In return for a whopping $1.4 billion deal, Astellas gets its hands on AVEO's tivozanib, currently in development for kidney cancer.
If successfully developed it will go up against similar products from Pfizer and Bayer.
If approved, it will become the latest of a class of compounds known as VEGF receptor inhibitors that prevent the production of new blood vessels around tumours.
The drug is currently in phase III studies that compare it directly against Nexavar, therefore the study results will be studied closely. Early results are suggested to show the drug to be more effective with fewer side effects than Sutent.
Pfizer's Sutent, a drug from the same family and used to treat kideny as well as other cancers, netted the company sales of $1.1 billion in 2010. Bayer's competing product Nexavar, netted sales of $842 million in 2009.
The deal with Astellas will allow Aveo to accelerate development and testing of the drug in breast and colon cancer, according to AVEO.
Astellas will pay Aveo as much as $575 million if the treatment is approved by regulators and as much as $780 million or more if it achieves certain sales targets. The companies said they will share equally all costs and profits from sales of the drug in North America and Europe. Outside those regions, Astellas will pay development and marketing costs and a royalty on sales, the companies said.
Kidney cancer is the eighth most commonly diagnosed cancer in men and women in the U.S. An estimated 200,000 people worldwide were diagnosed in 2010 with the disease, which killed more than 100,000, the companies said.
Aveo jumped 22 percent to $16.99 in extended trading upon announcement.