AVEO Pharmaceuticals, Inc. (NASDAQ: AVEO) is a biopharmaceutical company dedicated to advancing a broad portfolio of targeted therapeutics for oncology and other areas of unmet medical need. The Company is focused on seeking to develop and commercialize its lead candidate tivozanib, a potent, selective, long half-life inhibitor of vascular endothelial growth factor 1, 2 and 3 receptors, in North America as a treatment for renal cell carcinoma and other cancers.
Tivozanib (FOTIVDA) is already approved by the European Commission for the treatment of adult patients with advanced renal cell carcinoma (RCC) in the European Union plus Norway and Iceland. The EU approval was one of the key drivers behind the company’s momentum in the recent past, and it transformed AVEO from a late-stage development firm to an entity with a commercial product on-shelf, which could partially offset its ongoing regulatory and operational expense.
With this approval, AVEO now has relatively much more financial bandwidth than they had back in April. AVEO holds around $40 million in cash and equivalents as of Q2 2017, which is almost double the cash they had in 2016.
Now that the company already have EU approval, the focus is more on the US program, which has a much larger potential market than that of Europe (it said, Europe itself is a huge market for a company of AVEO’s size). Therefore, the successful progress of US regulatory program is the key catalyst to Fotivda, which has a potential to place the company on the rapid growth trajectory and make a significant difference to its overall valuation.
There is an ongoing Phase 3 TIVO-3 trial in the US and the readout from this study is going to drive the near to medium term direction of the company. The data is expected to hit press during the first quarter of 2018, making the next few months extremely crucial for AVEO. If the data hit the news as positive, they will support a strong regulatory submission to the FDA and, in turn, should facilitate a swift regulatory approval in the region.
On the flip side, if the numbers are disappointing, the company will likely take a plunge. However, this would be partially mitigated by already in place European approvals. Therefore, with an expectation that company will exhibit positive results over the near to medium term, it is available at a discount at current levels. The company currently has an average rating of “Buy” and an average near-term price target of $3.50.
About the Company: AVEO Oncology (AVEO) is a biopharmaceutical company focused on seeking to develop and commercialize its lead candidate tivozanib, a potent, selective, long half-life inhibitor of vascular endothelial growth factor 1, 2 and 3 receptors, in North America as a treatment for renal cell carcinoma and other cancers.
AVEO is leveraging multiple partnerships aimed at developing and commercializing tivozanib in oncology indications outside of North America, and at progressing its pipeline of novel therapeutic candidates in cancer and cachexia (wasting syndrome).
About Tivozanib (FOTIVDA): Tivozanib is an oral, once-daily, vascular endothelial growth factor (VEGF) tyrosine kinase inhibitor (TKI) discovered by Kyowa Hakko Kirin and approved for the treatment of adult patients with advanced renal cell carcinoma in the European Union plus Norway and Iceland.
It is a potent, selective and long half-life inhibitor of all three VEGF receptors and is designed to optimize VEGF blockade while minimizing off-target toxicities, potentially resulting in improved efficacy and minimal dose modifications.
Tivozanib Three Pillar Strategy in RCC:
Market opportunity:
The company has large market opportunity expected to grow in Europe and North America
Market needs:
- Improved tolerability with uncompromised efficacy in the first line
- Demonstrated safety and activity in highly refractory patients
- Treatment standard following immunotherapy
- Tolerable combinations to improve efficacy
Enhanced financial flexibility after EU approval:
- Approval triggered $4M R&D reimbursement payment from EUSA.
- Approval based on TIVO-1 first line RCC Phase 3
- EC provides marketing authorization in 28 EU cos., Norway, Iceland, and Liechtenstein
- $388M in Potential Future Milestones, $2M milestone per reimbursement approval in each EU5 country & $2M for approval in 3 of 5 defined countries ex-EU
- Commercially Focused Partnership -Tiered royalties from low double digits to mid-twenties
Second quarter financial results:
Revenue: Total collaboration revenue was approximately $0.4 million in Q2 2017 compared with $0.2 million for Q2 2016.
Net loss for Q2 2017 was $33.3 million, or a loss of $0.30 per basic and diluted share, compared with a net loss of $8.6 million, or a loss of $0.13 per basic and diluted share for Q2 2016.
Liquidity and financial flexibility:
- AVEO ended Q2 2017 with $40.1 million in cash, cash equivalents and marketable securities as compared with $23.3 million at December 31, 2016.
- Cash on hand as of 2Q 2017 would fund planned operations into 4Q 2018, beyond TIVO-3 readout which is expected 1Q 2018
- EC marketing approval triggered $4M R&D reimbursement payment from EUSA (received 3Q 2017)
- EUSA $2M opt-in to co-fund the Phase 1/2 TiNivo Study (to be received 4Q 2017)
Potential near-term milestones:
- $2M milestone per reimbursement approval in each EU5 country
- $2M for approval in 3 of 5 defined countries ex-EU
- Tiered low double-digit royalties on EU Fotivda (tivozanib) net sales stepping up to mid-twenties
- ~$10M in additional non tivozanib potential milestone payments through 2018
Key risk factors and potential stock drivers:
AVEO is the beneficiary of royalty payments, after their agreement with EUSA pharma for granting them European rights to tivozanib in exchange for milestone payments and royalties. This gives the company around one full year of the runway from the Q2 filing.
It said, the cash burn has continued to grow for the company. Therefore, financial flexibility is critical for the operations to continue in the planned manner.
The positive outcome of the expected TIVO-3 to read out in the first quarter of 2018.
The company’s near-term stock movement is also dependent on its upcoming quarterly result, any major adversities/lower than expected guidance could adversely affect the investor sentiments.
Biotech space in itself is a high-risk sector due to uncertainties associated with the novel drug development. Therefore, favorable outcome of the upcoming catalyst is necessary for the stock to retain its momentum. Any adversities related with the same could impinge the stock performance significantly.
Stock Chart:
- On Friday, October 27th, 2017, AVEO closed at $2.98 (+9.56%) on volume of 3.15 million shares exchanging hands. Market capitalization is $352.56 million. The current RSI is 39.01
- In the past 52 weeks, shares of AVEO have traded as low as $0.50 and as high as $4.24
- At $2.98, shares of AVEO are trading below its 50-day moving average (MA) at 3.51 and above its 200-day MA at $1.76
- The present support and resistance levels for the stock are at $2.75 & 3.11 respectively.
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