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

It’s fi­nal­ly over: Bio­gen, Ei­sai scrap big Alzheimer’s PhI­I­Is af­ter a pre­dictable BACE cat­a­stro­phe rais­es safe­ty fears

Months after analysts and investors called on Biogen and Eisai to scrap their BACE drug for Alzheimer’s and move on in the wake of a string of late-stage failures and rising safety fears, the partners have called it quits. And they said they were dropping the drug — elenbecestat — after the independent monitoring board raised concerns about…safety.

We don’t know exactly what researchers found in this latest catastrophe, but the companies noted in their release that investigators had determined that the drug was flunking the risk/benefit analysis.

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It's not per­fect, but it's a good start: FDA pan­elists large­ly en­dorse Aim­mune's peanut al­ler­gy ther­a­py

Two days after a fairly benign review from FDA staff, an independent panel of experts largely endorsed the efficacy and safety of Aimmune’s peanut allergy therapy, laying the groundwork for approval with a risk evaluation and mitigation strategy (REMS).

Traditionally, peanut allergies are managed by avoidance, but the threat of accidental exposure cannot be nullified. Some allergists have devised a way to dose patients off-label with peanut protein derived from supermarket products to wean them off their allergies. But the idea behind Aimmune’s product was to standardize the peanut protein, and track the process of desensitization — so when accidental exposure in the real world invariably occurs, patients are less likely to experience a life-threatening allergic reaction.

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Lisa M. DeAngelis, MSKCC

MSK picks brain can­cer ex­pert Lisa DeAn­ge­lis as its next CMO — fol­low­ing José Basel­ga’s con­tro­ver­sial ex­it

It’s official. Memorial Sloan Kettering has picked a brain cancer expert as its new physician-in-chief and CMO, replacing José Baselga, who left under a cloud after being singled out by The New York Times and ProPublica for failing to properly air his lucrative industry ties.

His replacement, who now will be in charge of MSK’s cutting-edge research work as well as the cancer care delivered by hundreds of practitioners, is Lisa M. DeAngelis. DeAngelis had been chair of the neurology department and co-founder of MSK’s brain tumor center and was moved in to the acting CMO role in the wake of Baselga’s departure.

Penn team adapts CAR-T tech, reengi­neer­ing mouse cells to treat car­diac fi­bro­sis

After establishing itself as one of the pioneer research centers in the world for CAR-T cancer therapies, creating new attack vehicles to eradicate cancer cells, a team at Penn Medicine has begun the tricky transition of using the basic technology for heart repair work.

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Tal Zaks. Moderna

The mR­NA uni­corn Mod­er­na has more ear­ly-stage hu­man da­ta it wants to show off — reach­ing new peaks in prov­ing the po­ten­tial

The whole messenger RNA field has attracted billions of dollars in public and private investor cash gambled on the prospect of getting in on the ground floor. And this morning Boston-based Moderna, one of the leaders in the field, wants to show off a few more of the cards it has to play to prove to you that they’re really in the game.

The whole hand, of course, has yet to be dealt. And there’s no telling who gets to walk with a share of the pot. But any cards on display at this point — especially after being accused of keeping its deck under lock and key — will attract plenty of attention from some very wary, and wired, observers.

“In terms of the complexity and unmet need,” says Tal Zaks, the chief medical officer, “this is peak for what we’ve accomplished.”

Moderna has two Phase I studies it wants to talk about now.

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Sanofi takes a $260M hit to ex­tri­cate it­self from a dis­as­trous al­liance with Lex­i­con

Sanofi spent $300 million in cash to get into a $1.7 billion alliance with Lexicon on their SGLT1/2 diabetes drug sotagliflozin. And now that the drug has been spurned by the FDA after burning through a program that provided mixed late-stage data and a late shot at a last-place finish, the French pharma giant is forking over another $260 million to get out of the deal.

Sanofi’s unhappiness was already apparent when the company — now under new CEO Paul Hudson — posted a statement back in July that they were dropping the deal. But it wasn’t that simple. 

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Rit­ter bombs fi­nal PhI­II for sole lac­tose in­tol­er­ance drug — shares plum­met

More than two years ago Ritter Pharmaceuticals managed to find enough silver lining in its Phase IIb/III study — after missing the top-line mark — to propel its lactose intolerance toward a confirmatory trial. But as it turned out, the enthusiasm only set the biotech and its investors up to be sorely disappointed.

This time around there’s little left to salvage. Not only did RP-G28 fail to beat placebo in reducing lactose intolerance symptoms, patients in the treatment group actually averaged a smaller improvement. On a composite score measuring symptoms like abdominal pain, cramping, bloating and gas, patients given the drug had a mean reduction of 3.159 while the placebo cohort saw a 3.420 drop on average (one-sided p-value = 0.0106).

Ear­ly snap­shot of Ad­verum's eye gene ther­a­py sparks con­cern about vi­sion loss

An early-stage update on Adverum Biotechnologies’ intravitreal gene therapy has triggered investor concern, after patients with wet age-related macular degeneration (AMD) saw their vision deteriorate, despite signs that the treatment is improving retinal anatomy.

Adverum, on Wednesday, unveiled 24-week data from the OPTIC trial of its experimental therapy, ADVM-022, in six patients who have been administered with one dose of the therapy. On average, patients in the trial had severe disease with an average of 6.2 anti-VEGF injections in the eight months prior to screening and an average annualized injection frequency of 9.3 injections.

Alex Ar­faei trades his an­a­lyst's post for a new role as biotech VC; Sanofi vet heads to Vi­for

Too often, Alex Arfaei arrived too late. 

An analyst at BMO Capital Markets, he’d meet with biotech or pharmaceutical heads for their IPO or secondary funding and his brain, trained on a biology degree and six years at Merck and Endo, would spring with questions: Why this biomarker? Why this design? Why not this endpoint? Not that he could do anything about it. These execs were coming for clinical money; their decisions had been made and finalized long ago.