AbbVie to Buy Cancer-Drug Maker for $5.8 Billion

AbbVie will acquire Stemcentrx for approximately $5.8 billion, with $2 billion paid in cash and the remaining in stock.

Investors in Stemcentrx, a closely held company based in South San Francisco, would be eligible to receive up to $4 billion in cash if certain regulatory and clinical milestones are reached.

“We’re impressed with this”, AbbVie Chief Executive Richard Gonzalez told analysts on a conference call Thursday”.

Late-stage trials involving patients who have already failed to benefit from chemotherapy and radiation are under way and AbbVie expects the drug to be approved by 2018.

“We are thrilled to be joining the AbbVie team and believe that, together, we can bring much-needed therapies to cancer patients”, Stemcentrx founder and CEO Brian Slingerland said.

It is the latest in a series of deals AbbVie has struck to try to reduce its heavy dependence on the anti- inflammatory drug Humira, which faces potential competition from copycat drugs in coming years. AbbVie’s key future growth driver, the recently launched cancer drug Imbruvica, delivered net sales of $381 million for the quarter, with U.S. revenue coming in at $325 million, with worldwide profit sharing making up $56 million.

Earlier this month, USA regulators approved Venclexta, a treatment for a form of leukemia that was co-developed by AbbVie and Roche Holding AG.

The purchase gives AbbVie access to Rova-T (rovalpituzumab tesirine), Stemcentrx’s stem-cell treatment for small-cell lung cancer.

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.

AbbVie also lowered it full-year adjusted profit forecast to $4.62-$4.82 per share from $4.90-$5.10. AbbVie shares closed 0.82% higher at $61.20, after recovering from an earlier decline.

Meanwhile, Abbvie’s first-quarter earnings per share of $1.15 beat guesses by Credit Suisse as well as consensus ($1.14 and $1.13 respectively), while “narrowly missing our revenue expectations but in line with consensus” with $5.96 billion vs. $6.05 billion and $5.96 billion for Credit Suisse/consensus respectively, wrote analyst Vamil Divan in a research report.

The deal was announced as AbbVie also reported its first quarter net earnings rose almost 32%. As sales of Humira rise by double-digit percentages each year, investors are growing ever more fretful because its main USA patent lapses in December.

-Viekira Pak sales of $414 million, estimate was $514 million.