GlaxoSmithKline PLC (LON:GSK) has agreed to buy US cancer drug maker Tesaro Inc (NASDAQ:TRO) for US$5.1bn, hot on the heels of announcing the US$3.8bn sale of its Indian Horlicks business to Unilever PLC (LON:ULVR).
The FTSE 100 firm said the proposed acquisition would strengthen its pharmaceuticals business by building its drugs pipeline and commercial capability in oncology.
GSK will pay US$75 per share for the business, a 110% premium to the 30-day average price. In reaction, shares in GSK plunged 6.1% to 1,522p.
Tesaro’s key drug Zejula is currently approved for use in the treatment of adult patients with ovarian cancer in the US and Europe.
Zejula, which belongs to a new class of medicines called poly ADP ribose polymerase (PARP) inhibitors, is currently being investigated for use as a possible treatment in lung, breast and prostate cancer.
Tesaro’s pipeline of drugs includes Niraparib for the treatment of ovarian and breast cancer and Rolapitant IV for the prevention of delayed nausea and vomiting associated with chemotherapy.
“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,” said GSK chief executive Emma Walmsely.
Liberum 'not convinced' by Tesaro deal
Liberum maintained a 'hold' rating and target price of 170p, pointing out that the deal is expected to be mid-to-high earnings, dilutive in the first two years following completion, before being accretive by 2022.
The broker also noted that GSK continues to expect to pay 80p per share in dividends for 2018 even though net debt is forecast to increase.
"There is no doubt that GSK needs to bolster its pipeline but given the competition Tesaro faces with other PARP inhibitors and the relative lack of synergies with GSK's existing oncology pipeline we are not convinced that this is the best way to do so."
GSK sells Horlicks business to Unilever
The announcement comes a few hours after GSK said it had completed the sale of its Indian Horlicks nutrition business to consumer goods giant Unilever.
The deal covers GSK’s health food and drinks portfolio in India, Bangladesh, and 20 other markets, predominantly in Asia, and includes its 72.5% stake in India-listed GlaxoSmithKline Consumer Healthcare.
Following the transaction, GSK will hold a 5.7% stake in HUL which it intends to sell in tranches when it considers the timing is appropriate.