What happened

Shares of Tesaro (NASDAQ: TSRO) jumped over 60% last month, and another 60% since the beginning of December, according to data provided by S&P Global Market Intelligence. Investors grew excited over rumors that the biopharma company was in acquisition talks. Those rumors were confirmed on Dec. 3 when GlaxoSmithKline (NYSE:GSK) announced it was gobbling up the struggling biopharma for a cool $5.9 billion (including debt). As far as investors are concerned, that works out to $75 per share.

Believe it or not, despite gaining 156% since the beginning of November, shares of Tesaro are still down 11% since the beginning of 2018. That's because the company has struggled to impress with Zejula, a poly(ADP-ribose) polymerase (PARP) inhibitor, in approved indications. It also appears to be falling behind peers in the footrace for the multibillion-dollar opportunities that are expected from expanded approvals for the drug class. Can GlaxoSmithKline change the minds of investors?

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So what

There are currently three major PARP inhibitors on the market for treating late-stage cancers: olaparib (Lynparza) from Merck and AstraZeneca, rucaparib (Rubraca) from Clovis Oncology, and niraparib (Zejula). All three drugs treat types of ovarian cancer that have BRCA mutations, but the market for third- and fourth-line therapies is limited. That's why investors are so excited about the potential for the drug class to become first-line treatment options for BRCA-mutated cancers, namely breast cancer, ovarian cancer, and prostate cancer.

Lynparza recently released pretty impressive data demonstrating its ability to treat ovarian cancer, which led many analysts to declare the race for that multibillion-dollar bounty all but over. Meanwhile, Rubraca has shown strong results from its clinical trials in prostate cancer, which could help it become the first to earn approval as an early-stage treatment option in that indication. Zejula, on the other hand, is behind in both races and hasn't yet come close to living up to its market potential.

Now what

GlaxoSmithKline is apparently betting that it can use its deep financial resources and marketing know-how to help Zejula compete more effectively. It may be right, especially if Zejula can steal market share from other PARP inhibitors even if they gain marketing approval first. Considering that Lynparza is owned by two pharma heavyweights, it may take another titan to compete at all. Investors will have to wait for more data to know for sure, but the PARP inhibitor will now be only a small part of the company's portfolio.