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It is a strategic partnership that will see both Merck and Seattle Genetics venture new market opportunities as the market demand for specialized and less harmful drugs sharply increases amid the crisis.
Shares of Seattle Genetics Inc (NASDAQ: SGEN) jumped slightly over 16% to trade around $175 during Monday’s pre-market in reference to Friday’s close, $149.97. At the time of writing, teh stock was 10% up, at $165. The drastic change during the weekend is largely attributed to the news that the drug maker, Merck & Co Inc (NYSE: MRK) is set to purchase $1 billion worth of equity stake in Seattle Genetics common stock.
Notably, the latter’s stock had added approximately 1% to trade around $84.90 during the Monday pre-market.
Merck Investments in Seattle Genetics
According to the report from the two companies, they anticipate to co-develop and sell Seattle Genetics’s cancer therapy ladiratuzumab vedotin.
It is a strategic partnership that will see both companies venture new market opportunities as the market demand for specialized and less harmful drugs sharply increases amid the crisis.
In addition, the collaboration will assess ladiratuzumab vedotin in combination with Merck’s blockbuster drug Keytruda in types of breast cancer and other solid tumors.
The Seattle based company will receive an upfront payment of $600 million under the agreement. On the other hand, 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.
The Bigger Picture
Although full of ups and downs, 2020 has been one of the profit-making years for Seattle Genetics. According to metrics provided by MarketWatch, SGEN shares have added 110.90% in the past one year and managed to add 31.25% year to date through last Friday.
With a market cap of approximately $26.09 billion and a total of 174 million outstanding shares, as of the time of reporting, Seattle Genetics is set to reap most of the benefits of the health industry during the post COVID transition.
In the past 20 or so years, Merck & Co. has been making strategic acquisitions and partnerships to steer forward its goal.
Some of the notable ones during that period include the $41 billion acquisition deal of Schering-Plough.
In June 2014, the company announced the acquisition of Idenix Pharmaceuticals for approximately $3.85 billion. In December the same year, the company announced they would be spending $8.4 billion to purchase Cubist Pharmaceuticals. Later in the same month, the company acquired the Swiss biotechnology company OncoEthix for up to $375 million.
These among many others have made the company one of the world-leading pharmaceutical companies both by the expertise and market capitalization.
Merck has overseen the development and approval of over 60 molecular entities by the FDA. With a future possibility of developing more urgently needed vaccines, investors remain confident with the company’s ability to keep the rising trend, especially in the long term aspects.