Anato­my of a long-de­layed biotech buy­out: With its stock price beat­en down, aban­doned by po­ten­tial bid­ders, Tesaro wound up in GSK’s ea­ger arms

When the board at Tesaro $TSRO first cheered on a move to sell the com­pa­ny on Feb­ru­ary 23rd, 2017, spurred by a nod from an in­ter­est­ed phar­ma play­er as their PARP drug Ze­ju­la closed in a near-cer­tain FDA ap­proval, the siz­zling-hot stock was sell­ing at more than $186 a share.

None of the com­pa­nies they con­tact­ed to try and spark an auc­tion, though, were in­ter­est­ed enough to make an of­fer. And by the time Tesaro’s board and CEO Lon­nie Moul­der got around to com­plet­ing a buy­out deal 21 months lat­er, they did it with a phar­ma gi­ant that wasn’t even on their orig­i­nal hit list — and came away with well un­der half of the share price they start­ed out with.

The blow-by-blow, spelled out in an SEC fil­ing on Fri­day, in­cludes plen­ty of lessons for any­one in­ter­est­ed in one day do­ing one of these deals — on ei­ther side of the ta­ble.

By the end of June 2017, se­ri­ous talks with 4 po­ten­tial bid­ders had stale­mat­ed, with the stock down to about $140. But things were about to get much worse for Tesaro.

A year af­ter they had ini­ti­at­ed the at­tempt­ed auc­tion, the board and Moul­der were forced to start to think in broad­er terms. Look­ing at their cash needs af­ter fail­ing to sell the busi­ness, they start­ed to put more op­tions on the ta­ble.

Per­haps a Big Phar­ma col­lab­o­ra­tion on Ze­ju­la would work? They want­ed to ex­plore a roy­al­ty deal. They could go the debt route, or come up with an ex­pense-shar­ing pact on the I/O side of the pipeline. There was even a pro­pos­al to set up a new com­pa­ny to gain Chi­nese rights to Ze­ju­la, which could then fund $100 mil­lion of I/O R&D costs.

Mary Lynne Hed­ley

None of that would hap­pen, but the dis­cus­sions did trig­ger an over­ture from Pres­i­dent Mary Lynne Hed­ley to an un­named phar­ma com­pa­ny about a po­ten­tial al­liance on Ze­ju­la. Talks be­gan. On April 3 of this year, a non-dis­clo­sure agree­ment was signed for the talks to con­tin­ue.

Par­ty A, though, wasn’t will­ing to talk the kind of mon­ey that Tesaro want­ed and walked 8 days lat­er. The stock was down to $52 and change. Tesaro ex­ecs pur­sued a roy­al­ty deal with a pri­vate eq­ui­ty group.

On May 1, Par­ty A and Tesaro ex­ecs were talk­ing again, though the fil­ing doesn’t say who ini­ti­at­ed that call. Who­ev­er did make the first over­ture, though, Tesaro was in an even weak­er po­si­tion.

Three weeks lat­er, on May 22, Street In­sid­er ran a sto­ry spec­u­lat­ing that the com­pa­ny was in buy­out talks with “a large phar­ma­ceu­ti­cal com­pa­ny” — the same day the pri­vate eq­ui­ty group sug­gest­ed they might be will­ing to buy Tesaro.

Noth­ing came of it, and Hed­ley went to an­oth­er phar­ma com­pa­ny to see about an al­liance on Ze­ju­la. This was Com­pa­ny X.

Hal Bar­ron

Fi­nal­ly, on June 10, Hed­ley took her deal-mak­ing op­er­a­tion one step fur­ther and reached out to Hal Bar­ron, the new R&D chief at Glax­o­SmithK­line. By that time it was ob­vi­ous that GSK was get­ting ready to dive back in­to on­col­o­gy in a big way.

The stock at Tesaro had fall­en to about $44. The re­al­i­ties of com­mer­cial­iz­ing Ze­ju­la were clear­ly not as ex­cit­ing for in­vestors as de­vel­op­ing the drug and reach­ing ap­proval. And it wasn’t near­ly as in­ter­est­ing to the board or top ex­ecs as find­ing a part­ner who could take the whole pipeline on to the next step.

Kevin Sin, Bar­ron’s right hand man on the deal­mak­ing front, got in­volved in the deal talks.  The talks con­tin­ued in­to the fall, with every­thing still on the ta­ble. 

Em­ma Walm­s­ley

Af­ter a meet­ing be­tween GSK CEO Em­ma Walm­s­ley and Moul­der, the phar­ma gi­ant made a bid of $66 a share on Oc­to­ber 24. This was the first hard-dol­lar buy­out of­fer in the ta­ble. Two days lat­er, Tesaro’s shares would end the day at $31.50.

Tesaro re­ject­ed the of­fer, which is stan­dard op­er­at­ing pro­ce­dure.

On Oc­to­ber 29, things heat­ed up, a lit­tle. Tesaro had start­ed a new at­tempt at get­ting an auc­tion go­ing, and Par­ty A agreed to a col­lab­o­ra­tion deal that was worth — up­front and mile­stones com­bined — $2.34 bil­lion. That was a boost from their orig­i­nal pact, all-in, for $1.79 bil­lion.

Three of the 7 com­pa­nies they asked for a bid said they weren’t in­ter­est­ed and GSK would be the on­ly ac­tu­al bid­der at the ta­ble.

It took a few more weeks for GSK to set­tle on a $75 price for Tesaro, a fig­ure that would cause the phar­ma gi­ant’s shares to be pared back 8% on the same day.

Tesaro end­ed up sell­ing to a com­pa­ny they ini­tial­ly pitched on a part­ner­ship, fail­ing to get any trac­tion on a buy­out by re­peat­ed­ly ask­ing for bids as its share price swooned to a frac­tion of its pre-ap­proval peak. So if you have to ask for an of­fer, don’t be too sur­prised if you’re left wait­ing — for too long.

Share­hold­ers at Clo­vis $CLVS got the mes­sage about the road ahead on PARP. To­day, as the deal ne­go­ti­a­tions were re­vealed at Tesaro, Clo­vis with its ri­val drug saw its stock drop close to 6%. Those shares are now trad­ing at less than half of their price post­ed when Rubra­ca was first ap­proved in late 2016.


Fea­tured im­age: Lon­nie Moul­der Tesaro

2019 Trin­i­ty Drug In­dex Eval­u­ates Ac­tu­al Com­mer­cial Per­for­mance of Nov­el Drugs Ap­proved in 2016

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This report, the fourth in our Trinity Drug Index series, outlines key themes and emerging trends in the industry as we progress towards a new world of targeted and innovative products. It provides a comprehensive evaluation of the performance of novel drugs approved by the FDA in 2016, scoring each on its commercial performance, therapeutic value, and R&D investment (Table 1: Drug ranking – Ratings on a 1-5 scale).

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For start-up biotechnology companies and resource stretched pharmaceutical organisations, launching a novel product can be challenging. Lean teams can make setting a launch strategy and achieving your commercial goals seem like a colossal undertaking, but can these barriers be transformed into opportunities that work to your brand’s advantage?
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FH: We started working on the product at Phase II and now we’re going into Phase III trials. There is a significant unmet need in this disease area, and everyone is excited about the launch. However, the organisation is still evolving and the team is quite small – naturally this causes a little turbulence.

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Eli Lilly had high hopes for its pegylated IL-10 drug pegilodecakin when it bought Armo last year for $1.6 billion in cash. But after reporting a few months ago that it had failed a Phase III in pancreatic cancer, without the data, its likely value has plunged. And now we’re getting some exact data that underscore just how little positive effect it had.

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A $1B-plus drug stum­bles in­to an­oth­er big PhI­II set­back -- this time flunk­ing fu­til­i­ty test -- as FDA hold re­mains in ef­fect for Ipsen

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At the time Ipsen stepped up last year with more than a billion dollars in cash to buy Clementia and a late-stage program for a rare bone disease that afflicts children, then CEO David Meek was confident that he had put the French biotech on a short path to a mid-2020 launch.

Instead of prepping a launch, though, the company was hit with a hold on the FDA’s concerns that a therapy designed to prevent overgrowth of bone for cases of fibrodysplasia ossificans progressiva might actually stunt children’s growth. So they ordered a halt to any treatments for kids 14 and under. Meek left soon after to run a startup in Boston. And today the Paris-based biotech is grappling with the independent monitoring committee’s decision that their Phase III had failed a futility test.

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Roche's check­point play­er Tecen­triq flops in an­oth­er blad­der can­cer sub­set

Just weeks after Merck’s star checkpoint inhibitor Keytruda secured FDA approval for a subset of bladder cancer patients, Swiss competitor Roche’s Tecentriq has failed in a pivotal bladder cancer study.

The 809-patient trial — IMvigor010 — tested the PD-L1 drug in patients with muscle-invasive urothelial cancer (MIUC) who had undergone surgery, and were at high risk for recurrence.

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UP­DAT­ED: FDA’s golodirsen CRL: Sarep­ta’s Duchenne drugs are dan­ger­ous to pa­tients, of­fer­ing on­ly a small ben­e­fit. And where's that con­fir­ma­to­ry tri­al?

Back last summer, Sarepta CEO Doug Ingram told Duchenne MD families and investors that the FDA’s shock rejection of their second Duchenne MD drug golodirsen was due to some concerns regulators raised about the risk of infection and the possibility of kidney toxicity. But when pressed to release the letter for all to see, he declined, according to a report from BioPharmaDive, saying that kind of move “might not look like we’re being as respectful as we’d like to be.”

He went on to assure everyone that he hadn’t misrepresented the CRL.

But Ingram’s public remarks didn’t include everything in the letter, which — following the FDA’s surprise about-face and unexplained approval — has now been posted on the FDA’s website and broadly circulated on Twitter early Wednesday.

The CRL raises plenty of fresh questions about why the FDA abruptly decided to reverse itself and hand out an OK for a drug a senior regulator at the FDA believed — 5 months ago, when he wrote the letter — is dangerous to patients. It also puts the spotlight back on Sarepta $SRPT, which failed to launch a confirmatory study of eteplirsen, which was only approved after a heated internal controversy at the FDA. Ellis Unger, director of CDER’s Office of Drug Evaluation I, notes that study could have clarified quite a lot about the benefit and risks associated with their drugs — which can cost as much as a million dollars per patient per year, depending on weight.

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Gilead claims Tru­va­da patents in HHS’ com­plaint are in­valid

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Stephen Hahn, AP

The FDA has de­val­ued the gold stan­dard on R&D. And that threat­ens every­one in drug de­vel­op­ment

Bioregnum Opinion Column by John Carroll

A few weeks ago, when Stephen Hahn was being lightly queried by Senators in his confirmation hearing as the new commissioner of the FDA, he made the usual vow to maintain the gold standard in drug development.

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Over the last few years, biopharma has enjoyed an unprecedented loosening over just what it takes to clear that bar. Regulators are more willing to drop the second trial requirement ahead of an accelerated approval — particularly if they have an unmet medical need where patients are clamoring for a therapy.

That confirmatory trial the FDA demands can wait a few years. And most everyone in biopharma would tell you that’s the right thing for patients. They know its a tonic for everyone in the industry faced with pushing a drug through clinical development. And it’s helped inspire a global biotech boom.

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UP­DAT­ED: New play­ers are jump­ing in­to the scram­ble to de­vel­op a vac­cine as pan­dem­ic pan­ic spreads fast

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And they breathlessly reported every moment of the early morning dash.

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CNN helped illustrate how hard all that can be.

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