Zacks Investment Research | Dec 03, 2018 08:06PM ET
TESARO, Inc. (NASDAQ:TSRO) announced that it has entered into a definitive agreement with GlaxoSmithKline (NYSE:GSK) per which the latter will acquire TESARO’s outstanding shares and net debt for $5.1 billion (£4.0 billion)
Glaxo has offered TESARO’s investors $75 for each share in cash, which represents a 110% premium on the 30-day volume weighted average price of $35.67. Reportedly, TESARO had been on a lookout for a prospective buyer since last month and industry ’s decline of 7.6% in the year so far.
Shares of the company have been declining owing to rising competition in the PARP inhibitor segment where TESARO sells its sole marketed drug, Zejula. The drug, a PARP inhibitor, is approved as a second-line maintenance treatment for ovarian cancer irrespective of BRCA mutation. The buyout offer is a significant relief for its investors as they can sell their stake in the company at a higher price.
Although the drug has seen strong uptake since its launch, rising competition and stagnating market share of PARP inhibitors in the ovarian cancer market are concerns. AstraZeneca (NYSE:AZN) and Merck’s Lynparza and Clovis Oncology’s (NASDAQ:CLVS) Rubraca compete with Zejula in the PARP inhibitor segment. In October, Pfizer (NYSE:PFE) received approval for its PARP inihibitor, Talzenna, for treating breast cancer. Meanwhile, several other companies are also developing their PARP inhibitor candidates, including AbbVie’s veliparib, suggesting that competition will increase going forward.
Glaxo’s strong balance sheet should help to accelerate Zejula development and enable it to compete better with Lynparza, which is being developed by two of the large-cap pharmaceuticals companies. Although Clovis’ Rubraca may now be at a disadvantage due to limited availability of funds, its shares increased 10% probably on speculation of a potential buyout following TESARO’s acquisition offer.
The acquisition offer was made as part of Glaxo’s strategic review to boost its pharmaceutical business and its oncology pipeline. Earlier this week, Glaxo sold its Horlicks brand to London-based consumer giant Unilever (LON:ULVR) for $3.8 billion to focus on pharma business.
We note that Glaxo’s investors were not happy with the acquisition offer for TESARO as it seemed expensive with respect to Zejula’s future prospects. It also adds to the company’s debt, which is likely to put pressure on its margins.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.