Pfizer Deploying Some of Its Covid Cash in Arena Deal -- Analysis
December 13 2021 - 12:44PM
Dow Jones News
By Colin Kellaher
Drugmaker Pfizer Inc., flush with cash amid surging sales of its
Covid-19 vaccine, on Monday said it is putting some of those funds
to work with the $6.7 billion acquisition of Arena Pharmaceuticals
Inc.
New York-based Pfizer said it plans to use cash on hand to fund
the acquisition, which it expects will expand its pipeline of
treatments for immuno-inflammatory diseases and will be a
significant potential revenue contributor in a 2025-2030 time frame
that will be marked by the loss of patent exclusivity on its
blockbuster arthritis drug Xeljanz.
Arena's lead drug, etrasimod, is in late-stage studies in the
chronic inflammatory bowel disease ulcerative colitis and is also
being studied in Crohn's disease, atopic dermatitis, eosinophilic
esophagitis and alopecia areata.
Comirnaty, the Covid-19 vaccine Pfizer developed with partner
BioNTech SE, accounted for about $13 billion of the company's
third-quarter revenue of around $24 billion, and the drugmaker last
month raised its forecast for sales of the vaccine this year to
about $36 billion.
Pfizer had roughly $30 billion in cash, equivalents and
short-term investments at Oct. 3, according to its quarterly report
filed with the Securities and Exchange Commission, up from just
over $12 billion at the end of 2020.
Analysts at UBS, in a research report published before Pfizer
announced the Arena deal, said they think Pfizer's Covid-19
franchise of Comirnaty and the antiviral pill Paxlovid could reach
sales of $50 billion next year. Paxlovid is under review by the
U.S. Food and Drug Administration, and a decision could come before
the end of the year.
UBS raised its recommendation on Pfizer's shares to buy from
neutral and boosted its price target to $60 from $52, saying Pfizer
could generate roughly $70 billion in free cash flow over the next
three years, creating lots of business-development optionality.
Analysts at Mizuho applauded Pfizer for being aggressive in
deploying cash it will receive from its Covid-19 franchise.
The company recently completed the $2.25 billion acquisition of
immuno-oncology company Trillium Therapeutics and invested more
than $1 billion more in forming collaborations with Arvinas Inc.
and Biohaven Pharmaceutical Holding Co.
Mizuho said the Arena deal marks Pfizer's largest acquisition
since the roughly $11 billion takeover of Array BioPharma in June
2019. It said that depending on how the Arena assets and Pfizer's
own pipeline progress, the drugmaker could set its sights on a
bigger deal as it approaches 2026.
Shares of Pfizer were recently changing hands at $55.13, near
the 52-week high of $55.70 they hit late last month, while shares
Arena jumped almost 83% to $91.17.
Write to Colin Kellaher at colin.kellaher@wsj.com
(END) Dow Jones Newswires
December 13, 2021 12:29 ET (17:29 GMT)
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