Seagen, the biotech company Pfizer is buying for $43 billion, is considered a pioneer in the class of cancer drugs called antibody drug conjugates. But the first antibody drug conjugate (ADC) to reach the market wasn’t a Seagen drug. That honor belongs to Pfizer.

The FDA granted accelerated approval to Pfizer drug Mylotarg in 2000 as a treatment for acute myeloid leukemia. Toxicity risks led to a stern warning on its label. The drug’s failure in confirmatory studies along with toxicity concerns led the pharmaceutical giant to voluntarily withdraw the product from the market. ADC research has since advanced, leading to a dozen FDA-approved products that have validated the drug class. Three of those products belong to Seagen, a company that is projected to eclipse $2 billion in annual revenue this year.

“We did have, by the way, expertise in ADCs,” Pfizer CEO Albert Bourla said, speaking during a conference call after the deal was announced Monday. “And clearly, we didn’t do a good job as Seagen did. But by working on ADCs, we know what works and what doesn’t work. And we have enough expertise to appreciate how good the platform and how good the people of Seagen are. So that’s why we are investing over there.”

Bothell, Washington-based Seagen formed in 1997 under the name Seattle Genetics. Throughout its history, it was more commonly referred to as “SeaGen” and in 2020, it formally changed its name.

ADCs are comprised of a tumor-targeting antibody that’s chemically linked to a toxic drug payload. The targeting ability of the antibody is meant to deliver a lethal strike to cancer cells that spares healthy tissue. Seagen’s first ADC, Adcetris, was developed under a partnership with Takeda Pharmaceutical. The drug won its first approval in 2011 for treating two types of lymphoma. It accounted for $839.2 million in 2022 revenue, a 19% increase from the prior year.

Seagen has additional ADC alliances. Astellas Pharma is the partner on Padcev, approved in 2019 for bladder cancer. Tivdak, developed in partnership with Genmab, was approved by the FDA in 2021 for cervical cancer. The Seagen portfolio has one small molecule drug: Tukysa has approvals in breast cancer and colorectal cancer. But the biotech is known for ADCs and its success in this drug class paved the way for yet another alliance, a multi-drug research pact struck with Sanofi nearly a year ago for cancer targets that remain undisclosed.

Pfizer was able to bring Mylotarg back to the market, winning FDA approval in acute myeloid leukemia in 2017. That year, the FDA approved another Pfizer ADC, Besponsa, for B-cell precursor acute lymphoblastic leukemia. Besponsa is a modest seller, accounting for $219 million in 2022 revenue. Pfizer’s cancer drug lineup is dominated by small molecules. The biggest seller of the bunch is breast cancer drug Ibrance, which generated $5.1 billion in revenue last year. Mikael Dolsten, Pfizer’s chief scientific officer, acknowledged the prominence of small molecules in the company’s oncology portfolio. But he said the company views Seagen as complementary to the Pfizer portfolio and pipeline.

“In the end, cancer is going to be a combination game,” Dolsten said. “And by getting this scale between the two companies, you will see a lot of upside opportunities.”

That complementary perspective could be key for securing the Federal Trade Commission’s blessing. The FTC has taken a stronger stance against anticompetitive merger activity, particularly in the pharmaceuticals sector. But a Pfizer acquisition of Seagen poses a smaller regulatory risk compared to the proposed buyout by Merck last year, William Blair analyst Andy Hsieh wrote in a note sent to investors. Pfizer’s Ibrance addresses a different breast cancer population than Seagen’s Tukysa, he explained. Padcev could take market share from Pfizer’s Bavencio in bladder cancer, but there is no material overlap between Seagen ADC Adcetris and Pfizer’s hematology portfolio, Hsieh said. The other assets that could trigger antitrust concerns are in early-stage development, he added.

Pfizer Chief Financial Officer David Denton projected the Seagen acquisition could lead to $1 billion in cost efficiencies in the third year after the deal closes, savings that come from eliminating duplication. But he added that Pfizer does not expect the deal will lead to reductions in either company’s R&D programs. That’s key, because Pfizer expects Seagen’s approved products and drug pipeline will help contribute to the pharma giant’s stated goal of achieving $25 billion in risk-adjusted revenue in 2030—all of that new revenue coming from business deals.

The Seagen acquisition nearly gets the pharma giant to the revenue goal. Seagen’s pipeline has 11 product candidates spanning indications that include cancers of the breast, bladder, and lungs. Denton said Pfizer estimates Seagen could contribute more than $10 billion in risk-adjusted revenue in 2030, assuming products now in development win approvals. That estimate is close to the $10.5 billion in risk-adjusted revenue projected to come in 2030 from the 2022 acquisitions of immunology drug company Arena Pharmaceuticals, migraine drugmaker Biohaven Pharmaceuticals, sickle cell disease biotech Global Blood Therapeutics, and respiratory syncytial virus drug developer ReViral.

If Seagen’s pipeline ADCs reach the market, they should become strong revenue drivers. These drugs hold up better against follow-on competition because compared to other types of drugs, it’s harder to develop biosimilar ADCs, Hsieh said. That enables a branded ADC to continue generating strong revenue for a long time, a feature that has helped drive premium pricing in ADC deals. As an example, Hsieh cited Gilead Sciences’ $21 billion Immunomedics acquisition in 2021, which brought Trodelvy. Last month, that ADC won FDA approval in the most common type of breast cancer, putting it in position to reach blockbuster status. Meanwhile, Daichi Sankyo developed and commercialized the ADC Enhertu under an alliance with AstraZeneca. Enhertu is poised for strong revenue growth after receiving 2022 approvals in breast and lung cancers. The ADC field has momentum. Of the 12 approved ADCs, nine of them won their FDA nods within the last five years.

Pfizer agreed to pay $229 cash for each share of Seagen, an offer that represents a 33% premium to the biotech’s closing price last Friday. If Seagen accepts a superior offer, it must pay Pfizer a $1.65 billion termination fee, according to a regulatory filing. But if Pfizer can’t close the deal due to antitrust concerns or other issues, the merger agreement calls for the pharma giant to pay Seagen $2.22 billion. The companies expect to close the transaction late this year or in early 2024. If it passes regulatory muster, the acquisition will thrust Pfizer to the front of a drug class it once abandoned.

“The acquisition of Seagen, a current leader in the ADC space, brings Pfizer’s involvement in the field of ADCs to full circle,” Hsieh said.

Public domain image by the National Cancer Institute