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What's going on?

Pfizer announced plans on Monday to buy Arena Pharmaceuticals in a near-$7 billion deal, so let’s just hope the US drugmaker doesn’t regret meeting its hero…

What does this mean?

Business has been booming for Pfizer during the pandemic, thanks in no small part to a little-known vaccine it produced alongside BioNTech. In fact, the company’s expecting its annual revenue to be nearly twice as high this year as it was in 2020 – a new record.

But Pfizer’s not about to rest on its laurels, and it’s been looking to use all that extra cash to expand into other treatments. It started by buying Trillium Therapeutics for $2.2 billion last month to boost its arsenal of blood cancer therapies, before going one step further this week: the company announced it’d be buying drug developer Arena Pharmaceuticals for $6.7 billion. Pfizer’s hoping it’ll help speed up the development of Arena’s most promising drug – a tasty little bowel disease number.

Why should I care?

For markets: Pfizer goes above and beyond.
Arena’s share price jumped 92% following the announcement, which is pretty standard: Pfizer is paying a premium on what Arena’s currently worth to try and convince shareholders to accept the offer. And not just a small premium, either: the deal values Arena’s shares at $100 each – about double what they were trading at before the announcement.

Zooming out: Pfizer’s making serious margins.
Pfizer might be smart to branch out sooner rather than later. See, the company is reportedly selling its vaccine – which costs just 76p ($1) a dose to produce – for £22 ($29) a dose in the UK. But now that it’s coming under so much fire for arguably profiteering off a life-and-death situation, it might have no choice but to cut its prices – not great news for its bottom line going forward.

Originally posted as part of the Finimize daily email.

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