AVEO Oncology (NASDAQ:AVEO) stock jumped 40% in premarket trading after LG Chem (OTCMKTS:LGCLF) said it would buy the company for $15/share in cash.
The price implies a value of $566 million for AVEO. AVEO closed on Oct. 17 at $10.48/share, a market capitalization of $347 million.
Even before the purchase was announced AVEO was one of 2022’s rare winners, up 123%.
AVEO won approval last year for Fortivda, a tyrosine kinase inhibitor (TKI) for patients with advanced kidney cancer.
LG Chem said AVEO will become the “U.S. Commercial Foundation for LG Chem Life Sciences’ Oncology Segment.”
The Fortivda Story
Fortivda has done well since its approval. June quarter sales of $25.3 million were three times the $7.56 million achieved a year earlier.
Upon approval, AVEO put 65 sales reps on the drug and set a price of $24,150/month on it. It is usually compared with Nexavar from Bayer AG (OTCMKTS:BAYRY).
Bayer’s competition is one good reason for the sale. Another is the drug’s troubled history. As tivozanib, it repeatedly failed to gain approval, going back to 2013. Approval came only after AVEO narrowed its target to relapsed/refractory kidney cancer, in other words, cancer that has returned and failed to respond to other drugs.
While AVEO is finally drawing revenue from fortivda, it is still losing money. Quarterly losses, however, have narrowed 40% since approval, coming in at $8.32 million for the June quarter, and $13.6 million a year earlier.
AVEO also has a drug called ficlatuzumab under a “fast track” approval process with the FDA for the treatment of repeated skin cancers of the head and neck. Other similar cancer drugs are being tested with Bristol Myers Squibb (NYSE:BMY) and AstraZeneca (NYSE:AZN).
AVEO Stock: What Happens Next?
The LG Chem deal represents a happy ending for AVEO management as well as investors.
LG Chem will have the resources to fight for approvals on its cancer drugs, market those drugs effectively around the world, and to maintain control over new compounds.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
