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Merck Close to Acquiring Seagen in a $40B Deal
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Merck Close to Acquiring Seagen in a $40B Deal

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Merck & Co. is potentially on the verge of acquiring cancer-focused biotech company Seagen Inc. in a deal for more than $200 per share for a total consideration worth a whopping $40 billion.

In one of the biggest breakthrough deals in the biotech industry, healthcare giant Merck & Co. (MRK) is currently close to sealing a deal to take over Seagen Inc. (SGEN).

According to a report in the Wall Street Journal, Merck could soon announce a deal in the coming days to acquire Seagen that could be worth $40 billion or higher.

Seagen is a Washington-based global biotechnology company focused on developing and commercializing innovative and transformative monoclonal antibody-based therapies for the treatment of cancer, with a current market capitalization of over $30 billion.

Following the news, shares of Seagen gained almost 5% during the extended trading session on July 6, while Merck shares were trading 1% lower.

This is not the first time that the news of Merck’s potential acquisition of Seagen has come to the fore. Shares of SGEN have gained more than 20% ever since the news of the possible deal between the two companies was reported by the Wall Street Journal in mid-June. Meanwhile, Merck shares have risen 3% over the same period.

Synergies of the Possible Takeover

Notably, Seagen has achieved outstanding growth in its revenues over the last decade. Revenues have grown over 125x from just $200 million in 2012 to $1.57 billion in 2021.

Not only has it grown its revenues through the consistent expansion of its product portfolio, but it also continues to have an impressive pipeline of products paving the way for superior long-term returns.

Seagen’s lead product is Adcetris, and it reported sales of $1.4 billion last year. Furthermore, other drugs are also gaining traction, like Padcev, Tukysa, and Tivdak.

The addition of Seagen is a great strategic fit for Merck as it will expand its oncology portfolio and diversify its revenues away from its top-selling cancer drug, Keytruda (sales of $17.2 billion in 2021), which is slated to lose its patent rights in the coming years.

However, the deal, subject to certain regulatory approvals, could face intense scrutiny from the antitrust regulators. Merck is scheduled to release its Q2 results on July 28 and the deal announcement is expected to come before that or coincide with the results.

Wall Street’s Take on Merck

Ahead of the WSJ news report yesterday, Daiwa Securities analyst Narumi Nakagiri upgraded Merck from Hold to Buy and also increased the price target to $102 (9.5% upside potential) from $89.

The Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on seven Buys and three Holds. The average Merck & Co. price target of $99.20 implies 6.52% upside potential to current levels.

TipRanks’ Smart Score

MRK scores a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

Conclusion

There is no certainty whether the deal will come through. If its does, it will act as a strong catalyst for Merck’s revenues and profitability increasing long-term returns to the shareholders.

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