“Love is not love
Which alters when it alteration finds,
Or bends with the remover to remove:
O no! it is an ever-fixed mark
That looks on tempests and is never shaken.”
Shakespeare’s paean to love, contained in his Sonnet 116, could just as well describe the passion held by some of the largest pharmas for Seagen (SGEN), the antibody-drug conjugate (ADC) developer once known as Seattle Genetics.
Pfizer (PFE) is the latest would-be suitor to make a play for Seagen after The Wall Street Journal reported that the pharma giant was in “early stage” talks to acquire the Bothell, WA-based company. Pfizer is the second pharma giant in as many years to attempt a takeover deal for Seagen. Last year Merck & Co. tried, but failed, to buy the company, with the would-be buyer and seller reportedly unable to reach agreement on a price.
A Pfizer-Seagen deal could be valued at above $30 billion, the WSJ reported, based on Seagen’s market capitalization, which as of Thursday stood at $33.224 billion. That could push an eventual purchase price to above $40 billion, according to Berenberg Capital Markets.
Berenberg’s Zhiqiang Shu, PhD, head of healthcare equity research and senior biotech analyst, offered Reuters a reason why a Pfizer-Seagen deal could succeed where last year’s planned Merck-Seagen combination failed: “A Pfizer/Seagen combination will invite less scrutiny from the FTC [U.S. Federal Trade Commission] due to less overlap of their products when compared to a Merck/Seagen deal.”
The prospect of opposition from the FTC was no small concern to Merck and Seagen, since both Seagen’s best-selling drug Adcetris® (brentuximab vedotin) and Merck’s cancer immunotherapy blockbuster Keytruda® (pembrolizumab) have indications that include Hodgkin’s lymphoma.
By contrast, the biggest potential FTC stumbling block would likely be Pfizer’s urothelial cancer drug Bavencio® (avelumab), Andrew Berens, MD, Senior Managing Director, Targeted Oncology and a senior research analyst with SVB Securities, wrote Tuesday in a research note. That is because at $271 million in alliance revenues (since it was co-developed with Merck KGaA), Bavencio represents a mere 2% piece of Pfizer’s $12.132 billion in 2022 oncology revenues,
$8B+ in product sales by 2030
Seagen currently markets four drugs that generated a combined $1.707 billion in net product sales last year, up 23% from $1.386 billion in 2021. Three are ADCs—Adcetris, indicated for some forms of large cell lymphoma as well as Hodgkin’s lymphoma; the urothelial cancer drug Padcev® (enfortumab vedotin‐ejfv); and the cervical cancer treatment Tivdak® (tisotumab vedotin-tftv). Seagen’s fourth drug, Tukysa® (tucatinib) is a tyrosine kinase inhibitor indicated for some forms of breast and colorectal cancer.
Adcetris finished 2022 with near-blockbuster net product sales of $839 million (up 19% from $706 million in 2021); followed by Pacdev, $451 million (up 33% from $340 million); Tukysa, 353 million (up 6% from $334 million); and Tivdak, $63 million (up more than 10-fold from $6 million).
By 2030, Berens has estimated, Seagen’s four marketed drugs will rack up a combined $8 billion-plus in revenues: Adcetris will more than double in sales to $2.2 billion, Pacdev will balloon nearly 10-fold to $4.1 billion, Tukysa to $1.6 billion, and Tivdak to $560 million.
“Seagen would bring substantial revenue and future growth to Pfizer’s oncology franchise and help offset patent cliffs,” Berens added. “Pfizer has been making good progress with its internal oncology pipeline, but mid-late-decade patent exposure is significant.”
Several key Pfizer products are facing loss of exclusivity in coming years, Berens explained. Inlyta® (axitinib), indicated for some forms of renal cell carcinoma, is set to lose patent protection in 2025, a year after it is projected to generate $1.1 billion in sales.
By 2027, Pfizer can also expect to lose the alliance revenue it collects from having co-developed prostate cancer drug Xtandi® (enzalutamide) with Astellas Pharma (an estimated $1.4 billion in 2024). And in 2028, Pfizer will lose patent protection for breast cancer treatment Ibrance® (palbociclib), projected to generate $5 billion in 2024. Those three drugs account for a combined $7.5 billion or 60% of the $12.5 billion in oncology revenue that Pfizer is projected to make in 2024.
“SVB projects 2030 Seagen revenue of ~$11bn, which would more than offset LOE [loss of exclusivity] erosion,’ Berens added.
Pfizer could potentially leverage its current oncology sales force for Seagen’s marketed drugs, while potentially reorganizing the existing Seagen sales force to create synergies, according to Berens: “Additionally, given SGEN’s ADC concentration, the durability of these revenues could extend into the 2030’s.”
Filling revenue gap
Jay Olson, CFA, managing director and senior analyst covering Biotechnology at Oppenheimer, wrote in a research note that as a former pioneer of ADC technology, Pfizer may be seeking to enhance its ADC platform and clinical pipeline by acquiring Seagen.
Pfizer has also committed to generating $25 billion in new revenue through mergers and acquisitions (M&A) as revenue from its COVID-19 vaccine Comirnaty® (co-developed with BioNTech) and COVID-19 antiviral therapy Paxlovid® (nirmatrelvir and ritonavir) are expected to diminish in coming years.
Seagen can help fill that revenue gap, Olson wrote, since a consensus of analysts expect the company to grow to more than $8 billion in revenue by 2030.
“While SGEN has grown a single-product business into an impressive four-product portfolio with $2.3B in consensus 2023 revenues, challenges including profitability and increased competition suggest M&A may be a favorable path for shareholders,” Olson observed.
Olson on Tuesday raised Oppenheimer’s price target on Seagen shares 17%, from $180 to $210, while maintaining his firm’s “Outperform” rating on the stock. Oppenheimer adjusted its price target on Seagen two other times in February, down 5% from $188 to $178 on February 10, then up 1% to $180 on February 17.
Another analyst who weighed in on Seagen this week—Michael Schmidt, PhD, a Senior Analyst and Senior Managing Director at Guggenheim focused on biotech companies—simply reiterated his firm’s $170 price target and “Strong Buy” rating on Seagen.
Raising price targets
A likely reason why more analysts had not jumped on the Pfizer news was because several analysts had already raised their price targets on Seagen since February 15, when the company reported fourth-quarter 2022 results that included narrower losses year-over-year. Seagen finished Q4 with a net loss of $148.171 million, versus a $174.628 million net loss a year earlier. The company finished 2022 with a net loss of $610.308 million, vs. a $674.471 million net loss in 2021:
Among analysts raising their price targets on Seagen stock after the release of its Q4 2022 results:
- Reni Benjamin, PhD, a managing director and senior biotechnology analyst with JMP Securities, up 18% from $142 to $168, and maintained the firm’s “Outperform” rating.
- Etzer Darout, PhD, managing director and senior research analyst covering biotechnology at BMO Capital Markets, up 1% from $177 to $179, and maintained the firm’s “Outperform” rating.
- Ami Fadia, managing director and senior biotech equity research analyst with Needham, up 11% from $160 to $178, and maintained the firm’s “Buy” rating.
- Asthika Goonewardene, managing director and senior biotech analyst with Truist Securities, up 13% from $135 to $152, and maintained the firm’s “Hold” rating.
- Matthew Harrison, who focuses on biopharmas with market capitalizations of $10 billion and up as Head of Biotech Industry Research for Morgan Stanley, up 2% from $170 to $173, and maintained the firm’s “Overweight” rating.
- Gregory Renza, MD, a director and senior analyst of biotechnology equity research with RBC Capital, up 7% from $145 to $155, and maintained the firm’s “Outperform” rating.
- Josh Schimmer, MD, senior managing director with Evercore ISI’s Biotech Team, up 25% from $140 to $175, and upgraded the firm’s rating from “In Line” to “Outperform.”
- Dane Leone, managing director, biotechnology with Raymond James, up 13% from $155 to $175, and upgraded the firm’s rating from “Outperform” to “Strong Buy.”
For all the attention paid by analysts to news of Pfizer possibly acquiring Seagen, investors didn’t appear too excited by the possibility.
Since Monday when the news broke, shares of Seagen rose 10% Monday from $161.37 to $178.16, then plateaued for a couple of days, to $178.23 on Wednesday before dipping 1% to $177.17 as of 1:21 p.m. ET Thursday. Pfizer shares sank 2% Monday from $41.75 to $40.78, then plateaued to $40.18 on Wednesday and inched up 0.2% to $40.28 as of 1:21 p.m. Thursday.
Leaders and laggards
- Apexigen (APGN) shares tumbled 33% Monday, from $1.29 to $0.8681, after the developer of antibody-based cancer immunotherapies said it will chop its workforce 55% and explore an acquisition, company sale, merger, divestiture of assets, and licensing among strategic alternatives, with the goal of maximizing stockholder value. Apexigen named Ladenburg Thalmann to conduct the strategic review, which came six months after the company went public by merging with a special purpose acquisition company (SPAC). Just six weeks ago, Apexigen trumpeted positive Phase II data for its lead program, sotigalimab, a potentially first-in-class CD40 agonist designed to fight immune suppression in cancer patients.
- Aptinyx (APTX) shares plunged 66% on Tuesday, from 59 cents to 20 cents, after the company said it will cut costs, explore strategic alternatives, and halt development of NYX-458 after it failed a Phase II trial (NCT04148391) in patients with cognitive impairment associated with Parkinson’s disease and dementia with Lewy bodies. NYX-458 did not show clinically meaningful improvements over placebo on the study’s efficacy endpoints, Aptinyx said. The company will also terminate an ongoing Phase IIb study (NCT05181995) of NYX-783 in post-traumatic stress disorder (PTSD) and analyze the data available to date.
- Novavax (NVAX) shares skidded 26% on Wednesday, from $9.26 to $6.86 as of 11:50 a.m. ET, after the company said “substantial doubt exists regarding our ability to continue as a going concern” over the next 12 months. While saying it had sufficient capital to fund operations, Novavax said its forecast was “subject to significant uncertainty,” citing 2023 revenue, funding from the U.S. government, and pending arbitration with Gavi, the Vaccine Alliance, to resolve a dispute over an agreement through which Gavi was to have purchased 350 million doses of Novavax’s COVID-19 vaccine. Novavax shares fell last year after the FDA expanded its emergency use authorizations of the Pfizer/BioNTech and Moderna COVID-19 vaccines.
- Reata Pharmaceuticals (RETA) shares nearly tripled, zooming 173.5% on Wednesday from $31.17 to $85.32 as of 11:08 a.m. ET, after the FDA approved the company’s Skyclarys™ (omaveloxolone) to treat Friedreich’s ataxia in in adults and teens aged 16 years and older. Reata stock slipped 31% on Monday, from $44.51 to $30.85, after investors speculated that the FDA’s decision would be delayed after Bill Dunn retired immediately as director of the agency’s Office of Neuroscience, which reviewed the drug. Succeeding Dunn is Teresa Buracchio, the office’s acting deputy director since November.