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AVEO Pharmaceuticals (AVEO) Q4 Earnings: What's in Store?

Zacks Equity Research

AVEO Pharmaceuticals, Inc. AVEO is expected to report fourth-quarter 2016 results this month. The company has an impressive track record for the last four reported quarters having beaten estimates on three occasions and meeting expectations in one with an average positive surprise of 17.56%.

In the last reported quarter, AVEO posted a positive surprise of 41.6%. Let’s see how things are shaping up for this quarter.

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 14.8% during this period, in comparison to a drop of 2.6% for the industry.

Factors at Play

AVEO, a development-stage biopharmaceutical company, is focused on the development of treatments for cancer and other areas of unmet medical need. The company has an interesting pipeline with the most advanced candidate being tivozanib.

Tivozanib is currently under review in the EU for the first-line treatment of renal cell carcinoma (RCC). The regulatory application was submitted by AVEO’s partner, EUSA Pharma. A final response on the approval status of the candidate is expected in the first half of 2017.

In Aug 2016, AVEO initiated a phase I/II study (TiNivo) on tivozanib, in combination with Bristol-Myers’ BMY Opdivo (an immune checkpoint PD-1 inhibitor), for the treatment of advanced RCC. The phase I study will evaluate tivozanib in combination with Opdivo at escalating doses in patients with advanced RCC, and will be followed by an expansion phase II cohort at the established combination dose. Initial safety results from the phase I portion of the TiNivo study should be out in the first half of 2017.

The company recently announced clinical and regulatory updates for tivozanib. The company announced that the randomized, controlled, multi-center, open-label phase III trial, TIVO-3, is progressing substantially ahead of schedule. The trial is comparing tivozanib to Nexavar in subjects with refractory advanced renal cell carcinoma (RCC).  Hence, the company now expects TIVO-3 to complete enrollment in Jun 2017, ahead of its prior guidance of Aug 2017.

Top-line data from the trial is expected in first-quarter 2018. TIVO-3 is expected to undergo a pre-planned futility analysis around midyear. The trial along with the previously completed TIVO-1 trial of tivozanib in the first-line treatment of RCC, is designed to support first and third line indications for tivozanib in the U.S.

We note that a pivotal phase III (TIVO-3) study comparing tivozanib to Nexavar (sorafenib) for the third-line treatment of patients with refractory RCC is currently underway.

Apart from tivozanib, AVEO has several early- and mid-stage candidates in its pipeline including ficlatuzumab (phase II completed – non-small cell lung cancer) and AV-203 (phase I completed – advanced solid tumors) among others. The company has collaborated with several companies for the development of its pipeline candidates.

The company depends entirely on collaboration revenues, and milestone and other payments for its top line. Therefore, the top line may vary on a quarterly basis depending mainly on the timing of these payments.

Investors’ focus should remain on tivozanib’s progress and other pipeline-related updates.

What Our Model Indicates

Our proven model does not conclusively show that AVEO is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is pegged at 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at a loss of 11 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Though AVEO has a favorable Zacks Rank #3, an ESP of 0.00% makes surprise prediction difficult.

Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions

AVEO Pharmaceuticals, Inc. Price and EPS Surprise


AVEO Pharmaceuticals, Inc. Price and EPS Surprise | AVEO Pharmaceuticals, Inc. Quote

Stocks That Warrant a Look

Here are some health care stocks that you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Spectrum Pharmaceuticals, Inc. SPPI has an Earnings ESP of 15.4% and carries a Zacks Rank #3. The company is expected to release results on Mar 8. You can see the complete list of today’s Zacks #1 Rank stocks here.

Aratana Therapeutics, Inc. PETX has an Earnings ESP of 9.30% and carries a Zacks Rank #3. The company is expected to release results on Mar 13.

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