Deal: Pfizer Buys Drugmaker Arena Pharmaceuticals For $6.7B

Pfizer (NYSE: PFE), the pharmaceuticals giant best known at this time for its Covid vaccine, is making waves in another sector. It’s agreed to buy a promising drug developer named Arena Pharmaceuticals (NASDAQ: ARNA) for $6.7bn in cash, a 100% premium to its market value before the deal was announced.

It’s noteworthy that Arena Pharmaceuticals has no approved drug products on the market but is instead still in the clinical research stage. The company is testing drugs to treat ulcerative colitis and Crohn’s disease, two inflammatory bowel diseases. It also has its eyes set on treating skin disorders.

  • Big acquisitions for companies with no authorized products are common in the drug industry. The industry is generally “high stakes”, with companies betting billions of dollars on potential drug treatments. Sometimes, the drugs make it to authorization and reap big profits for their owners, and other times, they don’t make it to authorization and lose big money. Such is the game.

Arena Pharmaceuticals was founded in 1997 in San Diego, California, and held a public offering in the year 2000. It developed a weight-loss drug (Belviq) that was approved by the American Food and Drug Administration (FDA), but sales were lacklustre, and Arena sold it to a Japanese partner in 2017 but maintained royalty rights. The company pulled in a paltry $300k in revenue in 2020.

With heavy revenue from its Covid vaccine, Pfizer is well-positioned to spend big money on potential drug treatments. Just last month, it bought Trillium Therapeutics, a clinical-stage company working on potential cancer treatments, for $2.3bn, and now it’s paying nearly $7bn for another clinical-stage company with minimal revenues.

  • By revenue, Pfizer is the fourth-largest pharmaceutical company on earth. It brought in $41bn in revenue last year, but that will increase drastically this year. This year, Pfizer expects $36bn from Covid vaccine sales, excluding its other top-selling products such as the Prevnar vaccines Ibrance breast cancer drug. Altogether, it expects $81-$82bn in sales this year, double last year.

Pfizer’s stock closed up 4.6% on Monday. The pharma giant has a current market capitalization of $310bn.

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