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Aveo Soars as Astellas May Pay $1.3 Billion for Cancer Drug

Astellas to Pay Aveo as Much as $1.3 Billion for Drug
The Astellas Pharma Inc. headquarters in Tokyo. Photographer: Haruyoshi Yamaguchi/Bloomberg News.

Aveo Pharmaceuticals Inc. gained as much as 15 percent in Nasdaq trading after Astellas Pharma Inc. agreed to pay as much as $1.3 billion for the rights to develop and sell an experimental cancer treatment that may compete with medicines from Pfizer Inc. and Bayer AG.

Aveo rose $1.24, or 8.9 percent, to $15.12 at 10:01 a.m. New York time in Nasdaq Stock Market composite trading, after earlier reaching $16 for the biggest intraday increase since Nov. 30. Before today, the shares gained 54 percent since listing on the Nasdaq on March 12. Astellas, Japan’s second-largest drugmaker, rose 1.5 percent to 3,315 yen in Tokyo, its biggest gain in two weeks.

The drug, tivozanib, is 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 in a statement. The study compares the medicine with Nexavar, a treatment from Onyx Pharmaceuticals Inc. and Bayer AG that generated $842 million in 2009.

The purchase brings a potential blockbuster drug to Astellas, which has identified cancer as an area for earnings growth, said Atsushi Seki, an equities analyst at Barclays Plc in Tokyo. If approved, tivozanib will become the latest member of a class of anti-cancer drugs known as VEGF receptor inhibitors that includes Nexavar and Pfizer’s Sutent.

“It’s a bit expensive, but it’s a good purchase for Astellas,” Seki, who rates the stock “equalweight,” said by telephone today. “The drug appears to stop the progression of cancer longer than Nexavar, based on data currently available.”

Blocks Blood Supply

VEGF receptor inhibitors prevent the production of new blood vessels so tumors don’t grow. Sutent 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 Canaccord 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, and 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.

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

Rivals Sutent’s Effectiveness

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.

Studies in 272 patients released last year showed people 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 enable Aveo to accelerate development and testing of the drug in breast and colon cancer, he said.

Astellas will pay Aveo as much as $575 million if the treatment is approved by regulators and $780 million or more if it achieves certain sales targets.

The companies will share equally all costs and profits from sales of the drug in North America and Europe, they said in the statement dated Feb. 16. Outside those regions, Astellas will pay development and marketing costs and a royalty on sales, according to the statement.

Astellas will book the one-time payment to Aveo in the quarter ending March and maintain its full-year earnings forecast, the Japanese drugmaker said in a separate statement.

Aveo bought rights to develop tivozanib from Kyowa Hakko Kirin Co., a drug unit of Kirin Holdings Co., Japan’s second-biggest brewer, in December 2006, Astellas said.

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

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