The Three Most Important Questions For TESARO Inc (TSRO) Shareholders Right Now

TESARO Inc (NASDAQ:TSRO) took a bit of a hit early Thursday morning, as the FDA announced it had issued a complete response letter (CRL) to the company relating to its latest new drug application (NDA) submission. The submission is an attempt to get a drug called rolapitant IV approved for the prevention of delayed nausea and vomiting associated with initial and repeat courses of emetogenic cancer chemotherapy.

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Regular readers will know we have covered this one on a number of occasions in the past. At the beginning of this year, we highlighted the company as one to watch, based on this very application, and the expectation of an FDA response this quarter. While this response isn’t exactly what Tesaro and its shareholders wanted, it is probably the best outcome of a spate of potential bad outcomes, and markets seem to recognize this. The company took a dip early in the morning, but recovered throughout Thursday’s session to close out the day pretty much at the same valuation with which it started it.

Three questions have arisen on the back of the latest development. Specifically, what does Tesaro need to do to get things back on track, how long might this take, and – perhaps most importantly – are we looking at a near term approval or further delays?

Let’s answer these questions.

By way of a quick introduction to the drug, as mentioned, it’s called rolapitant, and it is designed as an intravenous administration therapy for patients undergoing the above-mentioned emetogenic cancer chemotherapy. Emetogenic It’s just another word to describe the potential for making a patient feel sick, so emetogenic cancer chemotherapy is any chemotherapy that has the potential to make patients nauseous.

Anybody who has had an experience with chemotherapy – be it patient, physician or a friend or family member of anybody undergoing this type of treatment – will be all too aware that the vast majority of chemotherapies fall into this category. Nausea (and in turn, vomiting) is one of the primary reasons many choose to skip chemotherapy, despite its overarching general benefits in many cancers, and therein lies Tesaro’s justification for attempting to bring one of these sorts of therapies to market.

So what’s the problem?

Well, it goes back to the early development pathway for the drug. When TESARO Inc (NASDAQ:TSRO) kicked things off, it was using a contract manufacturing organization (CMO) to manufacture the drug, both for the trial, and as an entity with which the company intended to work if and when the drug reached commercialization. A ways into the process, however, Tesaro raised some concerns about its initial CMO, and switched to a new entity. From a trial perspective, this didn’t really have any impact. However, with the application now in place, this switch is what the FDA is focusing on as a potential stumbling block ahead of any approval.

Specifically, the agency raised the following concern:

“(the FDA…) requested additional information regarding the in vitro method utilized to demonstrate comparability of drug product produced at the two proposed commercial manufacturers”

In other words, the FDA wants to make sure that the drug produced by the first CMO is exactly the same as that used by the second, not from a chemical perspective (as this is really easy to prove) but from a pharmacokinetic perspective. The in vitro element here refers to the drug’s action once it has entered the patient’s body. Basically, then, what the agency is saying, is we need you to show us that the drug manufactured by the second entity acts the same once it is in the patient as that which was manufactured by the first entity.

TESARO Inc (NASDAQ:TSRO) has made it clear that there will be no new clinical trials required, and this suggests that the company already has the data in hand. In turn, this tells us that the response should be a pretty quick turnaround, and that shareholders don’t really need to be concerned about any additional outlay (perhaps a small outlay from contingency, but nothing that would warrant any dilution or anything like that). Management expects to have the whole thing sewed up within the first half of this year.

So, going back to our initial questions, the data is already in place, and Tesaro just needs to package it, tie it up with a conclusion and fire it across to the agency; it shouldn’t take more than a few weeks to do this, and perhaps another 30-60 days for the FDA to analyze the response; and yes, as mentioned, we should be looking at a near-term approval, before the end of June this year.