Aveo Pharmaceuticals and Novartis are at odds over how to end a three-year-old, up-to-$326 million exclusive worldwide license agreement to develop and commercialize Aveo’s humanized inhibitory antibody targeting growth differentiation factor 15 (GDF15), AV-380, and related antibodies.

In a regulatory filing today, Aveo said Novartis sent the company a notice of termination of the agreement, dated June 29, one day after the biotech sent the pharma giant formal notice of a dispute “regarding Novartis’ compliance with its diligence obligations with respect to the development of the AV-380 program.”

The dispute resolution process under the license agreement requires talks with Novartis executives. Should those talks prove unsuccessful, Aveo said, it could pursue an arbitration case against Novartis.

Aveo contends that Novartis’ notice of termination was without cause. As a result, Aveo asserted, it will trigger the termination of all licenses and other rights granted by the company to Novartis related to the AV-380 development program, and the transfer to Aveo of all preclinical, technical, manufacturing, and other data developed by Novartis.

Aveo added that Novartis will have to grant it an irrevocable, exclusive, fully paid-up license, with a right to sublicense, any patent rights or know-how controlled by Novartis as of the termination date for the AV-380 Program, which will take effect August 28, according to Novartis’ notice of termination, dated June 29.

Under the licensing agreement, announced in August 2015, Novartis agreed to pay Aveo $15 million upfront and up to $311 million in payments tied to reimbursement, clinical, sales, and regulatory-based milestone payments assuming successful advancement of the product.

Targeting Cachexia

AV-380 is a preclinical first-in-class, potent, humanized inhibitory antibody that was to be developed as a potential treatment for cachexia, 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.

GDF15 is a proinflammatory cytokine whose elevated circulating levels have been correlated with cachexia in cachectic cancer patients and several animal models of cancer cachexia.

Aveo has reasoned that a proinflammatory state may be responsible for many of the symptoms associated with cachexia. The company has cited preclinical data showing that inhibition of GDF15 results in a switch from catabolism to anabolism—a finding that according to the company suggests that GDF15 inhibition with AV-380 may reverse the effects of cachexia, which affects some 5 million Americans with advanced cancer and other chronic diseases.

“Novartis has informed the Company that the AV-380 Program is an important asset and that the previously disclosed development delays, and ultimately the Novartis decision not to pursue further development is the result of changes in management and strategic priorities within Novartis,” Aveo stated in today’s filing.

As of March 31, according to Aveo’s Form 10-Q quarterly regulatory filing for the first quarter of this year, “Novartis has informed us that the AV-380 program development continues, but that timelines for development are uncertain.”

Also according to the filing, Aveo was eligible to receive up to $51.2 million in potential clinical and development milestone payments; up to $105 million in potential regulatory milestone payments tied to the commencement of clinical trials and to regulatory approvals of products developed in the U.S., the European Union and Japan; and up to $150 million in potential commercial milestone payments based on annual net sales of such products.

If the product is commercialized, Aveo added, it would be eligible to receive tiered royalties on net sales of approved products ranging from the high single digits to the low double digits.

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