Merck is nearing a takeover of cancer biotech Seagen in what could be one of the biggest deals this year, according to a report Friday that prodded SGEN stock higher.
The Wall Street Journal said talks have accelerated since initial reports of a deal arose last week. Parties from both companies are scheduled to meet this week, according to people familiar with the matter. Other suitors are said to be eyeing Seagen as well.
The deal would be huge. As of Friday, Seagen had a market cap north of $32 billion. Merck's cap is roughly $233 billion. The rumored transaction would bolster Merck's beefy portfolio of cancer drugs, which includes blockbuster hit Keytruda. Seagen makes antibody drug conjugates, a class of drugs that aim toxins directly at tumors. Its best-known medicine is Adcetris.
On the stock market today, SGEN stock jumped 3.1% to 179.33. Merck stock rose 1.2% to 93.13.
SGEN Stock: Existing Ties With Merck
The rumored takeover isn't the first time Merck and Seagen have been tied. The companies signed a deal in September 2020 to co-develop a breast cancer drug. Merck paid $600 million up front and bought 5 million shares of SGEN stock for $1 billion.
Merck and Seagen also have a licensing deal for another cancer drug, Tukysa, in countries outside the U.S., Canada and Europe. That deal was worth $125 million up front.
But Merck reportedly is worried regulators could block the potential deal. Both companies are big players in the oncology space. Keytruda brought in $17.2 billion in sales last year, growing 20%. Adcetris generated $705.6 million out of about $1.4 billion in total Seagen sales.
Meanwhile, SGEN stock has surged since rumors of the deal initially emerged last week. Shares are forming a cup base with a buy point at 192.89, according to MarketSmith.com. The stock is also well above its 50-day and 200-day moving averages.
Representatives of the two companies didn't immediately return requests for comment.
The news also comes at an odd time for SGEN stock. Former Chief Executive Clay Siegall was recently arrested on domestic violence charges, leading him to resign from his top post at Seagen. The company is now looking for a new permanent CEO.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
