Pfizer Inc (PFE.N) said on Monday it would buy drug developer Arena Pharmaceuticals Inc (ARNA.O) for $6.7 billion in cash, to add a promising treatment candidate that targets diseases affecting the stomach and intestine.
The $100 per share offer is double the last closing price of Arena’s stock, which surged 83.7% to $91.92 in early trading.
This is the latest deal Pfizer has struck this year to expand its treatment pipeline. The company last month acquired immuno-oncology company Trillium Therapeutics Inc for about $2.22 billion to strengthen its arsenal of blood cancer therapies.
Monday’s deal will help Pfizer gain access to Arena’s lead candidate, etrasimod, which is being tested in a late-stage trial in ulcerative colitis, as well as in a mid-to-late stage study in Crohn’s disease, both types of inflammatory bowel diseases that cause ulcers in the digestive tract.
Inflammatory bowel disease is a $20 billion market globally, making it a lucrative target for drugmakers.
Earlier this year, the U.S. Food & Drug Administration approved Bristol Myers Squibb’s (BMY.N) Zeposia for ulcerative colitis.
Jones Trading analyst Prakhar Agrawal said etrasimod produced strong data in a mid-stage trial which looked better than Zeposia and has other convenience benefits like dose adjustments, early onset of relief that could help differentiate from rivals.
“(Etrasimod) has the potential to be best-in-class drug in these indications…could be a multi-billion blockbuster drug in just Crohn’s and ulcerative colitis and we forecast risk adjusted revenue of $3.8 billion.”
Pfizer is also developing a treatment for ulcerative colitis, a chronic and inflammatory bowel disease that affects 3 million people in the United States. The candidate is currently in a mid-stage study, which is expected to be completed by the end of next year.
The deal is expected to close in the first half of 2022.