Why Seagen is a top acquisition target?

Cancer drugmaker Seagen (NASDAQ:SGEN) had reportedly drawn interest from two pharma giants in less than a year, indicating a bidding war not seen since Horizon Therapeutics (HZNP) sparked a buyout fight which Amgen (AMGN) won in late 2022.

Pfizer (PFE) is the latest to sniff at a deal to acquire the biotech, formerly known as Seattle Genetics, The Wall Street Journal reported last week, citing people familiar with the matter.

The news came weeks after Seagen (SGEN)-linked M&A chatter quietened last year as the company added a new CEO amid reports that pricing disputes ended Merck's (MRK) bid to acquire it for as much as $40B.

Similarly, Horizon Therapeutics (HZNP) was at the top of M&A news in 2022 as multiple drugmakers were eyeing the rare disease-focused drug developer before Amgen (AMGN) struck a ~$28B deal to acquire it in H1 2023.

With nearly $2B annual revenue and an expanding pipeline of antibody-drug conjugates (ADC), Seagen (SGEN) has characteristics of a prime buyout candidate, especially for companies like Pfizer (PFE) and Merck (MRK) looking to make up for their upcoming patent cliffs.

Out of four approved cancer therapies in Seagen's (SGEN) portfolio, two, Padcev, and Tukysa, feature in the top ten cancer drugs with blockbuster potential based on projected annualized growth, Evaluate Pharma reported last week, citing sell-side consensus.

The company, with partners Merck (MRK) and Astellas (OTCPK:ALPMF) (OTCPK:ALPMY), is awaiting label expansion for Padcev with Keytruda as a first-line option for certain patients with metastatic urothelial cancer. In late 2022, the FDA accepted its marketing application granting priority review with a target action date on Apr. 21.

Despite buyout interest, Seagen (SGEN) ended 2022 with a decline of 17%, underperforming other cancer drugmakers such as Genmab (GMAB) and Incyte Corporation (INCY), which added ~7% and ~9%, respectively.

However, Wall Street has remained bullish on Seagen (SGEN) throughout 2022, even as analysts' ratings on Genmab (GMAB) and Incyte (INCY) fell.

Meanwhile, Seeking Alpha contributors had mixed views on Seagen (SGEN). The author William Meyers issued a Hold rating on the stock in January citing valuation concerns. In contrast, Dan Victor issued a Buy rating in December, arguing that the stock "has not been this "cheap" at any time over the past decade."