Adam Feuerstein

Why Did Pfizer Buy Esperion Now?
12/22/03 02:52 PM ET

I'm scratching my head over this Pfizer (PFE:NYSE)-Esperion Therapeutics (ESPR:Nasdaq) deal. Why would Pfizer pay $1.3 billion for Esperion now? Durus Capital, the hedge fund that got in trouble for buying up a huge stake in Esperion over the summer, was supposed to start selling off its stake sometime next month. Why, then, wouldn't Pfizer just wait for Esperion shares to fall and get the company cheaper?

It's not like Pfizer had much competition from the rest of Big Pharma, since Pfizer already had first rights to codevelop Esperion's drugs. (I know some hedgies who were short Esperion, betting that Durus' anticipated selling would take the stock down; they're obviously hurting today, and also wondering why Pfizer stepped in so early.)

TSC reporter Matt Goldstein has been the axe on the Durus-Esperion saga, but he tells me he's running into silence when he asks similar questions. (He's working on his own story, so check it out.)

Pfizer's willingness to part with $1.3 billion in cash for Esperion is another indication of just how desperate Big Pharma has become for new drugs. Esperion's lead drug, ETC-216, is being heralded as "Drano for the arteries." But based on what? Findings from a phase II uncontrolled study? C'mon! Now that Pfizer has control, you won't hear a peep about ETC-216 for five to 10 years as it conducts huge clinical trials to really determine whether this drug can live up to the tremendous hype. Esperion longs, obviously, don't care about any of that right now; they're just counting their winnings.

Remember the U.S. commercial real estate market of the 1980s, when Japanese buyers dripping with cash spent wildly on trophy buildings across the country? They overspent. Is that what's going on with Big Pharma these days? If so, any biotech firm with a midstage drug in development is probably undervalued right now. It's a sellers market and the buyers don't seem to care how much they have to spend.