Abbvie to acquire VC backed Stemcentrx for $10bn

July 2016 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

Global biopharmaceutical company AbbVie announced that it will acquire Stemcentrx and its lead late-stage asset rovalpituzumab tesirine (Rova-T) in a deal worth in the region of $10bn.

Under the terms of the transaction, AbbVie will acquire Stemcentrx for approximately $5.8bn in cash and stock, with AbbVie paying approximately $2bn of the transaction value in cash and fund the remaining portion with stock. In addition, Stemcentrx investors are eligible to receive up to $4bn in cash for additional, success-based milestone payments for the achievement of certain regulatory and clinical developments.

AbbVie expects the transaction to be approximately $0.20 dilutive to its 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.

A research-based company formed in 2013 following separation from Abbott Laboratories, AbbVie develops and markets advanced therapies to address some of the world’s most complex and serious diseases. Alongside its wholly-owned subsidiary, Pharmacyclics, AbbVie employs more than 28,000 people worldwide and markets medicines in more than 170 countries.

“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, AbbVie’s chairman and chief executive. “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.”

Currently in registrational trials for small cell lung cancer (SCLC), Rova-T is a novel biomarker-specific therapy that is derived from cancer stem cells and targets delta-like protein 3 (DLL3) that is expressed in more than 80 percent of SCLC patient tumours and is not present in healthy tissue. The trials are expected to complete enrolment by the end of 2016.

“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. Rova-T also has been submitted to the US Food and Drug Administration for Breakthrough Therapy designation and was also presented at the 2016 ASCO Annual Meeting in June 2016.

In addition to Rova-T, Stemcentrx has four novel compounds in clinical trials across several solid tumour indications including triple-negative breast cancer, ovarian cancer and non-small cell lung cancer. Stemcentrx also 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 tumour 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 chief executive of 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 tumours. AbbVie, with its long-term commitment and expertise in drug development, will help us turn our scientific discoveries into a mainstay of cancer treatments.”

The AbbVie/Stemcentrx 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 deal, AbbVie intends to execute an accelerated share repurchase programme of up to $4bn of the company’s common stock.

Fraser Tennant