GlaxoSmithKline, GSK acquires Tesaro, in a significant move in the pharmaceutical market. The acquisition was intended to boost GSK’s oncology pharmaceutical business and increase its supply of cutting-edge cancer therapies.
An agreement between GlaxoSmithKline plc and TESARO Inc. affirmed that GSK would purchase TESARO for an estimated total cash consideration of $5.1 billion (£4.0 billion). The proposed merger considerably expands GSK’s pharmaceutical operations and speeds up the development of its oncology pipeline and commercial capacity.
Tesaro is a biopharmaceutical business with a specialty in oncology that focuses on creating cancer medicines. The business plans to seek commercialization in important product markets, including North America, Europe, and China, after successful product development and regulatory approval of its product candidates. Tesaro’s focus is on selling its products directly in North America as well as through partnerships with well-established businesses in China and Europe. The company’s aim is to find, buy, and develop innovative drug candidates as well as commercialise cancer medications that have the potential to be both safer and more effective than current therapies.
GlaxoSmithKline Plc is a healthcare organisation that conducts research, develops, and produces pharmaceutical drugs, vaccines, and consumer healthcare products. Pharmaceuticals, Vaccines, Consumer Healthcare, and Corporate Executive Team (CET) are its four operating segments. The pharmaceuticals industry focuses on creating drugs for oncology, immuno-inflammation, and respiratory and infectious disorders.
According to overall sales, GSK is one of the biggest corporations in the pharmaceutical sector. The corporation exercises its influence in a number of therapeutic areas, including vaccines, cancer, antiviral, and respiratory treatments. GSK employs collaborative ventures to increase its market share in niche sectors like oncology and HIV market.
These acquisitions can be undertaken due to a number of reasons such as, a part of their strategy to enter into new markets under strategic investment plans, organizations can create synergies by combining their resources, knowledge, and technology by merging with or purchasing another business, broader customer base and distribution channels, purchasing a business with significant patents, intellectual property, or cutting-edge technology can improve a company’s product line, research capacities, eliminate competition etc.
In the pharmaceutical industry, mergers and acquisitions (M&A) are relatively frequent. Due to a number of considerations, including the need for expansion, portfolio diversification, access to new markets or technology, cost synergies, and competitive positioning, the industry has experienced numerous mergers and acquisitions throughout the years. The highly competitive structure of the pharmaceutical market is mostly a result of a combination of profitability, patent protection, global demand, R&D spending, regulatory obstacles, marketing initiatives, and market dynamics.
Reasons for Tesaro Acquisition
A significant commercialized medication from TESARO is Zejula (niraparib), an oral poly ADP ribose polymerase (PARP) inhibitor that is currently approved for use in treating ovarian cancer. TESARO is a commercial-stage biopharmaceutical business. The use of PARP inhibitors in the treatment of ovarian cancer has significantly improved clinical outcomes in both patients with and without germline BRCA gene mutations (gBRCA). Regardless of BRCA mutation or biomarker status, Zejula is now licenced in the US and Europe as a treatment for adult patients with recurrent ovarian cancer who are responding to platinum-based chemotherapy.
Additionally, according to GSK, PARP inhibitors present excellent prospects for application in the management of several cancer types. Zejula is now being researched as a potential treatment for lung, breast, and prostate cancer in addition to ovarian cancer. It can be used alone or in conjunction with other drugs, such as TESARO’s own anti-PD-1 antibody (dostarlimab, formerly known as TSR-042). Along with Zejula and dostarlimab, Tesaro also has a number of cancer assets under development, such as antibodies targeting the TIM-3 and LAG-3 targets.
Therefore, Dr. Hal Barron, Chief Scientific Officer and President, R&D, GSK affirmed the reason for takeover was that, “Both GSK and TESARO are driven by a focus on patients and a deep desire to develop truly transformational medicines that can improve and extend their lives,”. Purchase of TESARO considerably boosts our oncology pipeline and adds additional scientific capabilities and knowledge that will speed up and scale up the pace at which the company can assist cancer patients.
Once completed, the deal will dramatically boost GSK’s pharmaceutical division and speed up the development of its oncology pipeline and commercial competence. In addition, the $75 per share cash purchase price marks a 110 percent premium over Tesaro‘s $35.67 30-day volume-weighted average price. The assumption of Tesaro’s net debt is also part of the deal.
GSK shares had their largest daily decline in ten years however, falling 8% in response to news of the high price and the fact that purchasing Tesaro will take years to pay off. Zejula, a marketed treatment for ovarian cancer from the class of drugs known as poly ADP ribose polymerase (PARP) inhibitors, is provided to GSK by Tesaro. Zejula’s yearly revenues are predicted by industry analysts to exceed $1 billion by 2023, according to statistics from Refinitiv.
Zejula, however, trails the competing PARP medicine Lynparza from AstraZeneca and Merck & Co., which sells almost three times as much, and Rubraca from Clovis Oncology, which is also a rival.
Zejula is a member of the class of medications known as PARP inhibitors. After clinical data suggested that patients did not live as long as those given chemotherapy, in “later-line settings,” that is, patients who initially have been treated with other drugs, the makers of the class of therapies were forced to restrict their use in ovarian cancer patients. The class of therapies has been plagued by safety setbacks.
GSK discontinued the use of Zejula in some ovarian cancer patients who had already received three or more chemotherapy treatments in line with FDA recommendations.
Market experts are of the view that the acquisition has not yielded expected results and consider it as an expensive deal. In recent years, GSK has lagged behind competitors in creating multibillion-dollar blockbusters, and it mostly avoided a flurry of dealmaking by rival pharmaceutical companies under previous CEO.
GSK made the strategic choice to acquire Tesaro in order to boost its pharmaceutical portfolio and increase its market share in the oncology sector. The benefits for the same may be seen in the future.
References:
https://www.reuters.com/article/us-tesaro-m-a-gsk-idUKKBN1O218H
https://www.wsj.com/articles/glaxosmithkline-to-acquire-tesaro-for-4-16-billion-1543842554
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