SGEN Stock: Merck’s Rumored Takeover Hits A Snag On Price

Merck‘s (MRK) rumored takeover of cancer-focused biotech Seagen (SGEN) has stalled on price, according to a report Friday that sent SGEN stock tumbling.

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So far, the companies have failed to agree on a price, Bloomberg said, citing people familiar with the negotiations. Earlier reports suggested Merck could pay roughly $40 billion to acquire Seagen and bolster its already formidable pipeline of cancer drugs.

On today’s stock market, SGEN stock skidded 5.7% to close at 155.01. Merck stock sank 1.1% to finish at 89.26 on a down day for the markets.

SGEN Stock: A Missile In Cancer

Merck already sells Keytruda, a behemoth in the cancer space. The immuno-oncology drug “teaches” the body how to find and destroy cancer. But Merck is heavily reliant on Keytruda. During the June quarter, Keytruda brought in $5.25 billion in sales, accounting for about 36% of total revenue.

Merck’s patents covering Keytruda are set to begin expiring in 2028, opening the medication up to generic competition.

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Seagen, formerly known as Seattle Genetics, is a leader in a different cancer space. Seagen makes antibody drug conjugates, or ADCs. These drugs aim toxic chemicals, missilelike, directly at tumors. The goal is to limit toxic side effects to surrounding healthy tissue.

In the second quarter, Seagen’s sales were about $498 million, including royalties. The company has four drugs on the market. It also has an extensive pipeline with hopes of launching new medicines and adding new uses for its suite of four approved drugs. SGEN stock jumped after its quarterly report.

Representatives of Merck and Seagen didn’t immediately return requests for comment.

Shares Eye A Potential Entry

Rumors of an SGEN stock takeover began circulating earlier this year after previous chief executive and co-founder Clay Siegall resigned. The company said it became aware of a “domestic violence” incident at Siegall’s house. Siegall was arrested for the incident.

Now, Seagen is without a permanent CEO. On an interim basis, Chief Medical Officer Roger Dansey stepped into the role.

Merck and Seagen are already collaborators in the cancer space. The companies are testing regimens using Keytruda with Seagen’s drugs. SGEN stock spiked this summer on the potential takeover news. But as talks quieted, shares have sloughed off somewhat.

SGEN stock is now about 10% off its recent high at 183. Shares could be actionable if they pass that point, however. Seagen stock is forming a cup-with-handle base and an entry at 183.10, according to MarketSmith.com.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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