Merck’s deal for Seagen deemed unlikely by earnings release

Merck & Co.’s roughly $40 billion deal for Seagen Inc.

is unlikely to be finalized before the pharmaceutical giant’s earnings report later this month, although talks remain on track, according to people familiar with the matter.

The Wall Street Journal reported earlier this month that Merck intended to agree on a purchase of the cancer biotech within weeks, a plan that has since been delayed, the people said.

The change is partly due to the need to await data expected soon from a study evaluating one of Seagen’s treatments, the sources said. There’s also a desire to eventually see the outcome of a royalty payment case that Seagen is pursuing and is also expected soon, the people said. Both could impact Seagen’s valuation.

There is still no guarantee that the companies will reach agreement on a takeover deal. Merck is expected to release its fiscal second quarter results on July 28.

The acquisition of Seagen would help Merck expand its line of cancer drugs, currently led by blockbuster immunotherapy Keytruda.

Seagen helped pioneer a class of drugs known as antibody-drug conjugates. The therapies take advantage of the honing capabilities of antibodies to deliver a potent toxin to a specific tumor target.

As early as this month, a study evaluating Seagen’s Padcev as a first-line treatment for bladder cancer could yield data. The study examines the use of Padcev alone and in combination with Keytruda, according to the analysts.

Padcev is currently approved to treat patients with bladder cancer who had failed previous treatment. Sales for the first-line bladder cancer treatment could reach billions of dollars a year if the study results are positive and regulators approve the use, analysts have estimated.

A combination with Keytruda for bladder cancer could also help Merck extend the commercial life of its product after current patents expire later this decade, analysts say.

Additionally, Seagen could receive significant royalties and milestone payments if it wins an arbitration case and other litigation against Japanese drugmaker Daiichi Sankyo. Co.

Ltd., a former partner who later developed its own line of antibody-drug conjugates, including a breast cancer therapy called Enhertu.

Seagen alleged that Enhertu and the rest of Daiichi’s antibody-drug conjugate pipeline infringed Seagen’s patented technology, while Daiichi said Enhertu did not rely on Seagen’s technology, analysts said. Daiichi sells Enhertu together with AstraZeneca PLC.

A decision in the arbitration case is expected as early as this summer, according to people familiar with the matter.

Write to Cara Lombardo at [email protected] and Jonathan D. Rockoff at [email protected]

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