Aveo Oncology agreed to be acquired by Korea's LG Chem for $566 million on Tuesday, and Aveo stock skyrocketed to near a two-year high.
Under the terms of their agreement, LG Chem will pay $15 per share of Aveo stock. In response, shares soared 42.4% to close at 14.92 on today's stock market.
SVB Securities analyst Andrew Berens says Aveo recently received notice it could win a longer-than-expected patent term for its drug, Fotivda. Previously, the patent had an expiration date in 2028. Now, the cancer drug might have protection until 2039, he said in a report to clients.
"We believe that this potentially extended (intellectual property) may have sealed the deal, as it could be worth an incremental $12 per share," Berens said.
Aveo Stock Trades On Kidney Cancer Efforts
LG Chem will add Aveo to its life sciences division, with the intention of establishing LG's commercial presence in cancer treatment with Fotivda. Fotivda won Food and Drug Administration approval in March 2021 to treat adults with a severe form of kidney cancer.
"In addition, the combined company will have significantly greater resources to develop and commercialize both companies' robust clinical pipelines of innovative oncology medicines," LG Chem and Aveo said in a news release.
Once the deal wraps — expected in early 2023 — Aveo will establish and operate as LG Chem's U.S. commercial operations for oncology.
The deal represents a 43% premium to Aveo stock's closing price on Monday. It's also a 71% premium to its 30-day, volume-weighted average price.
Aveo stock has a best-possible Relative Strength Rating of 99. This means shares trade in the top 1% of all stocks in terms of 12-month performance, according to IBD Digital. Shares also have a strong Composite Rating of 95, which measures fundamental and technical metrics on a 1-99 scale.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
