AVEO Pharmaceuticals (AVEO) Stock: Climbing On Licensing Agreement!

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AVEO Pharmaceuticals, Inc. (NASDAQ: AVEO)

AVEO Pharmaceuticals is having an incredible day in the market today after an early morning announcement of a licensing agreement. The agreement surrounds the rights to tivozanib, a drug designed for the treatment of renal cell carcinoma. Today, we’ll talk about the agreement and what it means for AVEO, take a look at how the market is reacting to the news, and discuss what we can expect to see from the stock moving forward.

AVEO Enters An Agreement With EUSA Pharma

AVEO announced early this morning that its oncology unit had entered into a licensing agreement with EUSA Pharma. Under the agreement, AVEO has granted EUSA Pharma rights to tivozanib in the European market as well as regions outside of North America and Europe such as South America and South Africa. Under the agreement, the licensing deal could create revenue that surpasses $396.5 million for AVEO.

Under this new agreement EUSA Pharma has agreed to pay AVEO an upfront research and development payment in the amount of $2.5 million. Following the $2.5 million payment, AVEO could generate an additional $394 million based on achievements in development, regulatory, and commercialization milestones. On top of the $396.5 million that is on the table for research, development and milestones, EUSA has agreed to pay AVEO a tiered royalty on sales of tivozanib that ranges from the low double digits to mid 20%. In exchange for the payments, AVEO has agreed to allow EUSA Pharma to submit a Marketing Authorization Application for tivozanib as a first in line treatment for advanced renal cell carcinoma to the European Medicines Agency. It is expected that this application will be submitted in the first quarter of 2016. In a statement, Michael Baily, CEO and president of AVEO had the following to say:

Between our partnerships with EUSA and our previous agreements with Ophthotech and Pharmastandard, we have a solid foundation to potentially generate near-term capital and long-term value for this important asset while retaining commercial rights to tivozanib in oncology in North America.”

How AVEO Reacted To The News

As mentioned above, AVEO is having an incredible day in the market. After all, any time we see positive news surrounding a publicly traded company, we can expect to see gains in the value of the stock. With that said, AVEO is currently (11:58) trading at $1.28 per share after a gain of 24.27% so far today.

What We Can Expect To See From AVEO Moving Forward

Moving forward, I have an overwhelmingly positive opinion of what we can expect to see from AVEO. Tivozanib is likely to be the company’s golden egg laying goose in the long run. Also, it’s important to keep in mind that AVEO made the right moves with regard to the licensing of this treatment. The company needed capital to grow further, and the licensing of tivozanib is a great way to generate that capital. However, AVEO didn’t give away the entire house. Under the agreement, AVEO will retain commercialization rights in the United States, a crucial market for this type of treatment. However, by licensing commercialization in Europe and other regions to another company, it has built the capital it needs to turn tivozanib into a success without giving away all rights to future profits that are likely to come as the treatment hits the market. In my opinion, this move was absolutely genius on the part of AVEO and is likely to lead to gains in the long run.

What Do You Think?

Where do you think AVEO is headed and why? Let us know your opinion in the comments below!

[Image Courtesy of Flickr]

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