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A Closer Look at the Most Recent Pfizer Acquisition Deal: Seagen Inc
Considering the hefty price tag on the most recent Pfizer acquisition deal, pharmaceutical industry leaders may benefit from a closer look at Seagen and why it’s appealing.
Recently, Pfizer Inc, a leading pharmaceutical manufacturer in the United States, confirmed plans to acquire Seagen, a smaller manufacturer focused on oncology medications, to expand its oncology portfolio, Pfizer Oncology. The recent acquisition deal is valued at about $43 billion, with each share amounting to $229 in cash. The deal is expected to be completed or finalized by the end of 2023 or the beginning of 2024, assuming the fulfillment of closing conditions. The sizeable price tag on this deal has persuaded many industry leaders to look closely at Seagen and its assets.
Even with Pfizer generating $100 billion in the 2022 fiscal year, the organization still faces a risk in this acquisition, having to finance the sale through $31 billion in new long-term debt in addition to short-term financing and existing cash from net profits. The hefty price tag on this acquisition is rumored to be the root of failed negotiations between Merck and Seagen earlier this year, with the companies disagreeing on the value of Seagen assets.
Although there is a risk, Pfizer executives favor this acquisition, with the board of directors at both companies unanimously agreeing on the investment and value under the financial and legal advisement of Guggenheim Securities LLC and Wachtel, Lipton, Rosen & Katz for Pfizer and Centerview Partners LLC and Sullivan & Cromwell LLP for Seagen.
Considering Pfizer’s role as a significant stakeholder in the pharmaceutical industry — ranking number one in Proclinical’s Top 10 Global Pharmaceutical Companies List — understanding the rhyme and reason behind this acquisition and the appeal of a smaller company like Seagen can position other pharmaceutical companies to make favorable business decisions and enhance pharmaceutical advancements.
Throughout this article, PharmaNewsIntelligence looks at what makes Seagen such an appealing acquisition for Pfizer.
Oncology Medicine Portfolio
Pfizer notes that Seagen is a trailblazer regarding antibody–drug conjugate (ADC) technology. The organization is responsible for one-third of the 12 FDA-approved ADCs.
An article in Signal Transduction and Targeted Therapy refers to ADCs as “biological missiles” made of monoclonal antibodies attached to cytotoxic drugs via a covalent bond. According to Pfizer, this technology has significant advantages in oncology as it can target cancer cells and minimize the toxic effects of traditional cancer treatments.
“Seagen has developed a leadership position in ADC technologies since its founding 25 years ago, with groundbreaking and proprietary technology that is positioned for significant growth in 2023 and beyond. Seagen’s portfolio includes four approved medicines that are first- or best-in-class in their respective indications across solid tumors and hematologic malignancies,” noted Pfizer officials in the press release.
The company currently manufactures ADCETRIS (brentuximab vedotin), PADCEV (enfortumab vedotin), and TIVDAK (tisotumab vedotin) while commercializing TUKYSA (tucatinib).
Clinical Trials
Moreover, Seagen has a multitude of clinical treatments in development, accounting for 38 clinical trials, that are expected to present additional assets in the coming years. The therapeutic reach of the existing and developing tools is broad, with treatment implications for a large patient population.
Responsibility
Seagen ranked 52 out of 500 in America’s Most Responsible Companies 2023 list by Newsweek, scoring an 83.18% overall. Beyond its general ranking, the company was sixth in the Health Care and Life Sciences industry for overall responsibility, only after Merck & Co, Abbott, Illumina, Regeneron, and Vertex.
The company ranked higher than other prominent healthcare and life sciences organizations, including Thermo Fisher and LabCorp. Seagen even ranked significantly higher than its acquirer, Pfizer, which had an overall ranking of 181 and an industry ranking of 22.
Breaking down the score further, Seagen had an environmental responsibility score of 84.07%, a social score of 83.06%, and a corporate governance score of 82.48%. Comparatively, Pfizer had an overall score of 76.76%, with environmental, social, and governance responsibility scores of 73.35%, 69.78%, and 87.21%, respectively.
Considering its ranking, Pfizer may be able to repurpose strategies used by Seagen in other aspects of its business model to increase responsibility once the acquisition has been finalized.
2022 Finances and Accomplishments
According to the press release by Pfizer announcing the acquisition, Seagen generated roughly $2 billion in revenue in 2022, a 25% increase from its 2021 revenue. The total net product sales accounted for $1,707 million in revenue, a 23% increase from the previous year.
Aside from net product sales revenue, royalty revenues grew from 9% to $165 million from 2021 to 2022. Collaboration and license agreement revenues increased by 139% from 2021 to 2022.
The overall cost of sales in 2022 was $410 million; however, research and development expenses cost the company $1.3 million in the same fiscal year. The company also has $1.7 billion in cash and investments; however, this year, the net loss was $610 million, significantly lower than the $674 million lost in the previous year.
PADCEV
In 2022, Seagen’s drug PADCEV was part of a Supplemental Biologics License Application (sBLA) with Keytruda to treat first-line advanced or metastatic urothelial cancer. Granting Priority Review, the FDA is expected to decide on the treatment by April 21, 2023. This treatment will provide an alternative therapy for patients with urothelial cancer who cannot be treated with cisplatin.
Considering the recent shortages of many chemotherapy drugs, including cisplatin, this development will be particularly advantageous in the coming months if cisplatin does not become readily available again soon.
PADCEV accounted for $451 million in net product sales revenue, a 33% increase, expected to be even greater pending the approval of the sBLA.
TUKYSA
According to Seagen’s annual report, TUKYSA was granted accelerated approval earlier this year, in January 2023. The Drug is intended for use in HER2-positive, unresectable, or metastatic colorectal cancer if other treatment options have not worked.
TUKSYA saw the least significant change in net product sales revenue; however, it still increased by 6% to $353 million. Although it saw the slightest increase in sales, growing emphasis on the early treatment and diagnosis of colorectal cancer may position TUKSYA for more growth in the future.
A recent estimate by the American Cancer Society notes that there will be 153,020 new colorectal cancer diagnoses and 52,550 colorectal cancer deaths in 2023. With these numbers in mind and rising incidence among younger populations, providers are adopting new treatment methods like TUKSYA.
ADCETRIS
ADCETRIS was granted expanded approval for indications in pediatric patients with untreated high-risk classical Hodgkin’s lymphoma. With the challenges associated with pediatric clinical trials, Seagan’s application and approval of new indications based on clinical trial data prove the organization’s robust clinical trial abilities.
ADCETRIS saw a 19% increase in net product sales revenue, jumping to roughly $839 million from $706 million. Seagen attributes these rising profits to diagnosis rates, which have begun to return to pre-pandemic levels.
TIVDAK
TIVDAK was also noted by the national comprehensive cancer network as a category 2A preferred regimen for types of metastatic cervical cancer.
The most significant rise in net product sales revenue, accounting for a 923% increase, was for TIVDAK, which rose from $6 million to $63 million. Although it is the lowest earner of its four in-line medications, TIVDAK is expected to continue bringing in revenue based on the preference from the NCCN, announced in December 2022.
Anticipated Growth
Seagen predicts that 2023 will result in roughly $2.2 billion in revenue, with the estimated revenue ranging from $2.14 billion to $2.24 billion. The projected revenue throughout this fiscal year is approximately 12% year-over-year growth. Beyond the estimated benefits in the coming fiscal year, while deciding whether to continue with the sale, Pfizer estimated that Seagen will generate roughly $10 billion in 2030 and continue to amass revenue by advancing and expanding its existing oncology portfolio.
The Pfizer press release notes, “When combining the expected strong growth trajectories for these medicines with candidates that could emerge from Seagen's pipeline, subject to clinical trial and regulatory success, Pfizer believes Seagen could contribute more than $10 billion in risk-adjusted revenues in 2030, with potential significant growth beyond 2030.”
