GSK reaches agreement to acquire late-stage biopharmaceutical company Sierra Oncology for $1.9bn

GlaxoSmithKline plc (LSE/NYSE: GSK) and Sierra Oncology, Inc (Nasdaq: SRRA) announced that the companies have entered into an agreement under which GSK will acquire Sierra Oncology, a California-based, late-stage biopharmaceutical company focused on targeted therapies for the treatment of rare forms of cancer, for $55 per share of common stock in cash representing an approximate total equity value of $1.9 billion (£1.5 billion).
Myelofibrosis is a fatal cancer of the bone marrow impacting the normal production of blood cells. Anaemia represents a high unmet medical need in patients with myelofibrosis. At diagnosis, approximately 40% of patients are already anaemic, and it is estimated that nearly all patients will eventually develop anaemia.[1],[2] Patients treated with the most commonly used JAK inhibitor will often require transfusions, and more than 30% will discontinue treatment due to anaemia.[3] Anaemia and transfusion dependence are strongly correlated with poor prognosis and decreased overall survival.[4]

Momelotinib has a differentiated mode of action with inhibitory activity along key signalling pathways. This activity may lead to beneficial treatment effects on anaemia and reduce the need for transfusions while also treating symptoms. In January 2022, Sierra Oncology announced positive topline results from the MOMENTUM phase III trial. The study met all its primary and key secondary endpoints, demonstrating that momelotinib achieved a statistically significant and clinically meaningful benefit on symptoms, splenic response, and anaemia.

Luke Miels, Chief Commercial Officer, GSK said: “Sierra Oncology complements our commercial and medical expertise in haematology. Momelotinib offers a differentiated treatment option that could address the significant unmet medical needs of myelofibrosis patients with anaemia, the major reason patients discontinue treatment. With this proposed acquisition, we have the opportunity to potentially bring meaningful new benefits to patients and further strengthen our portfolio of specialty medicines.”

Financial considerations
Under the terms of the agreement, the acquisition will be effected through a one-step merger in which the shares of Sierra Oncology outstanding will be cancelled and converted into the right to receive $55 per share in cash. Subject to customary conditions, including the approval of the merger by at least a majority of the issued and outstanding shares of Sierra Oncology, and the expiration or earlier termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the transaction is expected to close in the third quarter of 2022 or before.
The per share price represents a premium of approximately 39 per cent to Sierra Oncology’s closing stock price on 12 April 2022 and a premium of approximately 63 per cent to Sierra’s volume-weighted average price (VWAP) over the last 30 trading days. Sierra Oncology’s Board of Directors has unanimously recommended that Sierra’s stockholders vote in favour of the approval of the merger. Additionally, stockholders of Sierra Oncology holding approximately 28 per cent of Sierra’s outstanding shares, have agreed to vote their shares in favour of approval of the merger.

GSK will account for the transaction as a business combination and expects it to be accretive to adjusted EPS in 2024, the expected first full year of momelotinib’s sales. New GSK reaffirms its full-year 2022 guidance, the medium-term outlook for 2021-2026 of more than 5% sales and 10% adjusted operating profit CAGR* at CER**, and long-term sales ambition.

The value of the gross assets of Sierra Oncology to be acquired (as of 31 December 2021) is $109 million (£83 million at the rate of £1 = $1.312, being the 31 March 2022 spot rate). The net losses of the business were $95 million for the 12 months ended 31 December 2021 (£70 million, at the rate of £1 = $1.38, being the average rate for the period).

About Sierra Oncology
Sierra Oncology is a late-stage biopharmaceutical company based in San Mateo, California, on a mission to deliver targeted therapies that treat rare forms of cancer. In addition to momelotinib, the pipeline consists of two assets in phase I SRA515 and SRA737. SRA515 is a selective bromodomain-containing protein 4 (BRD4) bromodomain and extra-terminal domain (BET) inhibitor with a novel bivalent binding mode that inhibits both protein bromodomains, and SRA737 is a novel checkpoint kinase 1 (CHK1) inhibitor.
About myelofibrosis
Myelofibrosis is a fatal disorder of the bone marrow where fibrous scar tissue gradually replaces normal bone marrow, limiting its ability to make blood cells (haematopoiesis). This may cause anaemia (reduced red blood cells), leading to shortness of breath or fatigue; increased risk of infection due to decreased white blood cells; or increased risk of bleeding or bruising due to reduced platelet counts. Organs such as the spleen or liver may start to produce blood cells. This is known as extramedullary haematopoiesis, which causes splenomegaly or hepatomegaly (enlarged spleen or liver). Myelofibrosis affects approximately 20,000 patients in the US.
About momelotinib
Momelotinib has a differentiated mode of action with inhibitory ability along three key signalling pathways: activin A receptor, type I (ACVR1)/activin receptor-like kinase-2 (ALK2), Janus kinase (JAK) 1, and JAK2. This activity may lead to beneficial treatment effects on anaemia and reduce transfusion dependence while treating myelofibrosis symptoms and splenic response.
About the MOMENTUM phase III trial
MOMENTUM is a global, randomised, double-blind phase III clinical trial of momelotinib versus danazol in patients with myelofibrosis. Patients were symptomatic and anaemic and had been previously treated with an FDA-approved JAK inhibitor. The study was designed to evaluate the safety and efficacy of momelotinib for the treatment and reduction of the key hallmarks of the disease: symptoms, blood transfusions (due to anaemia) and splenomegaly.

About GSK

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