Updated from 10:30 a.m. EDT

Who might be on Eli Lilly's ( LLY) drug company shopping list?

Fresh off the $6.5 billion purchase of ImClone Systems, Lilly CEO John Lechleiter says that he's hungry for more drug and biotech deals in the $5 billion to $15 billion range, according to a Wall Street Journal interview.

"We're going to look for opportunities to be a bit more diverse pharmaceutical company. We're not going to buy a medical-device company. We're not going to buy a diagnostic company," he told the Journal.

Lechleiter didn't reveal which companies he's looking at, but let's take some educated guesses.

Cephalon

How about Cephalon ( CEPH)? The specialty pharmaceutical company (market cap $4.7 billion) focuses on drugs that target the central nervous system, pain and cancer markets -- all disease areas where Lilly has expertise and existing products.

Cephalon's Provigil and Nuvigil, approved as treatments for excessive sleepiness due to a host of conditions, as well as the chronic pain medicine Fentora, could find a home in Lilly's neuroscience division alongside drugs like the ADHD medicine Strattera and antidepressant/nerve pain drug Cymbalta.

Cephalon's cancer drug business is focused primarily on blood-related cancers. While still small, this could be an attractive add-on to the drugs Lilly acquired through ImClone.

And Cephalon, with 2008 sales of just under $2 billion, is growing and profitable, which could help make any acquisition quickly accretive to Lilly.

Forest Laboratories

Forest Laboratories ( FRX) is another possibility. The specialty drug maker (market cap $6.6 billion) generated a majority of its $3.8 billion in 2008 revenue from the antidepressant Lexapro and the Alzheimer's disease drug Namenda. The latter drug might be most compelling to Lilly because it would complement the company's experimental Alzheimer's drug currently in phase III trials.

I was going to put Shire ( SHPGY) (market cap $6.4 billion) on this list because the company's ADHD drug franchise, most notably Vyvanse and Daytrana, could be complementary to Lilly's neuroscience business, but Tuesday, Shire signed a marketing partnership for Vyvanse with GlaxoSmithKline ( GSK). That pretty much takes Shire out of the running.

Biotech options

What about possible biotech acquisitions? Well, if Lechleiter sticks to his $5 billion to $15 billion price range, big-ticket items like Biogen Idec ( BIIB), Amgen ( AMGN) and Genzyme ( GENZ) are too expensive.

Gilead Sciences ( GILD) would also be too pricey, plus the fit might be uncomfortable. Lilly has no current expertise or products in the HIV or anti-viral disease markets.

BioMarin

If Lilly were interested in a mini-version of Genzyme and its focus on rare, genetic diseases, BioMarin Pharmaceuticals ( BMRN) (market cap $1.2 billion) might make for a good acquisition. (BioMarin could be a too small to make much difference at Lilly, however.)

Vertex Pharmaceuticals ( VRTX) (market cap $4.8 billion) is in Lilly's price range, but again, Vertex's focus on hepatitis C drugs and the fact that Johnson & Johnson ( JNJ) is already a Vertex partner might not fit in well at Lilly. (Unless Lechleiter wants to be bold and move Lilly in an entirely new therapeutic direction.)

Alexion Pharmaceuticals ( ALXN) (markekt cap $3.1 billion) might be a buyout candidate for Lilly. The company sells Soliris as a treatment for paroxysmal nocturnal hemoglobinuria (PNH), a rare autoimmune disorder. Alexion charges about $370,000 a year for Soliris, which means the drug's revenue potential could grow from about $260 million in 2008 to almost $1 billion a year at peak.

The easiest acquisition Lilly could make is simply to buy out its diabetes partner Amylin Pharmaceuticals ( AMLN). The two companies co-market Byetta, a twice-a-day injectable drug for type II diabetes, and they are developing a longer-acting version that will be administered once weekly.

I've done the hard work for Lilly; now all the drug company needs to do is spend some money.
At the time of publication, Feuerstein's Biotech Select model portfolio was long Gilead Sciences and Amgen.

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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