Merck eyes Seagen purchase amid quest to diversify from star cancer drug Keytruda: WSJ

Merck & Co. already owns a stake in antibody-drug conjugate specialist Seagen. But now, the New Jersey pharma appears to want the whole thing.

The deal, as reported by The Wall Street Journal citing people familiar with the matter, would be a large one given Seagen’s recent market value at about $28 billion. News of the possible transaction sent Seagen’s stock up some 16.6% Friday morning, and the company’s market cap sits at around $31.5 billion by publication time.

Merck and Seagen have been talking about the possibility for some time, and a deal isn’t imminent, the people told WSJ. The two could eventually opt for a marketing collaboration instead, some of those people told WSJ.

Merck may not be the only suitor, with others also eyeing the cancer-focused biotech, some of the people told WSJ.

Through a 2020 deal, Merck acquired 5 million shares of Seagen for $1 billion. The Big Pharma company also paid $600 million upfront for the biotech’s LIV-1-targeting antibody-drug conjugates (ADCs) including the most advanced ladiratuzumab vedotin.

Beyond those, the two companies have inked several other partnerships. They teamed up on Seagen’s HER2 small molecule drug Tukysa, including pairing it with Merck’s PD-1 inhibitor Keytruda. Merck also holds Tukysa rights in Asia, the Middle East and Latin America.

What’s more, Seagen and partner Astellas are also their nectin-4-directed ADC Padcev with Keytruda in bladder cancer.

But Merck and Seagen’s shared cancer ambition could create an antitrust problem. WSJ’s people also cautioned that such a combination could be difficult to pull off given heightened regulatory risks.

The U.S. Federal Trade Commission is tightening its review of large pharma M&As. The antitrust watchdog signaled that it will move away from simply looking at specific product and pipeline overlaps and look more broadly at pharma market concentration and past anti-competition practices.

For Merck, it’s under investor pressure to diversify from the forever growing Keytruda, which contributed 35%, or $17.2 billion, to Merck’s total sales in 2021. The company did make some smaller purchases and one relatively large acquisition last year, shelling out $11.5 billion to take in Acceleron Pharma, gaining control of a promising pulmonary hypertension candidate.

Recently, at the ongoing BIO 2022, Merck’s Jannie Oosthuizen, head of U.S. Human Health, told Fierce Biotech that the company is looking at deals where it can “add significant value to the system.”

“It really does continue to be broad, focused cutting-edge science that is innovative, that will produce value, and that will really help to build out the pipeline for the future,” Oosthuizen said.

“A lot of it has been done in oncology. Clearly, that's where we focused a lot over the last few years. We continue to do that.”

Based on its existing portfolio, with Keytruda front and center, Merck is targeting over 80 potential oncology approvals by 2028, Oosthuizen said during a recent investor event.

As for Seagen, the Seattle area biotech is in the process of a CEO transition. Co-founder Clay Siegall recently stepped down after he was arrested and charged with domestic abuse. Chief medical officer Roger Dansey, M.D., is acting as interim CEO as the company searches for a permanent replacement.

Editor's Note: Max Bayer also contributed to the reporting.