Company Overview

AVEO Pharmaceuticals, Inc. (NASDAQ: AVEO) is a biopharmaceutical company that develops targeted therapeutics for oncology and other areas of unmet medical need. The company’s proprietary platform has delivered various insights into cancer and other related diseases. AVEO’s primary product candidate is tivozanib, which is being developed as treatment for renal cell carcinoma (RCC). The company has formed several partnerships with other companies to fund the ongoing development of its product pipeline.

AVEO was originally incorporated in 2001 as GenPath Pharmaceuticals, Inc., but changed its name in 2005. The company is headquartered in Cambridge, Massachusetts.

 

Product Pipeline

As shown below, tivozanib is the company’s most advanced product candidate. However, the company has several others under development with funding from various partnerships:

Source: Company Presentation

Tivozanib is an oral, once-daily, vascular endothelial growth factor (VEGF) tyrosine kinase inhibitor (TKI). The drug is designed to inhibit the VEGF pathway, which is critical for cancer angiogenesis (the formation of new blood vessels essential for cell proliferation, migration, and survival). Tivozanib has been investigated for use with renal cell, colorectal, and breast cancers.

In December 2015, the company entered into a license agreement with EUSA Pharma (UK) Limited that grants EUSA the right to develop and commercialize tivozanib in Europe, Latin America, Africa, Australasia, and New Zealand. Tivozanib is currently under consideration for marketing approval in the European Union.

With respect to the United States, the company is preparing a Phase III trial (TIVO-3) and expects to report initial data in the first quarter of 2018. The company has also initiated a Phase I/II clinical trial (TiNivo) of tivozanib in combination with nivolumab, an immune checkpoint inhibitor, for the treatment of RCC.

Ficlatuzumab is a hepatocyte growth factor (HGF) inhibitory antibody. HGF is the sole known ligand of the c-Met receptor, which is believed to trigger activities that are involved in cancer development and metastasis. It is currently being evaluated as a treatment squamous cell carcinoma of the head and neck and acute myeloid leukemia.

The company has partnered with Biodesix, Inc for the development of ficlatuzumab, and they will share equally in all future costs and profits. AVEO and Biodesix are currently funding two investigator-sponsored clinical trials of the drug.

AV-203 is a clinical-stage ErbB3 inhibitory antibody candidate. The drug has demonstrated preclinical activity in multiple tumor models including breast, head and neck, lung, ovarian, and pancreatic cancers. Pursuant to a March 2016 agreement, CANbridge Life Sciences Ltd. holds marketing rights for AV-203 outside of the United States, Canada, and Mexico.

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Recent Developments

• On June 23, 2017, the company announced that the Committee for Medicinal Products for Human Use (CHMP) recommended Fotivda (tivozanib) for approval to treat advanced renal cell carcinoma. A final decision from the European Commission, which typically adheres to recommendations of the CHMP, is expected within the next two months. If approved, tivozanib may be marketed in all member countries of the European Union, Norway, Iceland, and Liechtenstein. Management has indicated that if the European Commission grants marketing approval for tivozanib, AVEO will be due a $4 million research and development reimbursement payment from its marketing partner, EUSA. It will also be eligible for up to $12 million in additional milestone payments based on member state reimbursements and regulatory approvals.
• On June 28, 2017, the company announced that it had generated gross proceeds of $14 million from an existing credit facility with Hercules Capital, Inc. ($5 million) and the sale of common stock via its at-the-market issuance agreement with FBR & Co ($9 million). The company believes that this additional financing will ensure that operations are funded into the fourth quarter of 2018.

 

First Quarter Earnings Review

In the first quarter ended March 31, 2017, AVEO reported collaboration and licensing revenue of $2.5 million, as compared to $1.2 million in the same period one year ago. With respect to expenses, research and development increased 33 percent year-over-year to $8 million, and general and administrative decreased slightly to $2.3 million. AVEO’s first quarter loss widened to $8.8 million ($0.12 per share), as compared to $7.7 million ($0.13 per share) one year ago.

Net cash used in operations for the first quarter was $5.4 million compared to $10.3 million in the same period one year ago. As of March 31, 2017, the company listed a cash and marketable securities balance of $33.4 million, significantly higher than $23.3 million at December 31, 2016. This increase was primarily attributable to $15.5 million of cash proceeds from the issuance of common stock.

As noted above, AVEO recently generated gross proceeds of $14 million from its existing loan facility and the sale of common stock.

 

Stock Influences

• Approval of tivozanib from the European Commission;
• Achieving milestone payments from EUSA;
• Developments regarding the company’s Phase III (TIVO-3) tivozanib trial for the United States and the Phase I/II TiNivo trial; and
• Developments and/or partnerships related to the company’s other pipeline products.

Risk Factors

• The company is confident that recent financing will help fund the company into the fourth quarter of 2018. However, the company may require additional financing to ensure that it maintains $10 million of unrestricted cash as required by its loan agreement with Hercules;
• Furthermore, the company is required to make certain cost-sharing and licensing payments to its partners;
• The company has yet to obtain marketing approval for any product candidates; and
• The company faces substantial competition from existing products.

 

Stock Performance

 

As of July 7, 2017, shares of AVEO closed at $2.79, gaining nearly 15 percent on the day and yielding a market capitalization of approximately $300 million. So far, this year, shares have generally traded between $0.50 and $1.00. However, the stock price crossed $2.00 after the recent decision from the CHMP, and that momentum continued through the end of last week. Prior to the announcement, daily trading volume in 2017 averaged 500,000 shares. In the past two weeks, daily average trading volume has averaged 23 million shares.

Summary

Tivozanib appears to be a promising candidate for the treatment for the treatment of RCC and potentially other forms of cancer as well. The recent decision for the CHMP is good news, and will hopefully provide momentum for approval in the United States. However, AVEO must complete its TIVO-3 Phase III trial, which is expected to read out in the first quarter of 2018 and has estimated remaining costs between $18 million and $21 million. Still, its recent financing and potential milestone payments from EUSA should help fund operations until late 2018.

 

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