By Patricia Nann and Frank Siebelt

FRANKFURT (Reuters) - U.S. drugmaker Pfizer (PFE.N: Quote, Profile, Research) is exploring acquisition possibilities in the German biotech sector and has held talks with the management of Munich-based MediGene (MDGGn.DE: Quote, Profile, Research), two industry sources said.

"Pfizer is looking at it," one of the sources told Reuters.

Pfizer and MediGene declined to comment.

MediGene shares rose 13 percent to 6.3 euros after the news on Wednesday, valuing the group -- which specialises in cancer treatment -- at around 210 million euros ($325 million).

For Pfizer, the world's biggest drugs company, MediGene would be an easily digested acquisition and the New York-based company has a past history of buying up smaller companies with promising products or technologies.

Pfizer Chief Financial Officer Frank D'Amelio said on Tuesday Pfizer's recent focus was on smaller transactions, and he did not feel obliged to buy mid-size drugmakers, in the $10 billion to $15 billion price range, as some analysts have urged.

Medigene is the only German biotech firm with two products on the market -- prostrate cancer drug Eligard and genital warts treatment Veregen. European approval for skin drug Oracea is expected in a few weeks.

It also has a promising new product pipeline, including the pancreatic cancer drug Endotag, which it views as a potential blockbuster.