Market Overview

GlaxoSmithKline Strikes $5B M&A Deal With Tesaro In Quest To Boost Oncology Franchise

Share:
GlaxoSmithKline Strikes $5B M&A Deal With Tesaro In Quest To Boost Oncology Franchise
Related GSK
Gabelli Names Clovis As Top Pick, Calls The Biotech A Likely Takeout Candidate
Jim Cramer Gives His Opinion On GlaxoSmithKline, Abbott Laboratories And More
J&J weighing on big biopharma players (Seeking Alpha)
Related TSRO
Gabelli Names Clovis As Top Pick, Calls The Biotech A Likely Takeout Candidate
5 Biotech Companies To Keep On Your M&A Watchlist For 2019
Clovis down 7% on diminished prospects for takeover (Seeking Alpha)

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

Posted-In: 23andMe ZejulaBiotech News M&A Trading Ideas Best of Benzinga

 

Related Articles (GSK + TSRO)

View Comments and Join the Discussion!

GBP/USD Forecast: Sterling Set Re-test 2018 Low As Pressure Mounts Ahead Of Brexit Vote

The US-China Trade Truce: 'You Don't Know For Certain How This Is Going To Play Out'