© Reuters. GSK logo is seen in this illustration taken on January 17, 2022. REUTERS/Dado Ruvic/Illustration
(Reuters) -Britain’s GlaxoSmithKline (NYSE:GSK) sought to bolster its cancer business on Wednesday by agreeing a $1.9 billion deal to buy U.S. drug developer Sierra Oncology (NASDAQ:SRRA), the latest move to fend off pressure from activist shareholder Elliott.
GSK has been facing mounting calls to shore up its drug pipeline since Elliott built up a significant stake in the company last year.
The deal also comes as it prepares to spin off its large consumer healthcare business, which includes brands such as Sensodyne toothpaste and Advil painkillers, in July, in the biggest shake-up for the company in two decades.
Shareholders in Sierra, which focuses on targeted therapies for the treatment of rare forms of cancer, will receive $55 per share of common stock in cash, GSK said.
That’s a 39% premium to Tuesday’s closing price and about two thirds more than the volume-weighted average price over the last 30 trading days, it said. GSK’s shares were up 0.2% in London morning trade.
Sierra plans to apply for U.S. marketing approval for its experimental drug momelotinib, which is being developed to treat anaemic patients with a type of bone marrow cancer called myelofibrosis, in the second quarter.
Late-stage clinical trial results in January showed the drug was successful in reducing disease symptoms and cut patients’ dependence on blood transfusions.
The acquisition is expected to close in the third quarter and will complement Blenrep, GSK’s treatment for another form of blood cancer called multiple myeloma, the company said.
GSK’s oncology business last year accounted for about 2.8% of total pharmaceutical sales.
Momelotinib, which Sierra acquired from Gilead Sciences (NASDAQ:GILD) in 2018 for $198 million including milestone payments, could generate U.S. peak sales of $950 million, and $780 million in peak sales outside the United States, H.C. Wainwright’s Joseph Pantginis wrote in an analyst note in late January.
Over the past year, GSK has suffered several trial setbacks on the cancer compounds bintrafusp alfa and feladilimab, which were previously touted as potential billion-sellers.
It will lose patent exclusivity on HIV drug dolutegravir at the end of 2027, worth about 3 billion pounds ($3.9 billion) in annual sales.
Last June, GSK agreed to pay up to $2 billion to iTeos Therapeutics Inc to develop and sell a potential cancer treatment together.
($1 = 0.7692 pounds)