Merck Nears $40 Billion Deal For Cancer Biotech Seagen

"Merck & Co. is in advanced talks to acquire Seagen Inc. and is aiming to finalize a purchase of the cancer biotech in the next few weeks, according to people familiar with the matter, in a deal that could be valued at roughly $40 billion or more.

The companies are discussing a price for Seagen above $200 a share and are seeking to seal a deal on or before the announcement of Merck's fiscal second-quarter earnings, set for July 28, the people said. Seagen shares closed at $175.13 Wednesday.

There is still no guarantee the companies will reach agreement on a takeover deal.

The deal would rank as one of the year's biggest, and it would stand out at a time merger activity has slowed as a result of recent market instability. Takeover volume so far this year in the U.S. is just under $1 trillion, down nearly a third from the same period last year, according to Dealogic, as gyrating stock prices and higher interest rates give deal makers pause.

New Jersey-based Merck has a market value of around $235 billion. Acquiring Seagen would help broaden its lineup of cancer drugs, currently led by the blockbuster immunotherapy Keytruda, the company's top-selling product, with $17.2 billion in sales last year.

It could also help offset the sales blow expected when Keytruda loses patent protection, which analysts expect at the end of this decade. Keytruda could approach 40% of Merck's sales in 2027, Cowen & Co. analysts estimate.

Any proposed deal is expected to draw a close look from antitrust officials, with Cowen analysts recently predicting "a high likelihood" of litigation from the Justice Department or Federal Trade Commission.

Shareholders of both companies have nevertheless reacted positively to the possibility of a tie-up, with both stocks up sharply since The Wall Street Journal first reported on the talks in June.

Seagen helped pioneer a class of cancer therapy that works like a guided missile attacking tumors with toxins. By directing their strike, the therapies, called antibody drug conjugates, can maximize the treatment's benefits while minimizing side effects by not going off-target.

Among Seagen's products are Adcetris, which had $1.4 billion in sales last year. Sales have been rising for Padcev, a drug for urothelial cancers of the bladder and certain other organs that was first approved in 2019. Seagen sells Padcev with Astellas Pharma Inc.

The promise of antibody drug conjugates treating various cancers has drawn the interest of big pharmaceutical companies.

In 2020, Gilead Sciences Inc. paid $21 billion for Immunomedics and its antibody drug conjugate Trodelvy for breast cancer.

Merck was among the companies interested in Immunomedics, the Journal has reported.

Also attractive to drugmakers is the perceived limited risk that rivals could develop and sell lower-cost generic versions of antibody drug conjugates.

Seagen, previously known as Seattle Genetics and considered a prize asset, is seen as ripe for a deal after its co-founder, Clay Siegall, resigned as chief executive and chairman in May following an allegation of domestic violence. The company has said he denied the allegation and informed it he was going through a divorce. Chief Medical Officer Roger Dansey has been acting as interim CEO while the company looked for a replacement.

The largest healthcare deal so far this year in the U.S. is Pfizer Inc.'s $11.6 billion agreement to purchase the rest of Biohaven Pharmaceutical Holding Co. in May." [1]

1. Merck Nears $40 Billion Deal For Cancer Biotech Seagen
Lombardo, Cara; Cimilluca, Dana; Rockoff, Jonathan D. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 07 July 2022: A.1.