GlaxoSmithKline on Monday agreed to pay $5.1 billion for Tesaro, becoming the latest firm to bet on a new type of cancer drug that has shown promise treating multiple tumor types but has yet to become a blockbuster seller.
GSK (NYSE: GSK) said it will pay $75 per share in cash for Waltham, MA-based Tesaro (NASDAQ: TSRO), the owner of a cancer drug called niraparib (Zejula). The price represents a roughly 57 percent premium to Tesaro’s $46.38 per share close on Friday, though it comes in well short of Tesaro’s highest highs. The company was worth more than $190 per share in February 2017, just a few months before the FDA approved niraparib as a treatment for ovarian cancer.
Tesaro shares surged about 60 percent, to $74.15 apiece, on Monday morning
That roller coaster ride is emblematic of the struggle Tesaro has had trying to turn niraparib into a commercial success. But GSK’s bet on Tesaro shows that pharma is still willing to gamble on the future of drugs like niraparib, known collectively as PARP inhibitors. It also sets up a commercial battle between GSK and its British biopharma rival, AstraZeneca (NYSE: AZN), whose competing drug olaparib (Lynparza) is currently the market leader.
PARP inhibitors block an enzyme, poly (ADP-ribose) polymerase, that tumors use to repair DNA damage. After some initial clinical setbacks, four PARP blockers have won FDA approval since 2014: AstraZeneca’s olaparib, Tesaro’s niraparib , Clovis Oncology’s (NASDAQ: CLVS) rucaparib (Rubraca), and most recently in October, Pfizer’s (NYSE: PFE) talazoparib (Talzenna).
Olaparib was first, approved for patients with certain forms of ovarian cancer and defective BRCA genes who have failed multiple chemo regimens. Niraparib and rucaparib followed, both as maintenance therapies to delay ovarian cancer’s recurrence after chemotherapy. Beyond ovarian cancer, PARPs have begun to show real benefits for patients with other tumors as well. Both olaparib and talazoparib have won approvals for breast cancer. And developers have been testing these drugs alone and in combination with others in lung, prostate, and other cancers too.
So far, however, these drugs have struggled to sell. AstraZeneca’s drug has established itself as the leader, with $169 million in sales in its last quarter, though that total consists of both breast and ovarian cancer sales. Tesaro’s drug pulled in a total of $63 million last quarter, while Clovis’s rucaparib had about $23 million in sales. As Leerink analyst Andrew Berens wrote in a recent research note, developers have had “persistent challenges in growing the market” for PARP inhibitors, particularly in getting doctors to prescribe them as maintenance agents. GSK believes PARP blockers just haven’t hit their stride yet.
“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,” GSK president and chief scientific officer Hal Barron said in a statement. Barron added that GSK will test niraparib in “multiple tumor types” beyond ovarian cancer.
Tesaro was founded in 2010 by a group of drug developers that helped sell MGI Pharma to Japan-based Eisai for $3.9 billion in 2008. The concept behind the company was to snap up cancer drug candidates discovered by others and develop them. Tesaro acquired niraparib, for instance, via a 2012 licensing deal with Merck. Earlier this year the company sold off its only other commercial product, a drug called rolapitant (Varubi) for nausea associated with chemotherapy. Tesaro got the drug through a 2010 deal with Opko Health.