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Glaxo (GSK) to Buy Sierra for $1.9B, Add Hematology Drug

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GlaxoSmithKline (GSK - Free Report) announced an agreement to buy California-based cancer biotech Sierra Oncology for an approximate total equity value of $1.9 billion (£1.5 billion).

The acquisition, if successfully closed, will add Sierra Oncology’s late-stage oncology pipeline candidate momelotinib to Glaxo’s hematology pipeline. Particularly, momelotinib complements GSK’s new drug Blenrep/belantamab mafatotin, which was approved for fourth-line multiple myeloma in 2020.

Glaxo’s offer of $55 per share of common stock in cash represents a premium of 39% to Sierra Oncology’s closing price on Tuesday. The transaction is expected to close in the third quarter of 2022 and is expected to be accretive to adjusted EPS in 2024.

Glaxo's stock rose in pre-market trading on Wednesday in response to the news. Glaxo’s stock is up 7.1% this year so far compared with an increase of 10.1% for the industry.

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Momelotinib is in late-stage development for myelofibrosis, a fatal cancer of the bone marrow, which often leads to anemia that causes fatigue, increased risk of infection and bleeding or bruising due to reduced platelet count in patients.

Sierra Oncology announced positive top-line data from the pivotal phase III MOMENTUM study evaluating momelotinib for treating anemic myelofibrosis patients previously treated with an approved JAK inhibitor in January 2022. In the study, momelotinib achieved statistical significance in the primary and all pre-specified secondary endpoints, reporting a statistically significant benefit on symptoms, anemia and splenic size. 

Sierra Oncology plans to file a U.S. regulatory application in the second quarter of this year and EU submission in the second half of 2022. Momelotinib is expected to be approved in the United States in early 2023 and be commercially available by the first half of 2023. Sierra Oncology also plans to initiate a phase II study to evaluate a combination study of momelotinib and its novel BET inhibitor, SRA515

Glaxo has strengthened its presence in oncology over the past few years. It now has a development portfolio of 15 potential medicines. This has been achieved through the advancement of internal programs as well as targeted business development.

Meanwhile, it divested its non-core Consumer Healthcare (CHC) nutrition business to Unilever (UL - Free Report) and has formed a new CHC joint venture with Pfizer (PFE - Free Report) to focus on its pharmaceuticals business, particularly oncology.

In August 2019, Glaxo and Pfizer merged their consumer healthcare unit into a new joint venture (JV). Glaxo owns a controlling stake of 68% in the JV while Pfizer has a 32% stake.

The latest acquisition deal comes as Glaxo prepares to separate its CHC segment into a standalone company this year. The independent Consumer Healthcare company will be named Haleon. In this context, in January this year, Glaxo issued a statement saying that it received a non-binding and conditional acquisition offer of 50 billion pounds ($68 billion) for its CHC segment from Unilever on Dec 20, 2021. Glaxo said it had rejected this offer as well as two previous unsolicited proposals from Unilever as it believes they fundamentally undervalue the CHC unit. Unilever eventually decided not to raise the offer.

Glaxo currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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