Pfizer starts to put its vaccine cash to use

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.