Merck & Co., Inc. ( MRK Quick Quote MRK - Free Report) has been engaged in advanced talks with Seagen Inc. ( SGEN Quick Quote SGEN - Free Report) for potentially buying out the latter, per a Wall Street Journal (“WSJ”) article.
If the deal goes through, it will boost Merck’s oncology portfolio, led by its blockbuster PD-L1 inhibitor, Keytruda, which is already approved for treating several types of cancer indications.
Per the reports, Merck and Seagen are actively looking to seal the deal before or alongside MRK’s second-quarter earnings scheduled on Jul 28, before the opening bell. The WSJ article suggests that both companies are discussing to value Seagen above $200 per share, estimating SGEN at nearly $40 billion or even higher.
If the rumors are true, the deal will attract the attention of antitrust regulations. Considering the size of both the companies, there is a high probability that the deal will invite regulatory challenges from the Federal Trade Commission and the Justice Department.
Both Seagen and Merck are yet to confirm the validity of the news through a formal statement. There is no guarantee that Merck would make a potential buyout offer.
Merck’s stock price has rallied 21.5% this year so far in comparison with the
industry’s 5.2% rise. Image Source: Zacks Investment Research
Shares of Seagen have risen 13.3% so far this year against the
industry’s decline of 21%. Image Source: Zacks Investment Research
The rumors of the acquisition of Seagen by Merck have been floating for quite some time. Last month, WSJ had reported that a strategic or a marketing agreement between SGEN and MRK was looking
more likely than a complete buyout of the former.
Seagen boasts a strong portfolio of cancer drugs as well. A deal is likely to ensure a diversified and broader customer base for the company as it would include Merck’s market expertise and superior global presence.
SGEN currently markets four cancer drugs — Adcetris, Padcev, Tukysa and the newly approved Tivdak. In the first quarter of 2022, Seagen recorded total revenues of $426.5 million, which increased 28.4% year over year.
All these drugs have witnessed strong uptake so far, with Adcetris being the majority contributor to Seagen’s top line. The drug has been approved by the FDA for six cancer indications to treat Hodgkin lymphoma and T-cell lymphoma in various settings, including frontline therapy.
Several label expansion studies on Adcetris, Padcev, Tukysa and Tivdak are currently underway, wherein an approval is likely to drive sales further in 2022 and beyond.
The acquisition of Seagen could help Merck prepare when Keytruda loses patent protection, which is expected to occur with the onset of the next decade.
Currently, Keytruda is a strong revenue driver for Merck. In first-quarter 2022, MRK recorded $4.8 billion from Keytruda sales, which constituted around 30% of its total revenues. This contribution is further expected to increase as Merck is also evaluating Keytruda in clinical studies for more than 30 types of cancer, either as monotherapy or in combination with other drugs.
Seagen already has a collaboration deal with Merck, with the latter co-funding the Tukysa global development program. In addition, Seagen’s Padcev, in combination with Merck’s Keytruda, is being investigated in phase III studies for treating muscle-invasive bladder cancer.
Seagen and Merck are also co-developing ladiratuzumabvedotin, which is also currently being evaluated in early-to-mid-stage studies, both as monotherapy and in combination with other agents for treating metastatic breast cancer and other LIV-1-expressing solid tumors.
Zacks Rank & Other Stocks to Consider
Both Merck and Seagen currently carry a Zacks Rank #2 (Buy). A couple of other top-ranked stocks in the overall healthcare sector are
Novo Nordisk ( NVO Quick Quote NVO - Free Report) and Sesen Bio ( SESN Quick Quote SESN - Free Report) . While Sesen Bio sports a Zacks Rank #1 (Strong Buy), Novo Nordisk carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here .
Estimates for Sesen Bio’s 2022 bottom line have declined from a loss of 46 cents to 44 cents in the past 60 days. The share price of Sesen Bio has risen 3.6% in the year-to-date period.
Earnings of Sesen Biobeat estimates in three of the last four quarters and missed the mark on one occasion, the average surprise being 69.9%. In the last reported quarter, Sesen Bio delivered an earnings surprise of 100%.
Estimates for Novo Nordisk’s 2022 bottom line have increased from $3.42 to $3.52 in the past 60 days. Estimates for 2023 have increased from $3.96 to $4.24 in the past 60 days. Share prices of Novo Nordiskhave declined 1.4% in the year-to-date period.
Earnings of Novo Nordisk beat estimates in each of the last four quarters, the average surprise being 7.6%. In the last reported quarter, Novo Nordisk delivered an earnings surprise of 10.6%.