This week started with the announcement of Pfizer acquiring Seagen for USD 43 billion or USD 229 per share, which represents a 33% premium compared to their closing price last week.

Seagen is a commercial biotech company with a cutting-edge pipeline in oncology. The company pioneers so-called antibody-drug conjugates (ADC), a technology that combines the benefits of small molecules and antibodies. Certain small molecules can kill cancer cells very effectively, similarly to agents used in standard chemotherapy, but they also damage healthy cells leading to severe side effects.

To overcome this, Seagen combines chemotherapy agents with antibodies that are able to deliver the chemotherapy payload selectively to cancer cells. This minimizes the side effects and damage of healthy cells while also increasing the potency of the treatment. Seagen’s main value driver ADCs are Padcev for advanced bladder cancer, Adcetris for lymphomas, Tivdak for advanced cervical cancer (recently co-launched with Danish biotech leaders Genmab) plus a non-ADC drug for breast cancer, Tukysa. These products generated approximately USD 2 billion in revenues last year, which is expected to double by 2025.

Seagen was in negotiations with the pharma giant Merck last summer about a potential acquisition, but the two companies could not agree on terms. Now another large pharma company, Pfizer stepped in to acquire the company for USD 43 billion. Pfizer generated approximately USD 56 billion in revenues last year from their Covid franchise alone, but as we are largely putting the pandemic behind us, those revenues are expected to drop substantially. Therefore, Pfizer needs to replenish their pipeline, and acquiring Seagen was an important step in this direction as they expect Seagen to contribute USD 10 billion in risk-adjusted revenues by 2030.

The portfolio management team of the Arctic Aurora LifeScience and Biotech Select portfolios has a long and solid track record of successfully identifying takeout candidates in the biopharmaceutical industry, as the acquisition of Seagen is the 20th since the launch of the Arctic Aurora LifeScience fund in 2016.