Aveo Pharma Lands $1.4B Deal with Astellas, A Few Months Ahead of Cancer Trial Result

2/16/11

Aveo Pharmaceuticals has beefed up its cash coffers as it heads into the home stretch of a vitally important clinical test of its lead anti-cancer drug. The Cambridge, MA-based biotech company (NASDAQ:AVEO) has struck its largest deal ever with the major Japanese drugmaker Astellas Pharma.

Tokyo-based Astellas is paying Aveo $125 million initially (composed of a $75 million licensing fee and $50 million in research and development funding) and up to $1.3 billion in potential milestone payments for certain rights to Aveo’s lead cancer treatment, tivozanib. The deal brings an influx of cash to Aveo as the company completes a pivotal clinical trial of the drug in patients with an aggressive kidney cancer called advanced renal cell carcinoma (RCC).

The companies said that they have agreed to share all development costs and potential profits from the drug in North America and in countries of the European Union, two of the key markets for the treatment. (Read the company‘s  press release for all the ways the drug rights are now sliced and diced among Aveo, Astellas, and Aveo’s previous partner for the Asian market, Kyowa Hakko Kirin.)

Aveo has no drugs on the market, so its investors, including those that participated in its March 2010 initial public offering, are initially betting on the success of its lead drug tivozanib to drive the value of its shares. And several of its major shareholders are right here in the Boston area, including Weston, MA-based biotech giant Biogen Idec (NASDAQ:BIIB), the mutual fund giant Fidelity Investments, and the venture firm Highland Capital Partners in Lexington, MA, according to regulatory filings. A major event for Aveo and its investors will be when the company is expected to announce results from the pivotal trial of the drug in advanced RCC sometime in mid-2011.

Tuan Ha-Ngoc, Aveo’s president and CEO, says that his firm finished 2010 with about $140 million in cash and didn’t necessarily need to form a partnership with Astellas to advance tivozanib.

Aveo was clearly in a strong position before cutting this deal, and was getting kudos from Wall Street for it. The company completed enrollment of its pivotal study, called TIVO-1, of 517 cancer patients back in August—about six months faster than it forecasted. That’s a rare thing in oncology drug development, where there are a lot of clinical trials competing for the time and attention of doctors and nurses in major cancer centers. Wall Street, which is more accustomed to seeing companies make excuses about missing deadlines, reacted very positively, driving Aveo shares up from $9 at the IPO in March to $14.62 at year’s end.

“When you see that kind of enrollment curve, it immediately suggests good execution, and enthusiasm in the medical community,” Ha-Ngoc told my Xconomy colleague Luke Timmerman during an interview last month at the JP Morgan Healthcare Conference in San Francisco. “To enroll that many patients in six months is almost unheard of.”

One reason to get a big partner, then, is because Aveo needs to go toe-to-toe with some very big competitors. The Aveo drug is an oral pill designed to very specifically block three different receptors of a protein called VEGF-which allows formation of new blood vessels that nourish tumors. This drug is supposed to be a more selective blocker of VEGF than two currently marketed kidney cancer drugs that work in a similar way-Pfizer’s … Next Page »

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