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SGEN M&A Arbitrage Play

  • Writer: BPIQ
    BPIQ
  • Dec 5, 2023
  • 3 min read

SUMMARY

If the PFE SGEN M&A closes by end of Q1 '24 ...

  • Most likely closing timeframe ^1 and ^6

Return = 7-8% in 3-4 months

  • PFE agreed to pay $229/share

  • 12/1/23 SGEN closed at $212.72/share


^FN Refer to milestones in SGEN/PFE or HZNP/AMGN acquisition timelines shown in footnotes section


RISKS

What are the chances that ...

  1. FTC blocks the deal? 

  2. Very low

    • FDA is giving this deal a high level of scrutiny ^2

    • SGEN and PFE are in oncology

    • SGEN is a leader in Antibody drug conjugates (ADCs)

    • BUT, there is not much overlap in products/pipelines

      • As highlighted by European regulators on approval ^3

        • Pipelines target different segments & with different MOA

        • No loss of innovation because lots of competitors

        • Unlikely to impact prices for above reasons



  3. FTC delays the deal close?

    • Low/medium

  4. Not sure if low or medium, but NOT high risk

  5. How could FTC delay deal?

    • FTC files lawsuit

      • Likely to get more concessions from PFE

      • IF occurs, would likely occur by end of year

        • 30 days after PFE substantial compliance (SC)

        • SC should be announced any day now


      • Unlikely that FTC would fight lawsuit to the end - to block deal

        • Not enough anti-competitive risk (see above)

        • FTC settled with AMGN after enough concessions in HZNP M&A ^4

          • FTC taking this stance would have broad implications

        • & even if FTC blocks deal, SGEN has lots of value

        • SGEN has lots of value as a stand-alone

          • $577M revenue in 3Q23 (33% YoY increase)


  • But even if FTC delays the deal and files lawsuit

    • SGEN stock might go down 10-20% on lawsuit announcement

      • See HZNP price history below ^5

    • But the deal will still likely close in Q2 or Q3 '24


      • See timing of HZNP/AMGN closing in Footnotes below

      • SGEN then gets to $229/share

      • So ~7-8% return is delayed 1 yr



^FN Footnotes

See PFE/SGEN and AMGN/HZNP timelines below


PFE/SGEN timeline

3/13/23 AMGN agrees to buy SGEN for $229/share ($43B)

7/14/23  FTC sends SGEN & AMGN 2nd request ^2

  • Means FDA is giving this deal more scrutiny - asking for more documents

8/28/23 - See AMGN/HZNP news below

    $206.96 (+3.23%) (~+6.5% since 8/22/23)

9/1/23 AMGN settlement

    $207.91 (+0.89%)

9/22/23 Positive results from 1st line bladder cancer study

  • Possible market expansion of PADCEV in early stages of bladder cancer?

    $213.70 (+3.54%)

10/16/23 PFE has likely turned over all docs ^1

10/19/23 EU approval granted

10/23/23 Report that FTC sent out questionnaires to 3rd parties re: effect of deal on innovation in cancer

     $216.87 (+0.64%)

10/31/23 PFE CEO reiterates expects deal to close late Q4 '23 or early Q1 '24 ^1

11/1/23 SGEN reports Q3 update

  • $571M net product sales (+33%)

  • Reiterates likely Q4 '23 or Q1 '24 timing of PFE M&A

11/10/23 PFE may file substantial compliance in 3-4 weeks

  • CNBC reports that there is not a concern that FTC will sue to block deal

    • More likely early 2024 close (rather than late 2023) ^6

    $213.72 (+0.37%)

11/21/23

    $214.17 (+1.10%)

11/29/23

    $213.52 (-0.3%)


AMGN/HZNP timeline

11/30/22 Rumors that HZNP getting acquired

    HZNP $100.29 (+27%)

12/11/22 AMGN agrees to purchase HZNP for $116.50

    HZNP $112.36 (+15%)

1/26/23 Sen Warren concerned over HZNP/AMGN M&A

    HZNP $111.25 (-1.55%)

1/31/23 FTC sends AMGN & HZNP 2nd request

    $109.72 (-0.3%) (-~3% since 1/25)

3/22/23 Report that FTC probing AMGN acquisition of HZNP

    HZNP $107.32 (-1.75%)

4/XX/23 AMGN & HZNP substantially comply with FDA 2nd request

4/21/23 Report of FTC closed door meetings possibly to discuss AMGN/HZNP M&A

     $111.33 (-0.38%) (4/21-4/24/23 HZNP -1%)

5/16/23 FTC files federal lawsuit to block HZNP acquisition by AMGN: ^5

    HZNP $96.34 (-14%)

     $101.39 (- 0.21%)

8/9/23 (HZNP reported earnings

    $104.65 (up ~5.5% since 8/4/23)

8/21/23 CNBC report that FTC & AMGN are making progress on settling

    $104.98 (+1.08%)

8/23/23 FTC requests withdrawal of agency trial

8/28/23 FTC request to withdraw becomes public

      $112.15 (+5.14% (+ ~7.5% since 8/22/23)

9/1/23 Consent agreement executed ^4

    $115.30 (+2.27%)

10/6/23 Deal closes

    $116.30 (+0.04%)



This article is not investment, tax, or legal advice. Please do your own diligence and seek advice from professional advisors representing your interests.  


Article history:

Posted 12/5/23


 
 
 

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