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AVEO (AVEO) Reports Narrower-than-Expected Loss in Q4

Zacks Equity Research

AVEO Pharmaceuticals, Inc. AVEO reported a fourth-quarter 2016 loss of 7 cents per share, narrower than the Zacks Consensus Estimate of a loss of 9 cents. The company had reported a loss of 11 cents per share in the year-ago period.

AVEO’s share price movement shows that the stock has underperformed the Zacks classified Medical-Biomedical/Genetics industry in the past one year. In fact, AVEO has lost a substantial 11.6% during this period, in comparison to a drop of 3.3% for the industry.

AVEO does not have any approved products in its portfolio. The company’s top line mainly comprises of collaboration revenues, milestone and other payments. Total collaboration revenue in the fourth quarter was approximately $0.1 million, compared with $3.6 million in the year-ago quarter.

Quarterly Highlights

Research & development expenses were $7.7 million, compared with $3.9 million in the year-ago period. General and administrative expenses also decreased 67.9% year over year to $1.9 million.

Last month, AVEO announced that its pivotal phase III trial, TIVO-3, to compare lead candidate tivozanib to Bayer’s BAYRY Nexavar in patients with refractory advanced renal cell carcinoma (RCC), has successfully completed the first safety review by Safety Monitoring Committee (SMC).

The committee ruled no safety concern was observed for tivozanib and recommended that the study replace the small number of patients who dropped out prior to starting treatment.

Following the SMC recommendation to replace early dropouts, the company expects to complete enrolment in Jun 2017 ahead of its prior guidance of Aug 2017. A pre-planned futility analysis of the trial is expected around mid 2017, with top-line data expected in the first quarter of 2018. The company expects that the TIVO-3 trial, together with the previously completed TIVO-1 trial on tivozanib in the first-line treatment of RCC, will support potential regulatory approval of tivozanib in the U.S. as a third- and first-line treatment for RCC.

Concurrently, AVEO announced that the first patient has been treated in phase I/II TiNivo trial. The trial is evaluating tivozanib in combination with Bristol-Myers Squibb (BMY) anti-PD-1 therapy, Opdivo (nivolumab), in advanced RCC. The company expects to complete the phase I trial in the first half of 2017. This trial will evaluate the safety of tivozanib in combination with Opdivo at escalating doses of tivozanib. Assuming favorable results, the company will immediately initiate an expansion phase II trial at the established combination dose.

Meanwhile, AVEO announced that its European licensee for tivozanib, EUSA Pharma has received the Day 180 List of Outstanding Issues (LOI) from the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA). The LOI implies that the MAA cannot be approved in the present form as it outlines outstanding deficiencies. EUSA Pharma has informed the company that it expects to submit written responses to the LOI next month. On the other hand, the EMA has tentatively scheduled EUSA to provide an oral explanation to the CHMP in May 2017.

2017 Guidance

AVEO expects that its cash resources of $23.3 million will allow the company to fund its planned operations into the fourth quarter of 2017. However, the company will need additional funds to extend these operations into 2018 and maintain compliance with its $10.0 million financial covenant under the loan agreement with Hercules.

AVEO Pharmaceuticals, Inc. Price and Consensus

AVEO Pharmaceuticals, Inc. Price and Consensus | AVEO Pharmaceuticals, Inc. Quote

Our Take

The narrower-than-expected loss in the fourth quarter was encouraging. We expect investor focus on TIVO-3 trial for the third-line treatment of patients with refractory RCC. The trial is being conducted to address the overall survival concerns from the TIVO-1 trial. The concerns were identified by the FDA in the complete response letter issued in Jun 2013. The TIVO-3 trial is also intended to support a request for regulatory approval of tivozanib in the U.S. as a third-line treatment and as a first-line treatment for RCC.

AVEO anticipates a milestone rich calendar over the upcoming months, across both its proprietary and partnered programs. We note that the company has retained significant North American rights for its oncology pipeline while its non-oncology pipeline is being advanced through several partnerships including the likes of Novartis AG NVS.

Zacks Rank &  Stock to Consider

AVEO is a Zacks Rank #3 (Hold) stock.

A better-ranked stock in the health care sector is Heska Corp. HSKA, sporting a Zacks Rank #1 (Strong Buy). 

You can see the complete list of today’s Zacks #1 Rank stocks here.

Heska’s earnings estimates increased from $1.53 to $1.65 for 2017 and from $1.90 to $2.01 for 2018, over the last 30 days. The company posted a positive earnings surprise in all of the four trailing quarters with an average beat of 291.54%. Its share price increased 34.8% year to date.

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