Pfizer Inc. is purchasing cancer-drug maker Seagen Inc. for an enterprise value of $43 billion, using the biggest deal of the year to set its course out of the pandemic and back into mainstream pharma.
Pfizer will pay $229 a share in cash for Bothell, Washington-based Seagen, according to a statement Monday, about a third more than the drugmaker’s closing share price Friday. It expects the deal to close late this year or early 2024.
Seagen shares rose 16% in premarket trading as of 11:31 a.m. in New York, bringing its market value to $37.5 billion. New York-based Pfizer rose 2.5%. Through Friday’s close, Seagen had gained 34% since the year began.
The acquisition is by far the biggest takeover of this year, during which overall dealmaking has been down by more than 50%, according to M&A data compiled by Bloomberg. It shows how Big Pharma still has the appetite and firepower for deals, even as the collapse of SVB weighs on the short-term outlook for takeovers.
Other health-care deals Monday demonstrated the sector’s resilience as French drugmaker Sanofi agreed to buy Provention Bio Inc. for $2.9 billion and Cinven offering to take Synlab AG private. CVS Health Corp. last month agreed to buy Oak Street Health Inc. for $10.6 billion, the second biggest deal so far this year.
Antibody drugs
Seagen is a leader in developing a type of medicine called antibody-drug conjugates, or ADCs. These precision medicines deliver cancer-killing drugs so potent they might otherwise be too toxic to use. The delivery mechanism uses antibodies to deposit a strong concentration of drug directly at a tumor site, which may increase efficacy with fewer side effects. Seagen’s portfolio will double Pfizer’s pipeline of early-stage experimental cancer therapies, the company said.
Pfizer has been under pressure to show it can capitalize on its COVID-19 windfall, after vaccine revenue almost doubled its sales in a single year. While the Seagen deal is smaller than some of Pfizer’s megadeals of the past, it’s a bid for an expanded platform in a field, oncology, that will be the industry’s biggest growth market, Chief Executive Officer Albert Bourla said Monday.
“We think this really changes dramatically the oncology presence of Pfizer and makes it one of a kind,” Bourla said on a call with analysts. “We aren’t acquiring the golden eggs, we are buying the goose that lays the golden eggs.”
The acquisition caps months of takeover speculation for Seagen after Merck & Co. targeted the company last year. Talks with Merck stalled over price, according to people familiar with the matter. Suitors saw the potential for a takeover after the resignation of Seagen’s co-founder and former CEO, Clay Siegall, who had opposed a sale, people familiar with the matter have said.
Deal premium
“This development adds a potentially closing chapter to the events over the last year,” Gregory Renza, a New York-based analyst with RBC Capital Markets LLC, wrote in a note to investors. The premium Pfizer is paying validates Seagen’s ADC platform, Renza said.
Pfizer expects to finance the purchase substantially through $31 billion of new, long-term debt, and the balance from a combination of short-term financing and existing cash, according to the statement. Seagen is expected to contribute more than $10 billion in risk-adjusted revenue by 2030.
The Federal Trade Commission will likely conduct an in-depth review of the takeover for any potential anti-trust concerns, which will take up to eight months, Bloomberg Intelligence analyst Jennifer Rie said.
Pfizer’s financial adviser for the transaction is Guggenheim Securities LLC. Centerview Partners LLC is serving as Seagen’s financial adviser and provided a fairness opinion to Seagen’s board. MTS Health Partners also provided financial advice to Seagen.
(With assistance from Dinesh Nair.)
