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Why Pfizer, AstraZeneca, Clovis aen’t interested in acquiring Tesaro

June 3, 2017

Yesterday it was reported that Tesaro (TSRO) had opened itself up for a sale, but that so far interest was lukewarm. Today, Investor’s Business Daily News provided a little more color, noting that several major pharma companies have their own PARP inhibitors in the clinic.

The U.S. Food and Drug Administration (FDA) approved Tesaro’s Zejula (niraparib) for maintenance treatment of women with recurrent epithelial ovarian, fallopian tube, and primary peritoneal cancer who are in a complete or partial response to platinum-based chemotherapy on March 27. Zejula is a PARP inhibitor, which is a new class of cancer drug. It is the first to be approved by the FDA that doesn’t require BRCA mutation or other biomarker testing.

Analysts have projected that Zejula could hit $2 billion in annual sales at its peak. So why aren’t companies interested?

Mostly price. And the companies large enough to buy Tesaro generally already have their own PARPi programs. The company’s stock jumped 4 percent at the news it was up for sale, which kicked its market cap up to about $8 billion. With whatever premium the company would require, that puts it out of reach for many companies.

Poly ADP ribose polymerase (PARP) are enzymes involved in repairing damaged DNA. PARPi, drugs that inhibit those enzymes, appear to be effective in treatment ovarian and other cancers. Essentially the drugs keep tumor cells from repairing themselves.

Debjit Chattopadhyay, an analyst with Janney, said, “Based on the multiple competitive data events and regulatory decisions, which could significantly alter the competitive landscape, we find the timing to be defensive and are not surprised by lukewarm interest.”

AstraZeneca (AZN)’s PARPi is Lynparza (olaparib). On March 14, the company presented results from its Phase III SOLO-2 trial that demonstrated significant improvement in progression-free survival (PFS) in BRCA-mutated, platinum-sensitive, relapsed ovarian cancer patients treated with Lynparza compared to placebo.

Clovis Oncology (CLVS)’s PARPi is Rubraca (rucaparib). The drug received accelerated approval from the FDA. Rubraca was approved in December 2016 for women with advanced ovarian cancer who have been treated with two or more chemotherapies and whose tumors have a deleterious BRCA mutation as identified by an FDA-approved companion diagnostic test. On April 27, Clovis and Myriad Genetics (MYGN) announced a companion diagnostic deal to support a post-market regulatory commitment concerning Rubraca. Myriad will submit a supplementary premarket approval (sPMA) application under its existing PMA for BRACAnalysis CDx to include Rubraca.

In August 2016, Pfizer (PFE) acquired Medivation (MDVN) for $14 billion. As part of the deal, it picked up talozaparib, a PARPi. In some studies, talozaparib has shown to be fifty times more potent than Tesaro’s Zejula.

Chattopadhyay indicates that AstraZeneca and Pfizer both have data readouts later this year that “all have implications for Tesaro.” And although PARPi’s are currently being evaluated alone, some research is looking at them as combination drugs with immuno-oncology therapies. “Hence, an M&A at a significant premium to current valuation could translate into buyer’s remorse down the road.”

Which does leave Novartis (NVS). Just this week the company insisted it was really only interested in bolt-on acquisitions in the $5 billion range. It also indicated at a recent meeting between executives and investors that it has 18 immuno-oncology assets in the clinic and 22 combinations in trials by the end of the year. Notably missing? A PARPi program. Despite that, it seems like long odds that Novartis would be interested in Tesaro.

http://bit.ly/2spAqYS

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