Seagen Earnings: Robust Product Sales and Pipeline Advances; Acquisition by Pfizer on Track

Narrow-moat Seagen SGEN delivered robust product revenue of $544 million during the second quarter, growing 26% year over year thanks to continued strong performance from Adcetris, Padcev, and Tukysa. Total revenue for the quarter, including royalties and license agreement revenue, was nearly $604 million, representing growth of 21% over 2022. Seagen’s previously announced acquisition agreement by Pfizer remains on track to close in late 2023 or early 2024. We maintain our fair value estimate of $229 per share, which is the takeover price for the deal.

Adcetris reported record sales, and a phase 3 study demonstrated an unprecedented three-year progression-free survival of 94.9% compared with a more chemo-intensive international standard of care in advanced Hodgkin’s lymphoma. Due to Adcetris’ high efficacy, we forecast it is on track to achieve more than $1 billion in annual revenue in North America alone by 2024.

Seagen’s narrow moat rating is based on the intangible assets from its development of antibody-drug conjugates for various cancer indications. We believe Seagen will likely be able to earn excess returns over the next 10 years thanks to its highly effective technology in lucrative indications protected by patents that last until 2036. We continue to have a positive long-term outlook for Seagen thanks to the progression of Seagen’s pipeline. Late-stage trials for additional indications of Padcev and Tukysa have shown positive results and garnered additional approvals. We expect this will further expand Seagen’s patient reach, and we think Pfizer’s deep pockets will help accelerate the development of Seagen’s pipeline candidates over the next several years.

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.