GlaxoSmithKline to buy Tesaro for $5.1 billion, gaining PARP inhibitor Zejula

GlaxoSmithKline announced Monday an agreement to acquire Tesaro for around $5.1 billion in cash, gaining the latter's oral PARP inhibitor Zejula (niraparib). GlaxoSmithKline CEO Emma Walmsley said the deal represents "a step change" for the company's oncology pipeline, adding "this is going to be part of the acceleration and the change in the growth prospects for the group."

Zejula is currently approved in the US and Europe as a treatment for adults with recurrent ovarian cancer who are in response to platinum-based chemotherapy, regardless of BRCA mutation or biomarker status. The drug is also being investigated in "all-comers" patient populations, as a monotherapy and in combinations, for the first-line maintenance treatment of ovarian cancer. Results from the first of these trials, dubbed PRIMA, are expected in the second half of 2019.

Outside of ovarian cancer, Zejula is also being studied for use as a possible treatment in lung, breast and prostate cancer, both as a monotherapy and in combination with other medicines, including with Tesaro's experimental anti-PD-1 antibody dostarlimab, formerly known as TSR-042. Tesaro's pipeline also contains several other oncology assets, including antibodies directed against TIM-3 and LAG-3.

Hal Barron, chief scientific officer at GlaxoSmithKline, said "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."Zejula generated sales of $63 million in the third quarter, with analysts estimating full-year revenue of $240 million, rising to $1 billion in 2023. Meanwhile, there are three other PARP inhibitors on the market, with AstraZeneca and Merck & Co.'s Lynparza (olaparib) generating third-quarter revenue of $169 million and Clovis Oncology's Rubraca (rucaparib) pulling in sales in the same period of about $23 million.

The transaction comes shortly after Barron, who joined GlaxoSmithKline at the start of the year, unveiled the company's new approach to R&D, which includes a focus on science related to the immune system, the use of genetics and investments in advanced technologies. "This is an example of us executing on what we said we were going to bring growth, pipeline, commercial capability and near-term catalysts," Walmsley remarked, adding "we still will be open to other potential bolt-ons in business development."

Commenting on the purchase, Liberum Capital analyst Graham Doyle conceded that while GlaxoSmithKline needs to bolster its pipeline, "given the competition Tesaro faces with other PARP inhibitors and the relative lack of synergies with [its] existing oncology pipeline, we are not convinced that this is the best way to do so." Shares in GlaxoSmithKline fell as much as 7 percent on the news.

Under the deal, GlaxoSmithKline will acquire Tesaro for $75 per share, which represents a premium of about 62 percent to the company's closing share price on November 30. Last month, shares in Tesaro jumped after sources suggested that the company was considering a sale after reporting disappointing results from a study combining dostarlimab and the anti-TIM-3 antibody TSR-022 in patients with non-small-cell lung cancer who progressed following anti-PD-1 therapy.

According to GlaxoSmithKline, the purchase of Tesaro will impact adjusted earnings per share for the first two years by mid to high single digit percentages, reducing thereafter and starting to be accretive by 2022. The transaction, which has been approved by Tesaro's board, is expected to close in the first quarter of 2019.

Johnson & Johnson gained exclusive rights in 2016 to Zejula in prostate cancer under a deal potentially worth up to $450 million, with the former also making a $50 million equity investment in the company.

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