AVEO Pharmaceuticals, Inc. (NASDAQ: AVEO) is having an impressive day in the market today, up 37.79% at the moment and climbing. Although, the company hasn’t issued any news, the gains seem to be the result of rumors that it may be taken over relatively soon.
Update: AVEO announces positive data. No news on the rumored acquisition as of yet, but this sweetens the pot if there is indeed a buyer!
There’s one big question here. Will a takeover actually happen? The truth is that only a psychic could answer that question with surety, and I’m not one of them. However, what we can do is look at AVEO as a potential takeover target, and see if a deal would even make sense. Let’s take a look:
The Value That AVEO Would Offer Its Buyer
The first thing that we have to look at is what AVEO Pharmaceuticals has to offer a potential buyer. While a market cap of around $150 million isn’t massive, to get acquisition interest, the buyer would have to see a value of well over that to want to make a move.
The key value proposition for a buyer would be Tivozanib. The treatment was approved by the regulatory authorities in Europe and other countries as a first line option for those with Renal Cell Carcinoma, also commonly referred to as RCC. It is awaiting approval by the FDA for the same.
AVEO teamed up with EUSA for the commercialization of the treatment, which is currently ongoing. Moreover, the company is actively working to expand the label for Tivozanib with the following studies:
- Tivo-3 – This is a Phase 3 registrational study for Tivozanib as a third-line option for patients suffering from Renal Cell Carcinoma.
- TiNivo – This is a Phase 2 combination trial. The trial includes the use of Tivozanib in combination with Opdivo for the treatment of RCC.
- HCC – Finally, AVEO is working on a Phase 2 trial for Tivozanib as a treatment option for those suffering with Hepatocellular Carcinoma.
It’s worth mentioning that the RCC market is a massive one. In fact, it is expected that by 2022, the market will be worth $6.3 billion. Moreover, it is growing with an impressive CAGR of 5.4%.
Considering the fact that the company already has one approved indication in this massive market, the value of AVEO is clear for the right buyer.
To sweeten the pot, the company also has candidates other cancer types including SCCHN, AML, Pacreatic, and Esophogeal. The company also has a strong pipeline of candidates outside of the oncology space. All in all, it would be easy to argue that at its current market cap, AVEO Pharmaceuticals would make a perfect takeover candidate.
Who Would Buy AVEO
While the rumor suggests that AZN is interested in buying the company, there are a number of perfect buyers that would likely see AVEO as a perfect takeover candidate. Some of the top that come to mind include:
- Novartis – Novartis has recently made two acquisitions with values over $1 billion each. The company recently picked up both Advanced Accelerator Applications and Endocyte in massive deals. With a spending spree at the helm and a hunger for solid oncology candidates, Novartis could be interested.
- Amgen – Due to generic competition, Amgen is looking for strategic options. The key option that it’s looking at is the opportunity to make accretive acquisitions. Considering this, I wouldn’t be surprised to find out that Amgen is interested in AVEO.
- Pfizer – Pfizer is also a big player in the oncology space. In 2014, 2015 and 2016, the company was on a figurative acquisition spree. However, there hasn’t been one in some time. If there’s ever a time for Pfizer to make a move to show that it’s ready to start picking up new assets, now is it.
Is An Acquisition Going To Happen?
This question is one that is nearly impossible to answer. At the end of the day, all we have right now is a rumor saying that the company is in talks to be taken over. But rumors happen all of the time, and they are very rarely valid.
Nonetheless, an argument could be made that with the assets that the company has to offer a buyer and the relatively low market cap it currently holds, it would make a strong candidate. Moreover, there are a couple of big companies that have a clear interest in accretive acquisitions at the moment, and several others with dep pockets that could stand to gain from an acquisition of AVEO.
With that said, anything can happen. While the company makes a great takeover target and buyers are out there, rumors are just that, rumors.
Considering The Risks
First and foremost, it’s important to keep in mind that all of this talk about a coming acquisition is based on a rumor. There is no validation from either side of the coin that a deal is going to happen. Moreover, rumors are one of the most common forms of market manipulation.
Considering this, while I do believe that AVEO represents a strong acquisition target, and that there are plenty of potential buyers out there, everything about the acquisition rumor is speculative. Making a speculative move could be a very high risk play, and you should consider this risk if you plan on making a move based on the rumors.