Seagen Could Be the Deal Pfizer Investors Have Been Craving

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Pfizer Inc. is reportedly working on a deal that could finally satisfy investors’ cravings for a big acquisition. Last night, the Wall Street Journal reported that the pharma company is in very early talks to acquire Seagen Inc. for more than $30 billion, a deal that would instantly add four approved cancer drugs to its portfolio.  

Pfizer isn’t Seagen’s first suitor. Merck & Co. spent much of last summer trying to iron out a deal with Seagen, one reportedly worth as much as $37 billion. But as Bloomberg first reported, talks stalled in late August as the companies failed to come to terms on a price. Today’s news sent shares of Seagen up by as much as 13%.

But maybe Pfizer has what it takes to actually get the deal done. Or maybe this is the start of a healthy competition for a company that is widely considered one of the key acquisition targets in the industry. Seagen is a leader in antibody-drug conjugates, therapies that use an antibody to deliver powerful chemotherapy directly to cancer cells.

Pfizer certainly has the motivation to do the deal. The big pharma firm has been under pressure from investors to spend its huge pile of Covid cash.

The company has also repeatedly vowed to bring in $25 billion in new revenue by 2030 to combat an onslaught of patent expirations that could hit revenues hard between 2025 and 2030. That’s been driving a number of Pfizer’s acquisitions since late 2021: The company paid $11.6 billion for migraine drug-focused Biohaven Pharmaceutical Holding Co., $5.4 billion for sickle cell treatment-maker Global Blood Therapeutics Inc., and $6.7 billion for Arena Pharmaceuticals Inc., and made a series of smaller deals related to mRNA and gene editing technologies.

Seagen would provide a much bigger bite out of that $25 billion goal. The company has four approved products, and while its 2022 revenues came in just shy of $2 billion, stock analysts expect annual sales to reach over $7 billion by 2028.

Seagen’s antibody-drug conjugates increasingly appear viable in a wide range of cancers. What’s more, the complexity of manufacturing these drugs make them much more resistant to competition from generics. Antibody drugs already tend to hold their own against biosimilars; that likelihood rises even further when you factor in the difficulty of consistently tethering the right number of chemo molecules onto the antibody.

The wild card now is whether Merck — or anyone else — will step in to make it a bidding war.

As I wrote when last summer’s talks with Merck were underway, Seagen’s technology could potentially be a nice complement to Merck’s existing oncology portfolio, which is dominated by the cancer immunotherapy Keytruda. And Keytruda and Seagen’s Padcev work well together as a bladder cancer treatment — one the Food and Drug Administration is expected to approve in April.

But in the months since Merck and Seagen’s talks fell apart, a different potential partner for Keytruda has emerged. In December, Merck and Moderna Inc. reported very early, but very promising data showing that combining Keytruda with Moderna’s personalized cancer vaccine significantly lowered the chances that skin cancer would return or that patients would die.

At the time, Moderna’s Chief Executive Officer Stephane Bancel suggested that the combined effect of the two treatments could be meaningful across many types of cancers, noting that “anywhere Keytruda works, this should work.” There’s even hope that the vaccine could give Keytruda the juice to work in cancers where it has failed to have an effect on its own.

That broad-brush scenario is still a distant dream. Merck and Moderna are moving quickly into late-stage studies of the vaccine-immunotherapy combo, but even if the science falls into place, there are still plenty of commercial hurdles. Personalized vaccines are very hard to make at scale — and are likely to be extremely expensive. In other words, an antibody-drug conjugate portfolio (at the right price) could still be on Merck’s wish list.

Whether that combination would stand up to Federal Trade Commission scrutiny is another question. That’s a place where Pfizer has a clear upper hand. Seagen and Pfizer’s oncology approaches do not have strong overlap, and analysts see few regulatory barriers to getting a deal done.

But none of this accounts for another potential barrier: whether Seagen will give up its independence. CEO David Epstein, appointed in November, recently told Bloomberg the company was looking to do some deal-making of its own to build on its already strong growth.

Given that Pfizer has been (thankfully) discriminate in how it spends its Covid windfall, the risk of overpaying to try to get Seagen on board seems low. All of this might come down to whether Seagen wants to continue building something that stands on its own.

More From Lisa Jarvis at Bloomberg Opinion:

• Cancer Vaccine Hunt Makes Progress, Finally

• A Refreshing Gamble on Crispr Delivery

• CDC Report on Teen Mental Health Is a Red Alert

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Lisa Jarvis is a Bloomberg Opinion columnist covering biotech, health care and the pharmaceutical industry. Previously, she was executive editor of Chemical & Engineering News.

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