Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Tesaro, Inc. Shares Skyrocketed

By Sean Williams - Mar 13, 2014 at 1:43PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Tesaro shares soar after announcing a collaborative agreement. Will this deal change everything for Tesaro or is it not all that it's cracked up to be?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Tesaro (NASDAQ: TSRO), a clinical-stage biopharmaceutical company focused on developing therapies to treat cancer, rocketed higher by as much as 33% after announcing a collaborative agreement with privately held AnaptysBio for its immuno-oncology antibody program targeting PD-1, TIM-3, and LAG-3.

So what: Under the terms of the agreement, Tesaro will pay an up-front licensing fee of $17 million and provide funding of costs incurred by AnaptysBio during the drug development process. For each development program AnaptysBio is eligible to receive $18 million in milestone payments based on drug development achievements and an additional $90 million based on U.S. and rest-of-world submissions and approvals. To boot, AnaptysBio would also receive a single-digit royalty on all commercially sold therapies. The companies will collaborate on development in a preclinical setting with Tesaro taking over once development hits the clinical stage. Tesaro would handle manufacturing and marketing if approved as well.

In return, Tesaro gains exclusive access to AnaptysBio's immunotherapy platform, SHM-XEL. In the words of Mary Lynne Hedley, president of Tesaro, "In our view, immunotherapy-based approaches are likely to transform the way that cancer is treated and may become the foundation of many future cancer therapy regimens."

Now what: If you needed any confirmation that immunotherapy programs, which work by retraining the body's immune system to recognize and attack cancer, are incredibly hot, then let Tesaro's 33% move higher today serve as a blatant reminder. I wholeheartedly agree with Tesaro's president that a world of opportunity awaits in regulating the body's immune system to recognize and fight cancer. I am, however, a bit concerned by the enormity of today's run-up considering how little is known about AnaptysBio's cancer immunotherapy pipeline. Its anti-PD-1 antibody, for example, is only in preclinical studies, and a lot can change when going from preclinical to human trials. I'm ultimately hoping for success with this partnership for Tesaro, but I feel at this level its valuation simply doesn't make much sense.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
652%
 
S&P 500 Returns
142%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/08/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.