Pfizer has agreed to buy Seattle-based Seagen for $43 billion in a blockbuster deal that would unite the pharmaceutical giant with a biotechnology company that pioneered a new type of tumor-killing medicine.
The acquisition is the largest Pfizer has attempted since its 2009 purchase of Wyeth, and is the most sizable in the drug industry by value since AbbVie’s $63 billion buyout of Allergan in 2019.
Acquiring Seagen gives Pfizer control of the top-selling lymphoma medicine Adcetris as well as a pipeline of cancer treatments that’s yielded three new drug approvals in the past three years. Seagen specializes in a type of cancer therapy known as an antibody-drug conjugate, and has steadily improved on the technology since its founding in 1997.
As a result, Seagen has become one of the biotech industry’s most valuable companies, ranking below well-known leaders like Vertex Pharmaceuticals and Moderna but well above firms such as Incyte, Alnylam Pharmaceuticals and Biomarin Pharmaceutical.
Pfizer’s acquisition offer of $229 per share values Seagen at a 33% premium to the stock’s closing price Friday. However, Seagen shares have climbed as the company has been the subject of acquisition rumors. Merck & Co. discussed a deal for Seagen last summer, according to The Wall Street Journal, but the companies reportedly disagreed over price.
More recently, the Journal reported in February that Pfizer had entered the picture, beginning initial talks with Seagen.
The companies expect their deal to close in late 2023 or early 2024, although plans by the Federal Trade Commission to more closely scrutinize pharmaceutical mergers could create uncertainty.
Pfizer described the deal, for which it will take out $31 billion in new debt, as an opportunity to replicate its COVID-19 success in cancer, an area it has increasingly prioritized.
“Pfizer is deploying its financial resources to advance the battle against cancer, a leading cause of death worldwide with a significant impact on public health,” said company CEO Albert Bourla in a statement on the deal.
Together, Seagen’s four medicines are expected to earn an estimated $2.2 billion this year, a figure Pfizer anticipates will increase to greater than $10 billion annually by 2030.
Part of those gains will come from the larger sales infrastructure Pfizer can put behind Seagen’s drugs, Pfizer said in a presentation Monday.
The pharma currently markets more than a dozen cancer drugs, including several for breast and genitourinary tumors targeted by Seagen’s treatments. Adding Seagen’s portfolio of experimental medicines, meanwhile, would double Pfizer’s early-stage drug pipeline.
Pfizer expects the deal will boost its revenue immediately and be neutral to slightly accretive to earnings per share by the third or fourth full year after the deal’s completion.
Since Pfizer’s interest in Seagen was reported last month, analysts have questioned whether a deal of this size would be worth it. The team at Credit Suisse, for example, reported Monday that investors they spoke to recently “failed to see the value of doing such a deal, and saw much better uses of cash.”
Pfizer is under pressure to make up for declining revenue from its COVID vaccine and antiviral treatment, sales of which are forecast to drop significantly this year and stay lower in the future.
A biotech in transition
For Seagen, the acquisition comes at something of a transition point. The biotech has been working to convert its approved cancer drugs into consistent profits. But the past year has brought both ups and downs, as Seagen lost an important arbitration decision on drug royalties and then later claimed positive results for one of its approved medicines, a bladder cancer treatment called Padcev. Questions over both events had drawn out deal talks with Merck, the Journal previously reported.
Seagen’s leadership, meanwhile, has stabilized after the April 2022 arrest of founder and longtime CEO Clay Siegall for alleged domestic violence. Siegall resigned from his post and, in November, the company appointed David Epstein, a longtime Novartis executive, as his successor. At the time, the move was interpreted by Wall Street analysts as a sign that a takeover wasn’t imminent.
But antibody-drug conjugates, or ADCs, have continued to draw the interest of large pharma firms. Merck previously invested $1 billion in Seagen through a 2020 deal for rights to an experimental breast cancer drug and Seagen’s approved breast cancer treatment Tukysa, while that same year Gilead paid $21 billion to acquire Immunomedics and its ADC drug for breast cancer.
AstraZeneca has also invested heavily in licensing agreements for two ADCs developed by Daiichi Sankyo. One, now sold as Enhertu, has shown great promise in clinical trials.
Seagen employed nearly 3,300 staff at the end of 2022, nearly two thirds of whom supported the company’s research, clinical or supply chain operations. It reported a net loss of $610 million on revenues of $1.9 billion.
Pfizer expects to shave $1 billion in spending via “cost efficiencies” by the third year post-close.
Editor’s note: This story has been updated with additional detail and analyst commentary.