Merck (MRK) Buying Up To $4.5 Billion Equity Stake In Seattle Genetics (SGEN)

By Amit Chowdhry ● September 14, 2020
  • Merck & Co., Inc. (NYSE: MRK) is planning to buy an equity stake in Seattle Genetics, Inc. (NASDAQ: SGEN) valued at up to $4.5 billion

Merck & Co., Inc. (NYSE: MRK) is planning to buy an equity stake in Seattle Genetics, Inc. (NASDAQ: SGEN) valued at up to $4.5 billion in a series of deals for two of its cancer drugs, according to Bloomberg. The two companies have worked together in the past as they have studied the combinations of Seattle Genetics’ cancer drugs with Merck’s  Keytruda.

Merck is going to take a $1 billion stake in Seattle Genetics. The investment of 5 million shares will be be purchased at $200 each — which is a 33% premium on the company’s closing price on Friday.

Going forward, the companies will develop an experimental medicine called ladiratuzumab vedotin (LV). This experimental medicine has seen positive results in early trials for triple-negative breast cancer. Merck is going to pay $600 million upfront and development costs and any future profits will be split equally between the two drugmakers. Plus Seattle Genetics will be eligible for up to $2.6 billion in sales and development milestones.

LV is an antibody drug conjugates which are designed to kill cancer cells while leaving healthy as is. And the companies have a plan to test the medicine for other types of cancer as well.

Another aspect of the deal is Merck giving Seattle Genetics an advantage to reach new markets for Tukysa. Tukysa has U.S. approval for treating another aggressive breast cancer, which involves a protein called HER2 promoting rapid growth of cancer cells. Merck is going to pay Seattle Genetics $125 million upfront and up to $65 million in milestones for commercializing the drug outside of North America and Europe.

“We have very strong trajectory, I get up every morning excited to make a difference in cancer patients’ lives,” stated Seattle Genetics’ chief executive officer Clay Siegall in an interview with Bloomberg.

Disclosure: I own a small number of SGEN shares.