Pfizer preferred to Merck for Seagen acquisition: SVB analyst

Pfizer’s (PFE) investment in Seagen (SGEN) marks the second time in a year that the cancer-focused biotech has been an acquisition target of a major cancer pharmaceutical company.

Seagen was in talks with Merck (MRK) mid to late last year, but the talks reportedly stalled over a pricing disagreement, according to reports.

The Wall Street Journal announced Pfizer’s interest in the potentially $30 billion or more deal on Sunday. That’s different from Merck’s $40 billion, the company’s market cap at the time.

A potential conflict for the Pfizer deal is Merck’s partnership with Seagen on a therapy, Padcev, in combination with Merck’s blockbuster Keytruda.

SVB Securities analyst Andrew Berens said Pfizer may divest bladder cancer therapy Padcev to avoid antitrust scrutiny. That’s because Pfizer also partners with Seagen, splitting the rights to Bavencio, a therapy used to treat bladder cancer. According to Berens, this could give rise to antitrust concerns.

Both Pfizer and Merck face patent cliffs — Pfizer with a $17 billion loss from patent expirations by 2030, including some in the cancer field. Meanwhile, Merck’s biggest obstacle is keeping its $20 billion blockbuster, Keytruda, patented. Merck is tracking this by changing the recipe and delivery method.

The Pfizer company logo is seen at a Pfizer office in Puurs, Belgium, December 2, 2022. REUTERS/Johanna Geron

The Pfizer company logo is seen at a Pfizer office in Puurs, Belgium, December 2, 2022. REUTERS/Johanna Geron

In June 2022, when the Seagen-Merck deal was first discussed, investor opinion was mixed. While the cancer portfolio made sense, Seagen’s assets would not help solve Merck’s Keytruda problem, SVB analysts wrote at the time.

Instead, SVB sees the Seagen deal as a good option for Pfizer, given that the biotech could generate nearly $11 billion in sales by 2030 based on its current pipeline.

“We believe a potential deal is less complex than the Merck deal discussion and is unlikely to be marred by the same uncertainties,” the analysts wrote.

If it goes through, the acquisition would be Pfizer’s fourth and largest in a year as it continues to leverage its revenue from COVID-19 vaccines and treatments. Pfizer’s cash pile of more than $20 billion has been bolstered by sales to governments and entities worldwide during the pandemic.

In 2022, Pfizer acquired ReViral for $525 million in June and completed acquisitions of Biohaven Pharma for $11.6 billion and Global Blood Therapeutics for $5.4 billion in October.

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