Buying for cash

Arena Pharmaceuticals (ARNA) shares rose 93% in premarket trading on Monday after Pfizer (PFE) announced a $6.7bn cash acquisition at $100 a share double the current price. Market analysts are raising their forecasts for Pfizer stock.

Pfizer (PFE) has used its strong growth over the past two years to buy pharmaceutical company Arena Pharmaceuticals (ARNA) to expand its product range and boost sales.

The deal is worth about $6.7bn. Pfizer will pay $100 in cash for each common share of Arena, which had a price of $49.94 at the close of trading on Friday.

Pfizer shares, up 43.4% YTD, were up 1.25% in premarket trading on Monday.

Arena Pharmaceuticals (ARNA) shares, down 35% YTD, were up 92.5% at the time of writing.

Pfizer said in a press release that Arena's portfolio includes a range of diverse and promising therapeutics in development for immune-inflammatory diseases in gastroenterology, dermatology and cardiology, which Pfizer believes will potentially drive sales growth through 2025 and beyond.

Pfizer has a strong cash balance, allowing it to make large acquisitions. Pfizer recently announced a quarterly dividend of $0.40 per share, up about 2.6% from its previous dividend of $0.39. Pfizer posted a net profit of $8.146 billion in the last 3 fiscal quarters alone.

Pfizer shares

Pfizer shares rose after a UK study showed that the drugmaker's third shot of the Covid vaccine provides robust protection against the Omicron strain, and analysts at UBS raised their ratings and price targets.

The UK Health Safety Agency said that Pfizer's booster vaccine provides around 75% protection against symptomatic infections from Omicron, based on a study of 581 people in whom the new strain was identified, compared with around 90% against the Delta variant. Pfizer shares were also boosted by an upgrade from 'neutral' to 'buy' and a $52 to $60 target price from UBS analyst.

Analyst believes that sales of Pfizer's antiviral pill Covid Paxlovid will reach at least $14bn next year, 40% above Wall Street expectations.

Meanwhile, according to the UBS analyst, Pfizer's Covid-19 vaccines and pills have a maximum sales potential of $50bn in 2022.