21 February 2014

TESARO is a research client of Edison Investment Research Limited

With positive results from two Phase III trials in hand and a third expected, Tesaro should be able to file an NDA for rolapitant in mid-2014 and may gain US approval in H115. The prospects for rolapitant are good, given the management team’s past success in the CINV market. In the meantime, Tesaro’s smart clinical strategy in developing niraparib has positioned this drug well in a competitive PARP inhibitor landscape. Pivotal Phase III data are due in 2015, leading up to a possible approval in 2016. We value Tesaro at $1,851m, suggesting ~50% upside potential in the share price.

Year end

Revenue ($m)

PBT* ($m)

EPS* ($)

DPS ($)

P/E (x)

Yield (%)

12/11 0.0 (16.9) (32.9) 0.0 N/A N/A 12/12 0.0 (69.8) (5.1) 0.0 N/A N/A 12/13e 0.0 (94.3) (3.0) 0.0 N/A N/A 12/14e 0.0 (101.7) (2.8) 0.0 N/A N/A

Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items and share-based payments.

Rolapitant data met key primary endpoint… Tesaro reported positive results of two of the three rolapitant Phase III trials in patients receiving highly emetogenic chemotherapy (HEC) and moderately emetogenic chemotherapy (MEC) treatments, with the third to come out in Q2 this year. Despite missing one of the trial’s secondary endpoints, rolapitant should be approved in H115 in the US, reaching a market worth $1.5bn.

…and management knows the CINV market very well Rolapitant’s attractive product attributes, including availability of both an oral and IV form (in 2016), long half-life and lack of drug-drug interactions, position it well against its two other competitors. Furthermore, the Tesaro management team’s deep understanding of the CINV market obtained through its successful development and commercialisation of Aloxi (palonosetron) at MGI Pharma should come in handy when rolapitant is launched, an advantage that may be overlooked.

Niraparib sprints ahead Tesaro’s aggressive clinical strategy has advanced niraparib to the front of seven PARP (poly [ADP-ribose] polymerase) inhibitors in clinical development, with one Phase III trial actively enrolling patients and the second one near dosing of the first patient. Niraparib’s efficacy data, combined with the evolving understanding about genetic mutations and PARP inhibitor efficacy, makes the drug’s Phase III probability of success high, in our opinion.

Valuation: Upside remains Our rNPV valuation suggests an intrinsic value of $1,851m, or $51.5/basic share (including 3.2m shares recently offered) or $48.7/diluted share. Successful rolapitant launch and positive niraparib Phase III outcomes are the next major value inflection points.

TESARO Initiation of coverage

Building a cancer pipeline

Price US$31.97 Market cap US$1,148m

Net cash ($m) (pro forma*) 225

Shares in issue* 35.9m

Free float 55%

*Adjusted for current share placing.

Code TSRO

Primary exchange NASDAQ

Secondary exchange N/A

Share price performance

% 1m 3m 12m

Abs (2.6) (11.2) 64.4

Rel (local) (2.6) (14.1) 35.1

52-week high/low US$46.22 US$15.97

Business description

TESARO is an oncology-focused bio-pharmaceutical company engaged in developing and commercialising innovative drugs worldwide. Its pipeline includes rolapitant, NDA-ready for chemotherapy induced nausea and vomiting (CINV), niraparib, in Phase III for ovarian and breast cancer, and TSR-011, in Phase I for a subset of NSCLC.

Next events

Top-line results of rolapitant Ph. III (832) Q214

Rolapitant NDA filing Mid-2014

Completion of niraparib Ph. III enrolment YE14

Licensing of drug candidates 2014

Analysts

Jason Zhang PhD +1 646 653 7027

Robin Davison +44 (0)20 3077 5737

healthcare@edisongroup.com

Edison profile page

Pharma & biotech

TESARO | 21 February 2014 2

Investment summary

Company description: Treasure in the pipeline Tesaro is an oncology-focused company that has built an impressive and balanced pipeline consisting of one NDA-ready, one Phase III- and one Phase I-stage drug candidate since its inception in 2010. Its lead drug candidate, rolapitant, could reach the $1.5bn US chemotherapy induced nausea and vomiting (CINV) market by 2015, pending a filing in mid-2014 and FDA approval in early 2015. Niraparib, a PARP inhibitor, could be one of the first among seven competitors to finish Phase III trials and reach the market, pending positive Phase III results, in 2016. The company was founded in 2010, went public in June 2012 and has raised c $384m since inception. It is well funded with cash and cash equivalents of $225m (pro-forma adjusted for the current share placing), enough to support the launch of rolapitant and Phase III data readouts of niraparib, two key value inflection points. Tesaro is headquartered in Waltham, Massachusetts, US.

Exhibit 1: Tesaro pipeline Drug Indication Status Rolapitant (oral NK-1 receptor antagonist)

CINV in HEC treated patients Positive results from one Phase III trial released, another expected in Q114; NDA filing expected mid-2014

CINV in MEC treated patients Positive results from Phase III trial released; NDA filing expected mid-2014 Rolapitant (IV) CINV in HEC or MEC treated

patients Bioequivalence study ongoing; supplementary NDA filing expected in 2015

Niraparib (PARP inhibitor)

Ovarian cancer (gBRCAmut or gBRCAwt)

Pivotal Phase III trial (NOVA) initiated in Q313, enrolment to be completed by YE14, data c 2015

Breast cancer (gBRCAmut) Pivotal Phase III trial (BRAVO) to be started in Q114, data c 2016 TSR-011 (ALK/TRK inhibitor)

NSCLC, other solid tumour Phase I dose escalating trial ongoing

Source: Edison Investment Research

Valuation: Upside remains for rolapitant launch We value Tesaro based on a discounted cash flow method, which takes into account product revenue forecasts, royalty pay-outs and clinical success rates, among other market variables. Rolapitant and niraparib account for 38.5% and 57.8% of the total pipeline value, respectively. Our intrinsic value is $1,851m, or $51.5 per share ($48.7/share fully diluted).

Sensitivities: Main risks are Phase III trial results Our near- and mid-term investment case rests on the successful commercialisation of rolapitant and timely execution of the clinical trials of niraparib including the pivotal Phase III NOVA and BRAVO trials. In the longer term, Tesaro will have to continue its ‘license and development’ strategy by bringing in innovative drug candidates that can be leveraged with the company’s developmental and commercial capacity. Although we are positive on the outcome of NOVA and BRAVO, a negative result of either trial could have significant negative pressure on the stock, as niraparib represents 57.8% of the company’s pipeline valuation in our model.

Financials: Net cash of $225m sufficient beyond 2015 Tesaro reported a net loss of $23.3m for Q413, including G&A expenses of $4.5m and R&D costs of $18.9m. Cash burn for the quarter was $20.6m. The company had cash at end of December 2013 of $130m. Subsequently, the company raised net proceeds of $94.1m by offering 3.2m shares at $31.74 per share and increased its pro forma cash position to about $225m. We estimate the company’s cash utilisation will be $85.5m in 2014 and it will end the year with cash of c $143m, sufficient to support its launch of rolapitant in the US and continue development of it pipeline.

TESARO | 21 February 2014 3

Outlook: Positioned for success

Tesaro’s investment thesis rests on the commercial success of rolapitant for CINV and a positive outcome of niraparib’s two pivotal Phase III trials. Rolapitant should be successful because of the drug’s differentiated attributes and management’s familiarity with the market dynamics and its track record with Aloxi (palonosetron), a very successful CINV drug at MGI Pharma. Niraparib, a PARP inhibitor that is in Phase III development for ovarian cancer (OC) and metastatic breast cancer (mBC), showed promising clinical efficacy in a Phase I/II trial. Tesaro quickly moved the drug into Phase III pivotal trials based on the emerging knowledge of PARP biology, bypassing a lengthy Phase II and positioning it well in a competitive market that is worth several billion dollars. With enough cash to launch rolapitant and support its operation beyond 2015, we expect the company to actively look for other drug candidates to be added to its pipeline, a strategy that the management has successfully implemented with the previous and current company, resulting in a significant increase in shareholder value.

Rolapitant: A competitive new CINV drug

CINV background Chemotherapy-induced nausea and vomiting (CINV) is one of the most common and dreadful side effects of chemotherapy, occurring in up to 90% of patients receiving highly emetogenic chemotherapy (HEC, cisplatin, doxorubicin, cyclophosphamide, etc), or 30-90% receiving moderate emetogenic chemotherapy (MEC, carboplatin, azacitidine, busulfan, etc) drugs. CINV is commonly classified as acute, delayed, anticipatory, breakthrough or refractory. Acute CINV usually occurs within a few minutes to several hours after administration of chemotherapy, while delayed CINV develops more than 24 hours after drug administration, and can last for up to five days (120 hours). Acute and delayed CINV account for the vast majority of incidences of all CINV and represent the primary concern of a caregiver when considering prevention of CINV.

Despite its high frequency and being common knowledge among physicians and caregivers, CINV remains an underappreciated and sometimes under-addressed medical problem. Ranked only behind death if poorly controlled as the most fearful aspect of cancer by patients, there is a wide gap of perception of treatment effectiveness (as measured by lack of nausea and vomiting) between healthcare providers and patients (Exhibit 2). CINV not only presents as a major quality of life issue for most cancer patients, it also poses a threat to effective cancer treatment as fear and the actual effect of CINV could result in delay or discontinuation of chemotherapy.

Exhibit 2: CINV remains an unmet medical need

Source: J. Support Oncol 2004, 2 (suppl 1): 1-12

TESARO | 21 February 2014 4

CINV standard of care According to National Comprehensive Cancer Network (NCCN) guidelines, the most effective treatment of CINV is prophylactic treatment with a combination of two antiemetic therapies: a serotonin receptor antagonist (5-HT3 RA) and a neurokinin-1 receptor antagonist (NK-1 RA), plus a steroid (dexamethasone, dex). The cocktail should be given before the initiation of chemotherapy and can be used (if necessary) for the duration of delayed CINV.

The most commonly used 5-HT3 RAs are dolasetron (Anzemet, Sanofi), granisetron (Kytril, Roche), ondansetron (Zofran, GSK) and palonosetron (Aloxi, Eisai). NCCN guidelines recommend Aloxi as the preferred 5-HT3 RA because it is the only one that has demonstrated effectiveness at controlling both acute and delayed CINV, as well as superiority over other 5-HT3 RAs in several Phase III trials. Other 5-HT3 RAs were approved for controlling acute CINV (but also used for delayed CINV in practice). Aloxi was developed and commercialised by most of Tesaro’s senior management members when they were at MGI Pharma, which was later acquired by Eisai for $3.9bn in 2007. 5-HT3 RAs come in the forms of intravenous (IV) or oral, to largely fit into the types of cancer treatment regimens. There is also a patch form of granisetron approved in the US (Sancuso, Kyowa Hakko Kirin). Recently the FDA has recommended against IV dolasetron because of increased risk for cardiac arrhythmias, and removed the IV dose of 32mg ondansetron because of prolongation of the QT interval at this dose.

Aprepitant (Emend, Merck & Co) is the only FDA approved NK-1 RA at the moment. Emend’s approval (oral in 2003) was based on two Phase III HEC trials in which a three-drug regimen (aprepitant, ondansetron and dex) was superior to the two-drug regimen (ondansetron and dex) at controlling acute, delayed and overall period emesis. The differences (delta) of complete response rates (CR, defined as no emetic episodes and no rescue medication) between the three-drug regimen group and the control group for acute, delayed and overall CINV were 11-14%, 19-21% and 19-20%, respectively. Later, the same three-drug regimen was shown to be superior to the two-drug regimen in a Phase III, MEC trial, showing differences of CR for the acute, delayed and overall CINV of 7%, 6% and 9%, respectively. In 2008, an IV form of Emend was approved after demonstrating non-inferiority over the oral form in a Phase III, HEC trial. Emend’s efficacy in these trials suggests complementary biological effects of inhibiting 5-HT 3 and NK-1 pathways, which induce CINV distinctively.

The NCCN guidelines for 2014 also added olanzapine (Zyprexa, Eli Lilly, but generic since October 2011) into the standard of care category for CINV, based on a Phase III trial in which an olanzapine-containing three drug regimen (olanzapine, Aloxi and dex) was shown to be non-inferior to the standard three-drug regimen (Emend, Aloxi and dex). However, being only orally available is a disadvantage for olanzapine because about 80% of chemotherapy regimens were administered IV, which makes an IV CINV drug more desirable for convenience and better compliance.

Rolapitant clinical data: Phase II and Phase III Rolapitant was licensed in 2010 from OPKO Health, Inc., which gained rights to rolapitant and other assets from Schering-Plough, now part of Merck & Co, in 2010. Schering did extensive preclinical and Phase I studies on the drug and conducted a Phase II, randomised trial comparing the drug to placebo on top of the combination of ondansetron and dexamethasone (ond/dex) in patients receiving HEC (cisplatin-based). The drug at 200mg (oral) demonstrated significant improvement at controlling acute, delayed and overall CINV as well as significant nausea, with the delta (% of improvement) larger than NEPA, a fixed dose combination of netupitant and palonosetron (Helsinn Healthcare), showed in the Phase II and Phase III trials (Exhibit 3). When compared to aprepitant in two HEC Phase III trials, the differences in CR shown with rolapitant were slightly lower than aprepitant’s (except for acute phase CR), but the differences in ‘no significant nausea’ were larger. We should note that comparing anti-emesis efficacy of different CINV drugs in different trials can be

TESARO | 21 February 2014 5

problematic because the dose schedule and the background therapies are not always the same. Nonetheless, the Phase II trial showed that rolapitant, when added to a two-drug combo, did significantly better than placebo.

Exhibit 3: Selected clinical data of NK-1 RA on market or in development Trial Rolapitant, Phase II,

in HEC NEPA Phase II, in

HEC Aprepitant, Phase

III, in HEC (052) Aprepitant, Phase

III, in HEC (053) Aprepitant, Phase

III, in MEC (054) NEPA, Phase III, in

MEC Delta p value Delta p value Delta p value Delta p value Delta p value Delta p value

Complete response (CR) Acute 20.9% 0.001 8.8% 0.007 11.0% <0.001 14.4% <0.001 7.0% 0.034 3.0% 0.047 Delayed 14.7% 0.045 10.3% 0.018 19.0% <0.001 20.9% <0.001 6.0% NS (0.064) 7.0% 0.001 Overall 15.8% 0.032 13.1% 0.004 20.4% <0.001 19.4% <0.001 9.0% 0.015 7.0% 0.001 Complete protection Acute N/A N/A 9.5% <0.05 10.0% NS 15.0% <0.001 5.0% N/A 1.0% NS (0.528) Delayed N/A N/A 10.9% <0.05 14.0% <0.001 17.0% <0.001 4.0% N/A 7.0% 0.005 Overall N/A N/A 13.1% <0.05 14.0% 0.001 15.0% <0.001 6.0% NS 6.0% 0.02 No significant nausea Acute 13.2% 0.029 8.8% <0.05 N/A N/A N/A N/A N/A N/A -1.0% NS (0.747) Delayed 16.6% 0.026 9.5% <0.05 6.0% NS 8.0% NS N/A N/A 6.0% 0.014 Overall 21.0% 0.005 10.2% <0.05 7.0% NS 7.0% NS 5.0% NS 6.0% 0.02 Source: Company reports and Edison Investment Research; Note NS = not significant.

Exhibit 4: Rolapitant Phase III trials Trial TS-P04833 TS-P04832 TS-P04834 Treatment Day 1: Ro (200mg

oral) + granisetron (10mcg/kg IV) + dex (20mg oral); day 2-4: dex (8mg oral bid)

Placebo plus same background drugs

Day 1: Ro (200mg oral) + granisetron (10mcg/kg IV)+ dex (20mg oral); day 2-4: dex (8mg oral bid)

Placebo plus same background drugs

Day 1: Ro (200mg oral) + granisetron (2mg oral) + dex (20mg oral); day 2-3: granisetron (2mg oral)

Placebo plus same background drugs

N 555 530 1,365 Primary endpoint Delayed CR (>24 to 120 hour no emetic

episodes and no rescue medication) Delayed CR Delayed CR

Sec. endpoints Acute, overall CR Acute, overall CR Acute, overall CR Chemotherapy HEC HEC MEC Top line results Met primary endpoint; missed secondary

endpoints Ongoing, recruiting more patients Met primary endpoint; missed secondary

endpoints Source: Company reports and Clinicaltrials.gov

One of aprepitant’s drawbacks is its activity on cytochrome P450 enzyme 3A4 (CYP3A4), a common enzyme that is involved in the metabolism of approximately 60% of all drugs that are used today, including pain killers, steroids and many chemotherapy drugs. Aprepitant, when used concomitantly with these drugs, could alter the pharmacokinetics (PK) of these drugs, leading to increased toxicity or reduced efficacy. As a result, administration of aprepitant, particularly the oral form, sometimes requires dose adjustments of concomitant drugs. In a drug-drug interaction study in healthy volunteers, rolapitant was demonstrated to have no effect on midazolam, a sensitive CYP3A4 substrate, suggesting that it has no activity on CYP3A4. Further tests showed that it is safe to be co-administered with midazolam in these subjects and suggests that, unlike aprepitant, rolapitant use will not require dose adjustment of concomitantly administered drugs.

Based on the Phase II results, Tesaro conducted three Phase III trials, two in patients receiving HEC (cisplatin-based) and one in MEC (Exhibit 4). Top-line results from two of the three Phase III trials, 833 and 834, were released at the end of 2013. Both trials met their primary endpoints, meaning that rolapitant-treated patients had a statistically significant higher rate of delayed CR over control. The difference was not statistically significant for the acute CR, a secondary endpoint, but favoured the rolapitant arms numerically. The p-value for another secondary endpoint, CR during 0-120 hour (overall CR) was smaller than 0.05, but the difference could not be declared statistically significant because the common statistical rule of a hierarchical multiplicity analysis prevents unadjusted statistical claims on lower level secondary endpoints after the first secondary endpoint, acute CR, was missed in the trial. No detailed data are disclosed so far on other secondary endpoints, such as complete protection, and control of significant nausea. Tesaro did disclose that

TESARO | 21 February 2014 6

the numerical differences in delayed and overall CR, as well as delayed and overall complete protection, were larger than that of netupitant and aprepitant shown in MEC trials (Exhibit 5).

Exhibit 5: Greatest numerical difference vs control (in MEC trials only) Rolapitant, Phase III MEC Netupitant Phase III, MEC Aprepitant Phase III, MEC Complete response (CR) Acute + - - Delayed + - - Overall - - + Complete protection Acute + - - Delayed + - - Overall - - + Source: Company reports and Edison Investment Research. Note: + indicates the greatest numerical difference seen between treatment and control among the three trials, - indicates the difference is not the greatest among the three.

At the time of data release of 833 and 834, the remaining trial, 832, had not reached its full patient enrolment. As Tesaro had committed to file an NDA in mid-2014, we expect that trial to be fully enrolled in Q114, with a data release shortly after that. Since both 833 and 844 met their primary endpoints, and we expect the same from 832, we believe rolapitant should be approved in the US in Q2 of 2015.

Tesaro is developing a single-day rolapitant IV formulation to gain wider acceptance in oncology practices. Because most chemotherapy drugs are delivered IV, it is rather convenient to administer an IV anti-emetic prior to chemotherapy. Single day IV anti-emetics that are given prior to chemotherapy administration not only avoid compliance issues with multi-day oral anti-emetics in many cancer patients, but are the only choice for many cancer patients who cannot swallow pills due to the impact of the disease or the treatment. Emend did not really take off in the market place until its single day IV form was introduced to the market by 2010. Tesaro has identified an IV dose that is bioequivalent to the single dose of the oral formulation through a standard bioequivalence clinical study and is progressing to a bridging safety study to support regulatory approval. We expect Tesaro to file rolapitant IV as a supplementary NDA (sNDA), which will reference data from the oral rolapitant approval, shortly after oral rolapitant’s approval and launch approximately one year following the launch of the oral formulation.

CINV market dynamics Data from IMS Health and Ipsos Healthcare showed that approximately 6.6m doses of 5-HT3 RA containing anti-emetics were administered on the first day of chemotherapy in the US in 2011. Approximately 60%, or 3.96m, were used for HEC (including cisplatin-containing or anthracycline/ cyclophosphamide [A/C]-based) regimens in the treatment of various types of cancer, and 24%, or 1.58m, for MEC (including carboplatin-containing) regimens. As previously mentioned, the NCCN guideline recommends that an NK-1 RA should be added to a 5-HT3 RA and dex as the standard of care for CINV in ‘all’ patients receiving HEC and ‘appropriate’ patients receiving MEC. The guideline further clarifies that ‘appropriate’ MEC includes carboplatin-containing regimens, such as those used for breast cancer treatment. Therefore, the total chemotherapy regimens for which an NK-RA-containing CINV prophylaxis is required, including cisplatin-, AC- and carboplatin-containing, is about 5m in the US. Based on a price of $300/dose (equivalent to that of an Emend IV dose), the total NK-1 market in the US is c $1.5bn.

Merck reported total global sales of $498m and US sales of $276m for Emend in 2012, and global sales of $507m and US sales of $293m for 2013, suggesting that the drug did not fully penetrate the eligible NK-1 RA market. Market research (Ipsos Healthcare) has shown that physicians, when it comes to CINV treatment, have not been fully aware of the NCCN guideline updates, as compared to chemotherapy treatment guidelines. As a result, an NK-1 RA has not been routinely used for patients receiving most MEC regimens. In addition, Merck’s promotional effort behind

TESARO | 21 February 2014 7

Emend has been lacklustre, given the drug’s relatively small revenue (1.1%) compared to the company’s total sales. For example, Merck does not set up contractual commercial relationships with the vast majority of oncology networks, which administer the majority of chemotherapy drugs in the US. Such contractual commercial relationships help these oncology networks manage their drug inventories and cash flows better, and in general are required to successfully commercialise oncology supportive care products.

Rolapitant’s revenue estimate We believe rolapitant could do much better than Emend based on the drug’s differentiated product attributes and Tesaro management’s deep understanding of the CINV market and past experience in the same field. First, physician awareness of NK-1 RAs for CINV prevention should improve as Helsinn (or a partner) introduces another NK-1 RA (NEPA) to the market (possibly in late 2014), which could in turn prompt Merck to increase its promotional effort behind Emend. Second, rolapitant possesses a unique set of attributes that are important for it to be a successful drug. As listed in Exhibit 6, rolapitant should be available in an IV form in 2016, making it eligible for 80% of the CINV market. In contrast, NEPA would be only available in oral form (Helsinn has not developed an IV form of the drug yet) and therefore would be unavailable for the majority of the market. That disadvantage also exists for olanzapine, in addition to the drug’s lack of promotional effort since it is already generically available and its less favourable adverse events (AEs) profile. Rolapitant is shown in clinical trials without drug-drug interaction issues, a concern for Emend, which is clearly mentioned on the drug’s label. Most importantly, we think the Tesaro management is well prepared to make rolapitant a commercial success, similar to what they have accomplished with Aloxi. It is notable that this was achieved despite the fact that Aloxi was the fourth to market and was launched before genericisation of two drugs in the same class. Tesaro plans to commercialise rolapitant in the US and EU on its own, with a sales force of 70-90 in the US and 40-50 in the EU (Tesaro guided that rolapitant’s breakeven sales are c $50-60m annually). We estimate worldwide rolapitant sales to be $22.5m, $142m, $250m, $307m and $371m in the first five years post launch and reach peak sales of $752m by 2025, assuming market share of c 30% and 38% in the oral and IV segments, respectively.

Emend’s first patent expiration is April 2015, while a series of other patents protect the drug into 2027. One concern was how a generic aprepitant would affect rolapitant’s sales. Because CINV protection accounts for a small portion of total cancer treatment cost, forced generic substitution was not a primary focus of cancer treatment networks in the US. Furthermore, the US reimbursement system allows doctors to make a little more profit by prescribing branded products (provided that clinical efficacy is not sacrificed), therefore, generic availability of drugs in the same category does not usually affects another branded drug’s sales. The best example of this is the success of Aloxi after its launch. Two generic 5-HT3 RAs, ondansetron (12/2006) and granisetron (1/2008) did not affect Aloxi’s sales, which increased from $249m in 2005 to $565m in 2013.

Exhibit 6: Comparison of four anti-emetics Status Oral day 1

only IV day 1 only

No CYP3A4 interaction

Potential to prevent nausea

Rolapitant Phase III Positive from Phase II; missed acute in Phase III, positive for delayed and overall phase (unadjusted statistical analysis)

Aprepitant Marketed × × Not significant in Phase III trials NEPA NDA filed × N/A Positive from Phase II (HEC) and III (MEC based on

unadjusted analysis) Olanzapine Generic

available × N/A Non-inferiority vs aprepitant

Source: Edison Investment Research

TESARO | 21 February 2014 8

Niraparib for ovarian and breast cancer

PARP inhibitor background PARP inhibitors are a class of drugs that inhibit the poly (ADP-ribose) polymerase (PARP) family of enzymes. One critical role that PARPs play in cells is their involvement in single-strand break DNA repair, a mechanism utilised by cells to correct damage to DNA caused by various external or internal stimuli. Inhibition of PARPs in cells leads to accumulations of SSBs, and ultimately cell death if other DNA repair mechanisms are also inhibited or insufficient. The introduction of multiple and most often complementary deficiency of DNA repair is a form of so called ‘synthetic lethality’, which was proposed in the 1940s as an approach to treat cancer. However, it is only in the last decade that the biotech and pharma industry has fully embraced ‘synthetic lethality’ as an anti-cancer approach after PARP inhibitors showed promising early activity.

PARPs participate in mainly DNA repairs of single-strand breaks (SSBs), one of two types of DNA damage inside cells during DNA replication, the other being double-strand breaks (DSBs). SSBs, caused by external stimuli such as radiation, if left unrepaired, can leads to DSBs, which are normally corrected by mechanisms of DSB repair. In cells where DSB repair machinery are dysfunctional due to genetic mutations, such as BRCA1 or 2 mutations (BRCAmut), PARP inhibitors are found to be extremely potent, typically 10 to 20 times or more than in non-BRACmut cells.1 This breakthrough finding has greatly shaped the development path of PARP inhibitors, as most drugs in this class are now directed to tumour types that are BRAC1 and 2 deficient, or other mutations that lead to DSB repair deficiency. It is possible such a strategy would result in faster path to approval and better commercial success because targeted therapy in focused patient populations can lead to a higher response rate, faster regulatory approvals and premium pricing.

Niraparib clinical data Niraparib is one of seven (Exhibit 7) PARP inhibitors in development for cancer. Tesaro in-licensed the drug from Merck in May 2012 after Merck conducted a Phase I trial. An orally available drug, as is the case for all other PARP inhibitors, the drug has an IC50 of 2.1-3.8nM (against PARP-2 and -1, respectively), similar to that of other PARP inhibitors (IC50 4-20nM). One of the key mechanism-based differences between niraparib and some other PARP inhibitors is that niraparib (also olaparib, BMN 673 and rucaparib) possesses another mechanism of PARP inhibition: PARP trapping. All PARP inhibitors inhibit PARP’s enzymatic activity, referred to as catalytic inhibition. A team2 from National Institutes of Health (NIH) demonstrated that niraparib and olaparib, but not veliparib, inhibit PARP through the ‘trapping’ mechanism, which tightens the PARP-DNA repair complex to the DNA, resulting in greater inhibition of DNA repair. They showed that niraparib was more potent than olaparib, which was in turn substantially more potent than veliparib in ‘trapping’ PARP. Recently, Murai et al3 also showed that BMN 673 has ~100x more potent ‘trapping’ efficacy than olaparib and rucaparib (niraparib was not compared in the study). Theoretically, this dual MOA of DNA repair inhibition should lead to better efficacy, or at least longer duration of efficacy and possibly avoidance of drug resistance. So far it is still a hypothesis that is yet to be proven in a clinical setting.

In clinical trials, niraparib appears to be comparable to (and in some cases better than) other PARP inhibitors in terms of objective responses in both unselected and selected patient population (Exhibit 8). In a Phase I trial, the drug demonstrated objective response (RECIST) of 40% (8/19) in ovarian cancer patients carrying gremlin BRCA1/2 mutations. The RECIST PR rate was 50% (5/10) and 33% in platinum sensitive and resistant patients, respectively. At the recommended Phase III

1 Bryant HE et al., Nature 2005, 434:913-917 and Farmer H., et al., 2005, 434:917-921 2 Murai J. et al., Cancer Research 2012, 72:5588-5599. 3 Murai J. et al., 2013, Mol Cancer Ther. Published online first on 19 December 2013

TESARO | 21 February 2014 9

dose of 300mg qd, three out of four (75%) platinum sensitive patients had RECIST responses. In comparison, olaparib and rucaparib had RECIST PR (or better) of 31% and 18%, respectively in OC patients with gBRCAmut. Furthermore, niraparib demonstrated RECIST ORR of 50% (2/4) in breast cancer patients with BRACmut, whereas other PARP inhibitors had RECIST ORR ranging from 13% to 57%. Although it is hard to draw definitive conclusions when comparing efficacy across different trials, we believe these data suggest that niraparib is equally effective as, if not more than, other PARP inhibitors that are in active clinical development.

Given that no PARP inhibitors can definitely be differentiated from the rest based on clinical efficacy, timing of market entry and choice of indication are likely to play an important role in market performance. AstraZeneca (AZ) used to hold a considerable lead in olaparib over the rest because it was the first to conduct large, randomised Phase II trials in ovarian cancer. However, as the first Phase II trial was conducted in an unselected ovarian cancer patient population that failed to show any clinical benefit in an interim analysis and the inability to identify a suitable tablet dose, AZ halted the development of the drug in 2011. After a subsequent subgroup analysis in patients with germline or tissue BRACmut that demonstrated olaparib’s improved PFS over placebo (Exhibit 8), AZ resumed the development of the drug in September 2013, this time focusing on gBRCAmut ovarian and breast cancer patients (the only Phase III trial in unselected patients is for gastric cancer using the drug in combination with paclitaxel).

In contrast, Tesaro has speeded up its development of niraparib significantly by initiating the NOVA Phase III trial (Exhibit 9), which is to test the drug vs placebo in ovarian patients with or without BRCA1/2 mutations, and the BRAVO Phase III (Exhibit 9) in gBRCA1/2mut mBC, without conducting a randomised Phase II trial. Normally we would consider a Phase III programme without Phase II randomised data very risky. However, we think Tesaro’s strategy on niraparib is bold and, at the same time, thoughtful. Because niraparib showed similar, if not better efficacy (based on response rate) in a Phase I/II trial, to that of olaparib in the Phase II, and the mechanism of actions between the two are very similar, it is reasonable to assume the two would have similar clinical outcomes in a Phase III trial. Therefore, by incorporating much of olaparib’s Phase II data into niraparib’s Phase III design, Tesaro has saved considerable time and resources, and is able to initiate a Phase III in ovarian cancer only a month later than AZ (Exhibit 10).

While AZ’s focus is exclusively in gBRCAmut patients, Tesaro’s unique design of the NOVA keeps the drug’s option in gBRCAwt (BRCA wild type) open. The gBRCAmut subgroup gives the drug a high possibility of clinical success (based on olaparib’s HR of 0.18 in gBRCAmut patients) while the BRCAwt group could potentially give the drug a larger market. In breast cancer, Tesaro’s focus is on patients with gBRCAmut, a decision that gives the drug the best chance of clinical of success. In an area such as mBC where there are many different options available, the strategy of focusing on a molecularly defined patient population is commercially astute, in our opinion. We anticipate NOVA to be fully recruited in c 16 months after first-patient-in, which means that data from NOVA could be available before the end of 2015. First patient dosing in BRAVO should happen in Q114 but Tesaro has not given any guidance on enrolment at this point.

At the moment, Tesaro is poised to get niraparib into the market either first or at the same time as AZ’s olaparib. AZ filed an EU marketing application for olaparib in OC based on subgroup analysis of the Phase II trial in mid-2013 that was accepted by EMA in September 2013. However, given that the application is based on a post-hoc subgroup analysis, and the company is conducting two Phase III trials in almost exactly the same population, we believe the chance of an early approval of the drug in the EU is small. Separately, BioMarin announced in October 2013 the start of a Phase III trial testing BMN 673 vs physician’s choice in metastatic gBRCAmut BC patients and a goal of completing enrolment in H215. BioMarin chose to focus on BC probably because the drug’s efficacy in gBRCAmut ovarian cancer is not that strong (the company reported an overall ORR of 44% in OC at the Phase III of 1mg/day but has yet to disclose data in gBRCAmut OC).

TESARO | 21 February 2014 10

Exhibit 7: PARP inhibitors in clinical development Drug Company Mechanism of action Dose Status Olaparib AstraZeneca Catalytic inhibition,

trapping Oral, 400mg bid Phase III for gBRCAmut OC, gastric cancer (w/pac), gBRCAmut HER2- mBC; Filed

in EU for gBRCAmut OC based on Phase II data Veliparib AbbVie Catalytic inhibition Oral, 200mg bid Phase III in combo w/carboplatin in TNBC; Phase II mono in other cancer BMN 673 BioMarin Catalytic inh. trapping Oral, 1mg qd Phase III for gBRCAmut mBC Rucaparib Clovis Oncol. Catalytic inh. trapping Oral, 600mg bid Phase III (maintenance) for OC (t or tBRCAmut, or homologous recombination def.) E7016 Eisai Catalytic inhibition Oral, 320mg qd Phase II in combination with TMZ for BRAFwt melanoma Niraparib Tesaro Catalytic inh., trapping Oral, 300mg qd Phase III for gBRCAmut or wt OC (maintenance) and mBC CEP-9722 Teva Catalytic inhibition Oral, 150mg qd Unclear Source: Company reports and clinicaltrials.gov

Exhibit 8: Selected clinical data of PARP inhibitors Drug (company) Trial description Clinical data: gBRCAmut OC, overall OC, gBRCAmut mBC, overall BC and other cancer Olaparib (AstraZeneca)

Phase II rand. trial in OC, BRCAmut subgroup n=136

In g and tBRCAmut: PFS HR=0.18, p<0.000011, med. PFS 11.2 vs 4.3 mths, OS HR=0.74, p=0.208, med. OS 34.9 vs 31.9 mths; in BRCAwt: HR=0.53, p=0.007, med. 5.6 vs 6.5 mths

Phase II gBRCAmut, n=298 (OC=193, BC=62, panc. =23, prostate=8, other=12, ola 400mg bid

In gBRCAmut OC: 60/193 (31.1%) RECIST PR or better (3.1% CR), 138/193 (71.5%) CR/PR or SD>8 wks

In gBRCAmut mBC: 8/62 (12.9%) RECIST PR, 37/62 (60%) CR/PR or SD>8 wks.

In pan.: 5/23 (21.7%) RECIST PR, 9/23 (39.3%) CR/ PR or SD>8 wks; in PC: 4/8 (50%) PR, 8/8 (100%) CR/PR or SD>8 wks

Rucaparib (Clovis Oncology)

Phase I dose escalation, n=52, BC=26, OC=19, other=7, ruc (oral, 20-500mg qd and 240-840mg bid). OC subset, N=19, BRCAmut=16, platinum sens.=8, resis=11

In gBRCAmut OC: 2/11 (18%) RECIST PR, 3/11 (27%, 5/11 or 45% at dose >360mg bid, 3/4 or 75% at 600mg bid) PR and CA-125 res., 5/8 (63%) CR/PR or SD>24 wks, 11/11 (100%) CR/PR or SD>12 wks

In overall OC: 2/13 (15%) RECIST PR, 3/13 (23%) RECIST PR and CA-125 res., 5/10 (50%) CR/PR or SD>24 wks, 12/13 (92%) CR/PR or SD>12 wks

In gBRCAmut mBC: 4/11 (36%, 4/7 or 57% at dose >360mg bid) RECIST PR (1 CR), 7/14 (50%) CR/PR or SD>24 wks; 8/14 (57% ) CR/PR or SD>12 wks

In overall mBC: 4/25 (16%) RECIST PR or better, 7/25 (28%) CR/PR, SD>24 wks, 8/25 (32%) CR/PR or SD>12 wks

In gBRCAmut pancreatic cancer: 1 response (duration of response) 6.4 mths

Niraparib (Tesaro)

Phase I advanced solid tumour; OC=49, 13 platinum sens., 35 resist. 1 ref., CRPC=23, BC=12, other=16, BRCAmut=29, nir 30mg to 400mg qd

In gBRCAmut OC: 8/20 (40%) RECIST PR, 8/20 PR and CA-125 res., 5/10 (50%, or 75% at rec. Phase III dose) in sensitive and 3/9 (33%) in resistant. 10/20 (50%) CR/PR or SD>16 wks

In overall OC: 10/42 (24%) RECIST PR, 13/42 (31%) RECIST PR and CA-125 res., 13/42 (31%) CR/PR or SD>16 wks, 16/42 (39%) CR/PR/SD

In gBRCAmut mBC: 2/4 (50%) RECIST PR

In CRPC: 9/21 (43%) had SD (med. duration 36 wks); 1 PSA>50% reduction, no rPR

BMN 673 (BioMarin)

Phase I solid tumour. OC=23, BC=8, other=8, BRCAmut=25, BMN .025 to 1mg/day

In overall OC: 44% (11/25) RECIST PR at 1mg qd

In gBRCAmut BC : 8/18 (44%) RECIST PR+ (1 CR), 13/18 (72%) CR/PR or SD>24 wks; 7/14 (50%) RECIST PR (1 CR) at dose of 1mg/d

In NSCLC: 2 PR at 1mg/day, study in 22 pts ongoing

Veliparib (AbbVie)

Phase I in mBC with BRCAmut, n=28, vel (50 to 200mg bid) plus carbo

In BRCAmut: 16/28 (57%) PR or better (1 CR), 20/28 (71%) CR/PR or SD. Note: this is result from combination. Monotherapy data in mBC is not available yet

Source: Company reports and Edison Investment Research. Note: gBRCA: germline BRCA; tBRCA: tissue BRCA.

Exhibit 9: Niraparib Phase III trials Name Patient Treatment End points Statistical assumptions NOVA gBRCAmut and gBRCAwt,

platinum sensitive relapsed, high grade serous OC

Nir (300mg qd) vs pbo (2:1) randomisation as maintenance therapy; one cycle=28 days

Primary: PFS; secondary: OS, quality of life (QoL), chemo free interval

PFS: >90% power to detect 4.5 mths of improvement in both cohorts; assuming 4.5 mth PFS in control

BRAVO gBRCAmut, HER2-, advanced mBC

Nir (300mg qd) vs physician’s choice (eribulin, capecitabine, gemcitabine or vinorelbine) (2:1); one cycle=21 days

Primary: PFS; secondary: OS, QoL

PFS: >95% power to detect a 3 mth improvement; assuming 3 mths of PFS in control

Source: Company report and clinicaltrials.gov

In contrast, Clovis Oncology revealed in January 2014 plans to conduct a 540-patient Phase III study (ARIEL3, yet to dose first patient) in platinum sensitive OC only. Clovis aims to test rucaparib vs placebo as a maintenance therapy in patients who are homologous recombination (HR) deficient (including g or tBRCAmut), potentially giving the drug broader indication than olaparib and niraparib. AbbVie is conducting a Phase III of Veliparib in combination with carboplatin as neoadjuvant

TESARO | 21 February 2014 11

therapy for triple negative breast cancer (TNBC). The other two PARP inhibitors have yet to move into Phase III trials. There is currently only one clinical trial listed for Eisai’s E7016 and none for Teva’s CEP-9722 (Exhibit 10).

Exhibit 10: Selected clinical trials of PARP inhibitors Drug Company Trial name Trial details Olaparib

AstraZeneca

SOLO1 (GOG-3004)

344-pt Phase III, ola (oral, 300mg bid) vs placebo (pbo) in pts w/ BRCA mutation ovarian cancer (OC) w/ PR or CR post 1st-line platinum therapy. Primary endpoint: PFS. Start: 9/2013, data: 7/2016

SOLO2 (ENGOT-Ov21)

264-pt Phase III, ola (300mg bid) vs pbo in pts w/ BRCAmut. OC, relapsed after SD, PR or CR post platinum therapy (≥2 lines of prior therapy). Primary endpoint: PFS. Start: 9/2013, data: 7/2015

D081BC00004 500-pt Phase III, ola (100mg bid) /paclitaxel (pac) vs pac in Asian pts with advanced gastric cancer post 1st-line therapy. Primary endpoint: OS. Start: 9/2013, data: 9/2016

Olympia (NSABP B-55)

1,320-pt Phase III, ola (150mg,100mg) vs pbo as adjuvant therapy in pts with gBRCAmut, HER2- BC. Primary endpoint: invasive disease free survival (IDFS). Start: 1/2014, data: 3/2020

D0819C00003 310-pt Phase III, ola (300mg bid) vs physician's choice in pts with gBRCAmut mBC. Primary endpoint: PFS. Start: 3/2014, data: 2/2017

NCI-2012-02938

118-pt Phase II, ola (bid)/cediranib vs ola in pts with recurrent OC or TNBC. Primary endpoint: DLT and PFS. Start: 3/2010, data: 5/2014

D081DC00008 170-pt, Phase II, ola (300mg bid)/abiraterone vs abiraterone in mCRPC post docetaxel treatment. Primary endpoint: rPFS. Start: 3/2014, data: 6/2016

GOAL 186-pt, Phase II, ola (bid)/gefitinib vs gefitinib in pts. w/ EGFR mutation positive advanced NSCLC. Primary endpoint: MTD (PFS as 2nd-endpoint). Start: 8/2011, data: 6/2014

PIN 114-pt, Phase II, ola (300mg bid) vs pbo as maintenance in chemosensitive advanced NSCLC. Primary endpoint: PFS. Start: 5/2013, data: 5/2015

Veliparib AbbVie

Brightness 624-pt Phase III, Vel/carboplatin vs carbo/chemo as neoadjuvant therapy in TNBC. Primary endpoint: pathological CR. Start: 1/2014, data: 6/2016.

M12-895 242-pt, Phase II, vel (oral bid)/temozolomide (TMZ) vs vel/carbo/pac vs carbo/pac in gBRCAmut mBC. Primary endpoint: PFS. Start: 1/2012, data: 10/2014.

M10-898 152-pt, Phase II, vel/carbo/pac vs carbo/pac in previously untreated NSCLC. Primary endpoint: PFS. Start: 2/2012, data: 9/2014

M10-897 300-pt, Phase II, vel/whole brain radiation therapy (WBRT) vs WBRT in pts with brain metastases from NSCLC. Primary endpoint: OS. Start: 10/2012, data: 11/2014

M10-440 346-pt, Phase II, vel (20mg or 40mg, bid)/temozolomide (TMZ) vs TMZ in metastatic melanoma. Primary endpoint: PFS. Start: 2/2009, data: 3/2014

BMN 674

BioMarin

673-301 430-pt, Phase III, BMN vs physician's choice in mBC with gBRCA mutations (≤2 prior lines of Rx). Primary endpoint: PFS. Start: 10/2013, enrolment completion: H215, data: 6/2016

673-201 140-pt, Phase II, BMN monotherapy in in gBRCAmut mBC: platinum sensitive or platinum naïve but post two prior therapies. Primary endpoint: ORR. Start: 1/2014, data: 11/2015

Rucaparib

Clovis Oncology

ARIEL3 (CO-338-014)

540-pt, Phase III, ruc (oral, 600mg bid) vs pbo as maintenance in platinum sensitive (≥2 prior platinum-based Rx), High-grade serous OC. Primary endpoint: PFS in molecularly defined HRD subgroups. Start: 1/2014, data: 1/2016

ARIEL2 (CO-338-017)

180-pt, Phase II, ruc (600mg bid) single arm study in platinum-sensitive (≥1 prior platinum-based Rx), relapsed, high-grade OC. Primary endpoint: ORR. Start: 9/2013, data: 12/2015

CO-338-023 100-pt, Phase II, ruc (oral) single arm study in pancreatic cancer (2nd-line) with BRCAmut. Primary endpoint: ORR. Start: 4/2014, data: 8/2016

CO-338-010 137-pt, Phase II, ruc (oral, 40mg qd and higher) single arm study in solid tumour or OC pts with gBRCAmut. Primary endpoint: ORR. Start: 11/2011, final data: 3/2014

BRE09-146 135-pt, Phase II, ruc/cisplatin vs cisplatin in TNBC with BRCAmut. Primary endpoint: two-year DFS. Start: 2/2010, data: 5/2014

E7016 Eisai E7016-A001-201

25-pt Phase II, single arm study of E7016 (320mg qd) plus TMZ in BRAFwt melanoma. Primary endpoint: 6 mth PFS. Start: 3/2012, data: 3/2014

Niraparib

Tesaro NOVA (PR-30-5011-C)

360-pt Phase III study of nir (300mg qd) vs pbo as maintenance post platinum-based therapy in gBRCA mut or wt, platinum-sensitive, relapsed OC. Primary endpoint: PFS. Start: 10/2013, data: 10/2016

BRAVO (PR-30-5010-C)

306-pt Phase III study of nir (300mg qd) vs physician’s choice in gBRCAmut, HER2- mBC. Primary endpoint: PFS. Start: 10/2013, data: 6/2015

Source: Company reports and clinicaltrials.gov.

Niraparib revenue estimates High-grade serous ovarian carcinoma (HGS-OvCa) accounts for 60-80% of the approximately 26,000 women diagnosed with epithelial ovarian carcinoma in the US annually.4 Based on various clinical trial results, approximately 75%, or 14,625, of HGS ovarian cancer patients respond (CR or PR) to first-line platinum-based therapy. About 70%, or c 10,240, are defined as platinum sensitive, first relapsed, because they typically respond to further platinum-based therapy, and are therefore

4 Kobel M, et al. Int J Gynecol Pathol. 2010;29(3):203-211.

TESARO | 21 February 2014 12

eligible for maintenance therapy. Recently, it was found that germline BRCA1 and BRCA2 mutations could be as high as 25% in HGS-OvCa.5 Based on that, we estimate that in the US there are c 2,560 HGS-OvCa with gBRCAmut that are eligible for a maintenance treatment such as niraparib. If niraparib is found to be positive for gBRCAwt, then the drug would be applicable for 10,000 HGS-OvCA that are first relapsed platinum sensitive and eligible for maintenance treatment.

The NCI estimates that there were a total of 2,829,000 women currently living with breast cancer and 234,580 (232,340 in female and 2,240 in male) new cases of breast cancer in the US in 2013. Market research by Decision Resources estimates that c 480,000 BC patients are treated in US annually, including c 100,000 metastatic BC (mBC). Because gBRCA mutations are found in as high as 10% of all BC cases, we estimate the total mBC gBRCAmut carriers are c 10,000, and are likely to be candidates for niraparib.

We estimate niraparib sales in ovarian cancer, assuming the data are positive for both the gBRCAmut and gBRCAwt population, to be $85m, $201m, $282m, $362m and $434m in the first five years after its launch and reach peak sales of $673m, assuming treatment cost ranging from $44,000 to $84,000 and market shares in the respective markets of c 35%. If the drug only works in gBRCAmut patients, then the estimates are $33m, $79m, $110m, $141m and $174m in the first five years, with peak sales of $268m. For gBRCAmut mBC, we estimate sales of $57m, $150m, $208m, $260m and $301m in the first five years after launch and peak sales of $493m, assuming treatment cost of $44,000 and market share of c 35%. Tesaro plans to commercialise the drug on its own in the US and EU, utilising its sales force already established for rolapitant in various markets.

TSR-011: Not just an ALK Inhibitor Anaplastic lymphoma kinase mutation or translocation (EML4-ALK fusion gene) is present in 3-5% of all NSCLC patients (typically adenocarcinoma) and the disease is more aggressive and less likely to respond to existing therapies. Compounds that target ALK protein specifically (ALK inhibitor, ALKi) are found to be very efficacious in molecularly identified ALK positive (ALK+) NSCLC patients. One such compound, crizotinib (Xalkori, Pfizer), was approved conditionally in August 2011 based on high objective response (ORR) demonstrated in a single-arm Phase II trial (regular approval was granted in November 2013 after Phase III trials demonstrated improvement of PFS against chemotherapy). A host of companies (Exhibit 11) are developing next generation ALK inhibitors with either higher potency to the target or broader spectrum of activity, positioning the drug either as follow-on therapy to crizotinib or direct competitor. One such drug, LDK378 (Novartis), appears to be very potent and an NDA in the US and EMA in EU was just recently being filed.

TSR-011 is different from several next-generation ALK inhibitors in that, in addition to ALK, it also inhibits TRK, a protein also implicated in cancer development. TRK gene rearrangement and overexpression are correlated with progression and poor prognoses in various types of cancer, such as thyroid, pancreatic, ovarian, colon and lung cancer. In a study reported at ASCO 2013 (Abstract #8023), approximately 3% of marker-negative NSCLC was reported to have rearrangement of TRK-A, suggesting that a TRK inhibitor could be applicable to NSCLC patients who are not suitable for current molecular targeted therapies.

In a Phase I (n=19), dose escalating study, Tesaro reported that TSR-011 inhibits cells with both wild-type and resistant ALK genes, suggesting the drug may be able to overcome crizotinib resistance. Furthermore, the drug inhibits all three types of TRK, A, B and C, and showed potent growth inhibition of various xenograft tumour models, including colon and lung. In addition to being well tolerated, the drug exhibits anti-tumour activity in at least two of three patients with ALK mutations who have progressed previously following treatment with crizotinib, including a RECIST

5 Schrader K. A. et al., Obstet Gynecol. 2012 Aug;120(2 Pt 1):235-40.

TESARO | 21 February 2014 13

PR, a non-RECIST PR and a stable disease. Clinical benefit was also observed in papillary thyroid and pancreatic cancer patients without ALK expression. After the recommended Phase II dose is identified, the Phase I/II trial will be expanded to three cohorts, including: 1) ALK inhibitor (ALKi)-naïve, ALK+ NSCLC, 2) ALKi resistant (≥2 lines) ALK+ NSCLC, and 3) ALK+ or TRK+ tumour or lymphoma. We expect Phase II data to become available in 2015/16, and if the data are positive, a Phase III developmental programme to be in place in late 2016.

Exhibit 11: Selected ALK inhibitors Product (company)

Trial name Trial details

Crizotinib (Xalkori, Pfizer)

A8081029 200-pt Phase III study of crizotinib vs pemetrexed (pem)/cisplatin or carboplatin in East Asian ALK+ NSCLC, previously untreated pts. Primary endpoint: PFS. Start: 12/2012, data 11/2015

A8081007 347-pt Phase III study (PROFILE 1007) of cri. (250mg bid) vs pem or docetaxel/cisplatin or carboplatin in ALK+ NSCLC, post one line of prior therapy. (Results: N Engl J Med. 2013 Jun 20;368(25):2385-94). Median PFS 7.7 vs 3.3 mths

A8081014 334-pt Phase III study (PROFILE 1014) of cri. (250mg bid) vs pem/cisplatin or carboplatin in ALK+ NSCLC previously untreated NSCLC. Primary endpoint: PFS. Start: 7/2011, 2/2015

LDK378 (Novartis)

CLDK378A2201 141-pt Phase II study of LDK (oral, 750mg qd) in ALK+ NSCLC previously treated w/ chemotherapy and crizotinib. Primary endpoint: ORR. Start: 11/2012, data: 8/2014. Note: Novartis filed NDA in Q413

CLDK378X2101 303-pt Phase I study in 3 group of pts: NSCLC prev. treated with an ALK inh., NSCLC not prev. treated with an ALK inh., Other tumours that are ALK+. Primary endpoint: dose and ORR. Start: 1/2011, data: 8/2015

CLDK378A2203 105-pt Phase II study of LDK378 in crizotinib naïve NSCLC pts. Primary endpoint: ORR. Start: 12/2012, data 8/ 2014 CLDK378A2301 348-pt Phase III study of LDK378 (oral, 750mg qd) vs pem./carboplatin or cisplatin in ALK+ NSCLC prev. untreated. Primary

endpoint: PFS. Start: 7/2013, data 12/2017. Note: Novartis filed NDA in Q413 CLDK378A2303 236-pt Phase III study of LDK378 vs pem. or docetaxel in ALK+ NSCLC prev. treated with crizotinib and platinum-based 1st-

line therapy. Primary endpoint: PFS. Start: 6/2013, data 7/2017. Note: Novartis filed NDA in Q413 CLDK378X2102 65-pt Phase Ib study of LDK378 and AUY922 (HSP90 inhibitor) in crizotinib-naïve NSCLC. Primary endpoint: DLT, ORR.

Start: 6/2013, data 8/2015 Alectinib (Roche/Chugai)

AF-002JG 85-pt Phase I/II study of alectinib (CH5424802, 300mg bid) in ALK+ NSCLC, failed crizotinib and one platinum-based chemo. Primary endpoint: ORR. Start: 9/2013, data: 8/2015. Note: Chugai filed application in Japan

NP28673 130-pt Phase I/II study of alectinib in ALK+ NSCLC who failed crizotinib, chemo naïve or treated. Primary endpoint: ORR. Start: 8/2013, data 1/2016

ASP3026 (Astellas)

3026-CL-0102 69-pt Phase I study in advanced solid tumours/B-cell lymphomas. Primary endpoint: safety. Start: 3/2011, data 3/2014

TSR-011 (Tesaro)

PR-20-5006-C 150-pt Phase I/II dose escalating study in ALK + or TRK + advanced solid tumours and lymphomas who failed standard of care. Primary endpoint: ORR. Start: 12/2012, data: 7/2016

AP26113 (Ariad)

AP26113-11-101 175-pt Phase I/II study of 113 (30mg to 300mg qd) in ALK+, EGFR mutation positive NSCLC, crizotinib naïve or resistant, post one EGFR tyrosine kinas inhibitor (TKI). Primary endpoint: MTD and ORR. Start: 9/2011, data 9/2015

RXDX-101 (Ignyta)

N/A Up to 50 Phase I/II study of 101 (NMS-E628, oral) in advanced metastatic solid tumours, positive for TrkA, ROS1 and ALK. Primary endpoint: MTD and RR. Start: N/A, data: N/A

CEP-37440 (Teva)

C37440/1108 55-pt Phase I study of 37440 (25mg and 100mg qd) in advanced tumour, treated or untreated. Primary endpoint: ORR. Start: 8/2013, data: 10/2015

X-396 (Xcovery) X396-CLI-101 60-pt Phase I study in advanced solid tumour, may have received crizotinib. Start: 6/2012, data: 12/2014 Source: Company reports, clinicaltrials.gov

Sensitivities

In our view, the near- and mid-term investment case rests on the successful commercialisation of rolapitant and execution of the clinical trials of niraparib including the pivotal Phase III NOVA and BRAVO trials. Longer-term, Tesaro will have to continue its ‘license and development’ strategy by bringing in innovative drug candidates that can be leveraged with the company’s developmental and commercial capacity. We consider the clinical trial result of the remaining rolapitant Phase III, 832, a less important catalyst, because we are confident the trial will meet its primary endpoint. If, however, the trial misses its secondary endpoints similar to that of 833 and 834, the market may still view it as negative and cause temporary pressure on the stock. The outcome of NOVA and BRAVO is harder to predict, as is the case for most oncology Phase III trials. We assign higher probability in gBRCAmut patient (OC and BC) population than gBRCAwt in OC because niraparib’s (and several other PARP inhibitors) efficacy in this subpopulation is very robust. While we are positive on both trials’ outcomes, a negative outcome of either trial could have significant negative pressure on the stock, as niraparib represents 57.8% of the company’s pipeline valuation in our model.

TESARO | 21 February 2014 14

Valuation

We value Tesaro based on a modified DCF method (see Exhibit 12 for our assumptions) that examines revenues, possible milestone payments and royalties of rolapitant, niraparib and TSR-011 in the drugs’ current indications. We have applied success probabilities of 85%, 65% and 25% for these three products. We assigned 85% of success rate for rolapitant because positive results from two Phase III trials are already available and the likelihood of a positive outcome of the remaining Phase III is very strong. The total adjusted, after tax present value (rNPV) of the three pipeline drugs, using a discount rate of 12.5%, is $1,708m. By adding forecast 2014 year end cash of $143.4m, we derive a valuation of $1,851m, or $51.5/share ($48.7/share fully diluted).

The primary driver of our valuation is the probability of success of niraparib and rolapitant (Exhibit 13). A rolapitant and niraparib approval (100%) would increase the per share value (basic) to $69.5 (a 35% increase over our basic intrinsic value), whereas a rolapitant approval alone would increase it to $54.7 (6%). The per share value would be $74.8 (46%) if all three drugs are approved.

Exhibit 12: Tesaro valuation model Product Main indication Status Prob. of

success Launch

year Peak sales

($m) Patent

protection Royalty pay-out rate(%) rNPV

Rolapitant HEC/MEC CINV Phase III 85% 2015 752 2023 to 2028 Low 10' to 20's in US/EU, high single digit RoW

$657m

Niraparib gBRCAmut and wt OC Phase III 65% 2016 673 2027 to 2030 Low 10' worldwide $630m gBRCAmut mBC Phase III 65% 2017 493 2027 to 2030 Low 10’ worldwide $358m TSR-011 ALK+/TRK+ NSCLC and other Phase I 25% 2018 361 >2034 Mid- to slightly above single digit $63m Total pipeline $1,708m Cash and cash equivalents (YE14) $143.4m Total firm value $1,851m Total basic shares 35.9m Value per basic share $51.5 Diluted value per share $48.7 Source: Edison Investment Research

Exhibit 13: Tesaro rNPV ($ per basic share) based on rolapitant and niraparib clinical success rates Rolapitant probability 65% 85% 95% 100%

Niraparib probability

25% 30.3 34.6 36.7 37.8 35% 34.5 38.8 41.0 42.1 65% 47.2 51.5 53.7 54.7 85% 55.7 60.0 62.1 63.2 95% 59.9 64.2 66.4 67.4

100% 62.0 66.3 68.5 69.5 Source: Edison Investment Research

Financials

Tesaro reported a net loss of $23.3m for Q413, including G&A expenses of $4.5m and R&D costs of $18.9m. Cash burn for the quarter was $20.6m. The company had cash at end of December 2013 at $130m and subsequently it raised net proceeds of $94.1m by offering 3.2m shares at $31.74 per share, which increases the pro forma cash position to about $225m. We estimate the company’s cash utilisation will be $85.5m in 2014, with increased R&D costs in niraparib largely offset by completion of rolapitant Phase III, to end the year with cash of c $143m, which should be sufficient to support the company’s operation for rolapitant launch and key niraparib Phase III data. Cash utilisation in 2015 could increase to c $102m, including a $15m milestone payment to OPKO upon rolapitant launch and a c $24m SG&A increase due to rolapitant launch in the US.

TESARO | 21 February 2014 15

Exhibit 14: Tesaro financial summary $m 2011 2012 2013 2014e 2015e Year end 31 December IFRS IFRS IFRS IFRS IFRS PROFIT & LOSS Revenue 0.0 0.0 0.0 0.0 23.0 Cost of Sales 0.0 0.0 0.0 0.0 (4.6) Gross Profit 0.0 0.0 0.0 0.0 18.4 EBITDA (16.3) (71.8) (102.6) (112.1) (137.5) Operating Profit (before amort. and except.) (15.9) (69.9) (94.4) (101.9) (125.0) Intangible Amortisation 0.0 0.0 0.0 0.0 0.0 Exceptionals 0.5 8.0 1.9 0.0 0.0 Other (1.0) 0.0 0.0 0.0 0.0 Operating Profit (16.4) (61.9) (92.4) (101.9) (125.0) Net Interest 0.0 0.2 0.1 0.2 0.2 Profit Before Tax (norm) (16.9) (69.8) (94.3) (101.7) (124.8) Profit Before Tax (FRS 3) (16.4) (61.8) (92.4) (101.7) (124.8) Tax 0.0 0.0 0.0 0.0 0.0 Profit After Tax (norm) (16.9) (69.8) (94.3) (101.7) (124.8) Profit After Tax (FRS 3) (16.4) (61.8) (92.4) (101.7) (124.8) Average Number of Shares Outstanding (m) 0.51 13.70 31.56 36.35 37.55 EPS - normalised ($) (32.88) (5.09) (2.99) (2.80) (3.32) EPS - normalised and fully diluted ($) (32.88) (5.09) (2.74) (2.56) (3.02) EPS - (IFRS) ($) (31.90) (4.51) (2.93) (2.80) (3.32) Dividend per share (p) 0.0 0.0 0.0 0.0 0.0 Gross Margin (%) N/A N/A N/A N/A 80.0 EBITDA Margin (%) N/A N/A N/A N/A (597.7) Operating Margin (before GW and except.) (%) N/A N/A N/A N/A (543.3) BALANCE SHEET Fixed Assets 0.4 0.8 4.0 1.1 (1.8) Intangible Assets 0.0 0.0 0.0 0.0 0.0 Tangible Assets 0.4 0.8 4.0 1.1 (1.8) Investments 0.0 0.0 0.0 0.0 0.0 Current Assets 42.4 126.6 134.3 145.1 47.3 Inventory 0.0 0.0 0.0 0.0 0.0 Accounts receivable, net 0.0 0.0 0.0 0.0 0.0 Cash and cash equivalents 39.8 125.4 130.3 143.4 45.5 Other 2.6 1.2 4.0 1.7 1.8 Current Liabilities (3.6) (11.7) (12.4) (16.0) (22.0) Creditors (3.6) (11.7) (12.4) (16.0) (22.0) Short term borrowings 0.0 0.0 0.0 0.0 0.0 Long Term Liabilities (0.0) 0.0 (0.0) 0.0 0.0 Deferred revenue, long term 0.0 0.0 0.0 0.0 0.0 Other long term liabilities (0.0) 0.0 (0.0) 0.0 0.0 Net Assets 39.3 115.7 125.9 130.2 23.5 CASH FLOW Operating Cash Flow (14.1) (42.8) (84.6) (85.5) (102.4) Net Interest 0.0 0.0 0.1 0.2 0.2 Tax 0.0 0.0 0.0 0.0 0.0 Capex (0.1) (0.2) (0.4) (0.6) (0.5) Acquisitions/disposals (0.5) (8.0) (1.9) 0.0 0.0 Financing 52.1 136.3 92.5 96.5 5.0 Dividends 0.0 0.0 0.0 0.0 0.0 Net Cash Flow 37.4 85.4 5.7 10.6 (97.7) Opening net debt/(cash) (2.5) (39.8) (125.4) (130.3) (143.4) HP finance leases initiated 0.0 0.0 0.0 0.0 0.0 Other (0.2) 0.2 (0.8) 2.4 (0.2) Closing net debt/(cash) (39.8) (125.4) (130.3) (143.4) (45.5) Source: Company reports and Edison Investment Research

TESARO | 21 February 2014 16

Contact details Revenue by geography 1000 Winter Street, Suite 3300 Waltham, MA 02451 US +1 339 970 0900 www.tesarobio.com

N/A

CAGR metrics Profitability metrics Balance sheet metrics Sensitivities evaluation EPS 11-15e N/A EPS 13-15e N/A EBITDA 11-15e N/A EBITDA 13-15e N/A Sales 11-15e N/A Sales 13-15e N/A

ROCE 14e N/A Avg ROCE 11-15e N/A ROE 14 N/A Gross margin 14e N/A Operating margin 14e N/A Gr mgn / Op mgn 14e N/A

Gearing 14e N/A Interest cover 14e N/A CA/CL 14e N/A Stock days 14e N/A Debtor days 14e N/A Creditor days 14e N/A

Litigation/regulatory Pensions Currency Stock overhang Interest rates Oil/commodity prices

Management team Chief executive officer and founder: Leon (Lonnie) O Moulder, Jr. President and co-founder: Mary Lynne Hedley, PhD Mr Moulder previously served as vice chairman of the board, president and CEO of Abraxis BioScience, as vice chairman and executive VP of Eisai Corp of North America, and as president and CEO and as member of the board of MGI Pharma. Mr Moulder earned a BS in pharmacy from Temple University and an MBA from the University of Chicago. He is currently on the boards of Cubist Pharma and Trevena.

Dr Hedley previously served as EVP and CSO of Abraxis BioScience, as EVP of Eisai Corp of North America, as EVP and CSO of MGI PHARMA, and as founder and CEO of ZYCOS. She was a postdoctoral fellow at Harvard University and earned a BS in microbiology from Purdue University and a PhD in immunology from the University of Texas, Southwestern Medical Center.

Executive vice president, CFO and co-founder: Richard J Rodgers Chairman of the board: David M Mott Mr Rodgers previously served as SVP of finance of Abraxis BioScience, and as SVP of finance, controller and chief accounting officer of MGI PHARMA. He has held finance and accounting positions at several private and public companies, including Arthur Anderson. Mr Rodgers earned his BS in financial accounting from St Cloud State University and his MBA in finance from the University of Minnesota.

Mr Mott has served as a general partner of New Enterprise Associates. Previously he served as EVP of AstraZeneca and CEO of MedImmune. He received a BA from Dartmouth College. Mr Mott serves as the chairman of the board or board member of 3-V Biosciences, Mersana, Zyngenia, Ardelyx, Epizyme, Omthera and Prosensa.

Principal shareholders (%) NEA Management Company LLC 30.1 Wellington Management Co., LLP 9.74 InterWest Partners 7.55 Kleiner Perkins Caufield & BY 5.48 T. Rowe Price Associates 5.15 FMR LLC 5.13 Perceptive Advisors LLC 4.62

Companies named in this report Merck (MRK-NYSE), Pfizer (PFE-NYSE), Novartis (NVS-NYSE), Sanofi (SNY-NYSE), AstraZeneca (ASN-NYSE), BioMarin (BMRN-NASDAQ), Clovis Oncology (CLVS-NASDAQ), Amgen (AMGN-NASDAQ), Helsinn (private), Ignyta (private)

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority (www.fsa.gov.uk/register/firmBasicDetails.do?sid=181584). Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is not regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com DISCLAIMER Copyright 2014 Edison Investment Research Limited. All rights reserved. This report has been commissioned by TESARO and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is not registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2014. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960 Schumannstrasse 34b 60325 Frankfurt Germany

London +44 (0)20 3077 5700 280 High Holborn London, WC1V 7EE United Kingdom

New York +1 646 653 7026 245 Park Avenue, 39th Floor 10167, New York US

Sydney +61 (0)2 9258 1161 Level 25, Aurora Place, 88 Phillip Street, Sydney NSW 2000, Australia

Wellington +64 (0)48 948 555 Level 15, 171 Featherston St Wellington 6011 New Zealand