Tesaro Is the Wrong Medicine for Glaxo
The acquisition of cancer drug Zejula is a risky and expensive bet.
Bad side effects.
Photographer: Matthew Lloyd/Bloomberg
GlaxoSmithKline PLC’s ambitious but rather vague efforts to rebuild its pharma unit became more concrete Monday with its $5.1 billion acquisition of Tesaro Inc. But the deal comes with details that investors may not like.
The company is paying a significant premium for Zejula, an ovarian cancer drug with sluggish sales, and an unproven pipeline.1 It’s difficult to get biotech deals done without paying up, and Glaxo is rebuilding a cancer program from scratch. While Tesaro’s lofty past valuation gives the appearance of a bargain, Glaxo may not have gotten one. Glaxo achieved an ignominious milestone Monday morning: Its market cap declined by more than the deal cost.