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 sunitinib (Sutent) and Bayer and Onyx Pharmaceuticals’ sorafenib (Nexavar). Researchers hope that more selective VEGF receptor blockers will be more effective, and that they might avoid blocking similar receptors on healthy cells—which can cause side effects.

Aveo has a pretty clear idea of how this drug ought to perform in this big study of 517 patients. The company already conducted a mid-stage, placebo-controlled trial of 272 patients which showed that tivozanib was able to keep tumors from spreading for a median time of 11.8 months—a finding that was reported at the American Society of Clinical Oncology meeting in June 2009. Aveo has now seen this key measurement of effectiveness stretch out as long as almost 15 months, Ha-Ngoc has said.

Based on that finding, Aveo structured this ongoing pivotal trial to give itself the best chance of success—winning FDA approval. The company designed the study to directly compare how patients do on its treatment, versus the currently approved drug from Bayer and Onyx. This pivotal study is designed to be a success if it can keep tumors from spreading for at least three more months than the Bayer/Onyx comparator, Ha-Ngoc says. Bayer and Onyx’s drug has shown in separate studies that it can hold tumors in check for a median time of about 5.5 months, or 6.7 months in the very best case, Ha-Ngoc has said. So essentially, if history repeats itself from Aveo’s past experience, and past studies from the competition, then Aveo should be able to easily add another three months of what is known as progression-free survival.

“We share AVEO’s vision for oncology drug development and confidence that the TIVO-1 trial is positioned for success,” said Masafumi Nogimori, president and chief executive officer of Astellas, in a statement.

But if Aveo really does nail this pivotal trial with results that will satisfy the FDA and regulators around the world, it will soon need to think about how to extend the franchise into other tumor types.

This is a key point where the Astellas deal fits in. However, the deal helps a small company like Aveo with 150 employees to develop the drug for more types of tumors, building on the firm’s current work in kidney, breast, and colon cancers. (The firm isn’t yet saying what those new areas will be.) Astellas has also shown that it is committed to the oncology field, having bought the cancer drug developer OSI Pharmaceuticals last year for $4 billion, Ha-Ngoc points out.

While Aveo is giving up some ownership of its lead drug in this deal, Ha-Ngoc says that the Astellas partnership also makes the potential size of the business around the product larger than before. “I always say, in laymen’s terms, that I don’t mind sharing the pie,” he says, “as long as the partnership would allow me to get to a bigger pie faster.”

About 58,000 people in the U.S. get diagnosed with kidney or renal cancer each year, and about 13,000 die from it each year, according to the American Cancer Society.

Renal cell carcinoma, which accounts for 90 percent of kidney malignancies, is highly resistant to traditional chemotherapy drugs and existing treatments typically offer less than a year of progression-free survival and cause side effects, according to Aveo.

Aveo is also one of the fastest-growing biotechs in the Boston area, where it was founded in 2002 based on research at Dana-Farber Cancer Institute. Ha-Ngoc says that the company plans to add 70-75 workers this year, growing the ranks of the firm by about 50 percent from the 150 people it now employs.

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