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You are here: Home > Blogs > Company > GSK buys Tesaro to re-enter oncology race

GSK buys Tesaro to re-enter oncology race

December 13, 2018 | Company

Melanie senior

GlaxoSmithKline’s latest deal to buy US cancer company Tesaro looks a bit like a strategic U-turn. In 2014, Sir Andrew Witty, then CEO, did a swap-deal with Novartis: it sold off the company’s established oncology business because it was un-competitive, and bulked up instead on consumer healthcare. Now, Witty’s successor Emma Walmsley has ditched a flagship consumer brand in India, the malted drink Horlicks, and is paying $5.1 billion for Tesaro’s marketed oncology drug, Zejula (niraparib), and a pipeline.

 

 

It is not quite a U-turn: Witty maintained some promising early-stage cancer programs, and the intention was to bide time until these came through, potentially leap-frogging rivals, including in the white-hot immune-oncology space. But the internal assets were never going to be enough. And shopping for cancer assets is pricey – GSK paid a 110% premium to Tesaro’s 30-day average share-price, sending its own stock plummeting (even though Tesaro’s share price had been even higher earlier on in the year).

Zejula is a PARP (poly-ADP ribose polymerase) inhibitor, which works by blocking cancer cells’ ability to repair their own DNA. The class is highly promising, but Zejula, approved in the US in 2017 for recurrent ovarian cancer, is not at the front. AstraZeneca and Merck & Co.’s pioneer Lynparza (olaparib) has been available for four years for advanced ovarian cancer. In 2018, it was approved for use in some forms of breast cancer, and showed strong Phase III data supporting earlier use in ovarian disease – all of which solidifies its lead over rivals, including Clovis Oncology’s Rubraca (rucaparib), which was recently awarded FDA breakthrough designation for use in prostate cancer. Meanwhile, Pfizer came onto the scene in October 2018 when Talzenna (talazoparib) was approved for patients with a certain kind of breast cancer.

In short, GSK is joining a suite of more experienced rivals in a hotly-contested race to expand PARP inhibitor use into other cancer types. Walmsley points out that the Tesaro deal will build GSK’s commercial capability in oncology as well as its pipeline. But catching up will be tough – and will require more capital still, beyond the $3.8 billion generated by the Horlicks sale.

Hence investors’ flight from the stock despite reassurances that the hallowed dividend would be protected. There are bright spots, including the vaccines division and HIV-focused ViiV Healthcare. And GSK has successfully dampened the impact of generic Advair on its flagship respiratory franchise. But in pharmaceuticals, the company has spent years organizing and re-organizing its R&D, shifting its focus in and around emerging markets,

consumer health and generics. These changes have come at a cost, in terms of innovation, performance, and trust. It’s precisely these three pillars that Walmsley has identified as GSK’s priorities – for the long-term.

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