AbbVie Pays $5.8 Billion+ for Bay Area's Stemcentrx, Which Has Ties to Paypal and SpaceX Investors

AbbVie Pays $5.8 Billion+ for Bay Area Stemcentrx, Which Has Ties to Paypal and SpaceX Investors April 28, 2016
By Mark Terry, Breaking News Staff

North Chicago, Ill.-based AbbVie announced today that it is acquiring South San Francisco-based Stemcentrx for $5.8 billion.

As part of the deal, AbbVie picks up the company’s lead product, rovalpituzumab tesirine (Rova-T), which is presently in registrational trials for small cell lung cancer (SCLC). The drug is a biomarker-specific therapy based on cancer stem cells that targets delta-like protein 3 (DLL3), which appears in 80 percent of SCLC tumors, but not in healthy tissue.

“AbbVie is committed to continued innovation in oncology, a critical component of our long-term growth and an area of significant need to millions of patients worldwide,” said Richard Gonzalez, chairman and chief executive officer of AbbVie, in a statement. “The addition of Stemcentrx and its late-stage compound Rova-T provide AbbVie with a unique platform in solid tumor therapeutics and complement our leadership position in hematologic oncology. We believe the acquisition of Stemcentrx will strengthen and accelerate our ability to deliver innovative therapies that will have a remarkable impact on patients’ lives.”

The drug is being evaluated as a third-line treatment for SCLC when no other therapies are available. It has also been submitted to the U.S. Food and Drug Administration (FDA) for Breakthrough Therapy Designation.

“Rova-T is the first predictive biomarker-based therapy associated with drug efficacy in small cell lung cancer, and that is a big deal for this difficult disease,” said Charles Rudin, chief, thoracic oncology service, Memorial Sloan-Kettering Cancer Center, in a statement.

In addition, Stemcentrx has four other drugs in clinical trials for various solid tumors, including triple-negative breast cancer, ovarian cancer, and non-small cell lung cancer. It also has several compounds in preclinical studies, as well as a proprietary technology platform that utilizes stem cells to identify and screen tumor targets.

AbbVie is paying a $5.8 billion upfront fee made up of $2 billion in cash and the rest in stock. An additional $4 billion could be earned through various milestones, for a total of $9.8 billion. Because Stemcentrx has cash on hand, which will be returned to shareholders, the company has a total enterprise value of about $10.2 billion.

Brian Slingerland, a former investment banker, is the company’s chief executive officer. Scott Dylla, previously a senior scientist with Oncomed Pharmaceuticals , is Stemcentrx’s chief executive officer. They founded the company in 2008.

Stemcentrx had a few small venture capital rounds with investments made by Western Technology Investment and Artis Ventures. Then in 2012, it pulled in $42 million in a Series D round, with about a $300 million valuation. The Founders Fund threw $30 million into that pot, which makes them the company’s largest outside shareholder. Founders Fund is affiliated with Peter Thiel and Brian Singerman. Peter Thiel is perhaps best known as the co-founder of PayPal. Fortune notes that Stemcentrx is the Founder Fund’s “largest single investment, even larger than its commitments to Elon Musk’s SpaceX).”

“We weren’t space experts and wouldn’t have done SpaceX if Elon wasn’t running it,” Singerman told Fortune. “This was similar for us in that we’re also not cancer experts, but the founders were so strong and science was so sound.”

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