What happened

Shares of Tesaro, Inc. (NASDAQ: TSRO) were down 10.8% as of 3:38 p.m. EDT on Monday. The decline appeared to be related to two developments. One was that analysts at investment bank Cowen reaffirmed its hold rating for the biotech stock, with a one-year price target of $38 per share. Tesaro's share price opened on Monday 10.5% higher than Cowen's price target.

Perhaps the more important news, though -- and likely the primary reason behind Cowen's rating for Tesaro stock -- was that AstraZeneca (NASDAQ:AZN) and Merck & Co. (NYSE:MRK) reported very encouraging results from a phase 1 study of PARP inhibitor Lynparza at the European Society for Medical Oncology (ESMO) Congress over the weekend. Lynparza is a major rival to Tesaro's ovarian cancer drug, Zejula.

A row of test tubes holding colorful fluid, with an eyedropper

Image source: Getty Images.

So what

Tesaro made its own presentation of data at ESMO from a phase 1 clinical study of anti-PD-1 antibody TSR-042. Although the updated results were positive, it's still really early for TSR-042. And AstraZeneca's results for Lynparza overshadowed Tesaro's presentation.

AstraZeneca and Merck reported that 60% of ovarian cancer patients receiving Lynparza experienced progression-free survival after three years, compared to 27% of patients on placebo following platinum-based chemotherapy. Thus far, Lynparza is the only PARP inhibitor to show an improvement in progression-free survival when used as a first-line maintenance therapy for ovarian cancer.

The good news for Lynparza wasn't so great for Tesaro's PARP inhibitor, Zejula. Although sales for Zejula grew from $26 million in the second quarter of 2017 to $54 million in Q2 of 2018, Tesaro lowered its full-year revenue outlook for the drug. The biotech is already running into fierce competition from Lynparza and Clovis Oncology's PARP inhibitor Rubraca; the latest data from AstraZeneca and Merck could make it even harder for Tesaro to compete.

Now what

Tesaro has a few opportunities over the next few weeks to make positive impressions on investors. The biotech reports third-quarter financial results on Nov. 1. It also presents data at the Society for Immunotherapy of Cancer (SITC) Annual Meeting on Nov. 9.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.