Why Pfizer buys Seagen, the second largest acquisition in its history

The U.S.-based pharmaceutical company Pfizer will use its cash flow from revenues from the sale of coronavirus vaccines to make the second-largest purchase in its history.

The New York-based laboratory will pay 43 billion dollars (around 40 billion euros) for Seagen, a biotechnology company focused on the development and commercialization of experimental therapies for the treatment of cancer

At the end of last February, it became known that the company was interested in the biotechnology company, after it was unable to reach an agreement with Merck Sharp & Dohme for its sale to the other large U.S. pharmaceutical company.

It is the second largest purchase in Pfizer’s history, after the acquisition it carried out in 2009 when it paid 67 billion dollars (62.7 billion euros) for the Wyeth laboratory.

Pfizer offered 230 euros for each share of the biotech company, as reported by the pharmaceutical company itself this week, which means a premium of 32.6 percent over last week’s closing price.

In a statement, Pfizer announced that it had reached an agreement with Seagen’s board of directors. The U.S. laboratory intends to finance the purchase mainly through 31 billion dollars in new long-term debt.

Why Pfizer is buying Saegen

Predictably, the deal won’t close until late this year or early 2024, after the biotech’s shareholders sell and competition authorities give the go-ahead for the purchase.

The biotech company is known for being part of the group developing experimental cancer treatments, some of these therapies have already been approved to treat various lymphomas and have shown promising results against other tumors along with other treatments.

Seagen is currently considered, and in the absence of future treatments, a mid-sized company, as it recorded a turnover last year of almost 2 billion dollars, thanks to the demand for its antibody-based treatments, such as the lymphoma treatment Adcetris and the breast cancer drug Tukysa.

Analysts estimate that these revenues will double by 2025, according to Refinitiv data collected by the British agency Reuters.

Pfizer executives believe the biotech could bring in more than $10 billion in revenue by 2030, with significant potential growth after 2030.

The purchase is not risk-free as most of the treatments at the moment are experimental, although when they are launched on the market they are likely to be priced as high as other antibodies.

Seagen, a gold mine for Pfizer

The U.S. drugmaker needs new acquisitions to replace the revenues it will start to lose from its vaccines and coronavirus treatments. Pfizer broke all possible records last year, when it surpassed 100 billion dollars in turnover for the first time in the history of the sector, due to the sale of Cominarty and Paxlovid (the oral treatment against Covid-19).

Similarly, the pharma’s earnings grew exponentially in 2022, confirming a solid financial position.

Profits tripled the 2022 figure, ending 2022 with 31.4 billion, i.e. growth of 43 percent.

However, they estimate that the situation will be reversed. The New York pharmaceutical company, led by Albert Bourla as CEO, already foresees a decrease of 17 billion dollars in annual sales between 2025 and 2030, due to the expiration of patents for the main treatments, to which is added the decrease in sales of treatments against the coronavirus, which has already begun to be recorded, thanks to the control of the health situation.

“The company is extending its financial resources to continue advancing in the fight against cancer, one of the leading causes of death globally with a significant impact on public health,” said the CEO in a statement. “Together with Seagen, we seek to accelerate innovative cancer treatments and bring new therapies to patients by combining Seagen’s antibody-based drug technology advances with the scale and strength of our company’s capabilities and expertise,” he added.

Currently, the U.S. drugmaker’s oncology unit has a portfolio of 24 approved innovative cancer treatments that have generated $12 billion in revenues in the past year.

However, none of these outsells its rivals, a list headed by Merck Sharp & Dohme, Bristol Myers-Squibb, Abbvie and Johnson & Johnson.

Pfizer, one of the big Covid-19 winners

The New York lab’s vaccine became Pfizer’s blockbuster in 2022, according to the company’s own disclosures.

Thanks to this vaccine, it turned over $37.8 billion, a growth of 3 percent over 2021.

The second product that boosted the company’s numbers is Paxlovid, the oral treatment against coronavirus, thanks to sales that reached 18.9 billion, due to the fact that in 2021 this drug was launched but had almost no time to market (only 76 million).

A congested market

Seagen has caused a sensation in the industry with an innovative commercial strategy for the sector.

With several blockbuster drugs already on the market and a strong pipeline of new treatments in development, Seagen quickly became a major player in the field. Pfizer knows this and that’s why it set its sights there.

At the heart of Seagen’s commercial strategy is a focus on developing targeted cancer therapies that deliver maximum benefit with minimal side effects.

The company’s flagship product, Adcetris, has generated more than $630 million in annual revenue.

Seagen CEO Clay Siegall has been instrumental in driving the company’s growth and success.

Siegall is a renowned scientist and entrepreneur, with a graduate degree in genetics from George Washington University and a strong track record in the biotechnology industry. Under his leadership.

Pfizer buys Seagen and adds competitors

Seagen, about to be acquired by Pfizer, competes directly with rivals such as Gilead Sciences, Bristol Myers Squibb and Roche, which also have a strong presence in the cancer therapy market.

Despite the competition, Seagen’s revenues continue to grow. In 2022, the company reported total revenues of $2.3 billion, up from $1.9 billion in 2021. This growth is expected to continue. Revenues of $2.9 billion are expected in 2023.

Investors are taking note of Seagen’s success, with the company’s share price rising more than 30 percent last year, despite the downturn.

With a market capitalization of more than $31 billion, Seagen is a valuable investment opportunity for those looking to capitalize on the growing demand for cancer therapies.