Instant Analysis: Tesaro Receives a Big Thumbs-Up From the FDA

By Cory Renauer Markets Fool.com

What happened?

Continue Reading Below

The U.S. Food and Drug Administration approved Tesaro Inc.'s(NASDAQ: TSRO)Zejula (niraparib), an oral cancer therapy that produced compelling results in trials supporting its application for the treatment of ovarian and related cancers.

Although an approval was widely expected, today's announcement contains some pleasant surprises for Tesaro -- including a decision more than three months ahead of schedule.

Image source: The Motley Fool.

Does it matter?

Tesaro's stock popped last summer when it announced that ovarian cancer patients taking Zejula capsules in combination with standard chemotherapy survived significantly longer without disease progression. Drugs like Zejula inhibit tumor growth by blocking their ability to repair DNA. Known as PARP inhibitors, these drugs have been associated with a stronger benefit in patients with certain genetic mutationsthat are increasingly screened for with genetic testing. When given as a maintenance therapy for patients on standard chemotherapy used to treat ovarian cancer, Zejula produced a significant survival benefit for groups with or without the these mutations, either inherited or present in their tumors.

Continue Reading Below

Image source: Getty Images.

Investors had long assumed the clinical data would convince the FDA to approve Zejula as a maintenance therapy for ovarian cancer patients, which was a big reason why Tesaro was one of the best-performing biotechs stocks last year. And this morning, Zejula was approved as a maintenance therapy forovarian, fallopian-tube, and primary peritoneal cancer patients with disease that is in complete or partial response to platinum-based chemotherapy.

Tesaro hasn't set a price just yet, but with this broad-based label, Zejula could generate more than $2 billion in annual sales as the first available maintenance therapy for this large population of patients.

Investors will want to keep an eye onAstraZeneca's(NYSE: AZN)Lynparza, another PARP inhibitor for the treatment of ovarian cancer in patients with an inherited BRCA mutation and disease progression following three or more lines of chemotherapy.AstraZenecarecently announced that the FDA had granted a priority review of an application to expand Lynparza to the maintenance setting based on favorable data for patients with inherited BRCA mutations.

Although the data supporting Astra's application is more focused on patients with BRCA mutations, if Lynparza receives a broad-based label similar to Zejula's, it could pressure Tesaro's launch in the quarters ahead.

10 stocks we like better than Tesaro
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Tesaro wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 6, 2017

Cory Renauer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.