Is AVEO the Next Aquinox for Traders?

By Chris Lange Published Aug 17, 9:45AM EDT

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AVEO Pharmaceuticals Inc. (NASDAQ: AVEO) made waves in early trading indications Monday on news of a licensing agreement with Novartis A.G. (NYSE: NVS). Both companies announced an exclusive, worldwide license agreement for the development and commercialization of AVEO’s humanized inhibitory antibody targeting growth differentiation factor 15 (GDF15), AV-380 and related antibodies.

Over the past month, AVEO has suffered, and shares were down nearly 28% to Friday’s close. This deal with Novartis is a welcome savior to this recent slide. What will be interesting to see in Monday’s trading session and throughout the week is if traders will treat AVEO the same way that Aquinox Pharmaceuticals Inc. (NASDAQ: AQXP) was treated in the past week.

Under its terms of the agreement with Novartis, AVEO will receive an upfront payment of $15 million and will be eligible to receive reimbursement, clinical, sales and regulatory-based milestone payments totaling $311 million, assuming a successful advancement. The company also will be eligible to receive tiered royalties on product sales ranging from high single digits to a low double digit. Novartis will be responsible for all clinical development, manufacturing and commercialization activities and costs associated with the product.

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For some background: Cachexia is a complex metabolic syndrome associated with malnutrition and severe involuntary weight loss due to the loss of muscle and fat tissue, as well as the clinical manifestation of anemia, inflammation and suppression of immune functions. While GDF15 is a pro-inflammatory cytokine whose elevated circulating levels have been correlated with cachexia in cachectic cancer patients and several animal models of cancer cachexia.

Preclinical data show that inhibition of GDF15 results in a switch from catabolism to anabolism, suggesting that GDF15 inhibition with AV-380 may reverse the effects of cachexia.

Michael Bailey, president and CEO of AVEO, said:

AV-380 holds great promise as a potential treatment for cachexia secondary to multiple disease states, including cancer, chronic kidney disease, congestive heart failure and chronic obstructive pulmonary disease. Novartis brings resources and expertise to bear on advancing this program, which we believe provides the optimal path forward toward realizing its full potential.

In early trading Monday, AVEO shares were up 88% at $2.20. The stock has a consensus analyst price target of $3.00.

Novartis shares down 0.2% at $102.27, and the consensus price target is $113.50.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.