With $43B buyout, Pfizer sees cancer specialist Seagen as a 'goose' laying 'golden eggs'

Scoring two of the three largest M&A deals in biopharma last year was just an appetizer for Pfizer. On Monday, the industry giant sat down to the main course, gobbling up Seattle cancer specialist Seagen for $43 billion.

It is the largest acquisition in biopharma since June of 2019, when AbbVie acquired Allergan for $63 billion. Five months before that, Bristol Myers Squibb pulled off the biggest transaction in industry history with its $74 billion purchase of Celgene.

Seagen, long considered one of the world’s most attractive biotech targets, brings four commercial medicines and a deep pipeline full of antibody-drug conjugate (ADC) candidates.

The company hit $2 billion in revenue last year, a 25% increase from 2021. Pfizer said that it expects the products brought by Seagen to bring $10 billion in annual revenues by 2030, with growth beyond that because of its rich pipeline.

“We are not buying the golden eggs,” Pfizer CEO Albert Bourla said on a conference call on Monday. “We are acquiring the goose that is laying the golden eggs.”

Bourla added that the combination of the two companies' strengths will allow for more potential oncology breakthroughs and accelerate their progress to the market. The merger also will boost their marketing capabilities, he said.

“The potential go-forward U.S. commercial infrastructure of the two companies would be three times the size of Seagen,” Bourla said.

Pfizer agreed to pony up $229 per share, a 33% premium on Seagen’s share price at close on Friday and a 40% increase on the price before rumor of a deal circulated two weeks ago.

The companies expect the transaction to wrap up at the end of this year or early next year. The acquisition will likely be closely scrutinized by the Federal Trade Commission, which has pledged to conduct more oversight of biopharma mergers.

Flush with cash after scoring a record $100.3 billion in revenue in 2022—fueled by sales of its COVID-19 products Comirnaty (vaccine) and Paxlovid (oral antiviral)—Pfizer was primed to make a major deal.

The company has been very active on the M&A trail since 2021, when COVID money started flowing in. In that year, Pfizer snapped up cancer specialists Arena Pharmaceutical for $6.7 billion and Trillium Therapeutics for $2.3 billion. In May of last year, Pfizer stepped up its game with an $11.6 billion buyout of migraine pioneer Biohaven. Three months later, Pfizer paid $5.4 billion for sickle cell specialist Global Blood Therapeutics, outbidding Johnson & Johnson.

Pfizer’s most recent purchase comes after much speculation last year about a potential buyout of Seagen by Merck, said to be in the $40-billion range. But the parties could not agree on a price, Bloomberg reported in August.

Rumors of that potential acquisition swirled shortly after the resignation in May of Seagen co-founder, chairman and CEO Clay Siegall, following a domestic violence arrest. In November, Seagen appointed Novartis oncology veteran David Epstein as its new CEO.

As for the concern over FTC scrutiny, there would have been considerable overlap between Merck and Seagen. There is less between Pfizer and Seagen, but enough to warrant examination, according to a note from Evercore ISI analyst Josh Schimmer. Both companies have bladder cancer drugs, assuming Seagen’s Padcev wins an approval in the indication next month, Schimmer noted.

Several other companies however also treat bladder cancer including Merck with Keytruda, Bristol Myers Squibb with Opdivo and Astellas, which teams with Seagen, on Padcev, Schimmer added.

“Blocking this deal would set a new precedent in biopharma which would reverberate across the industry,” Schimmer wrote.

Seagen's four commercial products are Adcetris, Padcev, Tukysa and Tivdak, which together generated $1.7 billion last year. The foursome will bring in $8 billion annually by 2030, Pfizer estimates, with an additional $2 billion-plus expected to come from pipeline products.

"I'm confident that this is the right time for Seagen to come together with Pfizer and benefit from each other's strengths," Epstein said. "Pfizer's footprint in clinical development, manufacturing and commercial oncology medicines will allow globalization of Seagen's products on a scale previously unattainable."