Seagen to Be Acquired by Pfizer

Wide-moat Pfizer announced it will acquire narrow-moat Seagen SGEN for $229 per share in cash, for a total enterprise value of $43 billion. Pfizer’s acquisition price represents a roughly 50% premium to our stand-alone fair value estimate of $150 per share. Seagen’s stock has jumped substantially this year, rising over 34% as of the March 10 market close based largely on chatter surrounding Pfizer’s acquisition and healthy fourth-quarter results. Investors reacted positively to news of the acquisition and sent Seagen’s stock up nearly 15% on March 13. We think Pfizer is paying a premium for Seagen, but we have increased our fair value estimate to the takeover price of $229 per share, as we anticipate the deal to close in late 2023 or early 2024. We don’t see any major antitrust issues, and the agreement has been unanimously approved by the boards of directors at both companies.

Pfizer has ample cash on hand thanks to its successful COVID-19 vaccine and treatment sales. The acquisition of Seagen would enhance Pfizer’s oncology portfolio and help offset the firm’s major patent losses affecting several drugs over the next five years, including cardiovascular drug Eliquis, oncology drug Ibrance, and rare-disease drug Vyndaqel between 2027 and 2028.

Despite the premium Pfizer is paying for Seagen, we expect cost synergies (close to $1 billion highlighted by management) to help offset this overpayment. Further, if Seagen’s pipeline of early- and mid-stage drugs develops better than our expectations, we believe there could be upside for Pfizer.

We believe the Seagen acquisition is likely to bring in close to $8 billion of revenue for Pfizer by 2030. Pfizer expects over $10 billion in Seagen-related sales by 2030, but we are skeptical of that estimate and would need to see strong pipeline data before increasing our estimates to Pfizer’s guidance.