Seattle Genetics Acquires Cascadian Therapeutics, Continuing a Strong 2018 Start in Biotech Mergers and Acquisitions

On January 31, two Seattle biotech companies, Seattle Genetics and Cascadian Therapeutics, announced a merger agreement under which Seattle Genetics will acquire Cascadian Therapeutics for $614 million.[1] The announcement catapulted Cascadian Therapeutics shares to a 16-month high, and a 69% increase over the previous day’s closing price.[2]

Under the agreement terms, Seattle Genetics has commenced tender offer to acquire all outstanding common stock shares of Cascadian Therapeutics at $10 per share on February 8. The board of directors of Cascadian Therapeutics unanimously recommends that the stockholders tender their shares.[3] Seattle Genetics is preparing a public offering of $550 million in shares of its own common stock to help fund the acquisition, and it has secured $400 million in financing from Barclays and JPMorgan Chase. The companies expect the transaction to close in the first quarter of 2018.[4],[5]

Seattle Genetics focuses on targeted, antibody-based therapies for treating cancer. Its one marketed product, ADCETRIS^® (brentuximab vedotin), is sold worldwide to combat relapsed classical Hodgkin lymphoma and relapsed systemic anaplastic large cell lymphoma.[6] Sales of ADCETRIS^® exceeded $480 million in 2017.[7]

Cascadian Therapeutics’ lead drug candidate, tucatinib, is an orally bioavailable tyrosine kinase inhibitor that is highly selective for HER2, a growth factor receptor overexpressed in many cancers. Phase 1b trials demonstrated that tucatinib co-administered with capecitabine and trastuzumab exhibits clinical activity in patients with and without brain metastases, and is generally well tolerated.[8] Currently, Cascadian Therapeutics is conducting a global pivotal trial comparing the tucatinib-capecitabine-trastuzumab combination with placebo in patients with locally advanced or metastatic HER2-positive breast cancer. Its portfolio also includes a preclinical immune-oncology agent targeting TIGIT.[9]

President and CEO of Seattle Genetics, Clay Siegall, stated that the acquisition of “[t]ucatinib would complement our existing pipeline of targeted cancer therapies, provide a third late-stage opportunity for a commercial product in solid tumors, and expand our global efforts in breast cancer.” Siegall “believe[s] there may be opportunities for tucatinib in other tumor types, such as HER2-positive metastatic colorectal cancer.” Scott Myers, President and CEO of Cascadian Therapeutics, declared that the “agreement represents a very positive outcome for patients with HER2-expressing cancers, our employees and for our stockholders.” He added “Seattle Genetics has the development and commercial capabilities and the resources needed to more fully realize the potential of tucatinib as a new best-in-class treatment option for metastatic breast cancer, colorectal cancer and potentially for other indications.”[10]

The merger was the second biotech acquisition in January in the Seattle area. On January 22, Seattle’s Juno Therapeutics agreed to be acquired by Celgene for $9 billion.[11] These two deals follow several other life science mergers and acquisitions in 2018: Celgene’s purchase of Impact Biomedicines for up to $7 billion, Sanofi’s purchase of Bioverativ for $11.6 billion, Sanofi’s purchase of Ablynx for $4.8 billion, and Takeda Pharmaceutical’s purchase of TiGenix for $630 million.[12],[13] Industry analysts have forecasted a significant rise in biotech mergers and acquisitions for 2018, fueled by pressures to find high-value replacements for aging drug products and supplement dry research pipelines in many of the large companies. Some analysts predict that recent U.S. tax reform will further drive this trend, particularly the lowered levy on repatriated corporate cash.[14],[15],[16],[17]