The year has been good for pharma and
biotech companies, with earnings, drug approvals and M&A fueling strong buying in the space. Another multibillion-dollar
deal was announced Monday.
What Happened
Large-cap biotech GlaxoSmithKline plc (NYSE: GSK) and TESARO Inc (NASDAQ: TSRO) announced a
definitive agreement under which the former will acquire the latter for $5.1 billion in cash, including the assumption of Tesaro's
debt.
Deal Rationale: strengthening of the London-based pharma giant's business and accelerating the build of its
pipeline and commercial capability in oncology.
Terms Of The Deal: The acquisition has been struck for a per-share price of $75, representing a 110-percent
premium to Tesaro's
30-day volume-weighted average price of $35.67. The deal price is at a 62-percent premium to Tesaro's closing price Friday.
The proposed deal has been vetted by the boards of both companies. A subsidiary of GlaxoSmithKline will begin a tender offer for
all issued and outstanding shares of Tesaro within the next 10 business days.
Financial Impact: GlaxoSmithKline expects the deal to be dilutive to its adjusted EPS for the first two years
by mid-to-high single-digit percentages, with the dilutive impact waning thereafter. By 2022, the company expects the transaction
to turn accretive to adjusted EPS.
Why It's Important
The acquisition of Tesaro brings to GlaxoSmithKline a key oncology drug, Zejula, a PARP inhibitor approved for use in the U.S.
and Europe.
It is currently approved as a treatment for adult patients with recurrent ovarian cancer who are in response to platinum-based
chemotherapy, regardless of BRCA mutation or biomarker status.
Tesaro is also working on clinical trials to expand the use of Zejula as a first-line maintenance treatment for ovarian cancer,
both as a monotherapy as well as in combinations.
The company expects to report the results from the first of these studies in the second half of 2019.
Zejula is being evaluated for multiple cancer types.
"Our strong belief is that PARP inhibitors are important medicines that have been underappreciated in terms of the impact they
can have on cancer patients. We are optimistic that Zejula will demonstrate benefit in patients with ovarian cancer beyond those
who are BRCA-positive as front-line treatment," Hal Barron, GSK's chief scientific officer and president of R&D, said in a
statement.
GlaxoSmithKline is bolstering its pipeline and R&D; it made a $300 million investment in consumer genetics company
23andMe earlier this year.
What's Next
The Tesaro deal is subject to satisfaction of customary closing conditions, including the tender offer of at least one share
more than 50 percent of the outstanding shares and the securing of regulatory approvals, including clearance from the Federal
Trade Commission.
The deal is expected to close in the first quarter of 2019.
In pre-market trading Monday, Tesaro shares were jumping 59.14 percent to $73.81, while GlaxoSmithKline was slipping 6.97
percent to $38.95.
Related Links:
The
Week Ahead In Biotech: ASH Presentations Pick Up Pace, PDUFA Dates, Clinical Trials And IPOs
Attention
Biotech Investors: Mark Your Calendar For These December PDUFA Dates
© 2018 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.