By Matilda Oculy and Filip Stoilov (The University of Manchester), Ritu Joseph (London Business School)
Photo: CDC (Unsplash)
Overview of the deal
Acquirer: Pfizer
Target: Global Blood Therapeutics
Total Transaction Size: $5.4bn
Closed date: October 5, 2022
Target advisors: J.P. Morgan and Centerview Partners (Financial), Cravath, Swaine & Moore and Goodwin Procter (Legal)
Acquirer advisors: Morgan Stanley and Goldman Sachs (Financial), Wachtell, Lipton, Rosen & Katz (Legal)
Pfizer acquired Global Blood Therapeutics on October 5, 2022 for a total estimated enterprise value of $5.4 billion. The firm purchased GBT’s outstanding shares for $68.50 per share, representing a 102% premium to the unaffected share price. This acquisition enhances Pfizer’s portfolio of drugs in rare haematology, notably cementing its entry into the market to treat sickle cell disease (SCD), a blood disorder affecting up to 100,000 Americans. The acquisition of GBT’s Oxbryta sickle cell treatment drug and two major pipeline assets GBT601 and Inclacumab will enable Pfizer to address the medical needs of a larger number of patients. The drugs are expected to generate $1 billion in sales in 2026, and overall Pfizer expects GBT to add $3 billion to its yearly sales by 2030 through its sickle cell disease branch.
“Sickle cell disease is the most common inherited blood disorder, and it disproportionately affects people of African descent. We are excited to welcome GBT colleagues into Pfizer and to work together to transform the lives of patients, as we have long sought to address the needs of this underserved community.” - Albert Bourla, Chairman and CEO (Pfizer)
Company Details (Acquirer - Pfizer)
Pfizer is one of the largest multinational pharmaceutical companies, developing medicines and vaccines in a wide range of medicine branches including oncology, immunology and rare diseases. In partnership with BioNTech, Pfizer developed the first Covid-19 vaccine approved by the FDA, known as Comirnaty. In 2022, the firm’s revenue amounted to $100.3 billion.
Founded in 1849, headquartered in New York, United States
CEO: Albert Bourla
Number of employees: 79,000
Market Cap: $246.8bn (as of 01/02/2023)
EV: $247.9bn
LTM Revenue: $100.3bn
LTM EBITDA: $43.6bn
LTM EV/Revenue: 2.5x
LTM EV/EBITDA: 5.7x
Company Details (Target - Global Blood Therapeutics)
Global Blood Therapeutics is a biopharmaceutical company providing treatments particularly for Sickle Cell Disease. Its crown jewel GBT440, an oral, once-daily therapy for sickle cell disease, is a drug targeting the underlying mechanism of red blood cell (RBC) sickling. In addition to its treatment for SCD, the company is also engaged in other research and development activities targeted at hereditary angioedema and owns exclusively licensed rights to a wide portfolio of product candidates in the United States, Europe, and other major markets.
Founded in 2011, headquartered in San Francisco, California
CEO: Ted W. Love
Number of employees: ~500
Market Cap: $4.6bn as of (05/10/2022 - closed date)
EV: $4.6bn
LTM Revenue: $234.9mn
LTM EBITDA: $(293.2)mn
LTM EV/Revenue: 19.7x
Projections and Assumptions
Short-term consequences
Due to the success of its Covid-19 vaccine, developed with BioNTech, and its antiviral medicine Paxlovid, Pfizer has a great availability of cash. However, according to analysts, Pfizer will struggle to boost revenues as sales of Covid-19 drugs and vaccines are expected to decline over the next few years, while several of its other drugs face competition from generic rivals.
With the acquisition of Global Blood Therapeutics, Pfizer added Oxbryta (a treatment for sickle cell disease) to its portfolio, which was approved in 2019 and has sales predicted to reach $1.5 billion in 2028. Pfizer will also acquire two of the pipeline assets of Global Blood Therapeutics (GBT601 and Inclacumab), which target the same disease. Pfizer said GBT’s drugs could generate more than $3 billion in peak sales if they were all approved.
Sickle cell disease is an inherited blood disorder that affects an estimated 70,000 to 100,000 people in the United States. According to the CEO of Global Blood Therapeutics, Ted Love, the resources of Pfizer and its multinational infrastructure will allow the company to launch Oxbryta in additional markets and increase its uptake.
The deal comes during an apparent increase in M&A activity across the biopharma sector, which is being driven by a combination of larger pharmaceutical companies seeking new drugs to bolster their pipelines and more realistic valuations in the biotech sector.
Long-term Upsides
This acquisition will allow Pfizer to bolster its foothold in the Rare Haematology Market, namely with the addition of GBT’s Oxbryta tablets, which have already gained approval in the USA, EU, UK and UAE. Through Pfizer’s global distribution channels, GBT plans to help accelerate these medicines to those communities that are most affected by SCD. GBT is also in the midst of developing various oral medicines that will be the next generation agents in improving hemolysis. These medicines are currently in Phase 2 of clinical studies, and if effective could provide immense benefits to Pfizer’s existing drug portfolio. GBT is also in the middle of two Phase 3 trials to create antibodies targeting P-selectin that will help reduce hospital readmission due to vaso-occlusive crisis. If these drugs are able to gain approval past the research stage, GBT will be able to generate annual sales of more than $3 billion by 2030. Pfizer’s acquisition is predicted to help improve this number, while helping transform the lives of underserved communities.
Risks and Uncertainties
The biggest risk with this acquisition lies in the fact that GBT’s drug portfolio is still in the trial phase. If these trials prove to be unsuccessful, the deal could result in several set-backs for Pfizer, who paid a 101% premium on GBT’s share price. This deal also relies heavily on leveraging Pfizer’s existing infrastructure to promote GBT’s drugs. It is still unclear if new infrastructure will be required to launch GBT’s Oxbryta in additional markets. Note, Oxbryta is an expensive drug with a list price of $125,000/year - double the median family income in the United States - and must be taken for life.
Pfizer’s acquisition of GBT comes after a long list of recent acquisitions - such as that of BioHaven Pharmaceuticals for $11.6bn in cash carried out in May 2020, followed by its acquisition of Trillium Therapeutics and Reviral. Pfizer has carried out a number of acquisitions within the last 2 years, having generated large amounts of cash through its Covid-19 vaccine. Pursuing acquisitions at such breakneck speed carries higher risk that Pfizer may not be able to fully realise the synergies for each of these deals and perhaps has overpaid for the targets acquired.
“Today is an exciting milestone that accelerates GBT’s mission to discover, develop and deliver life-changing treatments that provide hope to underserved patient communities.” - Ted W. Love, President and CEO (Global Blood Therapeutics)