Why These Pfizer Analysts Like The Global Blood Therapeutics Deal

Zinger Key Points
  • Pfizer has acquired sickle cell disease specialist Global Blood Therapeutics for $5.4 billion.
  • Analysts say the deal helps Pfizer diversify its business and recharge its growth.

Pfizer Inc. PFE shares were trading lower Monday after the drugmaker announced a $5.4-billion bid to acquire blood disorder drugmaker Global Blood Therapeutics Inc GBT.

Pfizer said it will pay $68.50 per share for Global Blood, roughly a 42.7% premium to the stock's closing price last Thursday. Global Blood shares ripped higher in midday trading on Friday after the Wall Street Journal reported Pfizer was in talks to acquire the company.

Related Link: Pfizer Scoops Up Sickle Disease Player For $5B

After huge sales growth in 2021 thanks to its COVID-19 vaccine developed with partner BioNTech SE - ADR BNTX, Pfizer's revenue growth slowed to 46.1% in the second quarter and will likely continue to decline in the second half of the year as the company runs into difficult comps.

Pfizer appears to be looking to use the cash it has earned from its COVID-19 vaccine to supplement its growth via acquisitions. The Global Blood deal comes after Pfizer spent $11.6 billion to acquire Biohaven Pharmaceutical Holding Co Ltd BHVN in May.

Related Link: BioNTech Earnings Shocker: Posts Lower Than Expected Q2 Profits, Revenues Fall

Voices From The Street: On Monday, Bank of America analyst Geoff Meacham said the Blood Therapeutics deal means Pfizer is reentering the sickle cell disease market in a meaningful way.

"We continue to like Pfizer, as it has generated a substantial cash position from its COVID-19 vaccine and Paxlovid and is deploying that capital to meaningful M&A transactions in the case of Biohaven, Arena, and ReViral, which is likely to continue," Meacham wrote.

Bank of America has a Buy rating on Pfizer and a $70 price objective. 

Wells Fargo analyst Yanan Zhu said Pfizer has worked on compounds that have similar mechanisms of action to Global Blood's products.

"Overall, we believe the strategic fit and common expertise between the two companies bode well for the prospects of the deal," Zhu wrote.

CFRA analyst Stewart Glickman said Pfizer is "taking advantage of a strong war chest" and diversifying its business.

"If consummated, the deal provides PFE with entry into treatment for sickle-cell disease (SCD) as GBT's drug, Oxbryta, is already approved by the FDA," Glickman said.

CFRA has a Strong Buy rating on Pfizer and lowered its price target from $68 to $66.

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Posted In: Analyst ColorBiotechM&APrice TargetReiterationTop StoriesAnalyst RatingsGeneralBank of AmericaCFRAGeoff MeachamStewart GlickmanWells FargoYanan Zhu