Shares of Clovis Oncology (CLVS) dropped in morning trading in response to a regulatory filing from Tesaro (TSRO) that showed no other bidders for the company besides GlaxoSmithKline (GSK), which announced a $75 per share offer on December 3.
TESARO FILING: According to a regulatory filing by Tesaro detailing its $75 per share takeover offer from GlaxoSmithKline, Tesaro evaluated a potential co-development collaboration with respect to Zejula, as well as potential financing alternatives available to the company to fund its long-range plan. While several parties were interested in a strategic transaction with Tesaro at various points over the last year, true strategic interest in the company was likely driven by GlaxoSmithKline and one additional company, “Party A,” a large biopharmaceutical company with global expertise in oncology R&D and commercialization. The company’s review of strategic alternatives found that the majority of companies were more interested in buying royalty, licensing or co-development rights instead of pursuing an outright acquisition. On December 3, GlaxoSmithKline said it would buy cancer-focused drug company Tesaro for about $4.16B. In acquiring Zejula, Tesaro’s ovarian cancer drug, GlaxoSmithKline will compete with AstraZeneca’s (AZN) market-leading Lynparza, as well as a poly ADP ribose polymerase, or PARP, inhibitor from Clovis Oncology. Zejula’s sales have lagged behind rivals, with doctors and industry officials saying the treatment’s side-effect profile is worse than the other drugs. Tesaro unsuccessfully explored a potential sale more than a year ago, with four companies — not including Glaxo — executing non-disclosure agreements and performing due diligence, but ultimately failing to reach an agreement.
ANALYST COMMENTARY: Gabelli analyst Je Hing recently highlighted Clovis as a likely takeout target, telling investors earlier this week in a research note that with the Tesaro acquisition by GlaxoSmithKline, Clovis will become the only standalone PARP. He named Bristol-Myers (BMY), Sanofi (SNY) and Roche (RHHBY) as the most interested buyers. Leerink analyst Andrew Berens said on Friday that he sees “Party A’s” interest, including the final offer of $2.34B including upfront and contingent payments for a 50/50 profit split, as validating for interest in the PARP class and valuation. He thinks Clovis shares might see some weakness today, as investors may have been hopeful that the filing would have included additional interested parties or acquisition offers for Tesaro, suggesting a competitive process. The analyst said investors may interpret the lack of additional takeover offers in the home stretch as suggesting there is no buyer for Clovis, but caution that Clovis would likely receive different types of suitors than Tesaro because of differences in the the companies’ profiles.
