GSK to buy Tesaro in $5.1bn deal

February 2019 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

February 2019 Issue

In a transaction which strengthens its pharmaceuticals business, GlaxoSmithKline (GSK) plc is to acquire oncology-focused biopharmaceutical company Tesaro Inc for an aggregate cash consideration of approximately $5.1bn.

Upon completion, the transaction will significantly strengthen GSK’s pharmaceutical arm and accelerate the build of its pipeline and commercial capability in oncology. Moreover, the acquisition price of $75 per share in cash represents a 110 percent premium to Tesaro’s 30-day volume weighted average price of $35.67. The acquisition also includes the assumption of Tesaro’s net debt.

GSK expects to fund the acquisition from cash resources and by drawing under a new acquisition facility.

“The acquisition of Tesaro will strengthen our pharmaceuticals business by accelerating the build of our oncology pipeline and commercial footprint, along with providing access to new scientific capabilities,” said Emma Walmsley, chief executive of GSK. “This combination will support our aim to deliver long-term sustainable growth and is consistent with our capital allocation priorities. We look forward to working with Tesaro’s talented team to bring valuable new medicines to patients.”

A commercial-stage biopharmaceutical company based in Massachusetts, Tesaro’s major marketed product is Zejula (niraparib), an oral poly ADP ribose polymerase (PARP) inhibitor currently approved for use in ovarian cancer. Zejula is currently approved in the US and Europe as a treatment for adult patients with recurrent ovarian cancer who are receiving platinum-based chemotherapy.

“Our strong belief is that PARP inhibitors are important medicines that have been under appreciated in terms of the impact they can have on cancer patients,” said Hal Barron, chief scientific officer and president of R&D at GSK. “We are optimistic that Zejula will demonstrate benefit in patients with ovarian cancer beyond those who are BRCA-positive as front-line treatment. We are also very excited that through this transaction, we will have the opportunity to work with an outstanding oncology group with deep clinical development expertise and together we will explore Zejula’s efficacy beyond ovarian cancer into multiple tumour types to help many more patients.”

Expected to complete in the first quarter of 2019, the transaction is subject to the satisfaction of customary closing conditions, including the tender by Tesaro stockholders of at least one share more than 50 percent of the issued and outstanding shares of Tesaro and required regulatory approvals, including clearance by the US Federal Trade Commission (FTC).

“This transaction marks the beginning of a new global partnership that will accelerate our oncology business and allow our mission of delivering transformative products to individuals living with cancer to endure,” said Lonnie Moulder, chief executive at Tesaro. “Our board and management team are very pleased to announce this transaction, and we are grateful to the management team at GSK for their tremendous vision and the opportunity to preserve and build upon the impact we have had in the cancer community to date.”

Under the terms of the definitive merger agreement – which has been unanimously approved by Tesaro’s board of directors – an indirect subsidiary of GSK will commence a tender offer to acquire all of the issued and outstanding shares of Tesaro common stock upon completion of the offer.

Following closing of the tender offer, GSK will acquire any shares of Tesaro that are not tendered in the tender offer through a second-step merger at the tender offer price.

Mary Lynne Hedley, president and chief operating officer at Tesaro, concluded: “This partnership marks an evolution in the scientific and drug development strategies that will ultimately enable us to provide more time for more patients.”

Fraser Tennant