By Colin Kellaher

Drugmaker Pfizer Inc., flush with cash amid surging sales of its Covid-19 vaccine, on Monday said it is putting some of those funds to work with the $6.7 billion acquisition of Arena Pharmaceuticals Inc.

New York-based Pfizer said it plans to use cash on hand to fund the acquisition, which it expects will expand its pipeline of treatments for immuno-inflammatory diseases and will be a significant potential revenue contributor in a 2025-2030 time frame that will be marked by the loss of patent exclusivity on its blockbuster arthritis drug Xeljanz.

Arena's lead drug, etrasimod, is in late-stage studies in the chronic inflammatory bowel disease ulcerative colitis and is also being studied in Crohn's disease, atopic dermatitis, eosinophilic esophagitis and alopecia areata.

Comirnaty, the Covid-19 vaccine Pfizer developed with partner BioNTech SE, accounted for about $13 billion of the company's third-quarter revenue of around $24 billion, and the drugmaker last month raised its forecast for sales of the vaccine this year to about $36 billion.

Pfizer had roughly $30 billion in cash, equivalents and short-term investments at Oct. 3, according to its quarterly report filed with the Securities and Exchange Commission, up from just over $12 billion at the end of 2020.

Analysts at UBS, in a research report published before Pfizer announced the Arena deal, said they think Pfizer's Covid-19 franchise of Comirnaty and the antiviral pill Paxlovid could reach sales of $50 billion next year. Paxlovid is under review by the U.S. Food and Drug Administration, and a decision could come before the end of the year.

UBS raised its recommendation on Pfizer's shares to buy from neutral and boosted its price target to $60 from $52, saying Pfizer could generate roughly $70 billion in free cash flow over the next three years, creating lots of business-development optionality.

Analysts at Mizuho applauded Pfizer for being aggressive in deploying cash it will receive from its Covid-19 franchise.

The company recently completed the $2.25 billion acquisition of immuno-oncology company Trillium Therapeutics and invested more than $1 billion more in forming collaborations with Arvinas Inc. and Biohaven Pharmaceutical Holding Co.

Mizuho said the Arena deal marks Pfizer's largest acquisition since the roughly $11 billion takeover of Array BioPharma in June 2019. It said that depending on how the Arena assets and Pfizer's own pipeline progress, the drugmaker could set its sights on a bigger deal as it approaches 2026.

Shares of Pfizer were recently changing hands at $55.13, near the 52-week high of $55.70 they hit late last month, while shares Arena jumped almost 83% to $91.17.

Write to Colin Kellaher at colin.kellaher@wsj.com

(END) Dow Jones Newswires

12-13-21 1229ET