TESARO Inc (NASDAQ:TSRO) shares have been running higher in recent days. The cause of the move is very well-understood in an abstract sense: take-out potential. The company started the chatter itself, Bloomberg helped to foment it, and rumors circulating through the market helped to entrench the idea with enough intellectual force to spur a major adjustment in positioning around the stock.

However, there is an important point lost in the shuffle of this characterization: that the stock makes very good sense as a take-out candidate and would fit extremely well under a number of different very well-capitalized umbrellas. This is the important fact that has really driven the gains, and without it, we would not see this stock up 65% in the past 5 days.

TESARO Inc (NASDAQ:TSRO) has, in other words, earned this rally by a combination of mismanagement and exceptional R&D.


In the Cards

Some type of deal is extremely easy to imagine simply because of the company’s PD-1/TIM-3 chemo combo as demonstrated through its anti-PD-1 (TSR-042)+anti-TIM-3 (TSR-022) AMBER trial in NSCLC presented at SITC.

In our last piece, we highlighted GILD as a likely suitor given its puzzle piece fit with this set of pipeline assets. The company has lined this deal up unwittingly with the manner in which it has failed to capitalize on the full potential of its research assets, and the fact that the market appears to have lost perspective on the value of those assets.

That is generally when we see this type of situation emerge: the stock is not undervalued as a standalone business. But when it is considered in light of its potential IP synergies with existing frameworks at companies that have much deeper reservoirs of capital, the undervaluation is suddenly very clear, as it is in this case.

 

TESARO Inc (NASDAQ:TSRO) trumpets itself as an oncology-focused biopharmaceutical company that identifies, acquires, develops, and commercializes cancer therapeutics and oncology supportive care products in the United States.

It offers ZEJULA (niraparib), an orally active and potent poly polymerase inhibitor for the maintenance treatment of women with recurrent epithelial ovarian, fallopian tube, or primary peritoneal cancer; and VARUBI (rolapitant), a neurokinin-1, or NK-1, receptor antagonist for the prevention of chemotherapy induced nausea and vomiting.

The company also develops Niraparib for the treatment of various tumors. In addition, it is developing immunotherapy antibody product candidates, including TSR-042, which is in a phase I clinical trial targeting programmed cell death protein 1; TSR-022 that is in phase I clinical trial targeting T-cell immunoglobulin domain and mucin domain-3; and TSR-033, an antibody candidate, which is in phase I clinical trial targeting lymphocyte-activation gene-3.

The company has collaboration and exclusive license agreement with AnaptysBio, Inc., as well as collaboration agreements with Janssen Biotech, Inc., Millennium Pharmaceuticals, Inc., Zai Lab (Shanghai) Co., Ltd, Jiangsu Hengrui Medicine Co., Ltd., Merck Sharp & Dohme B.V., and Jiangsu Hengrui Medicine Co., Ltd., as well as Genentech.

Tesaro, Inc. was founded in 2010 and is headquartered in Waltham, Massachusetts.

TESARO Inc (NASDAQ:TSRO) pulled in sales of $64.4M in its last reported quarterly financials, representing top line growth of -54.9%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($476.8M against $190.4M).

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