NEW YORK (AP) -- Shares of Aveo Oncology sank Friday after the company said its partner Astellas won't ask European Union regulators to approve their kidney cancer pill tivozanib.
Astellas said it was informed of Astellas' decision on May 17. It also said Astellas does not plan to fund any more studies of tivozanib as a treatment for renal carcinoma, the most common type of kidney cancer. The disclosure comes three weeks after a panel of Food and Drug Administration advisors recommended the drug not be approved because of its potential health risks.
Aveo said it is evaluating the effects of Astellas' decision. The companies are also studying tivozanib, or Tivopath, as a treatment for colorectal cancer and breast cancer. The company does not have any approved products and tivozanib is its most advanced experimental drug.
Stifel Nicolaus analyst Brian Klein predicted major cost cuts for Aveo in light of the news, which was announced in a form filed with the Securities and Exchange Commission on Thursday.
"We believe this signals the end for tivozanib," Klein said. "We forecast a significant cost cutting effort will occur in the near future as management attempts to conserve cash, which will likely include a meaningful headcount reduction."
Shares of Aveo Oncology lost 29 cents, or 10.7 percent, to $2.41 in morning trading. The stock has lost almost half its value since May 2.
Tivozanib is a tablet intended to be taken once per day. It is designed to affect three types of vascular endothelial growth factor receptors, which are involved in the formation of new blood vessels. Without the new blood vessels, the cancer cells are starved of blood and nutrients. In two late-stage clinical trials, patients who were treated with tivozanib in two late-stage clinical trials lived longer before death or the resumption of disease progression than patients treated with Nexavar, a drug marketed by Onyx Pharmaceuticals Inc. and Bayer HealthCare.
However in one of those trials, patients who took tivozanib were less likely to be alive a year after the start of treatment. Analysts said the companies attributed the difference to treatments the Nexavar patients received after the study ended.
In May an FDA panel voted 13-to-1 that the benefits of the pill did not justify the risks it poses to patients. Those risks include severe high blood pressure.
The FDA is scheduled to make a decision on tivozanib, by July 28. The agency is not required to follow the advice of its panels, but it often does.
Klein said Aveo was depending on approval and sales of the drug and will need to change strategy in light of the FDA panel vote. He maintained a "Hold" rating on the company's shares.
Aveo Pharmaceuticals Inc. shares have dropped 67 percent since April 23, about a week before the company reported its first-quarter results and a week and a half before the FDA panel vote. Aveo's legal name is Aveo Pharmaceuticals Inc. In 2012 the company renamed itself Aveo Oncology as part of a rebranding effort.