Tesaro Inc (NASDAQ:TSRO) stock has seen a strange day of trading marked by a big open followed by a collapse near the close.
Specifically, TSRO stock climbed higher Tuesday on the thing that biotechs are wont to do — an FDA approval. Specifically, of an ovarian cancer drug called Zejula. Shares of the biotech took off out of the gate, opening at $167.45.
But as news filtered through to Main Street that the oncology-focused company would wait another month before revealing the price of Zejula, TSRO stock came back down to earth. As of now, TSRO trades for $151.51.
But first, let’s take a look at Zejula and why it matters.
What Zejula Means for TSRO Stock
Zejula, a medication called niraparib, treats women with epithelial ovarian, fallopian tube and primary peritoneal cancers. It’s the first PARP inhibitor to garner FDA approval without treatment limitations. Previous PARP inhibitors that have been approved must only be used in patients with “certain biomarkers, such as a BRCA mutation.” Tesaro plans to develop a version of Zejula to treat illnesses ranging from metastatic ovarian cancer to breast and lung cancers.
The first PARP inhibitor to be approved, Lynparza, was in late-2014 and belonged to AstraZeneca plc (ADR) (NYSE:AZN). By the end of last year, Lynparza saw adoption in 30 countries and was used by 5,000 patients. The treatment brought more than $156 million to AZN’s top line in 2016, more than doubling its sales in the previous year.
Tesaro’s Zejula has a much wider range of treatment possibilities, and could stand to gain much more market share than any other PARP inhibitor on the market. In the trailing twelve months, Tesaro’s only brought in $45 million, and its lost $8.13 on a per-share basis. Zejula could fix that.
Why the Pricing Suspense?
It’s not hard to get a handle on the price of Zejula. Just look to the competition. As a PARP inhibitor, it would cost at least $13,700 a month. AstraZeneca’s Lynparza, however, is priced at a relatively competitive $12,600 a month. But as mentioned above, Lynparza and the rest of the PARP market so far is limited. Zejula is not, which is why it could command a premium.
On the matter of pricing, Tesaro CEO Leon Moulder had this to say:
“So we have a sense of the value proposition here, and I think it will be a well-informed pricing decision, but we’re just not going to comment until we’re about to launch on that.”
Trump, and Hillary Clinton before him, brought biotech price-gouging under the white hot heat of Main Street scrutiny. It’s not unreasonable to think that Tesaro is hoping to sidestep such bad press in favor of allowing room to focus on the treatment itself. That, however, may not have been the best course of action.
Of the patients who received Zejula, 15% discontinued taking it, as they experienced side effects such as low blood count, insomnia, high blood pressure and nausea, the latter of which is fairly common with PARP inhibitors.
That said, in addition to the premium price we’re likely to see Zejula slapped with, it’s important to see what, if any, nausea medications come packaged with Zejula.
TSRO stock is now up just shy of 14% for the year-to-date, and has added 232% in the past 12 months.
As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.
