Pfizer To Buy Seagen In $43b Cancer Drug Deal

Pfizer has announced its intention to purchase Seagen for a whopping $43 billion in order to further its reach in the field of cancer treatment. The pharmaceutical giant hopes to leverage Seagen’s biotech expertise and technology to develop novel cancer treatments that specifically target tumor cells while preserving surrounding healthy tissue.

According to a statement released on Monday, March 13, the Manhattan-headquartered drug maker plans to pay $229 for each Seagen Inc. share. That denotes a 32.7 percent premium over Seagen’s closing share price last Friday, prior to the announcement of the definitive merger agreement.

Seagen’s stock rose sharply from $172.61 to close at $200 a share when the markets opened on Monday for early trading, although still slightly under the premium offer price. The shares of Pfizer, which has secured $31 billion in long-term debt plus a mix of existing cash, windfall from its BioNTech Covid-19 vaccine, and short-term financing to foot the bill, ticked up by 1.2 percent to $39.86.

What Seagen brings to Pfizer’s fold

Seagen blockbuster purchase is the biggest acquisition deal Pfizer has marshaled since spending a record-shattering $68 billion in 2009 to buy then its arch-rival drug manufacturer Wyeth. It’s also the most noteworthy recent pharma acquisition by value since Allergan’s $63 billion buyout by AbbVie in 2019.

On an analyst call, Pfizer’s CEO and Chairman Albert Bourla said that the pharmaceutical company intends to provide more resources to Seagen to enable them to continue innovating while partnering with them. He further indicated that Pfizer is planning to pool resources with the biotech firm to achieve their goal of enhancing innovation in cancer treatment.

Bourla likened Pfizer’s massive deal to “acquiring the goose [that lays] golden eggs,” and it’s easy to understand why. 

Seagen brings plenty to the table, including a trove of four best-in-class, FDA-approved cancer therapies that bring in a combined $2 billion yearly sales. It also has a robust R&D pipeline that has taken three new drugs — TIVDAK® (tisotumab vedotin), PADCEV® (enfortumab vedotin), and ADCETRIS® (brentuximab vedotin) — through FDA approval in the last three years alone.

The acquisition will help Pfizer diversify and expand its already notable presence in the field of cancer treatment. It’ll be able to compete on the high-end of the oncology spectrum with market leaders like Moderna and Vertex Pharmaceuticals while keeping in check with mid-tier and lower-tier players like BioMarin Pharmaceutical, Alnylam Pharmaceuticals, and Incyte.

“Together, Pfizer and Seagen seek to accelerate the next generation of cancer breakthroughs and bring new solutions to patients by combining the power of Seagen’s antibody-drug conjugate (ADC) technology with the scale and strength of Pfizer’s capabilities and expertise.,” commented Albert Bourla in a statement accompanying the purchase press release.

Perhaps of immediate importance to Pfizer is that the merger will give the New York City-based pharma company complete control of Adcetris. This leading lymphoma drug rakes in more than $1.3 billion in worldwide sales each year.

Seagen pioneered and currently specializes in antibody-drug conjugates (ADC), a nascent biotechnology it has been enhancing since it was founded in the late 1990s. ADC is a class of cancer therapies centered around monoclonal antibodies, which are lab-created proteins that obliterate cancerous cells yet spare surrounding healthy tissue.

A third of the dozen ADC cancer therapies currently approved by the FDA and marketed to consumers use Seagan’s technology.

The Bothell, Washington-headquartered drug maker is well-known for incorporating artificial intelligence, machine learning, and other disruptive technologies to improve its ADC technology. It has a handful of medications under development, including potential therapies for advanced breast cancer and a form of lung melanoma.

Seagen already has a co-marketing agreement with Array BioPharma — a Pfizer subsidiary — for Tukysa, a cancer treatment for breast and colorectal cancers. The partnership has contributed significantly to Seagen’s revenue stream, with Tukysa adding a whopping $353 million to the company’s bottom line in 2021 alone.

Focus on cancer treatments

Seagen’s primary product, Adcetris, is utilized to cure lymph system cancers, with a revenue of $839 million last year, indicating a 19% growth rate from the previous year.

Apart from Adcetris, Seagen has partnered with Pfizer’s Array BioPharma to develop, produce, and market Tukysa, a breast and colorectal cancer therapy that generated $353 million in sales last year.

Seagen’s sales of Padcev, a urinary tract cancer medication, rose by 33% to $451 million last year. The drugmaker, in collaboration with Astellas Pharma Inc., develops and sells the medication.

Seagen anticipates about $2.2 billion — the majority of which is expected to stream in from its FDA-approved cancer therapies — in revenue this year, reflecting a 12% uptick.

While Pfizer reported a total revenue of $100 billion last year, the sales of its COVID-19 vaccine and treatment, Comirnaty and Paxlovid, have resulted in a massive cash surplus.

Analysts doubt if Pfizer’s purchase of Seagen is worth the price tag

Pfizer currently boasts a diverse range of cancer drugs, including those specifically designed for treating breast and genitourinary tumors, which are the same types of cancer targeted by Seagen’s treatments. Should the acquisition go through, Pfizer’s portfolio of experimental drugs would double, significantly increasing its early-stage drug pipeline.

Pfizer is optimistic that the deal will result in an immediate revenue boost and will be earnings per share neutral to slightly accretive in the third or fourth year after the acquisition is finalized.

Despite Pfizer’s expressed interest in acquiring Seagen, some analysts remain skeptical about whether such a large deal is worthwhile. Credit Suisse’s team reported that investors they recently spoke with said that Pfizer had better ways of spending its Covid-19 vaccine windfall.

Pfizer recent acquisitions fueled largely by fear of patent expirations

Pfizer is continuing to expand its portfolio through acquisitions. Its CEO, Bourla, has announced that the company aims to generate an incremental revenue of $25 billion by 2030 through strategic purchases.

Pfizer has already made significant investments in companies such as Biohaven Pharmaceutical, a developer of migraine treatments, and Global Blood Therapeutics, a maker of sickle cell disease treatments. It also acquired Arena Pharmaceuticals for $6.7 billion.

To maintain its financial growth, Pfizer plans to launch 19 new products or indications for existing products over the next year and a half. However, the company faces the loss of revenue due to the expiry of patents that protect drugs like Ibrance from competition from cheaper generic alternatives.

To fund its latest acquisition, Pfizer will take on $31 billion in new, long-term debt. The deal, which has been approved by the boards of both companies, awaits regulatory approval and a vote from Seagen shareholders.

Assuming the necessary approvals, the duo expects to finalize the acquisition in late 2023 or early 2024.

Seagen: A pharma company in transition

Seagen has been navigating a transitional phase where it has been attempting to translate its approved cancer drugs into steady profits. However, the last year has been a mixed bag for the Seattle-based drug maker, marked by both successes and setbacks. 

While it recorded positive outcomes for one of its approved medications, Padcev, which is used to treat bladder cancer, it also lost a crucial arbitration decision regarding drug royalties. These events led to a protracted period of negotiations with Merck regarding the acquisition.

Despite these developments, Seagen’s management has regained its footing after the founder and longtime CEO, Clay Siegall, was arrested for alleged domestic violence in April 2022. 

Siegall stepped down from his position, and in November, the company appointed David Epstein, a former Novartis executive, as his successor.