Did Pfizer Just Give Investors 7 Billion Reasons to Buy Its Stock?

Key Points

• Pfizer is paying over $7 billion to buy clinical-stage biotech Metsera.

• This gives it a wedge into the hottest segment of the pharma industry.

• Yet, shares of the giant drugmaker remain at depressed levels.

• 10 stocks we like better than Pfizer ›

In the pharmaceutical world, if you can't develop 'em, acquire 'em. That seems to be the philosophy behind Pfizer's (NYSE: PFE) latest big-ticket buy, specifically its purchase of clinical-stage biotech Metsera (NASDAQ: MTSR), which it announced on Monday.

Metsera specializes in a therapeutic area that's white-hot these days -- weight loss -- so it could help Pfizer leap several spaces ahead in the race to develop next-generation drugs for this use. This was a pricey deal, however, so let's look at how it affects the buy (or sell) case for the purchaser.

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The skinny on Pfizer's latest buy

The deal is fairly straightforward. Pfizer and Metsera have agreed for the former to acquire the latter. In the all-cash arrangement, Pfizer is to pay $47.50 per Metsera share for its asset-to-be. Additionally, Metsera shareholders will hold non-transferable contingent value rights to receive potential additional milestone payments of up to $22.50 per share.

Image source: Getty Images.

Specifically, the three milestones that would pump up the price of Metsera are 1) $5 per share just after a phase 3 trial of two of the company's investigational medicines in combination; 2) $7 per share following U.S. Food and Drug Administration (FDA) approval of the main drug in that combination; and 3) $10.50 per share if and when the combination therapy earns an FDA green light.

This places the total value of the deal at $4.9 billion to $7.3 billion. Both companies anticipate the acquisition will close in the fourth quarter of this year.

So Pfizer is paying just under $5 billion at least for a fairly obscure young biotech few people have heard of. But why? Because Metsera's focus is on next-generation weight loss drugs akin to the two GLP-1 drugs FDA-approved for the indication, Novo Nordisk's first-mover Wegovy and Eli Lilly's Zepbound.

Metsera has four investigational programs in this area with the leading one, an injectable tagged as MET-097i, currently in phase 2 clinical trials. Two of the relatively early stage pipeline drugs are oral medications.

Growth opportunities wanted

While Pfizer has something of a reputation as a large, powerful, and monolithic pharmaceutical company, it has several vulnerabilities. First and foremost is the patent cliff that looms in the coming few years for a clutch of the company's blockbuster drugs. These include its current top seller, anticoagulant Eliquis, and breast cancer medication Ibrance.

The second is its finances. Earlier this decade, when that patent cliff was further in the distance and the company was riding high as the co-developer of the popular Comirnaty COVID vaccine, revenue and profitability both reached historic peaks and the coffers were bursting.

Since then, though, some of the company's key fundamentals have deflated. And its balance sheet is less clean, due to a series of acquisitions that generally haven't helped the company much. They've reduced cash on hand and helped drive up long-term debt (from $38 billion and change at the end of 2020 to over $64 billion last year, falling to under $58 billion at the end of second quarter 2025).

Another setback Pfizer suffered was the cessation of its own once-promising GLP-1 investigational drug program, danuglipron, back in April. This followed a liver injury to a patient testing the orally administered medication.

An obesity treatment developer once again

So in short, Pfizer's swallow of Metsera is its attempt to reenter the next-gen obesity drug development race. Given the demand for such treatments, which is obviously strong and sustainable, this feels not only like a sensible move, but a necessary one. Investors of top pharmaceutical companies are understandably expecting these businesses to be competitive in this segment.

Owning Metsera's pipeline is about the best throw possible given the current conditions. Yes, the deal is expensive, but four is a high number of potential weight-loss competitors and nothing in this field is likely to sell at bargain prices these days.

Pfizer undoubtedly has the potential to succeed, and with most researchers anticipating monster growth in obesity drugs -- Morgan Stanley, to name one, believes it will balloon from global sales of around $15 billion in 2024 to $150 billion in 2035 -- it's facing an irresistible opportunity. To me, just the fact that Pfizer is much better positioned to exploit it is reason alone to consider owning its stock.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.