Tesaro's Zejula Nabs Early OK, But What's Next?

By Motley Fool Staff Markets Fool.com

Patients with ovarian cancer who have responded to platinum-based chemotherapy may soon be prescribed Tesaro's (NASDAQ: TSRO) Zejula as a maintenance therapy to help prevent the cancer's return. The decision by the FDA to approve Zejula three months ahead of schedule was a surprise, and it clears the way for it to reshape how doctors view the use of PARP-inhibitors, a relatively new class of drugs that up until now have only been approved for use in patients with BRCA positive gene mutations.

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In this video clip from the Motley Fool's Industry Focus: Healthcare podcast, analyst Kristine Harjes is joined by Todd Campbell to discuss the implications of Zejula's approval and how the PARP-inhibitor market is evolving.

A full transcript follows the video.

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This video was recorded on March 29, 2017.

Kristine Harjes: Last news item of the day involves Tesaro, which I believe we've talked about on the podcast before as well. They announced that their drug Zejula was approved early.

Todd Campbell: Yeah, this was, I guess if you look at it, it's not a complete and utter surprise. Regulators had already approved two different drugs that have the same target that Zejula does. So, maybe they're very confident in their understanding of what these drugs do. But, yes, early approval. The decision was supposed to come on June 30. Instead, we got it more than three months ahead of time. That's great news for patients, because this is the first one of the drugs of its class that can be used right after patients first respond to a platinum-based chemotherapy. This is for ovarian cancer patients.

Harjes: Right, it's a maintenance drug for these patients. I think, besides the early approval, another thing that caused the very positive reaction to this news is, it was a wider-than-expected label. It was approved for ovarian, fallopian tube, and primary peritoneal cancer patients with their disease in complete or partial response to a platinum-based chemotherapy.

Campbell: And even more importantly, it was approved for use in either BRCA-positive or non-BRCA-positive patients, which is a first for drugs of this class. We're talking about something called PARP inhibitors, which, Kristine, you and I have talked about before on the show. PARP inhibitors, basically what happens is, the cancer cells, once they get damaged by chemotherapy, they can use those -- those nasty little beasts -- they can use the human body's repair system to repair the damage that's been caused to their cells. This helps stop that. So, these drugs have been shown in trials to be very effective at crimping cancer. In trials, this drug specifically did a great job of increasing the amount of time that it takes for the disease to recur. So, prolonging progression-free survival versus standard of care today. That's so huge for ovarian cancer patients. 85% of ovarian cancer patients end up relapsing. As they go through additional platinum-based chemotherapy treatments, the duration of the benefit continually shrinks. So, being able to insert a drug early on in the use -- in this case, in the second-line setting -- is a big win for patients, and potentially, a big win for the company. PARP inhibitors right now are racking up sales north of $200 million a year. Obviously, that's for a much more limited patient population, because they're only approved right now for BRCA-positive patients. So, this could be a nine-figure drug, at least within the first year or two.

Harjes: Right. And when you consider that it's also being studied in the first-line setting, then those numbers could get even bigger, potentially.

Campbell: Mm-hmm, they could get bigger because of the expansion into the first-line setting, and they could also get bigger because PARP inhibitors are being studied in other types of cancer -- breast cancer, pancreatic cancer. Now, Tesaro just reported they're going to study it in non small-cell lung cancer. So, PARP inhibitors may end up having a lot of value in being used as part of combination therapy across a lot of different cancer types. But that doesn't mean, Kristine, that Tesaro is the de facto winner in its class.

Harjes: Right. They're not the only player in this space. You also have other players, such as AstraZeneca. They have a PARP inhibitor called Lynparza, which was also very successful in showing the same sorts of effects that Zejula was able to. So, as an investor, how are you looking at the competition there?

Campbell: It's really a wait-and-see game here. Tesaro has run up remarkably on excitement surrounding the launch of its drug. An argument could be made that you have to now see sales come in to back up that valuation. AstraZeneca just announced this week that the FDA has accepted for review, priority review, its application to expand Lynparza's use to include maintenance therapy. Probably would just end up in BRCA patients. But, a lot will depend on the label. And obviously, that takes away a little bit of the advantage that Tesaro has, and that approval could come as soon as September. There's all sorts of movement that's going to be going on in the next year or two in this class of drugs, and that could very well shift the landscape as far as market share. So, investors should keep a cautious approach to all of these companies, because I don't know if it's necessarily clear who the winner will ultimately end up being. If Tesaro can prove that its drug has enough unique properties that it's not a classwide effect, then, obviously, it would be the best-selling drug, because it can be used in both BRCA and non-BRCA patients. Again, being able to treat 100% of the patients is way better than being able to treat the 15% to 20% that happen to be BRCA positive.

Harjes: For sure. So, the waters are still a little bit muddy on this one as far as investing takeaway goes. But for patients, this is indisputably great news, that PARP inhibitors are gaining approval and picking up steam. Again, they block tumors' ability to repair DNA. That is fantastic from a patient perspective. We will definitely be rooting for all of these companies to succeed from that standpoint.

Kristine Harjes has no position in any stocks mentioned. Todd Campbell 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.