PFE

Pfizer, Inc.

53.91
USD
-0.15%
53.91
USD
-0.15%
38.48 61.71
52 weeks
52 weeks

Mkt Cap 300.72B

Shares Out 5.58B

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Why Pfizer's Deal With Beam Therapeutics Is a Smart Move

Pfizer (NYSE:PFE) recently announced a collaboration with Beam Therapeutics (NASDAQ:BEAM) to develop gene-editing therapies targeting rare genetic diseases. In this Motley Fool Live video, recorded on Jan. 12., Fool contributors Keith Speights and Brian Orelli discuss why Pfizer's deal with Beam appears to be a smart move. Keith Speights: We mentioned this on Monday I believe, that Pfizer had announced a collaboration with Beam Therapeutics to develop therapies targeting rare genetic diseases. We just spoke briefly about it on Monday. But Brian, what's your take on this deal? Is it a smart move for Pfizer? Brian Orelli: I mean, it seems like a good, solid deal for Beam for sure. The company is getting $300 million upfront for three different programs. On one of those programs, Beam can opt-in for a 35% share. There's also future milestone payments of up to $1.05 billion. These are new targets, so it's not actually giving up anything in its pipeline to get this $300 million upfront. Shares of Beam closed down 2.7% on Monday. I didn't really understand the decline, but then it jumped to more than 10% on Tuesday, yesterday. I don't know, perhaps I wasn't the only person who was scratching my head at the decline after what seemed like a pretty solid deal for Beam. Of course, Beam is still really expensive. Its market cap is more than $5 billion dollars. Keith, do you know how many drugs it has in clinical trials? Speights: I believe the correct answer is zero. Orelli: That is correct, zero. A $5 billion dollar valuation and zero drugs in clinical trials. I think they're shooting for having their first one to go into clinical trials later in the second half of this year. I like the technology. Gene editing is a lot more specific than the general CRISPR technology. CRISPR is pretty good at knocking genes out but it's difficult to do anything else with it besides that where Beam can make precise single-base pair of mutations, and so they can, in theory, correct an issue that a gene might have. But it's really expensive and I think you're considering how much risk you're taking on due to the lack of data. Speights: Yeah, $300 million dollars upfront for Pfizer is essentially pocket change, but that's not an insignificant amount of money for a deal like this. $300 million upfront. That's a reasonably large amount of money. I guess that along with Beam's market cap, which is really high considering it's still in preclinical stage, it just shows that a lot of people have high hopes for Beam's technology. Orelli: Yes. You can see why Pfizer didn't want to just go buy the whole company because it put a cost of $10 billion for no drugs in clinical. This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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