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Our Take: Pfizer signs definitive agreement to acquire oncology-focused biotech Seagen for $43 billion

Mar 20, 2023

Last Monday, Pfizer and Seagen announced that they had entered into a definitive merger agreement, confirming rumors that cropped up late last month.   

Pfizer agreed to pay $229 in cash per share for the Bothell, Wash.-based biotechnology company, for a total enterprise value of approximately $43 billion.

“Together, Pfizer and Seagen seek to accelerate the next generation of cancer breakthroughs and bring new solutions to patients by combining the power of Seagen’s antibody-drug conjugate (ADC) technology with the scale and strength of Pfizer’s capabilities and expertise,” said Albert Bourla, Pfizer’s CEO. 

The boards of both companies unanimously approved the acquisition, though it is still subject to approval by Seagen’s stockholders and regulatory authorities. The companies expect to complete the transaction late this year or early next year. 

Our Take: On a call with analysts, CEO Bourla said the plan is for Seagen to continue innovating, only now it will have more resources. 

“We are not buying the golden eggs,” he said. “We are acquiring the goose that is laying the golden eggs.” 

Seagen was founded 25 years ago and is among the pioneers of ADC technology, which links a monoclonal antibody to a small molecule drug to create a targeted therapy. Unlike chemotherapy, ADCs target and kill tumor cells without harming surrounding healthy tissue.

The biotech firm has four approved drugs — Adcetris (brentuximab vedotin), a lymphoma treatment; Padcev (enfortumab vedotin), a treatment for advanced bladder cancer; Tivdak (tisotumab vedotin), a cervical cancer therapy; and Tukysa (tucatinib), a treatment for HER2+ metastatic forms of breast cancer and colorectal cancer. The three biologics all employ Seagen’s ADC technology.

Seagen is testing all four drugs for additional indications and has nearly a dozen other new molecular entities in various stages of clinical development. The company is also developing next-generation linker-payload technologies for ADCs, as well as other antibody platforms, such as bispecific antibodies, that engage the immune system to destroy tumors. 

When analysts on the conference call asked about regulatory approval concerns, Douglas Lankler, general counsel for Pfizer, said the companies anticipate that regulators will closely review the transaction because of its size.

“We understand the environment,” Lankler said, referring to the federal government’s heightened scrutiny of proposed mergers the last couple of years. “We take it seriously. And … we believe that the government is going to see the complementary natures of our compounds and the value [for] patients.”

Pfizer needs to shore up its means of generating revenue now that there’s significantly less demand for the company’s COVID-19 products. The Comirnaty vaccine, which Pfizer markets in partnership with BioNTech, and the antiviral treatment Paxlovid generated more than $90 billion in sales through 2022, Reuters reported. 

Pfizer is also facing a loss of up to $17 billion in revenue by 2030 because of patent expirations, Reuters added. The company said Seagen could contribute more than $10 billion in risk-adjusted revenue in 2030 and has “potential significant growth beyond 2030.”

Seagen generated approximately $2 billion in revenue last year, an increase of 25% from 2021, and anticipates sales totaling $2.2 billion this year. 

Pfizer’s oncology portfolio generated sales of $12.1 billion in 2022. The company’s current oncology pipeline includes 20 new molecular entities, most of which are in Phase I development.  

Endpoint News reported that Pfizer would be required to pay Seagen more than $2.2 billion if the acquisition has to be scrapped for antitrust reasons, and Seagen would owe Pfizer approximately $1.7 billion if it accepts a better offer. 

Citing an SEC filing, Endpoint News also reported that Seagen signed a licensing agreement with Gracell Biotechnologies on March 8 granting Gracell a worldwide license to certain patent rights on cell therapy products Seagen owns.

What else you need to know
Novo Nordisk and Sanofi revealed plans to lower their insulin prices, following the lead of Eli Lilly, who announced on March 1 that it would reduce the price of two of its branded insulins by 70% in the fourth quarter. Lilly also capped out-of-pocket costs for its insulins at $35 for people with commercial insurance, effective immediately. Starting Jan. 1 of next year, Novo Nordisk will lower prices on Levemir (insulin detemir) and Novolin by 65% and on NovoLog (insulin aspart) and NovoLog Mix 70/30 by 75%, according to a press release. The company will also cut the list price of its unbranded products to match the lower prices of the corresponding branded insulins. And on Thursday, Sanofi announced that it would cut the list price of Lantus (insulin glargine), the company’s most widely prescribed insulin, by 78%, and establish a $35 cap on out-of-pocket costs for Lantus for people with commercial insurance. Both of those moves will take effect on Jan. 1, 2024. Sanofi had already established a $35 cap on out-of-pocket costs on insulin for uninsured individuals last summer, along with launching an unbranded biologic for Lantus priced 60% lower than the branded product’s list price. Reuters reported that the three companies constitute 90% of the U.S. market for insulin. 

In separate news, Sanofi agreed to pay approximately $2.9 billion to acquire Provention Bio, a biopharmaceutical firm based in Red Bank, N.J., that won FDA approval in November for Tzield (teplizumab), the first and only treatment approved to delay the onset of stage 3 type 1 diabetes in adults and children ages 8 and older who have stage 2 type 1 diabetes. The two companies already had a co-promotion agreement for Tzield’s launch in the U.S., Sanofi noted in the acquisition announcement. That agreement also put Sanofi first in line to negotiate licensing rights for Tzield. If customary closing conditions are satisfied, Sanofi expects to complete the acquisition in the second quarter. The $25-per-share price is a 273% premium over the closing price of Provention Bio’s shares on the business day before news of the acquisition was made public.

The Veterans Health Administration (VHA) will cover Eisai and Biogen’s Leqembi (lecanumab) for veterans with early Alzheimer’s disease who meet criteria established by the VHA and labeling set by the FDA, Eisai said in a press release. The FDA granted Leqembi accelerated approval in early January. The VHA’s decision diverges from CMS’ decision in February to apply the same coverage limitations to Leqembi as it did for the drug’s predecessor, Aduhelm (aducanumab). CMS’ policy permits coverage only for patients enrolled in clinical trials until more data demonstrating Leqembi’s benefit becomes available or the drug gains full FDA approval, which could happen by July 6. According to Eisai’s estimates, Endpoint News reported, Leqembi, which has a list price of $26,500 per year, could attain global sales of $7 billion by 2030 if CMS broadens its coverage. 

CMS identified the first group of drugs subject to Medicare inflation rebates under a provision of the Inflation Reduction Act. Prices for the 27 Medicare Part B prescription drugs and biologics on the list increased faster than inflation in the final quarter of 2022. Depending on their coverage, Medicare beneficiaries may pay lower coinsurance amounts for these 27 drugs from April 1 through June 30, with saving ranging from $2 to $390 per average dose. Pfizer had five drugs on the list. AbbVie’s Humira (adalimumab) also was listed. 

Renton, Wash.-based Providence had a net loss of $6.1 billion last year. The not-for-profit health system said in a press statement that inflation, labor shortages, delayed payer reimbursement, supply chain disruptions, and financial market weakness contributed to the loss. Financial statements show that the split with Hoag Memorial Hospital Presbyterian, located in Orange County, Calif., accounted for $3.4 billion of the reported loss, and investment losses accounted for $1 billion. Operating revenue increased 4% relative to 2021, but operating expenses increased by 6%. In related news, Dr. Guy Hudson will step down as CEO of Providence’s north division on April 1, at which time Kevin Brooks will assume the role. Dr. Hudson will also step down as president and CEO of Swedish Health Services on Sept. 30. The Swedish board will begin an immediate search for his successor, according to the announcement

Atlantic Health System is acquiring Thompson Healthcare & Sports Medicine, which has 11 locations in New Jersey and more than 75 providers specializing in chiropractic, acupuncture, physical and occupational therapy, and pain management. Based in Morristown, N.J., Atlantic Health System offers care at more than 400 sites, including seven hospitals. Atlantic Medical Group, a multi-specialty practice with 1,600 physicians and advanced practice providers, is part of Atlantic Alliance, along with Atlantic Accountable Care Organization and Optimus Healthcare Partners. 

What we’re reading
It’s Time For US Hospitals To Withdraw From The US News And World Report Rankings. Health Affairs, 3.17.23

Innovator Awards: First-Place Winning Team: ProMedica. Healthcare Innovation, 3.14.22


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