The pharmaceutical giant will pay $55 per share in cash for California-based Sierra.
GlaxoSmithKline (GSK) agreed to a $1.9 billion deal to buy United States (US) drug developer Sierra Oncology on Wednesday, the latest move to fend off pressure from activist shareholder Elliott. Since Elliott purchased a significant stake in GSK last year, the business has been under increasing pressure to improve its drug pipeline. In July, the company intends to spin off its huge consumer healthcare business, which includes names like Sensodyne toothpaste and Advil pain killers. Sierra, a cancer drug developer, will receive $55 per share of common stock in cash to shareholders, a 39% premium over the company's closing price on Tuesday. The deal’s price tag doesn't look unreasonable given it is roughly three times consensus peak sales expectations of $630 million for Sierra’s lead experimental drug, momelotinib.
Sierra purchased momelotinib from Gilead Sciences in 2018, and it's used to treat anaemia in patients with myelofibrosis, a kind of bone marrow malignancy. It's scheduled to be submitted for marketing approval in the US this quarter. The drug was found to be effective in reducing disease symptoms and reducing patients' need on blood transfusions in a late-stage trial published in January. “We see the key risk around the acquisition as being commercial execution on the launch, given the number of competitors targeting the myelofibrosis space, and momelotinib’s mixed historical data, prior to the recent positive study results,” the analysts added. The deal is scheduled to finalize in the third quarter and will supplement GSK's Blenrep therapy for multiple myeloma, a kind of blood cancer.