Pfizer starts to put its vaccine cash to use

After years of U-turns Arena's pivot to bowel disease pays off, with a $6.7bn takeout bid.

Before the pandemic changed its fortunes spectacularly, Pfizer’s sparse pipeline was the subject of some concern. Today's takeout of Arena Pharmaceuticals for $6.7bn is an attempt to answer those worries, and is the first big deal for the pharma giant since the Covid-19 cash started flowing.

The move is largely about etrasimod, a bowel disease project in which some see blockbuster potential, and on which several crucial readouts are due next year. These data will determine whether the deal's price tag is too high: the $100 per share offer means Pfizer is paying more than double Arena’s closing share price on Friday. This is easily affordable for Pfizer, of course, and on a conference call today management suggested that many more transactions could be on the cards in the coming months. 

Arena, meanwhile, had been left with a mixed bag of projects after several strategic shifts over the past 10 years. Most infamously this included the obesity drug Belviq, which flopped commercially and was sold to partner Eisai for a pittance in 2017. Given the numerous disappointments and setbacks many investors are likely to be happy with today's outcome. 

Those that believe in etrasimod might be less so. The asset has a chequered past, however, having failed in an atopic dermatitis trial just over a year ago, so holding out for a better offer would be a bold move. And it is probably worth remembering that Arena's stock has not traded above $100 since 2012.

Gut feeling

The move has some logic for Pfizer, which has been working in the inflammatory bowel disease area for some time, albeit with Jak and Tyk2 inhibitors. A clue that all was not well with these mechanisms came at the company's latest results, however, when Pfizer announced it was walking away from a couple of projects (Pfizer bows out of the Tyk2 race, November 2, 2021). 

Etrasimod is an oral sphingosine-1-phosphate receptor modulator in development for a range of gastrointestinal and dermatological diseases. Three trials are due to yield data early next year, the most important being the phase 3 ulcerative colitis trials Elevate UC 12 and Elevate UC 52. 

A few months later, the first cohort in the phase 2 Cultivate study in Crohn’s disease ought to read out. Substudy A is assessing etrasimod in moderate to severe Crohn’s with the aim of finding a phase 3 dose. In the second half of the year, data could come from a phase 2 study of etrasimod in alopecia areata. 

Pfizer’s thinking was likely influenced by Bristol Myers Squibb’s Zeposia, also an S1P receptor modulator, which was approved in UC in May and is forecast to sell $2.4bn by 2026, according to Evaluate Pharma’s sellside consensus. That project is also approved in MS. 

Although these oral agents are considered less efficacious than some other mechanisms, they also come with fewer toxicities. With safety concerns still haunting the Jak inhibitor class, another big mechanism in bowel disease, Pfizer clearly saw the upside with etrasimod.  

A disparate mix? Arena's pipeline and interests
Project  Mechanism Use Detail
Wholly owned assets   
Etrasimod S1P receptor 1 regulator  Ulcerative colitis Ph3 Elevate UC 52 and Elevate UC 12 trials read out Q1 2022; ph2 Gladiator trial reads out 2023
Crohn's disease Ph2 Cultivate trial reads out Q2 2022
Eosinophilic oesophagitis Ph2 Voyage trial reads out Aug 2022
Atopic dermatitis Ph2 Advise trial failed; ph3 being planned
Alopecia areata Ph2 trial reads out 2023
APD418 Beta 3 adrenoceptor antagonist Heart failure Ph2 trial ongoing in Poland; data expected late 2022
Temanogrel 5-HT2A inverse agonist  Microvascular obstruction/ Raynaud's secondary to systemic sclerosis Ph2 trials ongoing, data expected late 2022
Olorinab  CB2 agonist   IBD-associated pain  Failed ph2b Captivate trial in March 2021; effectively abandoned
Partly owned assets
Ralinepag Prostacyclin receptor agonist  Pulmonary hypertension  Licensed to United Therapeutics for $800m up front in 2018; two ph3 trials enrolling
RIST4721 Oral CXXR2 antagonist Palmoplantar pustulosis and other neutrophil-mediated diseases Under development by Aristea Therapeutics; Arena has an option to buy Aristea on completion of a ph2b study, which has yet to start
LP352 (and other preclinical projects) 5-HT2C superagonist Epileptic encephalopathies Neurosciences assets spun out into Longboard Phamaceuticals in 2020, Arena has ~33% stake in Longboard
Source: Evaluate Pharma and company communications.

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