Merck in talks over $40bn deal for cancer biotech SeaGen

Merck & Co is in talks to buy the cancer biotechnology company SeaGen for about $40bn, according to two people familiar with the matter.

The New Jersey-based pharmaceutical company has offered around $200 per share for SeaGen, one of the people said, a 15 per cent premium on Wednesday’s close. There is no guarantee that the companies will agree to a deal.

The US drugmaker needs to refill its pipeline as it prepares for its mega blockbuster cancer drug Keytruda to lose patent protection by the end of the decade.

SeaGen — formerly known as Seattle Genetics — has four approved oncology treatments. It is studying their effectiveness against different forms of cancer and in a variety of combinations to try to expand the number of potential patients. It has a dozen other drug candidates in trials.

Shares in SeaGen have risen 47 per cent since its chief executive Clay Siegell resigned in May, after he was arrested on charges of domestic violence. He denied the allegations.

Investors have been anticipating that the management team might be more willing to sell after the departure of Siegell, who helped start the company 24 years ago.

Analysts have been predicting a boom in biotech M&A since a sharp sell-off in the sector since late last year. They believe that large drugmakers, which are sitting on huge piles of cash and needing to restock their pipelines, will be tempted by lower valuations.

But many pharmaceutical companies are still wary of taking big bets on riskier early stage companies, making SeaGen’s approved drugs an attractive asset. In the first quarter, SeaGen’s total net product sales rose by 27 per cent year-on-year to $383mn and it forecasts full year total revenue of about $1.7bn. 

In 2020, Merck took a $1bn stake in SeaGen, as part of a deal to co-develop an antibody-based drug for breast cancer and other solid tumours and to license another drug for cancers that overexpress the HER2 gene. SeaGen also recently signed a partnership with French drugmaker Sanofi and has agreements with Takeda and Bristol-Myers Squibb among others.

SeaGen declined to comment. Merck did not respond to a request for comment.

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