Merck & Co is in talks to buy cancer biotech company SeaGen for about $40 billion, according to two people familiar with the matter.
The New Jersey-based pharmaceutical company offered about $200 a share for SeaGen, one of the people said, a 15% premium at Wednesday’s close. There is no guarantee that the companies will agree to a deal.
The US drugmaker must renew its pipeline as it prepares for its mega cancer drug Keytruda to lose patent protection by the end of the decade.
SeaGen – formerly known as Seattle Genetics – offers four approved oncology treatments. He is studying their effectiveness against different forms of cancer and in various combinations to try to expand the number of potential patients. He has a dozen other drug candidates in trial.
Shares of SeaGen have risen 47% since its chief executive Clay Siegall stepped down in May, after being arrested for domestic violence. He denied the allegations.
Investors anticipated the management team might be more willing to sell following the departure of Siegall, who helped start the company 24 years ago.
Analysts are predicting a boom in biotech mergers and acquisitions since a strong sell-off in the sector since late last year. They think big drugmakers, which are sitting on huge piles of cash and need to replenish their pipelines, will be tempted by lower valuations.
But many drug companies are still hesitant to make big bets on riskier start-ups, making SeaGen-approved drugs an attractive asset. In the first quarter, the company’s total product net sales rose 27% year-on-year to $383 million and it expects total revenue for the full year to be approximately $1.7 billion.
In 2020, Merck took a $1 billion stake in SeaGen, part of a deal to co-develop an antibody drug for breast cancer and other solid tumors and to license another medicine for cancers that overexpress the HER2 gene.
SeaGen also recently signed a partnership with French drugmaker Sanofi, and struck deals with Takeda and Bristol-Myers Squibb, among others.
SeaGen declined to comment. Merck did not respond to a request for comment.