Image source: Tesaro.
In terms of cash burn, despite a $35 million payout of licensing revenue from J&J on its prostate cancer agreement, Tesaro reported a net loss of $58.4 million last quarter. But that's not going to lead to any urgency on Tesaro's part to do a deal. Tesaro had cash and cash equivalents of approximately $320 million at the end of June. And it raised an additional $409 million in a follow-on offering one month later. That will get the biotech comfortably through launch on niraparib.
Could Clovis also be a target?
As I see it, Big Pharma may decide to pay up for Tesaro and its superior PARP inhibitor, or it might seek a discount with Clovis. Clovis suffered an implosion last year, losing 73% of its value in two days in November, after the FDA questioned the reliability of data on its PARP inhibitor targeting lung cancer, a program Clovis ended up shuttering. Since then, Clovis has been bouncing around, having recaptured 31% of its value on Aug. 23, when the FDA accepted Clovis' NDA for its new lead drug, rucaparib. But it dropped 14.5% just last week, based on recently released data showing that 63% of patients had a severe adverse event to that drug.
I can't count Clovis out as an acquisition target, but Tesaro looks like a much better long-term investment. M&A activity is always just the icing on the cake, and Tesaro doesn't need to be acquired to be a worthwhile stock. While Tesaro has been bid up on its ovarian-cancer hopes, what hasn't been accounted for yet in the stock price is the possible widespread potential of PARP inhibitors. Make no mistake: Tesaro is in the high-risk zone, with multiple hurdles ahead. But it's a potentially exciting stock and well worth investigating further.
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Cheryl Swanson owns shares of Johnson and Johnson. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool has the following options: short October 2016 $85 calls on Gilead Sciences. The Motley Fool recommends Johnson and Johnson. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .