According to the Wall Street Journal, drug manufacturing giant Merck & Co. will buy renowned biotech business Seagen in a huge move in the international pharma sector. The massive transaction could be worth up to $40 billion.
Seagen, known for its cancer-focused approach, might fetch more than $200 per share. Seagen’s stock closed at $175.13 just hours after the news emerged. Even today, Merck’s stock is up 0.53 percent, while the biotech firm’s price is down 0.93 percent.
When could this multi-billion dollar Merck and Seagen deal take place?
Though it is not definite, both parties are seriously considering reaching an agreement on or before July 28, when Merck’s second-quarter earnings will be released. With the threat of more regulatory scrutiny looming over Merck, it remains to be seen if the proposed acquisition of the Seattle-area biotech can finally sail through.
Previously, such a shift may have materialized without much ado under the previous Federal Trade Commission (FTC), but the ecosystem has changed dramatically. When asked to comment on Merck’s billion deal news, both FTC Chairwoman Lina Khan and Justice Department antitrust chief Jonathan Kanter indicated a harsher stance, which they want to make apparent to the broader healthcare industry.
A recent study from Brigham and Women’s Hospital reveals that the median price of a new drug has skyrocketed from around $2,000 in 2008 to about $180,000 in 2021, driving annual spending on prescription drugs in the U.S. to more than $500 billion. At an event organized by the FTC and the DOJ last week, FTC Commissioner Rebecca Kelly Slaughter commented, “When mergers diminish competition in pharmaceutical markets, the result is higher prices, which can have a devastating effect on patients.”
The two companies, which have already collaborated to find the possible antidote to breast cancer, are scheduled to meet this week to make this blockbuster deal happen.
How does it stand now?
Currently, the New Jersey-based Merck & Co. stands tall in the pharma industry with a market value of around $235 billion. On the other hand, the Washington state company is quite a name in the field of cancer drug research. Right now, Seagen’s market capitalization stands at more than $30 billion.
To what extent could this deal affect Merck’s growth and why is it going all guns blazing?
Merck, a major player in oncology, has plenty of reasons to shell out big bucks to acquire Seagen—
Merck’s highest-grossing cancer drug, Keytruda, which fetched the big gun $17.2 billion last year, is set to lose its patent shield within the next few years. According to Cowen & Co. analysts’ estimates, Keytruda could account for up to 40% of Merck’s sales by 2027.
Seagen happens to be a pioneer so far as cancer drugs are concerned, with three approved drugs in its prized possession, of which Adcetris clocked $1.4 billion in sales last year.
Due to an array of factors like market volatility and Russia’s war in Ukraine, deal volumes are down by 20% globally. Hence, Merck seems to strike the iron when it’s hot.
Seagen is going through a topsy-turvy situation following the resignation of its co-founder, Clay Siegall, from the posts of chief executive and chairman due to alleged domestic violence.
What does it mean for the pharma world?
If the Merck and Seagen deal sees the light of the day, then it might initiate the monopoly of Merck, as the renowned healthcare strategist at Oppenheimer, Jared Holz, fears that the high-profile healthcare deal would magnify Merck’s “prowess in the category and, in so doing, almost force” people to buy its drugs for cancer treatment. We will keep a close watch on how this ‘Merck to buy Seagen’ thriller unfolds and offer exclusive updates.
