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AVEO Pharmaceuticals Down More Than 40% in 90 Days: Here's Why

Zacks Equity Research

Shares of AVEO Pharmaceuticals, Inc. AVEO have witnessed a sharp decline in the past three months, underperforming its industry. In fact, the biotech stock has plunged 43.2%, wider than the industry’s decline of 3.5%.

Notably, this January, AVEO faced a major setback when it had to delay the submission of a new drug application (NDA) for Fotivda (tivozanib) for the first-line treatment of advanced renal cell carcinoma (RCC). The company decided not to file an NDA in the United States after the FDA informed that it was not satisfied with the preliminary overall survival (OS) data reported along with the top-line TIVO-3 study results on the progression-free-survival (PFS), last November. Consequently, the stock took a massive hit back then.

Previously, the company intended to submit the NDA in the first half of 2019. However, it has planned a final analysis of OS come August. Data from this interim assessment will be available during the fourth quarter of 2019. Investors are keen to know the outcome of the same as shares trend down on this negative news. A timely approval would have aided the company to start reaping revenues from Fotivda.

The phase III TIVO-3 study evaluated Fotivda in highly refractory advanced/metastatic RCC patients compared with Bayer AG’s BAYRY Nexavar (sorafenib). Outcomes from this study along with the previously completed TIVO-1 evaluation will support the filing of a regulatory application for Fotivda’s nod receipt in the United States.

Last December, AVEO entered into a collaboration deal with AstraZeneca AZN to evaluate the safety and efficacy of the latter's Imfinzi in combination with its Fotivda. The phase I/II program will evaluate the combo for treating first-line hepatocellular carcinoma. The phase I part of the same is expected to begin in 2019.

We would like to remind investors that AVEO’s Fotivda is the first approved drug in the company’s portfolio. It won the nod in the EU during August 2017 for the first-line treatment of advanced RCC. The company is now focused on launching the medicine across various European countries.

In December 2015, AVEO reached a license agreement with EUSA Pharma. Following this, the former granted an exclusive right to develop, manufacture and commercialize Fotivda in Europe to EUSA. Evidently, the company receives milestone payments and royalties on the drug’s sales in Europe.

Another promising candidate in AVEO’s pipeline is ficlatuzumab, a hepatocyte growth factor inhibitory antibody, currently being evaluated in phase I/II studies for various oncological indications. Earlier this month, AVEO along with partner Biodesix, Inc. announced positive results from the phase Ib expansion cohort of ficlatuzumab combined with cytarabine in patients with relapsed and refractory acute myeloid leukemia (AML). Shares of the company surged following this news.

We believe, the approval of Fotivda in the United States will be a huge boost to AVEO and is critical for the stock’s long-term growth as the RCC market holds great potential. However, the string of setbacks that the company is facing of late persists to raise a concern. Moreover, the company is heavily dependent on its partners for the development and commercialization of its pipeline candidates. If any partner fails to receive the regulatory approvals or terminates a deal, AVEO’s future prospects would be then severely hampered.

AVEO Pharmaceuticals, Inc. Price

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

Zacks Rank & Other Key Pick

AVEO currently carries a Zacks Rank #2 (Buy). Another top-ranked stock in the same sector is PDL BioPharma, Inc. PDLI, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PDL BioPharma’s earnings estimates have been revised 100% upward for 2019 and 30% for 2020 over the past 60 days. The stock has rallied 19.3% year to date.

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