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Pfizer Wheelin' and Dealin' For Encysive's Thelin

The world's biggest drug company is spending chump change to take out a little biotech at a 118 percent premium. Pfizer , which has a cash hoard of more than $20 billion, is plunking down a paltry (for Pfizer, that is) $195 million in cash money to buy Encysive Pharmaceuticals . ENCY closed yesterday at $1.08 a share and PFE is offering $2.35 a share.

An analyst at a firm called "Collins Stewart" upgraded ENCY shares from Market Perform to Buy yesterday. It went up nine cents on relatively heavy volume of nearly 3.5 million shares. The average daily volume was less than 900,000 shares.

Pfizer's buying Encysive to get its hands on the drug, Thelin, for pulmonary arterial hypertension (PAH). It's a very rare and fatal lung disorder that strikes mostly women in the prime of their lives. You can read more about it here.

It's one of those small, but potentially lucrative markets for drugmakers. Thelin, though, has had a very rocky road in the developmental and U.S. regulatory review process. (It's already on the market overseas and in Canada.) ENCY got three approvable letters for Thelin from the Food and Drug Administration.

Approvable letters mean the agency thinks it might someday okay a drug if the company satisfies specific, often publicly undisclosed issues. Pfizer, with its deep pockets, says it's going to do the so-called pivotal Phase Three clinical trial to try to win FDA approval of Thelin. A three-year ENCY chart tells the Thelin story. It went from the low-teens to a less than a buck.

So, Pfizer's getting a relative steal. Especially when you compare the takeout price to the $2.5 billion Gilead Sciences paid to buy Myogen in late 2006. Myogen was working on a similar PAH drug which is now on the market under the brand name Letairis. Myogen and Encysive were racing to get their respective drugs approved and for awhile had a fun-to-cover little war of words over whose molecule is better and would get to market first.

PFE already has a PAH drug in its portfolio. It sells Viagra under the name Revatio (with a hard t). But it's not a big money maker. And Lilly is testing its erectile dysfunction drug Cialis on PAH as well. ED drugs improve blood flow and that's why they might also help PAH patients with the constriction of blood vessels in the lungs.

The Pfizer acquisition of Encysive is part of the ongoing trend in big pharma to scoop up or partner with relatively inexpensive baby biotechs with promising products to flesh out their drug pipelines. Some analysts think the critical mass of a bunch of small deals could eventually help PFE through all of its problems. Others say the company needs to do a really big deal to weather the storm. We should learn more about Pfizer's strategy at the upcoming analyst meeting on March 5th.

Questions? Comments? Pharma@cnbc.com

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