Merck & Co to Buy $1B Stake in Seattle Genetics

Drugmaker Merck & Co Inc. revealed on Monday that it is buying a $1 billion equity stake into cancer focused drug developer Seattle Genetic’s common stock.

The two companies announced that they would co-develop and sell Seattle Genetics’s cancer therapy, ladiratuzumab vedotin. The two said in a joint statement that they will assess ladiratuzumab vedotin in combination with Merck’s blockbuster drug Keytruda in types of breast cancer and other solid tumors.

Seattle Genetics will receive an upfront payment of $600 million under the agreement, while Merck will invest the $1 billion to buy 5 million shares of Seattle Genetics for $200 per share, a premium of 33.4% to Seattle’s last close. According to Refinitiv IBES data, this would mean a stake of almost 2.9%.

“Collaborating with Merck on ladiratuzumab vedotin will allow us to accelerate and broaden its development program in breast cancer and other solid tumors, including in combination with Merck’s KEYTRUDA, while also positioning us to leverage our U.S. and European commercial operations,” said Clay Siegall, Ph.D., President and Chief Executive Officer of Seattle Genetics. “The strategic collaboration for TUKYSA will help us reach more patients globally and benefit from the established commercial strength of one of the world’s premier pharmaceutical companies.”

“These two strategic collaborations will enable us to further diversify Merck’s broad oncology portfolio and pipeline, and to continue our efforts to extend and improve the lives of as many patients with cancer as possible,” said Dr. Roger M. Perlmutter, President, Merck Research Laboratories. “We look forward to working with the team at Seattle Genetics to advance the clinical program for ladiratuzumab vedotin, which has shown compelling signals of efficacy in early studies, and to bring TUKYSA to even more patients with cancer around the world.”

As part of the deal, Seattle Genetics is also eligible for additional milestone payments of up to $2.6 billion.

Seattle Genetics has also given Merck exclusive license to sell its cancer therapy Tukysa in Asia, the Middle East and Latin America and other regions outside of the U.S., Canada and Europe.

The company will receive upfront payment of $125 million from Merck for the same, with additional milestone payments of up to $65 million.

Merck shares were barely changed on the news but Seattle Genetics saw a gain of almost 12% on Monday.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.