GlaxoSmithKline is making a major move into the highly competitive cancer drug business by acquiring Tesaro, the maker of a drug that targets the repair mechanisms in cancer cells, for $5.1 billion.
Under new CEO Emma Walmsley, GSK has been focusing on drugs that either work on the immune system or target diseases where a genetic driver can be identified. The company had sold its marketed cancer drugs to Novartis in 2014 as part of an asset swap.
Tesaro’s Zejula drug is currently approved for use in ovarian cancer. Like other so-called PARP inhibitors, it blocks an enzyme used by cancer cells to repair themselves after they have been damaged by chemotherapy, potentially slowing the growth of tumors.
Glaxo believes drugs such as Zejula fit with its new strategy because they are based on a gene-level understanding of cancer.
“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 Chief Scientific Officer Hal Barron said in a news release, adding that the company “will explore Zejula’s efficacy beyond ovarian cancer into multiple tumor types to help many more patients.”
But on news of the deal, GSK’s shares fell 8% to $38.50 in trading Monday, reflecting investor concern that it is overpaying for Tesoro. The deal represents a a 61% premium to Tesaro’s closing price and one analyst had valued the company last month at only $3.3 billion.
“Zejula’s sales have lagged rivals, with doctors and industry officials saying the treatment’s side-effect profile is worse than the other drugs,” The Wall Street Journal said.
Zejula generated $63 million in sales in the third quarter of 2018, but Leerink estimates that sales will eventually top $1 billion. Rival products include AstraZeneca’s Lynparza, the market leader, and a PARP inhibitor from Clovis Oncology.
Barron told reporters that data published in the past 12 months, along with some internal analysis conducted by Glaxo, gave him confidence that Zejula will be effective beyond ovarian cancer patients whose cancer has mutations in a gene called BRCA.