5 Reasons Stemcentrx May be Getting Ready to IPO

A cancer stem cell (CSC) is said to be the single cancer cell that gives birth to all other cancer cell types. If you can target cancer stem cells, you can destroy cancer much more effectively. While the existence of cancer stem cells is still being debated, this hasn’t stopped 3 companies involved in cancer stem cell technology from going public in the past 3 years; Stemline Therapeutics (NASDAQ:STML), OncoMed Pharmaceuticals (NASDAQ:OncoMed), and Verastem (NASDAQ:VSTM). A few months ago, we created a Nanalyze Cancer Cell Stock motif to track the performance of the “cancer stem cell theme”:

Nanalyze_Cancer_Stem_Cell_Motif

As seen above, the cancer stem cell stocks have not performed very well over the past year. In fact, only one of these companies has shown a positive return since IPO which is Stemline Therapeutics which sits at just +3% over the closing price of their first-day trading.

While the theme hasn’t fared well so far, investors in any of these stocks should be aware of a cancer stem cell startup that is valued at nearly 3X the combined market cap of all three publicly traded companies above. Having just emerged from stealth mode with a massive late-stage round of funding, Stemcentrx is a company that both Elon Musk and Peter Thiel believe will be able to make cancer stem cell treatments a reality.

Founded in 2011, Stemcentrx has taken in around $373 million in funding so far from the likes of Fidelity Investments, Sequoia Capital, Capital Group, ARTIS Ventures, Elon Musk, and Peter Thiel’s “Founders Fund”. The Company’s latest round of funding was announced a few weeks ago, a whopping $250 million Series G round giving them a valuation of over $3 billion and landing them in 3rd place as the highest valued healthcare unicorn.

Top-4_Healthcare_Unicorns
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Stemcentrx has five investigational drugs in human clinical trials, two of which have recently begun Phase I clinical trials. They also have a pipeline of additional novel targets to address other major cancer types. That’s about all Stemcentrx reveals on their recently constructed website. To learn more about the Company, we turn to a very interesting article by MIT Technology Review titled “Peter Thiel Backs Biotech “Unicorn” Fighting Cancer Stem Cells”. In this article, we learn a bit more about a simple recipe Stemcentrx uses to isolate cancer stem cells.

Start with 18,000 mice, all of which have no immune systems. Collect tumors from 600 different people that represent more than a dozen types of cancer. Implant one type of said cancers into a single mouse and let the cancer begin growing. Collect the cancer and divide it into N number of cancer cell types. Transplant each type of cancer cell into N number of mice. Rinse and repeat until you find the one type of rare cell that always regenerates a tumor which is the same as the original. You’ve then identified a cancer stem cell to target.

Biotech IPOs have been hot and in demand, with the overall Nasdaq Biotech Index up +323% in the past 5 years. With the recent market turmoil, it’s questionable just how long this window may stay open. Here are 5 reasons that Stemcentrx may be looking for an IPO soon:

  1. Companies emerge from stealth mode when public awareness becomes an asset instead of a hindrance. Awareness is an important prerequisite to an IPO.
  2. A massive late-stage funding round usually ensures the Company won’t have to go back for VC funding until a liquidation event
  3. The market has had a chance to value and dissect 3 publicly traded cancer stem cell companies. This makes the technology a “known good” and sets the stage for easier valuations and investor participation
  4. Stemcentrx revealed the results of its first clinical trial at the same time they announced their latest funding round. It’s probably no coincidence, and hints that the outcome of the funding round was is some way dependent on the outcome of this trial. This could be an event that represents the tipping point towards an IPO.
  5. When Fidelity Investments comes in to participate in a late-stage funding round, this usually means an IPO is imminent

Pure-play disruptive tech stocks are not only hard to find, but investing in them is risky business. That's why we created “The Nanalyze Disruptive Tech Portfolio Report,” which lists 20 disruptive tech stocks we love so much we’ve invested in them ourselves. Find out which tech stocks we love, like, and avoid in this special report, now available for all Nanalyze Premium annual subscribers.

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