Daily Brief: Pfizer Puts Its Vaccine Profits To Good Use With Its Acquisition Of Arena Pharmaceuticals

Daily Brief: Pfizer Puts Its Vaccine Profits To Good Use With Its Acquisition Of Arena Pharmaceuticals

about 2 years ago3 mins

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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.

Vaccines

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.

Arena Pharmaceuticals stock
Source: Google Finance

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.

Keep reading for our next story...

The Cost Of Air Freight Has Hit Record Highs

Air freight image

Data out on Monday showed that the cost of flying cargo around the world has reached record highs, as the world’s economies try to get their fragile economies where they need to be.

What does this mean?

Supply chains are always messy in the run-up to Christmas, but this year’s come with an added wrinkle: a shipping container shortage has been forcing companies to transport their products by air rather than sea. That’s problematic because passenger planes transport half of all air cargo, and many of them are – for obvious reasons – still grounded. And while logistics companies like FedEx and DHL are trying to pick up the slack, it’s not enough: the amount of air cargo that can be transported is 13% lower than it was at the same time in 2019. So it stands to reason that costs are literally sky-high, with prices on key routes between China and the US and Europe having nearly doubled in the last three months.

Air freight rates

Why should I care?

The bigger picture: Danged if they do…

The world’s biggest central banks are set to meet this week to discuss how to tackle spiking inflation, and this data will only compound their worries. But Omicron’s put them in a Catch-22: anything they do to slow down rising prices also risks disrupting their countries’ economic recoveries – not ideal at a time when lockdowns are back on the cards.

Central banks meet
Source: Bloomberg

Zooming out: Turkey chances its arm.

Turkey’s arguably a good example of what not to do: the country’s prices were an eye-watering 21% higher in November than the same time last year, largely because its central bank has recently taken the left-field approach of cutting interest rates. That’s made it cheaper for companies and people to borrow money, encouraging them to spend and pushing prices even higher. Batten down the hatches: economists are expecting the country’s central bank to cut rates even lower this week.

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