Pharma giant Merck is reportedly eyeing a takeover of embattled biotech Seagen, according to multiple reports that sent SGEN stock flying Friday.
The rumored deal could face regulatory challenges. Both companies make cancer drugs. Merck's biggest is blockbuster Keytruda, an immuno-oncology drug.
Seagen is best known for its drug Adcetris. Adcetris belongs to a class known as antibody drug conjugates and treats blood cancers.
According to the Wall Street Journal, which cited people familiar with the matter, negotiations have been under way for awhile. But a deal isn't imminent and other suitors reportedly are eyeing Seagen as well.
On today's stock market, SGEN stock surged 12.7% to 165.45. Merck stock dipped 0.3% to 84.62.
Confident In Efforts
Bill Smead, chief information officer with Smead Capital Management said, if true, Merck is likely very confident in Seagen's scientific efforts. Merck is one of Smead's top 10 holdings.
"Merck is the premier investor in medical research," he said in an email. "If they are buying Seagen, it is because they have a massive amount of confidence in commercializing Seagen's research and development pipeline."
Representatives of the two companies didn't return requests for comment from Investor's Business Daily.
A potential deal also comes at a challenging time for Seagen, which is looking for a new chief executive after the company's former CEO, Clay Siegall, was arrested on domestic violence charges. He has since resigned. Chief Medical Officer Roger Dansey is acting as the interim CEO.
SGEN Stock: Huge Potential Deal
A deal would be huge. Seagen has a market cap north of $31 billion, as of midday Friday. In fact, SGEN stock is the seventh biggest in IBD's biotech industry group, behind Moderna. Merck has a market cap of roughly $213 billion.
Merck and Seagen are already tied. The companies inked a deal in September 2020 to co-develop and co-commercialize Seagen's drug, ladiratuzumab vedotin. It's in testing for breast cancer and other solid tumors. Merck paid $600 million up front and bought 500 million shares of SGEN stock for $1 billion.
The companies also agreed on a licensing deal for another drug, Tukysa, in countries outside the U.S., Canada and Europe. Merck paid $125 million up front in that agreement.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
