Astellas to Pay Aveo as Much as $1.3 Billion for Drug

Astellas Pharma Inc., Japan’s second-biggest drugmaker, said it will pay Aveo Pharmaceuticals Inc. as much as $1.3 billion for the rights to develop and sell an experimental cancer drug that may compete with medicines from Pfizer Inc. and Bayer AG.

The drug, tivozanib, is now being tested for kidney cancer in the last of three phases normally required for U.S. approval, Aveo, of Cambridge, Massachusetts, and Tokyo-based Astellas said today in a statement. The study compares the medicine with Nexavar, a treatment from Onyx Pharmaceuticals Inc. and Bayer AG, which generated $842 million in 2009.

If approved, tivozanib will become the latest member of a class of anti-cancer drugs known as VEGF receptor inhibitors that prevent the production of new blood vessels so tumors don’t grow. Nexavar is a member of that class, as is Pfizer’s Sutent, which had sales of $1.1 billion last year as a therapy for several cancer types including kidney.

“The Aveo drug appears to be the best of that class,” based on data released last year, said George Farmer, an analyst with Cannacord Genuity in New York. “Our view is it will probably be competitive with Sutent.”

Sutent is approved as an initial therapy for renal cell carcinoma while Nexavar is used by patients who don’t improve or regress after being treated with other drugs, Farmer said. While tivozanib won’t likely reduce sales and use of Nexavar, it may replace Sutent if it’s shown to work better, he said.

Rivals Sutent Effectiveness

Early studies suggest tivozanib is more effective and causes fewer side effects than Sutent, said Tuan Ha-Ngoc, Aveo’s chief executive officer.

While Sutent has “reasonable efficacy,” many patients “can’t stay on the drug for a long period of time,” Ha-Ngoc said in a telephone interview today.

Studies in 272 patients released last year showed that patients taking tivozanib kept their cancer from worsening for 14.8 months, compared with 11 months in studies using Sutent, Ha-Ngoc said.

The deal with Astellas will allow Aveo to accelerate development and testing of the drug in breast and colon cancer, Ha-Ngoc said.

Astellas will pay Aveo as much as $575 million if the treatment is approved by regulators and as much as $780 million or more if it achieves certain sales targets. The companies said they will share equally all costs and profits from sales of the drug in North America and Europe. Outside those regions, Astellas will pay development and marketing costs and a royalty on sales, the companies said.

Kidney cancer is the eighth most commonly diagnosed cancer in men and women in the U.S. An estimated 200,000 people worldwide were diagnosed in 2010 with the disease, which killed more than 100,000, the companies said.

Aveo jumped 22 percent to $16.99 in extended trading. The shares lost 28 cents, or 2 percent, to $13.88 at 4 p.m. New York time in Nasdaq Stock market composite trading before the deal was announced. Aveo shares have gained 54 percent since they began public trading on March 12. Astellas fell 1.5 percent to 3,265 yen in Tokyo trading.

To contact the reporter on this story: Rob Waters in San Francisco at rwaters5@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net.

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