Tesaro shows that Lynparza was no fluke

Just a few years ago the Parp inhibitor class was thought to be dead and buried, but then AstraZeneca’s Lynparza surprisingly got approval on a re-examination of phase II data. The overwhelming phase III success of Tesaro’s niraparib in ovarian cancer yesterday suggests that this was no fluke.

However, only half of niraparib’s $1.1bn 2022 consensus revenue forecast comes from ovarian cancer, EvaluatePharma data suggest. The key to meeting expectations for all Parp inhibitors is additional indications like breast cancer, and here the future is far less certain (see table below).

This is not to detract from Tesaro’s achievement in the Nova study; niraparib blew expectations out of the water, showing a highly statistically significant progression-free survival advantage over placebo in BRCA-mutant ovarian cancer patients – Lynparza’s approved indication – as well as germline BRCA-negative patients, with a 79% and 62% reduction in risk of progression respectively.

Leerink analysts said the non-BRCA mutant success was unexpected, and marked niraparib as being competitive with, if not superior to, Lynparza. They also highlighted the lack of outstanding safety/tolerability concerns; niraparib is to be filed in the US and EU in the fourth quarter, Tesaro said.

Valuation

However, the issue is one of valuation, and it is important for investors to consider whether expectations might be getting a little overblown (Therapy focus – Parp inhibitor class set to come of age in 2016, March 1, 2016).

Tesaro climbed 108% yesterday, to close with an enterprise value of over $7bn. Apart from niraparib its only other notable asset is the marketed antiemetic Varubi, but since this is expected to generate 2022 sales of only $471m most of the group’s valuation hinges on niraparib, which based on current forecasts at 75% probability – for all possible indications – has an NPV of $2.7bn.

This shows not only how reliant Tesaro is on further successes, but also how vital it is that it beats competition from Abbvie as well as Astra. At present niraparib is licensed to Johnson & Johnson specifically for prostate cancer; for ovarian and breast cancers Tesaro is on its own.

An interesting side effect of niraparib’s positive phase III hit were corresponding share price increases yesterday for Medivation, up 5%, and Clovis Oncology, up 22%. The Parp inhibitor rucaparib is now Clovis’s lead project, after the failure of rociletinib, and despite the surge the group is down 82% in the past year.

For Medivation talazoparib is not the main focus, but this Parp inhibitor is becoming increasingly important as the company fights off an unwelcome takeover approach by Sanofi. The French group is now trying to unseat Medivation’s board, while the target company plays up a valuation in which talazoparib plays an important role.

And here might lie part of the problem: at a recent presentation Medivation management suggested that the market for Parp inhibitors might be worth $30bn. While these lofty expectations have yet to be reflected in sellside forecasts for talazoparib the Parp class has benefited as a whole, and niraparib’s success will do little to dent enthusiasm.

Bang on cue Tesaro today announced a secondary equity offering to raise up to $345m. Niraparib’s next hurdle will be the Bravo study in Her2-negative, BRCA-mutated breast cancer, reading out in about a year’s time.

For Tesaro the Nova readout is an unexpectedly good start, but there is still some way to go before the most bullish expectations become reality.

To contact the writer of this story email Jacob Plieth in London at [email protected] or follow @JacobPlieth on Twitter