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Why Arena Pharmaceuticals Stock Skyrocketed 80% Today

By Joe Tenebruso – Dec 13, 2021 at 5:44PM

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A healthcare titan wants to acquire the drug developer for nearly $7 billion.

What happened 

Shares of Arena Pharmaceuticals (ARNA) soared 80% on Monday after the drugmaker struck a merger agreement with Pfizer (PFE 0.32%)

So what 

Arena is a clinical-stage company focused on developing treatments for immuno-inflammatory conditions. It has a promising pipeline of drug candidates in areas such as gastroenterology, dermatology, and cardiology.

Perhaps most promising is Arena's experimental oral therapy etrasimod. Clinical trials are underway to evaluate etrasimod for the treatment of ulcerative colitis, Crohn's disease, and other ailments.

Two people are shaking hands.

Pfizer reached an agreement to acquire Arena Pharmaceuticals. Image source: Getty Images.

Pfizer is seeking to purchase all of Arena's outstanding stock for $100 per share, or slightly more than double its closing price on Friday. The all-cash deal values Arena at roughly $6.7 billion. The transaction is expected to close in the first half of next year, pending regulatory and shareowner approval. 

"Pfizer's capabilities will accelerate our mission to deliver our important medicines to patients," Arena CEO Amit Munshi said in a press release. "We believe this transaction represents the best next step for both patients and shareholders."

Now what

COVID-19 vaccine sales have brought an enormous amount of cash into Pfizer's coffers. The pharmaceutical giant expects to generate as much as $36 billion from its Comirnaty coronavirus vaccine in its 2021 fiscal year. 

Pfizer is wisely choosing to use some of this cash to bolster its drug portfolio and long-term growth prospects. That could help to deliver new treatments to patients faster, as well as higher returns to investors.

"Utilizing Pfizer's leading research and global development capabilities, we plan to accelerate the clinical development of etrasimod for patients with immuno-inflammatory diseases," Pfizer executive Mike Gladstone said.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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