TESARO (TSRO) Slips on Wider-than-Expected Q2 Loss

TESARO, Inc.'s TSRO shares continued to decline after the company reported a wider-than-expected loss for the second quarter of 2014. Shares, which declined 5.2% immediately after the release of second quarter results, slipped a further 1.5% in the following trading session. Overall, shares were down 2.7%.

TESARO's second-quarter loss of $1.00 per share was wider than the Zacks Consensus Estimate of a loss of 89 cents and also exceeded the year-ago loss of 67 cents per share.  

TESARO did not generate any revenues in the second quarter of 2014.

The Quarter in Detail

R&D expenses increased 68.2% year over year to $30.6 million. This was due to higher costs related to pipeline development and increased headcount.

In Jun 2014, TESARO announced results from three phase III studies on oral rolapitant for the prevention of chemotherapy-induced nausea and vomiting. Rolapitant met the primary endpoints in all three studies. The company intends to file for rolapitant's approval for this indication in the U.S. within six weeks.

Additionally, TESARO completed a multiple ascending dose study on rolapitant IV formulation in which rolapitant showed satisfactory safety and tolerability for repeated daily doses.

Meanwhile, a phase III study (BRAVO) is ongoing in which another late-stage oncology candidate, niraparib, is being evaluated for the treatment of breast cancer patients with germline BRCA mutations.

TESARO is also conducting a phase III study (NOVA) on niraparib as a maintenance therapy for high grade serous, platinum sensitive, relapsed ovarian cancer. Enrolment is expected to be completed by year-end. The company intends to initiate additional studies on niraparib for small cell lung cancer and first-line ovarian cancer maintenance in early 2015.

Niraparib plus Temodal is in a phase I study for the treatment of Ewing's sarcoma.

Additionally, TESARO plans to submit an investigational new drug application (NDA) for TSR-042 in the U.S. in late 2015.

G&A expenses scaled up 63.7% year over year to $5.6 million primarily driven by increased headcount, higher non-cash stock-based compensation expense and higher professional service fees.

Our Take

The NDA filing for rolapitant will be an important step for TESARO. The company is building its sales-force (approximately 120 associates to be hired) and gearing up for the launch of rolapitant, subject to FDA approval. This is the company's first candidate to enter the regulatory process. We expect investors to remain focused on further updates on rolapitant.

TESARO holds a Zacks Rank #4 (Sell). Some better-ranked stocks in the health care sector are Salix Pharmaceuticals Ltd. SLXP, Enanta Pharmaceuticals, Inc. ENTA and Endo International plc ENDP. While Salix carries a Zacks Rank #1 (Strong Buy), Enanta and Endo hold a Zacks Rank #2 (Buy).