Here is an interesting one. AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO) is picking up some early week strength on the back of rumors that the company is in discussions with another company regarding takeover of the former by the latter. The interested party is reportedly Jazz Pharmaceuticals plc – Ordinary Shares (NASDAQ:JAZZ), the Dublin, Ireland based healthcare company that is currently valued at just shy of $10 billion.
The rumor has hit press on the back of this release and it’s something that, generally, we wouldn’t pay much attention to without further substantiation. In this instance, however, there is an interesting element of the situation suggests it might be worth keeping one eye on moving forward.
Our regular readers will know that AVEO is a company that we have covered on a few occasions over the last six months or so. We first highlighted it as part of our Biotech Catalyst series back in June, with the outcome of a regulatory application serving up a potential near-term reevaluation. The catalyst played out in our favor and the stock ran on the news. Specifically, we were looking at a drug called tivozanib and a program designed to underpin an approval for said drug in the treatment of patients with advanced renal cell carcinoma.
Fast forward to today and the drug is now approved in Europe following a successful advisory panel meeting and sentiment surrounding an expanded global approval effort is pretty positive.
So what is the deal with the latest rumors?
Well, as mentioned, the press release highlights Jazz as a potential suitor and suggests that the discussions are ongoing and could result in Jazz paying a substantial premium to current price if and when the deal goes through. Rumors right now put the acquisition price in the $15-19 range per share. To offer up some perspective, AVEO currently trades for just $3.66 a share. That’s a more than 300% premium using the conservative, low end of the just mentioned price range.
As noted above, these sorts of rumors are pretty common at this end of the biotechnology space and just because a blog has put out a press release pertaining to have some insider information doesn’t mean that the deal is a sure thing – not even close. So why are we paying it any attention?
Well, if it was any other company, we wouldn’t be. That it’s Jazz, however, makes this interesting?
Remember above when we said that tivozanib is approved in Europe? It is, but AVEO isn’t responsible for the commercialization campaign on the continent. Instead, the company has licensed the drug out to a company called EUSA Pharma, Inc, a Hertfordshire, UK based pharmaceutical company that operates a sort of distribution/supply type network in Europe and the US.
Again, why is this important?
EUSA Pharma, Inc is a privately held company and its parent organization is none other than Jazz Pharmaceuticals. So, to put all this another way, AVEO is already in bed with Jazz as the latter (or, more accurately, the latter’s subsidiary) is responsible for pushing the company’s lead portfolio asset in Europe. We don’t know the exact terms on which the AVEO, EUSA license are based, but the suggestion that Jazz would want to pick up rights to the drug in the US and elsewhere isn’t far fetched at all. Further, that the company might want to absorb AVEO as opposed to inking a bunch of additional licensing deals (which are going to get more and more costly as the drug picks up a regulatory green light in more and more regions) isn’t much of a stretch to imagine.
It’s a speculative claim, sure. These are rumors that are yet to be substantiated in any sense of the word. With that said, however, given the large potential for upside on a takeover in the above-discussed range, this one could well be worth a punt.
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Disclosure: We have no position in AVEO and have not been compensated for this article.