The correct form would be Matagal na tayong hindi nagkita.
In the context of "it's been a while", matagal na is just a sentence fragment that does not convey your complete thought. Matagal na simply means "a long time", a phrase used to modify Tayo ay hindi nagkita "We have not seen each other" to produce Matagal na tayong hindi nagkita.
As you may know, conversational Tagalog incorporates a lot of English words and phrases and it is not uncommon to hear "long time no see" between friends in the setting you have described. I would even say that it is more common to hear the English equivalent rather than the actual Tagalog sentence.
