Shares of biotech company Seagen (NASDAQ:SGEN) declined Tuesday morning, falling by over 6%. Weakness followed a report from Bloomberg overnight that suggested the Federal Trade Commission was preparing to challenge Amgen’s (NASDAQ:AMGN) deal to buy Horizon Therapeutics (NASDAQ:HZNP), raising concerns of increased scrutiny of drug industry deals, especially larger takeovers.
In March, Seagen entered into an agreement with Pfizer to be acquired in a merger valued at $43 billion. This compares to Amgen’s $28B deal for Horizon, announced in December.
“This development could put ongoing deals and future big deals in question,” said Wells Fargo analysts. “If this scrutiny is indeed related to stop bigger deals, we suspect it could make investors jittery around PFE-SGEN.”
There are nuances that make comparing Amgen/Horizon and Pfizer (NYSE:PFE)/Seagen imperfect. Berenberg analysts see possible action by the FTC as having only limited read-across for Pfizer/Seagen.
“While the [Amgen and Horizon] have little overlap in marketed drugs, it appears the FTC finds issues with the potential overlap in indications of pipeline assets, which suggests that the FTC has indeed stepped up its scrutiny of large mergers in the pharmaceutical industry,” they explained. “If this litigation is to happen, we think it marks a rising bar for anti-trust in biopharma M&A. Given the ‘bigger is bad’ mindset at the FTC, we expect even more scrutiny on the PFE/SGEN deal, but we think the read-across is fairly limited.”
The Pfizer and Seagen deal focuses on oncology, and this has a very different dynamic than Amgen and Horizon Therapeutics’ immunology indications.
“Immunology diseases are chronic, and drugs with different MoAs mostly compete for the same pool of patients. In contrast, we think in oncology, even the same tumor type could fit multiple products, because patients cycle through therapies (e.g., lines of therapy) with different targets/MoAs and AE profiles,” the analysts said. “Regarding the PFE/SGEN deal, we think there is virtually no overlap in marketed products after Pfizer divested Bavencio (for bladder cancer). Based on the latest pipelines of Pfizer and Seagen, we think the overlap of clinical stage assets is also limited.”