pfizer will pay $60 million up front and another $55 million in regulatory milestones. Assuming no problems on the manufacturing side, an approval from the Food and Drug Administration seems likely, considering the strong phase 3 trial data. For the total cost of $115 million, Pfizer owns 60% of the drug outside of Protalix's home country of Israel.
Genzyme (NASDAQ:GENZ) sold $1.24 billion worth of Cerezyme to Gaucher patients last year. Shire (NASDAQ:SHPGY) is also developing a Gaucher treatment called velaglucerase, so it'll likely be a three-way battle for patients in the coming years.
Normally, follow-on drugs into an orphan disease would have a hard time breaking into the market; that's the allure of companies like Genzyme and BioMarin Pharmaceutical (NASDAQ:BMRN). But Genzyme has been a train wreck the past year, including multiple manufacturing gaffes with Cerezyme. This has let Protalix make some of its drug available already under a special expanded access program approved by the FDA.
Genzyme's mistakes, combined with Pfizer's muscle, might eventually earn Uplyso a third of the market, or around $400 million per year, of which Pfizer would be entitled to about $240 million -- twice what it's paying for the drug.
Of course, Protalix will get its cash shortly and Pfizer will have to wait a few years to be paid back for the investment, but this looks like a low-risk deal that Pfizer's long-term investors should benefit from.
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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. BioMarin Pharmaceutical is a Rule Breakers pick. The Fool's disclosure policy has adopted the office copy machine as its own little pet.
