Wedbush Moves To The Sidelines On Tesaro Following Glaxo Deal

GlaxoSmithKline plc GSK on Monday announceda $5.1 billion deal to acquire Tesaro Inc TSRO in a bid to augment its oncology franchise.

The Analyst

Wedbush analyst David Nierengarten downgraded Tesaro from Outperform to Neutral and upped the price target from $60 to $75.

The Thesis

Glaxo is likely to benefit from Tesaro's mature oncology program and acquired talent in the oncology space, Nierengarten wrote in a Tuesday note.

The analyst noted worldwide sales of Tesaro's lead asset Zejula was $63.2 million in Q3, ahead of his $58.2 million estimate, with the 17 percent sequential growth attributable to strong sales in Germany and the UK, and expanding sales in Italy and Switzerland.

With roughly 25 percent of Zejula net sales coming from the EU, Nierengarten expects Glaxo to step up efforts to market it vigorously in Europe as well as the United States.

Glaxo would gain access to Tesaro's clinical programs as well as multiple assets from a license agreement with AnaptysBio Inc ANAB.

"We view TESARO's valuation as attractive on a risk/reward basis with approved products Zejula and Varubi, and see TSRO's immuno-oncology platform driving significant value going forward," the analyst wrote.

The firm sees the Q4 sNDA submission for Zejula in late-line ovarian cancer as the next upcoming catalyst.