- Cancer drug developer Seagen is in early talks to be acquired by Pfizer, according to The Wall Street Journal, which cited people familiar with the situation. A deal still may not be reached, the Journal said.
- Last summer, the Journal reported Seagen, a Washington-based company currently worth more than $30 billion, was considering selling to Merck & Co. for upwards of $40 billion. But as Bloomberg would later report, the deal stalled out because of disagreements over price. Since then, Seagen has brought on a new CEO, the longtime Novartis executive David Epstein, who played an integral role in ramping up the Swiss pharmaceutical giant’s cancer drug division.
- Should Pfizer acquire Seagen, it would gain access to a slate of experimental medicines as well as four marketed products that, together, generated $2 billion in revenue last year. Pfizer recorded $100 billion in product revenue in 2022, but estimates sales from its COVID-19 vaccine and Paxlovid therapy will fall significantly in the coming months. It also expects to lose around $17 billion in annual revenue between 2025 and 2030 due to the expiration of key patents.
While Pfizer may be interested in Seagen, pursuing an acquisition could present certain challenges.
Price, for instance, appears to have derailed the talks between Seagen and Merck, and might well be a sticking point again. Pfizer saw record revenues last year and, as of Dec. 31, had more than $22 billion in short-term securities that could be used for dealmaking. But a Seagen acquisition would still be expensive. Following the Journal’s report, Seagen’s share price spiked 12% Monday morning, raising the company’s market value to north of $33 billion.
Regulators may be a barrier as well. The Federal Trade Commission has said it will be more scrupulous when evaluating pharmaceutical mergers and acquisitions, stoking fears across the industry that deals — and, in particular, big buyouts — will be difficult to lock down.
When the Merck-Seagen rumors first arose, analysts questioned whether the FTC would take issue with the companies’ overlapping focus on cancer immunotherapy. Already, some are voicing similar concerns for the potential Pfizer deal, given it, too, has an expansive oncology division, which last year raked in more than $12 billion in product revenue.
"We’d argue FTC risk is potentially more of a headwind” for Pfizer than Merck, wrote Stephen Willey, an analyst at the investment firm Stifel, in a note to clients.
Willey explained that Pfizer and Seagen each have marketed drugs for metastatic urothelial cancer, and these drugs are likely to become — if they aren’t already — the two largest branded products for that specific disease. Therefore, he believes regulators may require Pfizer to divest its drug, Bavencio, should it pursue a Seagen acquisition.
Yet, Stifel analysts argued that such a divestiture likely wouldn’t hinder the deal since Bavencio is far from a top-seller for Pfizer.
Overall, Willey wrote that his team was “admittedly surprised” to see headlines about a potential Seagen sale, especially since the deal talks with Merck seem to have only recently fizzled.
Pfizer, though, has been saying that dealmaking will be essential to its growth. The company anticipates its portfolio of non-coronavirus products will generate anywhere from about $70 billion to more than $84 billion in annual revenue by 2030. And of that total, roughly $25 billion would come from medicines obtained through business development deals.
To that end, Pfizer last year acquired Global Blood Therapeutics for $5.4 billion and Biohaven Pharmaceuticals for $11.6 billion, obtaining marketed treatments for sickle cell disease and migraines. At an industry conference this January, Pfizer CEO Albert Bourla said a mix of small, medium and large deals will be necessary to achieve the company’s goals.