Tesaro's Lonnie Moulder Is Catching Lightning in a Bottle (Again)

Tesaro, Inc. (NASDAQ: TSRO) CEO Lonnie Moulder successfully launched Aloxi, a successful nausea drug, and then he sold MGI Pharma to Eisai for $3.9 billion in 2008. Then Moulder took the top spot at Abraxis Biosciences for a brief stint before it was sold by Patrick Soon-Shiong to Celgenefor $2.9 billion in 2011. After leaving Abraxis, Moulder joined the board of Cubist Pharmaceuticals in 2010 and Merck & Co.bought Cubist for $9.5 billion in 2015. Does Moulder's track record suggest that Tesaro investors will be similarly rewarded?

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This podcast was recorded on July 27, 2016.

Todd Campbell: You've got a few different managers that we're going to talk about, or leaders we're talk about today. The first one I want to talk about is a guy named Lonnie Moulder. He runs a company call Tesaro Inc. now. That's probably a name that most listeners are not going to be familiar with.

Kristine Harjes: But it's a pretty noteworthy company. Its got a market cap of around $4.2 billion. They IPOed in June 2012. The stock is up 558% since then, so Lonnie Moulder's probably doing something right.

Campbell: Yeah. You've got to look at why do we care about Lonnie Moulder being at the helm of Tesaro, and why should I consider Tesaro or even have it on my watch list or whatever? Lonnie Moulder is the former CEO of a company called MGI Pharma. MGI Pharma successfully won approval of a chemotherapy induced nausea and vomiting drug called Aloxi. Aloxi became a pretty widely used drug in that indication, and he successfully sold that company to a Japanese major drugmaker for about $4 billion in 2008.

After he did that, he stuck around for a little while at that new entity, and then he went off to be the president and CEO of a company called Abraxis BioScience, which shortly thereafter got sold to Celgene for about $2.9 billion. You start to see a trend -- here's a person who knows how to create value and then knows how to deliver that value to shareholders. Now at Tesaro he seems to be doing it again, because as you mentioned he's built a company with more than a $4 billion market cap, despite the fact that it only has one drug, very freshly on the market, and maybe another drug coming next year.

Harjes: These are both pretty interesting stories these 2 drugs. You have Varubi, which is another chemotherapy-induced nausea and vomiting drug, that was approved in September. If you recall with his experience with Aloxi, which is the drug that was sold for about $4 billion in 2008, that was also in the same indication. To me that indicates that there's a pretty good chance of success. They're actually teamed up with Opko on that drug, which we're going to talk about Opko somewhere later in the show. But before we do the other --

Campbell: Absolutely, absolutely. Varubi ... sales are a trickle right now, but I'm going to give Moulder a little bit of benefit of the doubt. He knows this market very well, we'll see how this plays out over the course of the next few quarters. But Varubi isn't even the one that gets me most excited about Tesaro.

Harjes: Totally agree. Yeah, that drug that we are a little more excited about, this is another one where I'm sure we're not pronouncing it correctly, so my apologies, but Niraparib. Yeah?

Campbell: Sure.

Harjes: OK. Let's go with that.

Campbell: Niraparib, sure.

Harjes: Tesaro bought the right to this drug in 2012 from Merckfor $7 million, which that's pocket change in biotech talk. Right now the drug is being studied in breast cancer and also ovarian cancer, and it's showing some pretty great signs that that could have been a really, really smart pickup.

Campbell: Yeah. Recently they reported late-stage data showing that this drug significantly delays the progression of ovarian cancer in patients with a certain genetic makeup. This is really, really big news, because 85% of ovarian-cancer patients end up relapsing, and as a result, as you relapse, there's fewer and fewer treatment options. Unfortunately, the prognosis gets worse and worse as you go along. I think that there's a very big unmet need that this drug could target. Its success in trials caused the shares in this company to double in the past few months. Pretty good investment so far -- $7 million in 2012 and a doubling to $4 billion in market cap this year alone.

Harjes: Absolutely. It's a pretty interesting drug, too, the way that it works. It's called a PARP inhibitor. In the presence of a PARP inhibitor, DNA damage isn't repaired, so the cell eventually dies. That sounds like a bad thing, but when you're talking about somebody that has cancer, even though PARP activity is a good thing in health patients, it can be a bad thing in cancer patients, because it reduces that damage that the chemotherapy does to cancer DNA.

Campbell: Anything that helps cancer cell die is good for a sick patient, even if it's working counterintuitively to someone who's healthy. They plan to file for FDA approval later this year. That should mean that a decision will come next year. Who knows whether or not this will be a big seller or not, but it certainly would seem that Moulder's proving that he knows now with a second drug, how to get drugs to the finish line.

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