AbbVie Agrees to Buy Stemcentrx, Reports Jump in Earnings

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U.S. biopharmaceutical firm AbbVie Inc. (North Chicago) on Thursday said it will acquire cancer biotech company Stemcentrx Inc. (South San Francisco) in a roughly $5.8 billion cash and stock deal that would expand AbbVie’s development of oncology drugs.

The deal was announced as AbbVie also reported its first quarter net earnings rose nearly 32%. The transaction terms call for AbbVie to pay approximately $2 billion in cash and fund the rest of the acquisition costs with stock.

Investors in closely held Stemcentrx would be eligible to receive up to $4 billion in cash if certain regulatory and clinical milestones are reached. AbbVie said it expects the transaction’s cost will cut approximately 20 cents per share from its 2016 earnings, and boost the company’s financial results starting in 2020.

Subject to customary closing conditions and antitrust review, the deal is expected to be finalized in this year’s second quarter, AbbVie said.

Stemcentrx has five cancer drugs under testing in human trials. The pipeline includes Rova-T, a medication aimed at treating small-cell lung cancer. Rova-T is a therapy derived from cancer stem cells that target a protein found in more than 80% of small cell lung cancer tumors but not found in healthy tissue, AbbVie said.

Long-term data on Rova-T, including overall survival results, is scheduled to be presented at the 2016 American Society of Clinical Oncology annual meeting in early June, AbbVie said.

AbbVie CEO and Chairman Richard Gonzalez said the addition of Stemcentrx and its Rova-T medication would “complement our leadership position in hematologic oncology” and “accelerate our ability to deliver innovative therapies that will have a remarkable impact on patients’ lives.”

Expansion of AbbVie’s roster of cancer therapies could also make the company less reliant on its top-selling Humira rheumatoid arthritis medication, which faces looming market competition.

In all, AbbVie said its first-quarter net earnings totaled $1.35 billion, or 83 cents a share, an increase from $1.02 billion, or 63 cents a share, for the same three-month period in 2015. Excluding one-time items, diluted earnings per share were $1.15, up from 94 cents last year, AbbVie said. Shares closed the week off 1% at $61.06.