It's nice to have a backup plan -- especially in biotech.
In the short term, AVEO Pharmaceuticals
But there's more to AVEO than just tivozanib. The company has a phase 2 drug, ficlatuzumab, that's being tested in lung cancer in combination with AstraZeneca's
Further back, in the discovery phase, AVEO has been working on developing drugs that target the recepteur d'origine nantais, or RON receptor for short. The company announced today that it had licensed the RON program to Johnson & Johnson
AVEO gets $15 million up front -- half in cash and half as an equity investment -- and potentially up to $540 million in milestone payments. By making it to market, AVEO will receive tiered, double-digit royalties on sales. Johnson & Johnson is responsible for all the costs associated with developing the drugs from here on out.
AVEO could certainly have gotten more upfront cash if it had pushed through proof of concept phase 2 trials, but licensing early is still the best move for AVEO. This way, the company can reserve its cash for the tivozanib and ficlatuzumab programs. And AVEO is built on a drug discovery platform that should produce additional drug targets. Once tivozanib is approved and bringing in revenue, AVEO will be in a better place to develop drugs on its own.
Of course, at that point, we won't be calling it a backup plan.
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Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson and Pfizer. Motley Fool newsletter services have recommended creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.