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Gilead (GILD), Sanofi (SNY) Reportedly Bidding on This $10 Billion Massachusetts Biotech

6/13/2017 5:38:27 AM

Gilead, Sanofi Reportedly Bidding on This $10 Billion Massachusetts Biotech June 13, 2017
By Mark Terry, Breaking News Staff

Rumors that Tesaro (TSRO) might be acquired have been ongoing for well over a year. And on June 1, it appeared that the Waltham, Mass.-based company was officially up for sale, but interest was a big tepid. Now there is talk that Sanofi (SNY) and Gilead Sciences (GILD) are interested.

The big appeal of Tesaro is its Zejula (niraparib), which was approved on March 27 by the U.S. Food and Drug Administration (FDA) for maintenance treatment of women with recurrent epithelial ovarian, fallopian tube, and primary peritoneal cancer who are in a complete or partial response to platinum-based chemotherapy. The drug is a PARP inhibitor, the first to be approved by the FDA that doesn’t require BRCA mutation or other biomarker testing. It is projected to have sales of $1.9 billion per year by 2022.

Zejula is widely viewed as having blockbuster potential, even with its $118,000 price. Tesaro also has Varubi (rolapitant) on the market, a drug to assist with nausea and vomiting caused by chemotherapy. It also has a promising pipeline, which brings on the question, why aren’t companies interested?

Most analysts cite price as the issue. The company’s market cap is around $8 billion. When it comes to bolt-on acquisitions, most companies are looking in the $5 billion range. The likely $10 billion+ price tag for Tesaro would put it out of reach for many companies. Pfizer (PFE), which is large enough to acquire Tesaro and has already demonstrated a willingness for acquisitions, already acquired its own late-stage PARP inhibitor, talazoparib, when it acquired Medivation for $14 billion, a price most analysts think was inflated.

According to StreetInsider, Sanofi is interested in Tesaro. But Gilead Sciences is also interested. Since Sanofi lost out on two high-profile acquisitions, many think management is eager to prove they can close a deal. And the company already tried to pick up a PARP inhibitor when it lost out to Pfizer for Medivation (MDVN).
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Although nobody is saying officially, Gilead is a likely suitor as well. Investors would love for Gilead to buy something—anything—that might replace its faltering hepatitis C (HCV) franchise. The company has formulated what appears to be a five-point outline to bolster sales going forward, and an oncology acquisition is likely one of those five points.

In a statement in May, Gilead’s chief financial officer, Robin Washington, said the company was “prioritizing the use of capital for investing in the long-term growth of our business, including partnerships and acquisitions.”

And earlier in the year Gilead brought on Alessandro Riva, formerly head of global oncology for Novartis (NVS). Riva joined as senior vice president, Hematology and Oncology Therapeutic Area Head. Many investors and analysts viewed this as an indication Gilead was going to accelerate its merger-and-acquisition activity—on the other hand, investors and analysts speculate constantly on Gilead M&A activity.

John Carroll, writing for Endpoints News on June 1, said, “Gilead has an interest in cancer therapies, but so far has refused to pull the trigger on a big one. Sanofi has been satisfied with second place in at least two bidding wars for Medivation (MDVN) and Actelion (ALIOF.PK). It won’t want to pay unlimited sums to buy what it wants, but that could always change.”

Or not. Because rumors of a Tesaro acquisition have been floated before with no action.

Tesaro stock is currently trading for $142.67.

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