A startup you've never heard just got acquired by a major pharmaceutical company for $5.8 billion

A $5 billion startup called Stemcentrx, with backing from Silicon Valley investors including Artis Ventures and Founders Fund, was just acquired by AbbVie for $5.8 billion.

Stemcentrx is in clinical trials of drugs designed to treat cancer by targeting cancer stem cells

Unlike general adult stem cells that are found all over the body as unspecified cells that are good at regenerating, cancer stem cells are a specific type of cancer cell that some research suggests could play a key role in defeating the disease.

The Stemcentrx drug that’s farthest along thus far is called rovalpitzumab tesirine, or Rova-T. It’s currently in phase 1 trials to treat small cell lung cancer, a type of lung cancer that makes up about 10-15% of all cases.

More data on Rova-T is expected to be presented in June, which will look more at the efficacy of the drug. AbbVie will give Stemcentrx up to $4 billion in milestone payments based on how the development of the drug goes.

Rova-T

The targeted drug goes after a special protein that may be linked to cancer stem cells. The protein, called DLL3, is highly expressed (meaning a genetic variation is telling the body to make a lot of it) in 70% of tumours, according to the drug’s lead investigator Catherine Pietanza. Ideally, Rova-T would latch onto the protein, deliver the deadly toxin to the cell and cut off the tumour growth at its source.

In September 2015, Stemcentrx presented its first clinical trial data of the drug in 79 people who’d previously been treated for small cell lung cancer. The purpose of the trial was to show the safety of the drug by increasing the dosage until it becomes too toxic for the body. Of the 79 participants, 33 showed high amounts of the DLL3 protein in their tumours. That’s a good sign; the researchers hoped those with high levels of the protein would have better success with the drug. Out of that group of 33, ten saw tumour shrinkage, something the trial defined as “a partial response” to the drug. For another nine people, no change in tumour size was observed.

The drug’s side effects were similar to those of other chemotherapies, and included things like fatigue and nausea. Another side effect some patients experienced was sensitivity to light. Still others experienced a condition called pleural effusion, where fluid builds up between the lungs and the chest. Compared to Topotecan, another drug that’s used in small cell lung cancer patients where the first round of treatment has failed, the DLL3-targeting drug had a better rate of keeping the tumours from growing, in some cases even shrinking the tumour.

“DLL3 may be the first predictive biomarker associated with drug response in small cell lung cancer,” Pietanza said in the presentation.

The cancer stem cell theory

The idea of targeting cancer stem cells isn’t new. For example, OncoMed (where Stemcentrx’s CSO Scott Dylla started out) has seven such drugs in clinical trials, a few of which have hid some rough patches in the past few years as they make their way through the trial process. Verastem, another company targeting cancer stem cells, stopped their phase 2 clinical trial in September 2015 after their cancer drug wasn’t effective enough on its own. Cancer is inherently complex, and there is some evidence that suggests that it’s not just cancer stem cells that spread cancer, but rather any cancer cell in the body.

“There is a major debate that is still going on and I don’t know if it’s going to be resolved so easily,” Ravi Majeti, a Stanford biologist told MIT Technology Review in September 2015. “It’s a complicated story, and I would say the cancer-stem-cell theory is waning a little bit.”

Tech mentalities hitting the biotech world

Unicorns, or companies at a valuation above $1 billion, at this early stage of clinical development are historically rare in biotech, with the exception of Theranos and its $9 billion valuation while still managing not to share its data publicly. Other highly valued biotech startups keep cropping up, with Samumed (another company looking at stem cells, though in a regenerative sense) at $12 billion, according to Forbes.

The traditional delay in high valuations is in for the most part because a drug has to prove that it works through vigorous clinical trials, which is no small cost and often falls short on the outcomes it needs to actually get approved. But Stuart Peterson, a founder of Artis Ventures which initially funded Stemcentrx back in 2011, told Business Insider that this is where Silicon Valley investors are starting to look.

“There’s a tsunami brewing,” he said. “[Cancer] is a big problem that’s meaningful for us on a global basis. This is where we should be focused.”

And the company appears to have lofty goals for the outcomes it expects to get from their drugs.

“Our mission, which is similar to the mission of many other companies, is to cure or significantly impact survival for cancer patients,” Scott Dylla told The Stem Cell Podcast in December 2015.

Venture capital firms are eyeing the M&A that’s the bread and butter of pharma companies looking to build up their pipeline. For example, pharma giant AstraZeneca picked up a $4 billion stake in Acerta, a relatively small cancer drug. These deals happen all the time, and in the frenzy of M&A, things are getting earlier and earlier stage. Stemcentrx’s own $5 billion valuation came from biopharmaceutical company AbbVie’s acquisition of Pharmacyclics — a cancer drug developer that has since seen one of its drugs get approved — for $21 billion.

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