Biotech unicorn Stemcentrx is reportedly up for a multibillion-dollar sale

Peter Thiel

Stemcentrx turned heads last year when it came out of stealth with a $250 million funding round that gave the company a reported valuation of $5 billion. Now the biotech, backed by PayPal founder Peter Thiel, is exploring the idea of selling itself, according to The Wall Street Journal, lining up for what could be a blockbuster deal.

The South San Francisco company has recruited Morgan Stanley to help it field offers, WSJ reports, citing unnamed sources who say Stemcentrx has already received some first-round bids. The company is also open to the idea of an IPO or sizable pharma partnership, according to the newspaper.

Stemcentrx claims to have 5 candidates in clinical development, each focused on the role cancer stem cells play in tumor growth. The biotech's lead drug, rovalpituzumab tesirine, is in Phase II for small cell lung cancer, and the antibody-drug conjugate SC-002 is in the midst of Phase Ia for the same indication. Behind that is SC-003, in Phase Ia for ovarian cancer, plus two Pfizer ($PFE)-partnered therapies for solid tumors that are now in Phase I.

Much of the fascination with Stemcentrx is tied to timing. The company's emergence as a superlatively well-funded biotech with little clinical data coincided with an industry-wide downturn in valuations, one that has worsened since the fall. If Stemcentrx does pull off a deal of any sort, the odds of it commanding that once-vaunted $5 billion valuation seem low.

Stemcentrx's investor syndicate is heavy on the sort of nontraditional biotech investors that usually participate only in mezzanine rounds, those that immediately precede an IPO. In addition to Thiel's Founders Fund, the company has drawn cash from Sequoia Capital, Elon Musk, Artis Ventures and Fidelity, according to reports.

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