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Pfizer seeks another ‘moonshot’ with $43 billion cancer deal

Covid-19 vaccine-maker said it will buy Washington-based Seagen in major acquisition that is sure to attract regulator attention

Pfizer's acquisition of Seagen would be among the largest pharmaceutical deals since the pandemic began. (Bess Adler/Bloomberg News)
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Pfizer Inc. said it would buy Seagen Inc. for $43 billion in cash, a major push into cancer-fighting drugs as the pharmaceutical giant remakes itself with the financial windfall netted from its covid-19 treatments.

Seagen, based outside Seattle, is known for pioneering a seek-and-destroy therapy that locates tumors and targets them with antibodies, delivering a drug that attacks cancer cells. Harnessing this technology, called antibody-drug conjugates, Seagen has won regulatory approval for drugs that treat Hodgkin lymphoma as well as bladder, cervical and breast cancer.

For Pfizer, the deal — which includes the assumption of Seagen’s debt — would double its pipeline of early-stage oncology drugs. It would be among the largest pharmaceutical deals since the pandemic began, according to data from analytics firm FactSet, and Pfizer’s biggest since its $68 billion acquisition of Wyeth in 2009. The size of deal is all but certain to attract antitrust scrutiny from federal regulators.

“Cancer is the obvious next target, is our obvious next moonshot,” Albert Bourla, Pfizer’s chief executive, said in an interview. Likening Seagen’s antibody-drug conjugates to Pfizer’s use of messenger RNA for its coronavirus vaccine, he said, “What mRNA is for vaccines, ADCs are for cancer.”

It is the latest in a series of major deals over the past year, as Pfizer has expanded into immune diseases, migraine therapy, sickle cell disease and respiratory syncytial virus (RSV) with four acquisitions totaling roughly $24 billion. The acquisition spree is aimed at boosting Pfizer’s revenue as some of its drugs lose patent protection, and has been enabled by the company’s extraordinary surge in cash flow from its covid-19 treatments.

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Pfizer’s revenue nearly doubled during the pandemic, soaring to $81.3 billion in 2021 from $41.7 billion in 2020, driven by the coronavirus vaccine developed in partnership with BioNTech, and its antiviral drug treating covid. Last year, the company booked $100.3 billion in revenue, netting a $31.4 billion profit.

Speaking of this surge in revenue, Pfizer’s chief commercial officer told financial analysts in December, “This is a direct result of the remarkable innovations in our COVID franchise,” adding that “this level of revenue growth is unprecedented and would be absolutely a first in the pharmaceutical industry,” according to a transcript compiled by S&P Capital IQ.

Pfizer executives have said they expect covid-related revenue to reach a low this year, as fewer people get vaccinated and the government works through the supply of vaccine doses and antiviral drugs it has already purchased from the company.

Analysts from TD Cowen said Monday that they don’t see antitrust obstacles and expect the deal to close, noting that Pfizer doesn’t have drugs that directly compete with Seagen’s main products. Pfizer shares were up 2.5 percent Monday.

Pfizer is paying a $229 a share, a 33 percent premium to Seagen’s closing price on Friday. To pay for the deal, the company said it would borrow $31 billion and use cash and short-term financing to cover the balance.

For Seagen, based in Bothell, Wash., the transaction comes after a leadership shake-up. The company’s chief executive, David Epstein, was appointed in November after its longtime CEO and co-founder resigned following allegations of domestic violence; he ultimately wasn’t charged.

“The proposed combination with Pfizer is the right next step for Seagen to further its strategy, and this compelling transaction will deliver significant and immediate value to our stockholders and provide new opportunities for our colleagues as part of a larger science-driven, patient-centric, global company,” Epstein said in a joint statement with Pfizer.

Steve Scala, an analyst at TD Cowen, said in a research note that the deal made strategic sense but the “price is steep,” estimating a lower future revenue target from Seagen’s drugs than Pfizer is making.

Bourla, Pfizer’s CEO, said Seagen long has been on Pfizer’s radar and Pfizer began courting Seagen after Epstein took the helm. Pfizer had previously developed antibody-drug conjugates before unloading its operation. That experience helped Pfizer assess the value of Seagen’s technology, Bourla said, adding that revenue from Seagen’s approved drugs makes the deal less risky.

The price Pfizer is paying “allows you to have a good return if things go okay, and a very good return if the pipeline provides upsides,” Bourla said, calling Seagen “an ideal target.”

Bourla said the companies expect to save $1 billion in costs after three years, without cutting Seagen’s existing operations.

“We are not buying the golden eggs,” Bourla told financial analysts Monday. “We are acquiring the goose that is laying the golden eggs.”