TESARO, Inc.’s shares rallied 16.3% on Jun 20 on rumors of a potential acquisition offer from Roche RHHBY, as reported by intereconomia.com. The article on the website states that Roche may announce an offer soon.
Roche is looking to strengthen its oncology portfolio through acquisitions.
Roche has recently offered to buy the remaining stake in molecular information company, Foundation Medicine FMI for $2.4 billion, which will help Roche to develop personalized cancer drugs using Foundation Medicine’s genomic profiling expertise.
Why Roche May be Interested in TESARO?
Tesaro has long been considered an attractive acquisition target by the investment community.
TESARO received a major boost with the approval of its PARP inhibitor, Zejula, in the United States in March last year. The drug is available as maintenance therapy for ovarian cancer treated with platinum-based chemotherapy. The drug has shown potential with commendable sales growth and has gained a majority share in the PARP inhibitor segment. The drug was also approved in Europe in November 2017.
Furthermore, TESARO is developing Zejula for the treatment of ovarian cancer in first-line setting. The company is also focused on developing the drug as monotherapy or in combination with PD-L1 antibodies beyond ovarian cancer in breast cancer, non-small cell lung cancer and bladder cancer.
The company has collaborations with Roche and Merck MRK for developing Zejula in combination with Tecentriq and Keytruda, respectively. Moreover, TESARO is also developing its own anti-PD-1 antibody, TSR-042, in several cancer indications.
The performance of Zejula in its approved indication and ongoing clinical studies in prospective indications makes TESARO an attractive acquisition target for Roche.
However, several large pharma companies now have ample cash in hand (following the tax overhaul).This increases the probability of other companies rivaling a potential bid from Roche.
TESARO currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A look at TESARO’s share price movement so far this year shows that the company has underperformed the industry. While the stock fell 43.9%, the industry declined 5.4%.
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