Big Pharma bets $10bn on cancer drug start-up

Pharma giant AbbVie is to acquire cancer drug developer Stemcentrx in a $10bn deal that is one of the largest private venture-backed acquisitions in history

AbbVie is to pay $5.8bn up-front in a combination of cash ($2bn) and stock and another $4bn in cash-based earn-outs, based on the achievement of various milestones. That brings the deal value to $9.8bn, but Stemcentrx also has cash on hand that would be returned to shareholders, thus giving the company an entire enterprise value of around $10.2bn, reported Fortune.

Stemcentrx is a drug developer that bases its cancer research on specific cancer stem cells. On its website the company said that: “Cancer stem cells initiate and perpetuate tumour growth, and are more resistant to chemotherapy and radiation therapies. Cancer stem cells are the tumour cells that metastasize, causing cancer to spread throughout the body.

“Stemcentrx therapies are engineered to target cancer stem cells, subsequently delivering a potent drug that can kill them. “

Stemcentrx has five drug candidates in clinical trials, with the furthest along designed to treat small-cell lung cancer and is one of the most likely to return after initial treatment.

AbbVie chairman and CEO, Richard Gonzalez, said in a statement: “The addition of Stemcentrx and its late-stage compound Rova-T provide AbbVie with a unique platform in solid tumour 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.”

Stemcentrx CEO, Brian Slingerland, told the Huffington Post: “This is not an Internet company that was started 18 months ago with a few software developers.

“There have been close to 200 people at this company, and we’ve been working for eight years, and we’ve been running extensive experiments to be able to yield [these] results.”

However, AbbVie seems to have taken a large leap of faith on the company considering that after eight years Stemcentrx is yet to bring a product to market.