Tesaro (NASDAQ:TSRO), a mid-cap oncology company, saw its shares dip by as much as 10.6% in early morning trading today on more than double the average volume. Although the company's shares have since rebounded and are only down by 2.95% as of 10:30 a.m. EDT, Tesaro's morning swoon is noteworthy because it was precipitated by the positive late-stage readout for Clovis Oncology's (NASDAQ:CLVS) advanced ovarian cancer drug Rubraca.
Long story short, Tesaro's drug Zejula, which works in a similar fashion as Rubraca, is starting to look like it'll be in the middle on an intense battle for the lion's share of this high-value market, especially after this impressive top-line readout for Rubraca. Clovis and Tesaro, after all, also both compete against AstraZeneca's (NYSE:AZN) Lynparza in the advanced ovarian cancer space.
Perhaps the real question on Tesaro's investors' minds today is how this competitive threat may affect any ongoing buyout negotiations. After all, Tesaro has been rumored to be in talks to sell itself to the likes of Sanofi and Gilead Sciences for months now.
What's my take? I think Tesaro is probably going to get a tender offer before the end of the year -- despite Clovis' fairly strong chance at expanding Rubraca's label within the next 12 months and eventually becoming a major rival to Zejula in the advanced ovarian cancer market. FDA-approved cancer drugs, after all, are still exceptionally rare commodities, and cash-rich companies like Gilead desperately need to find ways to shore up their top lines. And that's probably the underlying reason this stock is already on the mend following its initial double-digit dip this morning.