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Rationale behind Pfizer’s $43 billion acquisition of loss-making Seagen- unleashing guided missiles against Cancer

Albert Bourla, CEO of Pfizer, highlighted the significance of the company's $43 billion acquisition of Seagen, a biotech firm specializing in cancer therapies. Through this acquisition, Pfizer aims to accelerate cancer research and bring new solutions to patients by combining Seagen's ADC technology with its own capabilities and expertise.

March 14, 2023 / 01:49 PM IST
Pfizer plans to pay $229 in cash for each share of Seagen

Pfizer plans to pay $229 in cash for each share of Seagen

Pfizer is shelling out $43 billion to acquire the loss-making Seagen, making it one of the world's largest pharma acquisitions.

The American pharmaceutical giant plans to pay $229 in cash for each share of Seagen, with $31 billion of new, long-term debt financing the majority of the purchase. The remaining balance will come from a combination of short-term financing and existing cash.

Emphasizing the importance of the deal, Pfizer CEO Dr. Albert Bourla said, "We are not buying the golden eggs. We are acquiring the goose that is laying the golden eggs."

To understand why Pfizer sees Seagen as a golden goose, let's start with the fundamentals.

What is Seagen and what does it do?

Seagen, formerly Seattle Genetics, is a global biotechnology company that specializes in discovering, developing, and commercializing targeted cancer therapies using antibody-drug conjugate (ADC) technology. ADC technology uses monoclonal antibodies to deliver cell-killing agents directly to cancer cells, sparing healthy ones. According to Albert Bourla, Pfizer Chairman and Chief Executive Officer, ADCs are "turbo-charged guided missiles" that attack cancer cells.

Seagen markets four ADC products: ADCETRIS (brentuximab vedotin) for certain CD30-expressing lymphomas; PADCEV (enfortumab vedotin-ejfv) for certain metastatic urothelial cancers; TUKYSA (tucatinib) for certain metastatic HER2-positive breast cancers; and TIVDAK (tisotumab vedotin-tftv) for certain metastatic cervical cancers.

In its last year's annual report, Seagen stated that its strategy is to become a "leading global oncology company" by capitalizing on the commercialization and scaling of its products.

Also read: Seagen could be the deal Pfizer investors have been craving

The war against Cancer

According to Albert Bourla, the acquisition of Seagen by Pfizer aims to accelerate cancer research and provide new solutions to patients by combining Seagen's ADC technology with Pfizer's expertise. In an interview with CNBC, Bourla emphasized that one in three people worldwide will have cancer at some point in their lives.

The World Health Organization reports that cancer is one of the leading causes of death globally, with nearly 10 million deaths in 2020, accounting for almost one in six deaths. Breast, lung, colon and rectum, and prostate cancer are the most common types.

The International Agency for Research on Cancer (IARC) estimates that in 2018, there were 17.0 million new cancer cases and 9.5 million cancer deaths worldwide. This burden is projected to increase to 27.5 million new cancer cases and 16.3 million cancer deaths by 2040.

Pfizer’s long-term thinking

With a post-COVID record profit, Pfizer is looking to double down on cancer treatments in anticipation of the upcoming surge in cases.

The acquisition of Seagen appears to be a match made in heaven as Pfizer's oncology portfolio already boasts 24 approved innovative cancer medicines generating $12.1 billion in 2022 revenues.

Also read: Pfizer Standalone December 2022 Net Sales at Rs 621.75 crore, down 8.01% Y-o-Y

Seagen, with expected revenue of $2.2 billion in 2023, has trimmed its losses to $610 million.

Pfizer predicts Seagen could generate more than $10 billion in risk-adjusted revenues by 2030, with substantial growth beyond.

Seagen's Adcetris brought in $839 million in sales last year, a 19% increase over the previous year, and Tukysa brought in $353 million in sales.

Ravi Prakash Kumar
Ravi Prakash Kumar is a Senior Sub-Editor at Moneycontrol. He has over five years of experience as a business journalist and has worked with leading financial dailies including ET, Mint, and Business Standard.
first published: Mar 14, 2023 12:37 pm