M&A, Oncology

GSK bags Tesaro for $5B as it leaps back into commercial oncology and beefs up cancer drug pipeline

GlaxoSmithKline has struck a deal to buy Tesaro $TSRO in a $5.1 billion deal that will vault the pharma giant into the commercial oncology market as it stakes out a big new role for itself in the booming cancer field.

Long discussed after Tesaro management put out the word on several occasions in the past year that it was looking to sell the company and its PARP inhibitor Zejula, GSK is paying $75 a share, triggering an instant 60% spike in the stock this morning as investors caught up to the news today.

Waiting out the early buzz allowed GSK to pick this company up for a relative bargain. Tesaro started 2018 at $82 a share, but watched its share price slide 42% until today as analysts beat them up over their poor sales performance. In early 2017, the stock hit a high of $190. That helps explain why Tesaro was never able to succeed at auctioning the company earlier, when its share price was still inflated.

Zejula is one of several PARPs to hit the market after AstraZeneca pioneered the field with the first approval for Lynparza, though little Tesaro has struggled to play catch-up alongside Clovis and Pfizer, which won a recent approval for its PARP, obtained in the Medivation buyout.

It won’t be easy. AstraZeneca and its new partners at Merck have poured resources into the Lynparza franchise, winning blockbuster returns as they widen their lead over the pack. And the acquisition wasn’t exactly cheered by GSK investors, who drove the stock down a painful 8% after the news hit.

The acquisition, though, gives Hal Barron’s resurgent cancer research group under Axel Hoos a new drug to work with, as GSK pursues new indications in a range of clinical trials aimed at expanding its market presence in oncology.

GSK is just now jumping back into the commercial cancer field after striking a deal with Novartis to flip its late-stage and marketed oncology products for a portfolio of vaccines.

The move comes about a year after Barron — who had a legendary run at Genentech — took the top R&D job at GSK. As he told me earlier this year, his new team — including new BD chief Kevin Sin — was hard at it scouring the globe for deals that made sense for the company.

At this point, a weary Tesaro and Zejula looked undervalued. And that made it a prime target for the pharma company. GSK has been a major player in HIV and vaccines, but its pharma R&D ops are the weakest in its heavyweight class.

This new deal brings a pipeline that also adds a PD-1 — one in a tidal wave of checkpoints — as well as TIM-3 and LAG-3 assets, which are also not so uncommon. In the meantime, Barron made it clear in a call with reporters this morning that he was eager to see about the potential to expand Zejula into the broader HRD-positive community, which would dramatically increase the size of the market.

PARPs work by interfering with DNA repair mechanisms that allow cancer cells to survive, opening up an avenue that could relate to a variety of cancers.

So what happens to the 800 or so staffers at Tesaro? 

Emma Walmsley

In a call with reporters Monday morning, CEO Emma Walmsley noted that the deal wasn’t being driven by cost synergies and also brings commercial capabilities back to a company that currently doesn’t have an oncology sales force. In time, she added, they’ll look at synergies — code for cuts — but it’s early days on that.

Walmsley also declined to say just what kind of peak sales they can expect from Zejula. In the past, though, peak sales estimates have climbed to $2 billion.

“Our strong belief is that PARP inhibitors are important medicines that have been under appreciated in terms of the impact they can have on cancer patients,” Barron noted in a statement. “We are optimistic that Zejula will demonstrate benefit in patients with ovarian cancer beyond those who are BRCA-positive as front-line treatment. We are also very excited that through this transaction, we will have the opportunity to work with an outstanding Boston-based oncology group with deep clinical development expertise and together we will explore Zejula’s efficacy beyond ovarian cancer into multiple tumour types to help many more patients.”


Image: Axel Hoos, Hal Barron, John Lepore, Kevin Sin and Tony Wood.


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