Talks between Merck and Seagen are heating up as the former looks to buy the latter, according to a report published by The Wall Street Journal.
Kena Betancur/Getty Images
Talks between Merck and Seagen are heating up as the former looks to buy the latter, according to a report from The Wall Street Journal. If the merger-and-acquisition deal did go through, it would likely be a sizable one, since Seagen has a market cap above $32 billion.
This follows last week’s report published by WSJ that stated Merck was exploring purchasing the biotech company.
In September 2020, Merck and Seagen entered into an agreement to co-develop ladiratuzumab vedotincancer, a cancer treatment, with Merck pitching in $600 million upfront and acquiring 5 million shares of Seagen stock for $1 billion. They also have a licensing deal for Tukysa in countries outside the U.S., Canada and Europe, and Merck dropped $125 million upfront for that cancer drug.
Both companies are strong players in the oncology space. Merck’s lead product is its blockbuster anti-PD-1 checkpoint inhibitor Keytruda (pembrolizumab). The drug brought in $17.2 billion in 2021 alone. In the first quarter of this year, Keytruda brought in $4.7 billion, an increase of 23% from the previous year.
Seagen focuses on antibody-drug conjugates (ADCs). These drugs have onco-toxins attached to an antibody that delivers the drugs directly to the tumors. Its best-known drug is Adcetris.
On June 6, Seagen and Genmab announced interim data from the innovaTV 205 trial of Tivdak (tisotumab vedotin) in combination with Keytruda in patients with recurrent or metastatic cervical cancer who have not received previous systemic therapy. The interim data demonstrated a confirmed objective response rate (ORR) of 41% and median durability of response that was not achieved within almost 19 months of median follow-up.
Tivdak is an ADC made up of Genmab’s human monoclonal antibody directed to tissue factor (TF) and Seagen’s ADC technology.
“With Genmab, we will continue to investigate tisotumab vedotin in combination with other therapies because there is still an unmet need for more effective first-line treatment for advanced cervical cancer patients,” Marjorie Green, M.D., senior vice president and head of late-stage development at Seagen, said in a statement. “We’re also researching innovative new tools to help increase awareness of the disparities and unmet needs that cervical cancer patients experience in order to better support this community in the future.”
Although Merck is a powerhouse in the oncology space, it doesn’t really focus on ADCs. It has a significantly larger market cap than Seagen, at about $233 billion. According to Seeking Alpha, Seagen’s shares have risen considerably since the WSJ report, and Wells Fargo analyst Mohit Bansal wrote in a note that the value of a deal would be within the $200-$220/share range.
“The real value to MRK (Merck) is qualitative as SGEN (Seagen) adds durability and diversity to the company beyond Keytruda,” Bansal said in the note obtained by Seeking Alpha.
Although picking up Seagen would certainly beef up its already strong oncology portfolio, Merck is reportedly concerned that regulators might block the deal. The Securities and Exchange Commission has taken a close look at competing products with merging companies, sometimes forcing companies to divest drugs for the deals to go through. For example, in 2020, when AbbVie acquired Allergan, regulators required the companies to divest brazikumab and Zenpep (pancrelipase).
A recent report on the industry by PwC notes that one of the reasons M&A activity has been so slow this year is concern over increased regulatory scrutiny. On the other hand, a driving factor for M&A interest is an increasing number of patent expirations. Although Keytruda is still growing, its patents start to expire in 2028. Keytruda has been approved for a long list of cancer indications, both as a monotherapy and in combination with numerous other cancer drugs.
Amidst all of this, Seagen is undergoing some changes. In May, the company’s president, CEO and board member, Clay Siegall, resigned after domestic violence allegations, which had resulted in a leave of absence earlier in the month. The board is currently conducting a search for a replacement. Meanwhile, Roger Dansey, M.D., the company’s chief medical officer, is acting as interim CEO.
