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Pfizer’s
PFE,
proposed acquisition of Seagen
SGEN,
which develops cancer treatments, for $43 billion indicates that the legacy drugmaker is focused on shoring up its oncology business.
Pfizer said Monday it plans to pay $229 per share in cash for Seagen, whose stock soared more than 15% in trading on Monday afternoon. Pfizer’s shares gained about 1.7%.
“[Seagen’s] marketed products and pipeline fit well with [Pfizer’s] oncology portfolio in breast cancer, genitourinary, and [hematology] indications,” SVB Securities analyst David Risinger told investors on Monday morning, later noting: “[Seagen’s] pipeline program SGN-B6A adds interesting optionality in lung cancer, a market in which [Pfizer] has limited exposure.”
It seems the deal makes sense for both companies. Seagen has been viewed as a target ever since media outlets reported last July that Merck was considering buying the company for about $40 billion. (Merck reportedly balked at Seagen’s price tag.) Pfizer, on the other hand, is smarting from several downgrades to its stock earlier this year. The Wall Street view is that the company’s pipeline opportunities aren’t mature enough to make up for rapidly declining revenues in its COVID-19 franchise. A deal that repositions Pfizer as a leader in cancer care could change that narrative.
“With COVID-19, we chose the right mobile technology — mRNA — and the right partner — BioNTech
BNTX,
— and then applied the scale and power of Pfizer’s capabilities to deliver solutions for patients worldwide,” Pfizer CEO Albert Bourla told investors during a call on Monday. “We can do this again with cancer by using another novel technology.”
Pfizer’s oncology portfolio brought in $12.1 billion in 2022, down from $12.3 billion in 2021. Its top-selling cancer drug is Ibrance, a breast-cancer treatment that brought in $5.1 billion in sales last year. The company told investors it has 33 cancer programs in clinical development.
Seagen, which reported $1.9 billion in revenue from four products last year, is expected to add $10 billion in risk-adjusted revenues to Pfizer’s balance sheet in 2030. “We expect Seagen’s revenue to grow at a brisk pace over the next few years,” S&P Global Ratings analysts said Monday.
The boards at both companies have approved the deal, which is expected to close later this year or in early 2024. Analysts expect some regulatory pushback, however, notably in the bladder-cancer space. Pfizer markets Bavencio, while Seagen is set to get a Food and Drug Administration decision on Padcev as a first-line bladder cancer treatment by April 21.
Pfizer’s stock is down about 22% so far this year, while Seagen’s shares have rallied 55.7%. The S&P 500
SPX,
is up 1% year to date.
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