Pfizer Stock: How Pfizer’s Nearly $7 Billion Takeover Of Arena Just Paid Off

Pfizer‘s (PFE) nearly $7 billion takeover of Arena Pharmaceuticals looked prescient Tuesday after the company reported promising results for an ulcerative colitis treatment. But Pfizer stock gained just a fraction.




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The two final-phase studies of etrasimod are the first to read out after Pfizer closed its Arena buyout in March. After 12 weeks of taking etrasimod, 27% of patients with moderately to severely active ulcerative colitis entered remission. That compares with just 7.4% of patients who received a placebo. After a year, almost a third of patients were in remission, 32.1%, vs. 6.7% of those in the placebo group.

In a separate 12-week study, 24.8% of patients entered remission vs. just 15.2% of placebo recipients.

SVB Securities analyst David Risinger listed etrasimod as a potential blockbuster drug in a recent report. But Michael Corbo, Pfizer’s chief development officer for immunology and inflammation, says the company didn’t have any insight into the test results when it acquired Arena for $6.7 billion.

“When we did this deal with Arena, we did not see these data,” he told Investor’s Business Daily. “We actually did this deal based entirely on Phase 2 data that Arena generated and a look at blinded data. That was it. We did a lot of modeling and had a lot of trust in our scientists and we built a lot of trust with the Arena scientists.”

Pfizer Stock: Digging Into Inflammatory Diseases

Pfizer shares rose 0.2% near 53 in morning trades on the stock market today.

The news comes after Pfizer stock rose on good news for its Covid vaccine and its pending acquisition of Biohaven Pharmaceuticals (BHVN). Shares retook their 200-day moving average earlier this month and jumped above their 50-day line on May 20, according to MarketSmith.com.

Etrasimod belongs to a class of drugs that engage S1P receptors, which have ties to immune system and inflammatory diseases. It approved, etrasimod could compete most directly with Bristol Myers Squibb‘s (BMY) Zeposia, another S1P receptor modulator.

There are differences in how the drugs interact with the receptor, however. As a result, Bristol’s Zeposia can interact badly with antidepressants — specifically those targeting serotonin and norepinephrine. The dosage must also be increased slowly to prevent abnormal heart rate.

Pfizer’s Corbo doesn’t expect etrasimod to face the same challenges. In fact, he expects it to lead the S1P class in terms of safety and effectiveness. Etrasimod could also rival big names like AbbVie‘s (ABBV) Humira and even Pfizer’s own Xeljanz.

“We’re right in the middle of the (effectiveness) mix with biologics,” he said.

Etrasimod Also Meets Secondary Goals

Another key point for Pfizer stock investors: Etrasimod met all the secondary goals of Pfizer’s studies.

A statistically significant number of patients showed improvements under endoscopic review. Further, patients showed symptom improvement and evidence of mucosal healing, a phenomenon in which the intestinal lining heals.

After a year, a third of patients no longer needed corticosteroids to control their disease — a bullish note for Pfizer stock. Corticosteroids carry a number of side effects including heightened blood pressure, weight gain, fluid retention and psychological effects.

The most common side effects were headache, worsening of ulcerative colitis, Covid-19, dizziness, fever, joint stiffness, stomach pain and nausea.

Sometime in the second half of 2022, Pfizer plans to ask the Food and Drug Administration to approve etrasimod in patients with ulcerative colitis. Pfizer also expects to have midstage data for etrasimod in eosinophilic esophagitis and alopecia, and to begin a new study in eczema this year.

The etrasimod results could bolster Pfizer stock, which already has a perfect Composite Rating of 99, according to IBD Digital. Shares are consolidating with a buy point at 61.81.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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