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The Last of Stemcentrx

The final implosion of the Stemcentrx deal is worth a note, although I said a lot of what I have to say about it back in December. I want to especially emphasize two points I made back then – first, that the failure of this whole acquisition is different only in degree, and not in kind, from many others in this business. AbbVie paid an awful lot of money for Stemcentrx, and in the end they got zilch, zero, zippity-doo-dah in return for nearly six billion dollars in cash (and plenty of extra time and money spent on their own since then). It is easy to make fun of them for this – I’ll do a bit of that in a minute – but remember, this is how much drug development programs turn out. We have a 90% failure rate in the clinic. Smart money, stupid money, best laid plans of mice, men, nematodes, and whatever species it is that writes press releases, the reaper cometh for them all and for some time now the reaper has been taking 90% right off the top. The odds were against Stemcentrx from the start, because the odds are against everybody.

Ah, but return with me to those days when everyone who’d gotten into Stemcentrx early had just been paid off richly. (Mind you, they all still have that money – those folks did great, although no one else did). Here’s an interview with Stuart Peterson of Artis Ventures, one of those early investors, to tell you how they’re so darn talented. Luck, friends, had nothing to do with it:

. . .we were and still are excited to play the long game if the science is strong, particularly if it means going against the crowd.

(Interviewer) Without a deep science background yourself, how did you get comfortable with the technology risk?

(Peterson) First and foremost, we leveraged the expertise in our network — and our network’s network. We, along with our Limited Partner (LP) investor base, have strong life sciences contacts at universities like Stanford and throughout the industry. Many of our LPs have advised and supported multiple life science companies throughout their life cycle. 

That being said, we’ve found that sometimes advisors with deep industry experience and early battle scars can actually talk you out of investing in a great company. If you’ve been entrenched in a space for a long time, it’s possible to have some inherent skepticism around new ideas. We really had to get our advisors to engage in the science in order to get their support.

Yes, yes, it is possible to have some inherent skepticism, particularly when you have watched 90% of those great ideas burst into flame over a period of many years. But you’ll note that the folks with deep industry experience at AbbVie ponied up nonetheless, because some of these things really do work. Just not this one. Brian Singerman of Founder’s Fund, another big early investor, also did this interview where the word “luck” does not appear. But we don’t know enough about the underlying science in these areas for luck to be ignored. They folks did did a lot of due diligence and put in a lot of effort, but a lot of people do that. Those things are absolutely necessary, but they’re absolutely not sufficient, either. Artis and Founder’s Fund also got lucky, not least because they were able to exit when they did. AbbVie, not so much.

So those interviews aren’t about making a great scientific discovery – no one knew if one had been made or not. And they’re not about finding a drug, or curing any cancers – none of that had happened yet, either. They’re about getting someone to pay six billion dollars for your idea. And that’s pretty impressive – don’t get me wrong – but people sell companies all the time. As opposed to, say, keeping people from dying of cancer, which doesn’t happen nearly as often as we would like. But I’m even more impressed by it when it does.

And then there’s this now-famous quote from Peter Thiel himself:

“Our theory was that it was a biotech company that looked a little more like a software company,” says Thiel, who started investing in 2012. “The whole company was designed to get the probability of success closer to 1.”

Welcome to biotech, then. We’re a long way from 1, and for a lot of good reasons. If by “success” you mean unloading the company for a very large payout, then Stemcentrx was a very big success indeed. But if you mean “making a successful drug”, then it’s been a total wipeout. Join the club, guys, join the club. Now can you do what those of us in the industry have learned to do, which is to take a deep breath, shrug your shoulders, and try it all again?

 

38 comments on “The Last of Stemcentrx”

  1. AnonE says:

    Somewhere Moncef Sloui is smiling…the Sirtris/GSK boondoggle has been surpassed several times over. The “greater fool” theory holds solid. As is painfully evident, a lot of the “innovation” and “startup” plays these days are more about financial chicanery rather than actual science. Namedropping “Stanford”, “Broad Instiitute” etc. only increases the success in reeling in gullible investors. There is no incentive to change behavior, since the participants in the chain swindle all get paid along the way…just like the 2008 mortgage/CDO collapse, everyone makes money in the game, at the ultimate expense of the investor/taxpayer. This is what the drug development business has become.

    1. ScientistSailor says:

      I’m not so sure about that. I’ve heard that there were GSK scientists who knew that the Sitris chemical matter was BS. Whereas the Stemcentryx molecule was a legit play on new biology. So in absolute dollar value, maybe, the Stem. deal looks woroks, but in terms of $/odds, it was probably better.

      Discuss…

      1. Nesprin says:

        I’d argue that the biology they were selling was BS too, and that a number of cancer researchers were dubious. There were more reviews on cancer stem cells than primary research on cancer stem cells, which to my mind reads a field where hypotheses are not being tested rigorously.

        1. johnnyboy says:

          This drug (Rova-T) has nothing to do with cancer stem cells. It’s an antibody-drug conjugate, targeting a tumour antigen that in theory should be a good ADC target for SCLC (if the expression data was correct). It was a risky play inasmuch as all ADCs are risky plays for solid tumours, but it wasn’t a crazy idea.

          1. nesprin says:

            Rova-T was designed to attack cancer stem cells.

        2. Isidore says:

          I am sure, having been peripherally involved in one such years ago, that there are plenty of acquisitions that worked out fine, about which scientists of the acquiring company were dubious, but because the outcome was a good one their objections are forgotten, whereas in cases like Stemcentrx they are touted as having been prescient and smart. Not all such deals that fail are the result of carelessness or stupidity.

          1. Skeptic says:

            “Not all such deals that fail are the result of carelessness or stupidity.”
            I’m sure that’s true. One question is how many such deals are the result of carelessness or stupidity? I’m not sure what the answer is. Other questions are, “how many of these deals involve six billion dollars?”, and “don’t those deals merit special scrutiny?” I’m sure the answers are “not many” and “yes”.

      2. Sken says:

        I would be a little hesitant to call it a legit play on a new biology, it was more of a new-ish flavor of what companies like Genentech, SeaGen, Pfizer, MedImmune, others had been doing with ADCs. Picking a “good” target and a “good” warhead and hoping for the best.

        Stems problem like so many of these other companies is that target hunt isn’t easy nor is knowing what you should be looking for in your cytoxic agent. At one point they had a very expansive pipeline for several cancer indications….alas if you’re Achilles heel is the same for all of them you find yourself with all your eggs in a single fragile basket.

      3. anon3 says:

        GSK management had (and probably still does) a very poor relationship with their scientists. There was LOTS of disrespect going both ways. GSK management viewed their own people with distrust, and ignored all their concerns regarding Sirtris.

  2. dearieme says:

    “take a deep breath, shrug your shoulders, and try it all again”

    When I was younger, so much younger than today … I turned down an invitation to work for what later became Zeneca. Thank goodness.

    I admire the dogged way you chaps keep flogging on, but it’s not for me. Hats off to you all.

    1. R H Bradbury says:

      Once upon a time I accepted a job with ZENECA’s progenitor company. Thank goodness. Progenitor PLC, Z and Postgenitor AB all pretty good companies to work for, be part of and learn from. Ask anyone living nearby who knows anything about anything and most of the time see what answer comes back.

      At interview, Progenitor PLC’s reputation went before it – a quirky place with quirky people doing quirky things. Despite a quirky interview, I accepted the job offer ‘cos I liked the part of the world – wooded foothills overlooking the plain and the world famous radio telescope I’d last been to when 10 years old. Big city with big clubs and a test match ground on the doorstep too if that’s your thing. Over time, place and people grew on me (and vice versa, I like to think).

      (And by way of aside, apologies in advance, Captain Corante, for a comment that seems about to take on a life of its own. No wish to hijack your blog, but really is the right forum for airing things that have been building up for a while. Please say if I’ve been a nuisance and I’ll shut up forthwith. And thank you Dearieme for the cue…).

      In the main foyer at the former principal Z site there’s now a “patent wall.” 14 Brushed steel hexagonal plaques engraved with chemical structures, inventors’ names, patent numbers and priority dates for the 14 primary patents of the 14 approved drugs discovered at the site in the 57 years during which Progenitor PLC, Z and Postgenitor AB undertook research in labs there.

      Someone had the bright idea to size the hexagons by drug significance – some smaller, some bigger, some very big indeed. There are also hexagons for in-licensed drugs, for which much of the arduous late stage development work was done on site too.

      Somebody else had the idea to add into the mix more hexagons displaying the other drugs discovered worldwide throughout the history of Postgenitor AB and all its progenitor companies. That’s okay, I suppose. But a bit ironic that all company drugs discovered since the beginning of corporate time are now on display at a site the company exited stage east several years ago now. We prickly Brits do love our ironies you know. A national pastime, distraction and treasure all rolled up into one.

      14 Drugs in 57 years – pretty good site strike rate by whatever industry metric you fancy. Site must have got something right. Disinfectants, cardiovascular drugs, anti-cancer drugs, anti-infectives, an in-licensed anti-migraine drug. Most of which it’s fair to say sit pretty well with the old George Merck adage about medicines being for the people.

      In time I came to love the site, still do when I go back once again to visit a good friend and valued former colleague, with whom I worked on project and compound that was in all probability as near as either of us will ever get to seeing our names on the patent wall.

      In truth the close run thing came later, much later. Nothing much to do with either of us really – spotted by another respected and experienced colleague, a different therapeutic use than had been envisaged first time round. The Three Princes of Serendip up to their tricks again. All my good friend and I did then was chip in with found answers to long lost questions. So near yet so far.

      I started off in a lab overlooking an ornamental mere dug for an 18th century aristocrat by labourers with shovels, where once upon a time Technical Officers out for a lunchtime stroll were chased at high speed along the side of the Mere by stroppy Canada geese in full view of Experimental Officers laughing out loud in the labs two floors up. Happy days.

      The former Z site is now a science park. A few years ago the new company leadership decided that, after a bit of a lean patch that had I think, for the record, been shorter than the existing worst lean patch, the site could no longer live by heritage alone.

      Too many of the wrong people in the wrong place. Need for re-location to a more vibrant scientific ecosystem close to an elite university complete with elite academics fit for an elite company to foster elite collaborations with. Always did sound a bit of a circular and elitist argument that one. Shades of Les Grandes Ecoles. C’est la vie.

      And not much sign either of hard-to-come-by, hard-won, hard data to provide a sound evidence base in support of mass transition to the promised land for those admirable scientists made of the right stuff. Unlike slide decks running into 3 figures in slide number that class monitors reporting up to the managerial leadership vector used to demand from the rest of us in order to be granted mass transition into next week.

      (On last minute re-read, bit harsh that – more good than bad and knew in heart of hearts that generosity matters more than efficiency, as heard on Radio 4 the other day via C F Patten that R A Butler always used to say).

      Do as I say not as I do. ‘Twas ever thus. Or maybe not, if you go back far enough into an era way before most current living scientific memory. Perhaps back then they just acted on gut instinct too, but back then had the guts to say so outright. Anyway that’s all in the past, and as always you’ll only be as good as your next game.

      And maybe the new leadership was right, maybe it really was time for a radical change. And of course leaders have to be seen to lead. Or as the Modern Major General, Commander in Chief of the Grand Global Twittersphere himself in person might tweet – NEWLY BIG LEADERS need to LEAD BIGLY. And maybe true to Voltaire’s Candide, it’ll all turn out for the best, as Voltaire’s Dr Pangloss is always saying it does.

      Go then, let you go forward together. Here’s to a next 50+ years in whatever form(s) the company operates next, that are as productive as the previous 50+ years in whatever way turns out to matter most.

      Who knows, maybe there’s mind blowing science going on already in the vibrant ecosystem, that sooner or later will shed new light on the bioscience and medchem ZENECANs used to know and love, yet also open up new avenues that modern day chemists’ and biologists’ skill, creativity and nous are best placed to take advantage of. With a little bit of help from the Three Princes thrown in too…

      Looks like the science park at the former Z site seems to be taking off too. Car parks almost as full as in the site’s heyday. A productive time to you all too. Next time you’re working into the evening writing up lab book, report or scientific paper, watch out for white coated ZENECANs ghostily flitting in and out of the glass turnstiles to and from an Atrium that sits beneath a glass ceiling under a late evening sky that, in words written by an English poet who died a few years before ZENECA was born, is endless and is unbounded. Forward.

      Nearby, on a wooded escarpment where a long ago wizard is reputed to have drunk from a magic well, legend also lays knights in shining armour sleeping the sleep of centuries in a cave behind iron gates, ready to awake and come to the Land’s rescue at time of greatest need. Pop out when you’re ready, take your time, form orderly ranks, no rush, only when the time feels right. Cool heads and cold metal at the ready please.

      So there we have it. C’est la vie. 60+ Years in one single step. Carefully mix two parts Celebration and one part Lament in an appropriate flask (mild exotherm). Add a catalytic amount of Rant. Stir for 40 hours, work up in the usual way and purify by sublimation. Submit product to collection and test in appropriate assay(s). Make of the results what you will, Dear Reader.

      1. Nick K says:

        You Sir/Madame, win the Internet today for a truly poetic and memorable post!

        1. R H Bradbury says:

          Thank you. Always good to be appreciated. To answer your implicit question, the commenter is masculine but with a long ago female influence of content and style which only really surfaced relatively recently.

          1. BRH says:

            Good to hear you’re on form RHB. Hope life is treating you well. A number of us are still doing our best to keep the home Bunsens burning not too many miles away.

          2. RHB says:

            Good to hear from you BRH (next comment down). One of many of the best. Keep the home Bunsens fired up – flame, flame burning bright.

            As one chapter closed, another chapter opened and maybe chapter after that opening up now too…

      2. David Borhani says:

        Thanks for the memories! Lovely area. Your mentioning the Jodrell Bank radio telescope brings back my memories from a visit there in 1976. And I used to frequent the lab at Daresbury some years later, but still in the old days, when protein crystallographers would collect their data on x-ray film. Birth and final resting place of Charles Dodgson, a.k.a. Lewis Carroll. Ring ‘O Bells public house just across from the church and graveyard.

        1. R H Bradbury says:

          Yes, a good place to live. 1976 before my time (back then I was learning my trade in Hertfordshire in labs in a converted warehouse by the side of an old canal).

          Another local church stained glass window is the one at Mobberley to George Mallory (whose father was the church vicar – I’m sure I read somewhere that Mallory was seen climbing the church spire at a young age).

          1. A Nonny Mouse says:

            Migraine drug (Zomig) from lab 115 Wellcome Research labs Beckenham (I was in 113…)

          2. Diver Dude says:

            And I was a volunteer in the first-in-man study for that compound. How we laughed when the cmax related initial CNS adverse events started to really cut in!

          3. drsnowboard says:

            Oh, the days when your charismatic Project Managers could talk most of the project team into volunteering for FiM…. I mentioned that to my recent CMO and he was horrified at the conflict of interest. Fortunately, I wasn’t the super-absorber, kudos to Mike from Patents….

          4. Divery Dude says:

            I *was* one of those project managers. We did all our early phase studies in-house in those days and FIM studies with fully informed, expert (ie highly educated and in the business) volunteers are vastly more informative than those provided by CROs. There was a certain amount of quid pro quo between the clinical pharmacologists… 🙂

          5. drsnowboard says:

            Alan, Graeme? Is that you….

          6. Diver Dude says:

            Guess again. Think Clinical Project Manager (but not for 311, obvs) 🙂

  3. Eugene says:

    What characteristic of the human mind and environmental factors keep producing sociopaths like this and people who fall for this.

  4. Dionysius Rex says:

    Or to put it to Mr Peterson another way…..even a early stage VCs stopped clock tells the right time twice a day.

  5. PT says:

    Any idea why it failed? Wrong drug on the antibody? Antibidy targeting insufficient or off target? Or as many have worried, is the concept of linking “approximately” two drug molecules to the antibody protein asking for trouble? You know, because we could develop better bioconjugation chemistry if there was more investment in it and people thought it might make a difference (which I think it does).

  6. Red Agent says:

    Money continues to flow to drug development from rich fools because the potential return is so great and these guys all think they are smart enough to beat the odds. Part of the price that those of us in the industry have to pay for that funding is to listen to the smarter than thou gloating when one of them gets lucky.

    1. ReOrgChemist says:

      And another price is that every time such transactions/mergers take place some chemists are losing their job…

      1. lessons learned says:

        … and that happens because the smart guys believe their miniscule science training enables them to make key decisions better than the experts they hire.

        Of course, when things go south they will quickly blog about how good senior managers are at making decisions…

  7. Cb says:

    This cynical game is relatively easy: first you make the few medicines that really work extremely expensive and telling the world the R&D needs big budget. In the mean time you use the billions that arrive for acquisitions which make your friends (being executives and investors) happy and in the next round they take care of you…..and it is all legal in the free world.

  8. toluene says:

    Imagine where 6 Billion could have been spent with better impact

    1. Hap says:

      At this point, unfortunately, that’s like two drugs through Phase III, and given the success rate, you might not have gotten any more out of the investment. They might have chosen better small companies to buy and digest, but that’s not certain, either.

      Stock buybacks suck, but if you have no idea what to do, then they look better than anything else. The problems is that being incompetent or clueless still pays really well at the high end of mangement.

  9. steve says:

    The main problem is the whole cancer stem cell hypothesis. It should be burned into every scientist’s brain by now that when you start adding all kinds of ad hoc excuses for why a theory isn’t right then the theory is wrong. The original cancer stem cell hypothesis was that there was a minor population of cells in a tumor that drives the rest of the population, just like hematopoietic stem cells drive blood cell production. Then Sean Morris showed that this was an artifact and the apparent stem cell population increased to the whole tumor if you use increasingly immunosuppressed mice as the host instead of the partially immunosuppressed mice originally used. Still the myth persisted and people just adjusted their theory to the idea that the stem cell population could comprise the whole tumor. This turns the whole idea of cancer stem cells on its head but apparently it has been impossible to get rid of it and people will still invest in companies devoted to it and large pharma will still buy them.

    1. steve says:

      I should clarify that my comments refer to solid tumor stem cells; there is indeed a case to be made for stem cells in leukemias as John Dick has shown.

    2. Barry says:

      Anyone who has understood “multifactorial etiology of cancers”–which was established in the 80s–has no need for the “cancer stem-cell” concept. In any full-blown cancer, some cells will have achieved one transformation first, some another, some will have one, some two, some three–of the roughly six hallmarks Weinstein has enumerated. Those that have escaped Hayflick have some of the characteristics of “stem-cells”, some will display surface proteins that no cell in the adult should display.

      1. steve says:

        I think you mean Weinberg. He later was one of the founders of the cancer stem cell initiative at the Koch Institute and a cancer stem cell company, Verastem.

  10. joepie says:

    The payload was too toxic.

    With another payload it would’ve worked.

  11. Debunker says:

    Entresto flops trials!
    Nothing more than a ridiculous attempt to extend the patent life of Diovan.
    Entresto is just valsartan, many doctors and scientists scoff at sacubitril
    Entresto is just an old drug…now a cheap generic..in disguise

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