Tesaro (TSRO) Shares Up +70%; Here is Our Note to Clients on June 17
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June 17, 2016
Tesaro (TSRO) – Unusual buyer of 500 July 50 calls for $4.80 offer side on wide bid/ask spread of 4.00 x 4.80. Aggressive bull with approx $240,000 bullish bet. These are 20% out of money calls. To be clear note the short interest is 16%, hasn’t changed for over 6 months, steady at this rate. While one could make the case these are shorts hedging with calls, but there is a hard catalyst in play that paints more positive picture.
At ASCO Conference in early June, TSRO announced that the NOVA trial in ovarian cancer has reached the required number of progression-free survival (PFS) events. Management indicated top line results are expected “later this month” (i.e before end of June). The readout for the NOVA trial (PFS primary endpoint) is expected to be first data from a Phase 3 trial of a PARP inhibitor in ovarian cancer. Meaning, there is no precedent in history for this treatment that made it so far in clinical progress. Hence, likely ends up being very important even for stock. Could set industry standard. AstraZeneca has a drug Lynparza that is selling worldwide used by not a pure play.
There was a very detailed view presented by Leerink on April 10 with a lot of science discussed regarding NOVA trial. Here is the final conclusion:
“Based on our analysis of clinical and preclinical data, we place an 85% probably of success (POS) on the trial succeeding in gBRCAmut patients and a 65% POS in HRD+/non-gBRCAmut patients.”