In the ongoing saga of whether Merck will acquire formidable biotech Seagen, the companies have scheduled a meeting this week, sources told The Wall Street Journal on Thursday.
Others are eyeing the Seattle firm, people have told the WSJ, but none of those companies have been identified.
Merck already has extensive ties to the 25-year-old company, which is reeling after the recent domestic abuse arrest and departure of founder and CEO Clay Siegall.
Two years ago, Merck paid $1 billion to acquire 5 million shares in the company and shelled out another $600 million upfront for Seagen’s LIV-1-targeting antibody-drug conjugates including ladiratuzumab vedotin.
A deal to acquire the company would be pricey. Seagen’s market cap sits at $32 billion. But Merck has the wherewithal to pull it off. The company opened the year with $8.5 billion in cash holdings and with “high flexibility” for M&A, according to Moody’s Investors Service.
The company has repeatedly made its business development ambitions clear to stave off investor fears of a coming patent cliff for mega-blockbuster Keytruda, which raked in sales of $17.2 billion last year, accounting for 35% of Merck’s revenue.
But one potential stumbling block to a deal could be the Federal Trade Commission’s (FTC's) increased scrutiny on pharmaceutical mergers. In March of last year, the FTC revealed it had established a working group to examine the potential anticompetitive behavior arising from acquisitions. The findings have not been released but there is some belief in the industry that large deals will be tough to pull off.
Aside from the size of the deal, a merger between two cancer-focused companies could be problematic. Merck already has teamed up with Seagen on breast cancer drug Tukysa, pairing it with Keytruda. Merck also holds the rights to Tukysa in Asia, Latin America and the Middle East.
As an alternative, the companies could opt for a marketing deal, some have told the WSJ.
Early this week, SVB Securities projected that a deal for Seagen could be for $39.5 billion, but didn’t speculate on its likelihood. Such a deal price would work out to be $215 per share. On Friday, shares were trading at $174.
SVB also pointed out that Seagen’s commercial cancer drugs, which produced revenue of $1.39 billion in 2021, could reach sales of $6.41 billion by 2026.