Seattle Genetics plans to acquire Cascadian Therapeutics for approximately $614 million, the companies said today, in a deal that will add to the buyer’s oncology pipeline with a breast cancer candidate now under study in a pivotal Phase II trial.

That candidate—Cascadian’s lead candidate—is tucatinib (ONT-380), an oral, small-molecule tyrosine kinase inhibitor (TKI) that is highly selective for HER2 without significant inhibition of the epidermal growth factor receptor (EGFR). Tucatinib is the subject of the randomized HER2CLIMB global trial in patients with HER2-positive (HER2+) metastatic breast cancer, including patients with or without brain metastases.

Tucatinib has been assessed alone and in combination with both chemotherapy and other HER2-directed agents including two Roche/Genentech-marketed cancer drugs, Herceptin® (trastuzumab) and Kadcyla® (ado-trastuzumab emtansine, also called T-DM1). Cascadian has cited results from Phase Ib trials showing that the combination of tucatinib, Herceptin, and the chemotherapy drug capecitabine generated clinical activity in patients with and without brain metastases and was generally well tolerated.

“Tucatinib would complement our existing pipeline of targeted cancer therapies, provide a third late-stage opportunity for a commercial product in solid tumors, and expand our global efforts in breast cancer,” Clay Siegall, Ph.D., Seattle Genetics president and CEO, said in a statement. “It also leverages our broad expertise and resources to advance and expand the tucatinib program for patients. Beyond breast cancer, we believe there may be opportunities for tucatinib in other tumor types, such as HER2+ metastatic colorectal cancer.”

Cascadian’s pipeline also includes a preclinical immuno-oncology agent, an immune checkpoint inhibitor being developed with Adimab through a research collaboration designed to discover novel antibodies against undisclosed immunotherapy targets—as well as a preclinical small-molecule checkpoint kinase 1 (Chk1) inhibitor being licensed from Sentinel Oncology.

Founded in 1985 as Oncothyreon, Cascadian took its current name in June 2016, saying the change reflected its shift in focus from advancing therapeutic vaccines to developing targeted treatments for cancer.

The deal comes seven months after Seattle Genetics terminated a Phase III trial of cancer candidate vadastuximab talirine (SGN-CD33A) in frontline older acute myeloid leukemia (AML) after reviewing unblinded data indicating a higher rate of deaths, including fatal infections, in the vadastuximab talirine arm compared with the control arm. Seattle Genetics also halted enrollment in all other clinical trials assessing the antibody–drug conjugate (ADC) targeting CD33 protein.

“Very Positive Outcome”

“Seattle Genetics has the development and commercial capabilities and the resources needed to more fully realize the potential of tucatinib as a new best-in-class treatment option for metastatic breast cancer, colorectal cancer, and potentially for other indications,” added Scott D. Myers, Cascadian’s president and CEO. “This agreement represents a very positive outcome for patients with HER2-expressing cancers, our employees, and for our stockholders.”

Seattle Genetics plans to commence a tender offer on or about February 8 to acquire all outstanding common stock of Cascadian for $10 per share cash—a 69% premium over Cascadian’s closing price yesterday and a 139% premium to its 30-day volume-weighted average stock price.

The tender offer is subject to customary closing conditions, including the tender of at least a majority of Cascadian’s outstanding shares of common stock (on a fully diluted basis) and the expiration or early termination of the applicable waiting period under the Hart–Scott–Rodino Antitrust Improvements Act of 1976.

Following the closing of the tender offer, a wholly owned subsidiary of Seattle Genetics will merge with and into Cascadian Therapeutics, with each share of Cascadian Therapeutics common stock that was not tendered being converted into the right to receive the same $10 per share cash offered in the tender offer.

In connection with the acquisition, Seattle Genetics said it secured a $400 million financing commitment from Barclays and JPMorgan-Chase Bank, with the rest of the purchase price to be paid through cash on hand. As of September 30, 2017, Seattle Genetics had $450.4 million in cash, cash equivalents, and short-term investments set to mature within the next 12 months—of which $128.14 million was cash and cash equivalents.

Separately, Seattle Genetics announced it has begun a $550 million underwritten public offering of shares, and said it expected to grant underwriters a 30-day option to purchase up to an additional $82.5 million of shares of its common stock solely to cover over-allotments at the public offering price.

The transaction—anticipated to close in the first quarter—has been unanimously approved by the boards of both companies.

Should the deal fall through, Cascadian would have to pay Seattle Genetics a termination fee of $17 million, according to a regulatory filing. Seattle Genetics said it will instead use the net proceeds from the offering toward ongoing commercialization of its marketed cancer treatment Adcetris® (brentuximab vedotin) in the U.S. and Canada, toward R&D designed to further expand the Adcetris label, toward advancing its pipeline of product candidates, as well as for general corporate purposes, including working capital.

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