Seagen (SGEN) shares powered higher Thursday following a report from the Wall Street Journal that it's in advanced takeover talks with drugmaker Merck & Co. (MRK) that could value the cancer specialist at around $40 billion.
The Journal said Merck and Seagen are looking towards a $200 per share price for the Bothell, Washington-based group, and hope to unveil a deal prior to Merck's second quarter earnings report, which is due on July 28. Analysts suggest the loss of patent exclusivity on its blockbuster cancer treatment Keytruda in 2028 is driving the group's near-term need for a revenue replacement.
"Biosimilars could enter the market from 2028 onward, which poses a potential turning point for Keytruda given that it continues to generate sales growth," said Daiwa Capital Markets analyst Narumi Nakagiri. "With Keytruda markets attractive, we expect many firms to attempt development of biosimilars. If market entry looks feasible around the time primary patent expire in 2028, a growing number of firms may be poised to launch Phase 3 trials from the mid-2020s."
Seagen shares were marked 5.35% higher in pre-market trading to indicate an opening bell price of $184.50 each while Merck shares fell 1.8% to $91.48 each.
Last year, Merck's larger rival, Pfizer (PFE), paid $2.3 billion for immuno-oncology specialists Trillium Therapeutics TRIL as it expanded its cancer-related portfolio, with Gilead Sciences paying $21 billion for cancer treatments specialists Immunomedics Inc. IMMU in 2020.
Scott Gottlieb, the former Commissioner of the U.S. Food & Drug Administration, told CNBC Thursday that the Seagen/Merck deal could come under the scrutiny of the Federal Trade Commission, which could demand certain divestments in order to complete any potential takeover in the burgeoning bio-pharmaceutical sector.
Keytruda sales surged 23% from last year to $4.8 billion over the three months ending in March, Merck reported in late April, helping it post stronger-than-expected first quarter earnings and boost in its full-year profit guidance.
Looking into 2022, Merck said it sees full-year non-GAAP earnings in the range of $7.24 to $7.36 per share, up from its prior forecast of $7.12 to $7.27 per share, with revenues of molnupiravir -- the Covid antiviral pill developed with Ridgeback Theraputicis -- of between $5 billion and $5.5 billion.
