US pharmaceutical company Merck & Co is in advanced talks to take over cancer biotech firm Seagan. The value of the transaction is expected to be at least $40 billion.
Merck and Seagan want to negotiate the deal before the publication of Merck’s financial results, which is on 28 July. Negotiations have been going on for some time, but may still end without an agreement. If the negotiations are successful, it will be one of the biggest transactions in the pharmaceutical sector this year.
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According to sources, the companies are discussing a price above $200 per Seagen share. The company’s stock is still trading at around $177.5, bringing its market capitalization to $32.24 billion, according to Refinitiv. Merck’s market value is now around $235 billion, so we can see how big the difference between the two companies is.
Seagan is a good acquisition for Merck
Analysts at BMO Capital said last month that there is no doubt that Seagen is a good investment for Merck’s long-term growth. Among other things, Merck is known for its cancer drug Keytruda, but that drug’s patent protection expires in 2028, so Seagen could make up for that revenue shortfall with its product. Cowen & Co analysts estimate that Keytruda could account for up to 40% of Merck’s revenue in 2027.
Seagen helped create a pioneering cancer treatment that works like a cruise missile, attacking tumors with toxins. By steering, these drugs, called monoclonal antibody-drug conjugates (ADCs), can maximize the benefits of treatment while minimizing side effects because they don’t get off target. The promising results of these products have attracted the interest of big pharmaceutical companies. They also find it attractive that there is little risk that competitors will develop and sell cheaper generic versions of ADCs.