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How Are Tesaro’s Valuations and Cash Flows?

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Price performance

So far this year, Tesaro’s (TSRO) share price moved from a high of $81 on January 2 to a low of $44.7 on May 9. The company was trading at $47.8 on May 18.

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Cash flows

Tesaro used $147.6 million in operating activities in the first quarter—compared to $114.6 million in the first quarter of 2017. The increase of $33 million was mianly due to higher costs related to a higher employee headcount and increased expenses for commercializing Zejula. Higher external research and development expenses for niraparib and the company’s immune-oncology portfolio also contributed to the increased cash used in operating activities.

The company used $1.6 million in investing activities in the first quarter—compared to $1.8 million in the first quarter of 2017. The expense was mainly for purchasing property and equipment related to Tesaro expanding leased premises at its headquarters.

Tesaro generated $4.5 million from financing activities in the first quarter—compared to $3.3 million in the first quarter of 2017. The increase was due to higher proceeds from exercising stock options.

Valuation metrics

Tesaro’s enterprise value is $2.68 billion, while its enterprise value-to-revenue ratio is 9.92. The company’s price-to-sales ratio is 10.27, while its price-to-book ratio is 11.06. Tesaro’s debt-to-equity ratio is 3.74, which indicates that the company has taken on a higher degree of leverage. Tesaro’s current ratio, a metric of how effectively a company can meet its short-term obligations, is four. In comparison, Gilead Sciences (GILD), Johnson & Johnson (JNJ), and Pfizer’s (PFE) current ratios are 2.80, 1.60, and 1.30, respectively. Tesaro is in better positioned to meet its short-term obligations than its peers.

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