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  • Jonathan Poyer

SEAGEN Finally Acquired - But What's In It for Pfizer? For Investors?

Shock and awe M&A rallied the S&P Select Biotech Index after fears of contagion related to the Silicon Valley Bank (SVB) failure led to a decisive breach of the 200 day moving average.

Pfizer (PFE) announced the acquisition of Seagen (SGEN) for ~$43 billion or $229 per share, a ~33% premium to the prior day's closing price. SGEN shares had been trading at elevated levels since the WSJ speculated a takeout was in the works since early February. The deal values SGEN at ~20x current revenue of ~$2.2 billion, but PFE projects the 2030 revenue contribution from SGEN's assets will be >$10 billion. Notably, PFE's projections are well ahead of 2030 wall street numbers of ~$8 billion and are perhaps the only way they could justify the lofty valuation of the deal. PFE does not expect the deal to be accretive until 2028 and some analysts project the deal may never be accretive. PFE's willingness to pay a very high price for unprofitable SGEN signals the desperate need for large players to augment revenues and should benefit the valuations of other stand alone commercial biotechs.

Sanofi (SNY) emphasized the willingness to pay up for strategic commercial assets with the announcement it was acquiring Provention Bio (PRVB). The deal price was a whopping 273% premium to the prior close or $2.9 billion for PRVB's first in class therapy for type 1 diabetes, TZIELD, a CD3-directed antibody. Notably, SNY had an existing co-promote agreement with PRVB, but initial revenues for the drug have yet to be reported. SNY did not comment on when the deal might be expected to be accretive. Full protection of SVB's uninsured depositors provided additional momentum to the biotech rally allowing investors to focus on fundamental clinical / regulatory developments instead of potential capital impairment / recovery.

Acadia Pharmaceuticals (ACAD) announced the approval of the first drug for Rett Syndrome, DAYBUE (trofinetide). Rett is a rare genetic disease that severely impairs brain development and may be lethal providing a basis for ACAD's ~$400k estimated annual cost of therapy. BioMarin Pharmaceuticals (BMRN) lost ground on news FDA extended the review timeline for their hemophilia gene therapy, Roctavian, by three months so they could fully review recently submitted long term data. Roctavin would provide a long term therapy option and is projected to achieve >$1 billion in revenue by 2025 highlighting a growing stable of newly approved potential orphan blockbusters.

Culling of the biotech heard continued as Neoleukin Therapeutics (NLTX) announced the CEO was stepping down and a 70% reduction in force.

Regulators are apparently willing to backstop seemingly all bank depositors, but biotech equity holders must fend for themselves to protect capital.

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