ALPMF - Why Seagen is a top acquisition target?

2023-03-05 12:00:42 ET

Cancer drugmaker Seagen ( NASDAQ: SGEN ) had reportedly drawn interest from two pharma giants in less than a year, indicating a bidding war not seen since Horizon Therapeutics ( HZNP ) sparked a buyout fight which Amgen ( AMGN ) won in late 2022.

Pfizer ( PFE ) is the latest to sniff at a deal to acquire the biotech, formerly known as Seattle Genetics, The Wall Street Journal reported last week, citing people familiar with the matter.

The news came weeks after Seagen ( SGEN )-linked M&A chatter quietened last year as the company added a new CEO amid reports that pricing disputes ended Merck's ( MRK ) bid to acquire it for as much as $40B.

Similarly, Horizon Therapeutics ( HZNP ) was at the top of M&A news in 2022 as multiple drugmakers were eyeing the rare disease-focused drug developer before Amgen ( AMGN ) struck a ~$28B deal to acquire it in H1 2023.

With nearly $2B annual revenue and an expanding pipeline of antibody-drug conjugates (ADC), Seagen ( SGEN ) has characteristics of a prime buyout candidate, especially for companies like Pfizer ( PFE ) and Merck ( MRK ) looking to make up for their upcoming patent cliffs.

Out of four approved cancer therapies in Seagen's ( SGEN ) portfolio, two, Padcev, and Tukysa, feature in the top ten cancer drugs with blockbuster potential based on projected annualized growth, Evaluate Pharma reported last week, citing sell-side consensus.

The company, with partners Merck ( MRK ) and Astellas ( OTCPK:ALPMF ) ( OTCPK:ALPMY ), is awaiting label expansion for Padcev with Keytruda as a first-line option for certain patients with metastatic urothelial cancer. In late 2022, the FDA accepted its marketing application granting priority review with a target action date on Apr. 21.

Despite buyout interest, Seagen ( SGEN ) ended 2022 with a decline of 17%, underperforming other cancer drugmakers such as Genmab ( GMAB ) and Incyte Corporation ( INCY ), which added ~7% and ~9%, respectively.

However, Wall Street has remained bullish on Seagen ( SGEN ) throughout 2022, even as analysts' ratings on Genmab ( GMAB ) and Incyte ( INCY ) fell.

Meanwhile, Seeking Alpha contributors had mixed views on Seagen ( SGEN ). The author William Meyers issued a Hold rating on the stock in January citing valuation concerns. In contrast, Dan Victor issued a Buy rating in December, arguing that the stock "has not been this "cheap" at any time over the past decade."

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