Global biopharmaceutical company AbbVie (NYSE: ABBV) has agreed to acquire Southern San Francisco biotech startup Stemcentrx Inc. for $5.8 billion, of which $2 billion will be paid in cash and $3.8 billion with stock. In addition, Stemcentrx investors are eligible to receive up to $4 billion in cash for additional, success-based milestone payments.
Prior to the deal with AbbVie, the startup had raised over $473 million in total venture capital funding from prominent investors including Fidelity Investments, Artis Ventures, Peter Thiel’s Founders Fund, Sequoia Capital, and others. In a September 2015 Series G funding round, Stemccentrx was valued at $5 billion.
The startup’s lead late-stage asset rovalpituzumab tesirine (Rova-T), currently in registrational trials for small cell lung cancer (SCLC), is a novel biomarker-specific therapy that is derived from cancer stem cells. It targets delta-like protein 3 (DLL3) that is expressed in more than 80 percent of SCLC patient tumors and is not present in healthy tissue. These SCLC trials are expected to complete enrollment by the end of 2016.
Lung cancer accounts for 13 percent of all new cancer diagnoses but represents 27 percent of all cancer deaths.1 Small cell lung cancer accounts for approximately 10-15 percent of all lung cancers, with 60,000 new patients diagnosed each year2, and are among the most difficult to treat. Treatment options for patients remain limited, with chemotherapy and radiation as the most common forms of first- and second-line treatment.
Stemcentrx was founded in 2008 by CEO Brian Slingerland, chief scientific officer Scott Dylla PhD, and executive chairman Daniel T. Reiner. The company combines state-of-the-art research and GMP manufacturing capabilities, which have allowed it to advance from target discovery in its laboratory to treating patients in clinical trials at an accelerated pace. The company is investigating many of the largest and most lethal cancers through proprietary platforms that identify cancer stem cells and discover novel targets, and it engineer and manufacture antibodies and antibody drug conjugates for those targets.
“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 A. Gonzalez, chairman and CEO, AbbVie. “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.”
In Phase 1/2 studies of relapsed SCLC patients who have previously failed one or more standard therapies, Rova-T demonstrated overall response rates of 44 percent in the patients identified with high expression of DLL3. The expression of DLL3 suggests Rova-T also may be useful across multiple tumor types, including metastatic melanoma, glioblastoma multiforme, prostate, pancreatic and colorectal cancers, where DLL3 expression ranges from 50-80 percent. Rova-T combines a targeted antibody that delivers a cytotoxic agent directly to the DLL3-expressing cancer cells while minimizing toxicity to healthy cells.
Rova-T is under investigation as a third-line treatment in SCLC, where there is no currently approved therapy. Rova-T also has been submitted to the U.S. Food and Drug Administration for Breakthrough Therapy designation. Additional data on Rova-T, including overall survival data, will be presented at the 2016 ASCO Annual Meeting in June 2016. Rova-T was recently selected to be included in the Best of ASCO Program, which presents scientific and educational highlights from the meeting. Approximately one percent of all data abstracts are selected for this program. Studies designed to select a Rova-T regimen for first-line registration will be starting soon.
“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, M.D., Ph.D., chief, thoracic oncology service, Memorial Sloan Kettering Cancer Center.
Beyond Rova-T, Stemcentrx has four novel compounds in clinical trials across several solid tumor indications including triple-negative breast cancer, ovarian cancer and non-small cell lung cancer. Stemcentrx has additional pre-clinical compounds advancing toward clinical trials in 2016 and a proprietary technology platform that leverages stem cell biology to identify and screen potential targets against live tumor tissue to more predictably advance discovery and development of new assets.
“We are thrilled to be joining the AbbVie team and believe that, together, we can bring much-needed therapies to cancer patients,” said Brian Slingerland, founder and CEO, Stemcentrx. “We have worked for eight years exploring the origins of cancer and drivers of its recurrence and have discovered novel therapeutic targets to attack the most difficult-to-treat tumors. AbbVie, with its long-term commitment and expertise in drug development, will help us turn our scientific discoveries into a mainstay of cancer treatments.”
AbbVie’s clinical oncology pipeline is comprised of more than a dozen assets, with 5 programs in late-stage development, spanning nearly 200 clinical trials across more than 19 types of tumors. AbbVie currently markets Imbruvica, a BTK-inhibitor approved to treat chronic lymphocytic leukemia (CLL), mantle cell lymphoma and Waldenstrom’s macroglobulinemia, and Venclexta, a BCL-2 inhibitor approved to treat CLL in patients with 17p deletion.
The transaction is subject to customary closing conditions and expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, and is expected to close in second-quarter 2016. Upon completion of the transaction, AbbVie intends to execute an accelerated share repurchase program of up to $4 billion of the company’s common stock.
AbbVie expects this transaction to be approximately $0.20 dilutive to our ongoing earnings per share in 2016, with accretion beginning in 2020. As a result, AbbVie is updating its 2016 adjusted diluted earnings per share guidance range to $4.62 to $4.82.
AbbVie is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories (NYSE: ABT). The company’s mission is to use its expertise, dedicated people and unique approach to innovation to develop and market advanced therapies that address some of the world’s most complex and serious diseases. Together with its wholly-owned subsidiary, Pharmacyclics, AbbVie employs more than 28,000 people worldwide and markets medicines in more than 170 countries. The company is headquartered in North Chicago, Illinois. As of April 28, 2016, AbbVie had a market capitalization of $99 billion.