Merck & Co.'s $40B Acquisition of Pharmaceutical Company Seagen

The prospective Merck & Co. acquisition of Seattle-based biotech firm Seagen would be the largest pharmaceutical acquisition since 2020 if it is completed. Initial indications that Merck was looking to acquire the company surfaced early last month. However, the two companies have yet to make an announcement, and the Federal Trade Commission (FTC) may involve itself when they do.  

Seagen Inc, valued at $32 billion, is a cancer-focused biotech firm with four patented drugs on the market for treating different cancers. The acquisition of an emerging cancer-focused pharmaceutical company is vital for Merck’s oncology business, which mainly relies on its breadwinner Keytruda, a drug that will lose patent exclusivity by 2028.  

In addition to Seagen’s Adcetris, Padcev, Ttivdak, and Tukysa, the company has twelve other drugs in the development pipeline and over 40 ongoing trials seeking expanded indications for existing treatments. Included in their development pipeline is a product co-developed with Astellas Pharma that combines Keytruda and Padcev for treating urothelial cancer. Early clinical trial results showed that the therapy had a high objective response rate and positive topline results.  

Seagen’s cancer-focused field of products may lead to increased FTC scrutiny, and the agency may force both companies to drop some of their programs in order to merge. Additionally, the Biden administration made it clear that anticompetitive pharmaceutical deals would be watched carefully in an effort to avoid increased drug prices. And in this case, the suite of drugs acquired from Seagen would grant Merck’s oncology division a powerful set of treatments and therapies.  

The most significant intersection between the two company’s portfolios is the treatment of Hodgkin’s lymphoma, for which Merck sells Keytruda and Seagen sells Adcetris. Both drugs are immunotherapies. 

At a workshop in June, FTC Commissioner Kelly Slaughter explained how the agency is taking action to protect against anticompetitive mergers. “When mergers diminish competition in pharmaceutical markets, the result is higher prices which can have devastating effects for patients. Enforcement action is necessary to prevent such harm. Pharma mergers matter because the pharmaceutical industry has a particularly checkered legacy of anticompetitive conduct. In fact, anticompetitive conduct in the pharmaceutical industry is so widespread that we have an entire division of our agency, Health Care, dedicated to investigating and halting it.” 

In the past two years, Merck has acquired two other biopharmaceutical firms, VelosBio and Acceleron Pharma. The combined cost of buying out both firms was $14.3 billion, or around a third of the total cost Merck may pay for Seagen’s stack of cancer treatments.