British pharmaceutical company GlaxoSmithKline has struck a £1.5billion deal to buy US cancer treatments developer Sierra Oncology as it tries to fend off pressure from activist shareholder Elliott Management.
The deal will give Britain’s second-largest pharmaceutical company access to California-based Sierra Oncology’s momelotinib, a drug being tested in anemic patients with a type of bone marrow cancer called myelofibrosis. GSK said the drug had “significant growth potential” and expected sales to begin next year, with one analyst predicting it could generate peak annual sales of around 1.7 billion (£1.3 billion).
GSK chief executive Dame Emma Walmsley has faced growing calls to bolster its drug pipeline since Elliott, a US-based investor, acquired a large stake in the company last year.
The deal comes as GSK prepares to divest its large consumer healthcare business, which includes brands such as Sensodyne toothpaste and Advil painkillers, in July, the company’s biggest shake-up in two decades. The consumer arm, which will be chaired by former Tesco boss Sir Dave Lewis, will be called Haleon when it is listed on the London Stock Exchange this summer.
This spin-off will give GSK around £7 billion in cash that it can use to make acquisitions as it tries to find its next blockbuster drug. Elliott criticized GSK executives for “years of undermanagement” and questioned whether Walmsley, who is not scientifically trained, was the right person to lead the company.
Shareholders of Sierra, which focuses on targeted therapies for the treatment of rare forms of cancer, will receive $55 per common share in cash, GSK said. That was a 39% premium to Tuesday’s closing price. GSK shares were up nearly 1% as of midday Wednesday.
Results from late-stage clinical trials in January showed Sierra’s drug was successful in reducing disease symptoms and reducing patients’ reliance on blood transfusions.
GSK’s oncology business accounted for around 2.8% of total pharmaceutical sales last year. Its other products include Blenrep, a treatment for another form of blood cancer called multiple myeloma. Last June, GSK agreed to pay iTeos Therapeutics Inc up to $2 billion to jointly develop and sell a potential cancer treatment.
However, GSK has experienced several trial setbacks in the past year for the cancer compounds bintrafusp alfa and feladilimab, which it had touted as potential billion-dollar sellers.
The company will also lose patent exclusivity on dolutegravir, an HIV drug, at the end of 2027, worth around £3 billion in annual sales.