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AstraZeneca scores an unexpected win. Photograph by Andrew Yates AFP—Getty Images

The Year’s Best VC Deal Was for a Company You’ve Never Heard Of

Dec 17, 2015

There have been hundreds of articles written this year about unicorns, those once-mythical startups valued at $1 billion or more by their venture capitalists. But it turns out that the year's most valuable startup wasn't mentioned in any one of those stories, or included on any list. In fact, until today, few people had ever heard of it.

The company is Acerta Pharma, which was founded in Netherlands three years ago to develop treatments for cancers and autoimmune diseases. It raised $13 million in late 2013 from a small group of Dutch and U.S. investors, including OrbiMed Advisors, Frazier Healthcare Ventures and BioGeneration Ventures. Then, this past May, it quietly raised what I'm told was hundreds of millions of dollars at a multi-billion dollar valuation -- no press release, just a citation in a regulatory filing from deal participant T. Rowe Price. Apparently Acerta Pharma was intent on remaining as stealthy as possible, in order to keep both its process and progress secret from the pharma company -- Pharmacyclics, a unit of AbbVie (abbv) -- whose product wants to disrupt.

Now Acerta Pharma is worth $7 billion. And that's not just on paper.

British drug giant AstraZeneca announced this morning that it has agreed to acquire a 55% stake in Acerta Pharma for $4 billion. The first $2.5 billion of that is payable once the deal closes, which is expected to be by the end of March. The other $1.5 billion will come by the end of 2018, or earlier if the company meets certain regulatory approvals for its lead product. In addition, AstraZeneca has a $3 billion option to buy the remaining 45% of Acerta Pharma, dependent on the company reaching certain regulatory and commercial milestones.

This is easily the largest sale of a venture-backed company in 2015, and $7 billion is higher than the current market cap of any of the "unicorns" that went public this year. Just think of all the digital ink spilled on companies like Box (box) and Square (sq)—including at this website—compared to the invisibility of Acerta Pharma. Which one would you rather have in your portfolio right now?

To be sure, it is far from certain that AstraZeneca (azn) will exercise its $3 billion option (although there also is a seller put at an undisclosed price). Acerta Pharma's lead product—which focuses on treating blood cancers—is still in the early-stages, having only presented and published Phase I/II data last week (specifically for patients suffering from relapsed chronic lymphocytic leukemia). It is entirely possible that latter studies will show the drug to be less effective or exhibit more serious side effects, and that doesn't even address what AstraZeneca hopes will be its applicability to other blood cancers and, maybe, solid tumors.

But even if the option withers, Acerta Pharma would still have its $4 billion (which itself would be tops among VC-backed M&A this year). Not too shabby, particularly given how many venture firms have moved away from investing in pharma startups, citing high capital requirements and low regulatory certainty.

To me, all of this is a bit reminiscent of Facebook's (fb) $17 billion purchase of mobile messaging company WhatsApp in early 2014, which remains the largest-ever sale of a VC-backed company. WhatsApp was certainly better known at the time than is Acerta Pharma today—particularly given that it was a consumer tech product—but it had relatively little visibility in the U.S. and had just a single VC backer that had invested a relatively modest $60 million.

Perhaps the takeaway is, when searching for the next huge VC outcome, it may be best to ignore the current unicorn lists...

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