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In M&A Bonanza, AbbVie, Sanofi Throw Billions at Stemcentrx, Medivation

Xconomy San Francisco — 

It’s been a rocky 2016 for biotech, but so far lower valuations haven’t translated into large acquisitions. At least until this morning, when two of the world’s biggest pharma companies took out their wallets and threw billions of dollars at two biotechs from the San Francisco Bay Area.

First, Sanofi, the French pharma giant, went public with a hostile $9.3 billion cash bid for cancer drugmaker Medivation (NASDAQ: MDVN), a deal that values the San Francisco biotech at $52.50 per share. Medivation, which sells the prostate cancer drug enzalutamide (Xtandi), has already rebuked the offer. Sanofi has now publicly revealed a letter from CEO Olivier Brandicourt to Medivation CEO David Hung outlining their discussions, and Hung’s insistence that Medivation “has no interest in discussing a transaction.”

In the letter, Brandicourt revealed that Sanofi first contacted Medivation over a month ago about a deal, on March 25. Hung wouldn’t agree to meet, and rejected Sanofi’s overtures roughly a week later. On March 24, Medivation’s shares closed at $42.57 apiece.

“We are prepared to meet promptly so we can mutually work towards a transaction that benefits our respective stockholders,” Brandicourt wrote.

Medivation’s shares closed on Wednesday at $52.05 apiece, and climbed about 6 percent to $55 in pre-market trading Thursday morning. Enzalutamide generated close to $2 billion in sales in 2015, though Medivation shares rights to the drug with Japan’s Astellas Pharma. (The drug, which costs $129,000 per year in the U.S., was a recent target of Democratic presidential candidate Bernie Sanders, who sent a letter to the National Institutes of Health aiming to force the company to drive the price down.)

Down in South San Francisco, meanwhile, AbbVie (NYSE: ABBV), the pharma giant best known for autoimmune disease blockbuster adalimumab (Humira), went the friendly route to buy privately held stem cell drugmaker Stemcentrx in a deal worth $5.8 billion up front and possibly $9.8 billion when all is said and done. AbbVie will pay $2 billion in cash and $3.8 billion in stock initially, and Stemcentrx’s investors—which include Artis Ventures and Peter Thiel’s Founders Fund—stand to receive another $4 billion down the line if Stemcentrx’s drugs progress.

That’s a huge haul for the backers of Stemcentrx, a largely stealthy biotech that raised $250 million last year in a round that reportedly valued the startup at $5 billion. It’s also the latest significant cancer drug purchase for AbbVie, which shelled out a whopping $21 billion for Pharmacyclics last year.

Stemcentrx is one of the biotechs attempting to drug cancer by aiming at cancer stem cells, an effort that to date has yet to lead to any approved drugs. The company’s lead drug is known as rovalpituzumab tesirine, or Rova-T, and is in late-stage testing for small cell lung cancer (SCLC). Rova-T is a type of antibody-drug conjugate, which combines the targeting power of an antibody with the tumor-killing punch of a toxin. The drug is derived from cancer stem cells and homes in on delta-like protein 3—a molecular target expressed on the surface of a majority of SCLC tumors—and delivers a DNA-damaging agent called pyrrolobenzodiazepine.

AbbVie said that 44 percent of SCLC patients with “high expression of DLL3” who had failed one or more treatments responded to Rova-T in early-stage studies, and aims to start out by winning approval of the drug as a third-line treatment for SCLC. AbbVie added, however, that the drug might be useful in treating a number of other cancers—like glioblastoma, melanoma, and pancreatic colorectal cancers—in which DLL3 expression is also a factor. Stemcentrx has four other experimental drugs in preclinical testing. (Here’s more on Stemcentrx from MIT Technology Review last year.)