A startup largely unknown outside biotechnology circles has emerged from stealth with a $5 billion valuation and a pipeline of drugs that could give hope to some patients with lethal cancers.
Stemcentrx Inc. is one of a few companies looking to treat cancers by killing cancer stem cells, or cells thought to initiate tumors. These cells are believed to resist standard cancer treatments and enable tumors to spread throughout the body.
By combining cancer stem cell-targeted agents with chemotherapy, these companies hope to improve survival in patients with various tumors. Stemcentrx, which has five investigational drugs in clinical trials, said this week that three of these products have delivered measurable responses in early clinical studies of cancer patients. This includes a drug for small-cell lung cancer, a deadly cancer that has proved to be especially difficult to treat.
The approach remains unproven, but several
investors express confidence in the South San Francisco, Calif., startup. Stemcentrx last month completed a nearly a $250 million financing that valued the company at $5 billion, The Wall Street Journal has learned. Stemcentrx didn’t respond to requests for comment.
Stemcentrx investors include Artis Ventures and Founders Fund. Founders Fund has backed other notable technology companies, including Airbnb Inc. and Palantir Technologies Inc., and its founder, Peter Thiel, was an early investor in Facebook Inc. and a co-founder of PayPal Inc.
Founders Fund’s investment in Stemcentrx is the largest in the firm’s history, according to a person familiar with the matter. The bet on Stemcentrx illustrates investor appetite for novel biotech cancer drugs.
Several other cancer startups have soared to high valuations by advancing novel cancer therapies recently. Juno Therapeutics Inc., which formed in 2013, went public in December. The Seattle company, a developer of immuno-oncology drugs that help the immune system to battle cancer, is now valued around $3.9 billion.
Although Stemcentrx has just revealed its strategy, its approach isn’t new. Early last decade, the theory that cancer stem cells initiate tumors captured attention from venture capitalists and entrepreneurs, leading to the creation of companies such as OncoMed Pharmaceuticals Inc., which launched in 2004 and went public in 2013.
OncoMed drugs take aim at biological pathways such as Notch, a cell-signaling system, thought to be critical to cancer stem cells. The company’s products include a treatment for pancreatic and small-cell lung cancer, tarextumab, that targets Notch. Other potential therapies include a treatment for non-small cell lung cancer, ovarian and pancreatic cancer that takes aim at a target known as DLL4.
Stemcentrx, formed in 2008, is developing a small-cell lung cancer therapy that homes in on a similar target, DLL3. The product, which uses an antibody to guide a cell-killing drug to its target, appears to be effective in some small-cell lung cancer patients.
Since small-cell lung cancer is usually discovered after the disease has spread, it is difficult to cure. Although chemotherapy usually shrinks the tumor, the cancer tends to return quickly, leading to death within a few months, according to Max Wicha, a cancer stem cell researcher at the University of Michigan Comprehensive Cancer Center.
Stemcentrx’s approach of targeting small-cell lung cancer is sound, because the small-cell lung tumors that remain after chemotherapy treatment are rich in stem cells, according to Dr. Wicha, who was a founder of OncoMed.
OncoMed is conducting randomized clinical trials to determine the extent to which its products improve cancer treatment over the standard of care. Generally, the cancer stem cell field is waiting for clinical studies to show cancer stem-cell targeted therapy can make a significant impact, he said.
“Once one or two of these randomized trials show this is really going to work, everyone will jump into the field,” Dr. Wicha said. “But everyone is cautious until [we] see that.”
OncoMed, whose stock trades around $19, could see its share price more than double as a result of these randomized clinical trials, said Ted Tenthoff, an analyst with Piper Jaffray, which makes a market in OncoMed securities.
For now, Stemcentrx’s $5 billion valuation puts the startup well ahead of OncoMed, which has a market capitalization of about $560 million. A person familiar with the matter said Stemcentrx investors justify the valuation based on the success of Pharmacyclics Inc., a cancer drug developer that was acquired by AbbVie Inc., for $21 billion, in May.
AbbVie bought Pharmacyclics to gain access to the blood-cancer medicine Imbruvica. In addition to its initial products, Stemcentrx has a drug-discovery engine that could lead to several more cancer therapeutics, the person said.
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