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

No­var­tis reshuf­fles its wild cards; Tough sell for Bio­gen? Googling pro­teins; Ken Fra­zier's new gig; and more

Welcome back to Endpoints Weekly, your review of the week’s top biopharma headlines. Want this in your inbox every Saturday morning? Current Endpoints readers can visit their reader profile to add Endpoints Weekly. New to Endpoints? Sign up here.

If you enjoy the People section in this report, you may also want to check out Peer Review, my colleagues Alex Hoffman and Kathy Wong’s comprehensive compilation of comings and goings in biopharma.

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Demis Hassabis, DeepMind CEO (Qianlong/Imaginechina via AP Images)

Google's Deep­Mind opens its pro­tein data­base to sci­ence — po­ten­tial­ly crack­ing drug R&D wide open

Nearly a year ago, Google’s AI outfit DeepMind announced they had cracked one of the oldest problems in biology: predicting a protein’s structure from its sequence alone. Now they’ve turned that software on nearly every human protein and hundreds of thousands of additional proteins from organisms important to medical research, such as fruit flies, mice and malaria parasite.

The new database of roughly 350,000 protein sequences and structures represents a potentially monumental achievement for the life sciences, one that could hasten new biological insights and the development of new drugs. DeepMind said it will be free and accessible to all researchers and companies.

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In­side Bio­gen's scram­ble to sell Aduhelm: Pro­ject 'Javelin' and pres­sure to ID as many pa­tients as pos­si­ble

In anticipation of Aduhelm’s approval for Alzheimer’s in June, Biogen employees were directed to identify and guarantee treatment centers would administer the drug through a program called “Javelin,” a senior Biogen employee told Endpoints News.

The program identified about 800 centers for use, he said, and Biogen now pays for the use of bioassays to identify beta amyloid in potential patients having undergone a lumbar puncture procedure, the employee said — and one center preparing to administer the drug confirmed its participation in the bioassay program.

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EMA re­jects FDA-ap­proved Parkin­son's drug, signs off on Mod­er­na vac­cine use in ado­les­cents ahead of FDA

The European Medicines Agency on Friday rejected Kyowa Kirin’s Parkinson’s disease drug Nouryant (istradefylline), which the US FDA approved in 2019 under the brand name Nourianz.

EMA said it considered that the results of the clinical studies used to support the application “were inconsistent and did not satisfactorily show that Nouryant was effective at reducing the ‘off’ time. Only four out of the eight studies showed a reduction in ‘off’ time, and the effect did not increase with an increased dose of Nouryant.”

6 top drug­mak­ers of­fer per­spec­tives on FDA's new co­vari­ates in RCTs guid­ance

Back in May, the FDA revised and expanded a 2019 draft guidance that spells out how to adjust for covariates in the statistical analysis of randomized controlled trials.

Building on the ICH’s E9 guideline on the statistical principles for clinical trials, the 3-page draft was transformed into an 8-page draft, with more detailed recommendations on linear and nonlinear models to analyze the efficacy endpoints in RCTs.

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Vas Narasimhan, Novartis CEO (Jason Alden/Bloomberg via Getty Images)

No­var­tis dis­cards one of its ‘wild card’ drugs af­ter it flops in key study. But it takes one more for the hand

Always remember just how risky it is to gamble big on small studies.

A little more than 4 years ago, Novartis reportedly put up a package worth up to $1 billion for the dry eye drug ECF843 after a small biotech called Lubris put it through its paces in a tiny study of 40 moderate to severe patients, tracking some statistically significant markers of efficacy.

By last fall, the program had risen up to become one of CEO Vas Narasimhan’s top “wild card” programs in line for a potential breakthrough year in 2021. These drugs were all considered high-risk, high-reward efforts. And in this case, risk won.

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No­var­tis to pay near­ly $178M in law­suit over BRAF drug — and will be on the hook for roy­al­ty

After a four-year battle over a cancer drug patent, Novartis has been ordered by a California judge to pay a Daiichi Sankyo subsidiary $177.8 million.

Plexxikon filed a lawsuit against the pharma giant in 2017, alledging that Tafinlar, a rival to its melanoma drug Zelboraf that was brought to market in collaboration with Roche, has stepped on its intellectual property. The jury ruled in its favor, adding that the infringement is in fact willful.

Al Sandrock, Biogen R&D chief (Biogen via YouTube)

Bio­gen has a shaky end to H1 with a $542M write-off adding to its woes — but an­a­lysts see big rev­enue ahead for Aduhelm

All eyes at Biogen’s Q2 earnings call Thursday were on Aduhelm, but investors also got a glimpse of what Biogen would have faced had the FDA not opted to approve their controversial Alzheimer’s drug.

That glimpse, revealing a combination of declining sales, growing competition and failed medicines, underscores the stakes of the big biotech’s Aduhelm efforts, as execs punch back at the criticism they’ve engendered in the political and medical world and vigorously pushes its sales staff to roll out the drug as fast as possible.

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Michel Vounatsos, Biogen CEO (Credit: World Economic Forum/Valeriano Di Domenico)

Bio­gen de­fends slow roll­out of new Alzheimer's drug, crit­i­cizes neg­a­tive me­dia at­ten­tion

As Biogen execs bemoaned the negative media coverage around Aduhelm’s approval a month ago, the biotech isn’t gaining much traction yet in using its new drug, largely due to a lack of insurance coverage, according to an earnings call Thursday.

Management indicated that of the nearly 900 sites that were prepped and ready following Aduhelm’s approval, 325 of those, or about 35%, have completed a positive pharmacy and therapeutics (P&T) review or won’t require one. The review is a step some hospitals or health systems take prior to using a new drug. Some major sites, however, have said they won’t participate.