Shares of the cancer specialist Seagen (SGEN) were up by 10.2% as of 3:14 p.m. ET Monday afternoon. The big gain came after a Wall Street Journal article revealed that Pfizer (PFE) is considering a bid for the drugmaker. Talks are preliminary in nature, and a buyout is not imminent, according to the WSJ report.
Last year, Seagen was rumored to be engaged in buyout talks with Merck. After the two companies couldn’t agree on price, Merck walked away from negotiations last August, according to Bloomberg.
Seagen is presently valuated at approximately $33 billion. Industry experts expect the company to go for a little north of $40 billion in a buyout scenario. Seagen’s shares, in turn, ought to have another 21%-plus upside from current levels in the event Pfizer does indeed go through with this transaction.
Again, though, the cancer specialist has been rumored to be a buyout target of a major pharmaceutical company in the recent past, and nothing ever came of that rumor. As such, investors shouldn’t buy this biotech stock purely for its near-term prospects as a buyout play.
There are some good reasons to think this rumor may have legs, however. First up, Pfizer raked in over $100 billion in annual revenue in 2022, thanks to its record-breaking COVID-19 franchise. The drugmaker thus has a sizable war chest for dealmaking.
Second, Pfizer is known to be on the lookout for bolt-on deals capable of softening the blow from its declining COVID-19 franchise, as well as its upcoming battle with the patent cliff. An acquisition of Seagen, and its portfolio of four commercial-stage cancer drugs, would make a lot of sense for the pharma titan.
George Budwell has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Merck, Pfizer, and Seagen. The Motley Fool has a disclosure policy.