Seagen/Pfizer deal spread becoming increasingly attractive, analyst says

The deal spread in Pfizer's (NYSE:PFE) planned $43 billion purchase of Seagen (NASDAQ:SGEN) is attractive with investors seeing decent upside upside from current levels, according to an Oppenheimer analyst.

Seagen (SGEN) is currently trading at $202.47, while the deal it struck with Pfizer (PFE), is at $229 a share, representing 12% upside. The difference in the spread represents investors worry about the deal close, especially antitrust concerns about the combination.

Merck KGaA's (OTCPK:MKGAF) announcement's on Monday that it had regained exclusive global rights to bladder cancer Bavencio (avelumab) after the termination of the collaboration agreement with Pfizer (PFE), is likely indication of Pfizer's (PFE) commitment to getting the Seagen (SGEN) deal done, according to Oppenheimer analyst Jay Olson.

"We view this evolvement as an indication of PFE's preemptive planning to avoid potential antitrust concerns arising from the PFE/SGEN $43 billion M&A deal recently announced," Olson, who has an outperform rating on Seage (SGEN), wrote in a note on Monday.

With the termination of the deal, Pfizer (PFE) handed back the worldwide rights to develop, manufacture, and commercialize the bladder cancer treatment, replacing its current profit share with a 15% royalty on sales.

Olson highlighted that cancer drug Bavencio only contributed $72 million to Pfizer's (PFE) total $3 billion oncology franchise in Q4, though it may be considered to overlap with Seagen's(SGEN) Padcev.

"Besides Bavencio, we see no obvious assets as potentially concerning from regulatory perspectives, as we remain optimistic on the deal closure," Olson added. "We don't see any notable overlap between PFE/SGEN core businesses from regulatory perspectives, and believe early stage overlaps can be further divested."

Olson also pointed out that Amgen (AMGN) recently highlighted at Oppenheimer's healthcare conference its confidence in closing its $28 billion acquisition of Horizon Therapeutics (HZNP) in the first half of this year, which is likely to represent a positive read through to SGEN/PFE deal in the near-term.

Last month Pfizer (PFE) CEO Albert Bourla said he doesn't expect antitrust concerns will prove a stumbling block for the company's planned $43 billion acquisition of Seagen (SGEN).

“I anticipate very high scrutiny, but I anticipate zero problem,” Bourla said in a Bloomberg TV interview. “You can’t find a cleaner merger in terms of antitrust.”

M&A investors also recently had some positive antitrust news when CVS Health's (CVS) planned ~$10.6 billion purchase of Oak Street Health (OSH) passed an antitrust deadline and CVS's $8 billion acquisition of Signify Health closed last week.