AVEO Pharmaceuticals (AVEO) Q1 Loss Narrower Than Expected

AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO) reported a first-quarter 2017 loss of 12 cents per share, narrower than the Zacks Consensus Estimate as well as year-ago loss of 13 cents.

Shares of the company fell more than 3% on Thursday. However, AVEO’s share price movement shows that the stock has outperformed the Zacks classified Medical-Biomedical/Genetics industry year to date. In fact, AVEO has gained 8.9% during this period, compared with industry’s gain of 4.7% during this period.

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 first quarter was approximately $2.5 million, compared with $1.2 million in the year-ago quarter.

Quarterly Highlights

Research & development expenses were up 33.2% to about $8 million. However, general and administrative expenses decreased 5.4% year over year to $2.3 million.

Pipeline Updates

AVEO announced that it has completed the first dose cohort , and initiation of enrollment in the second and final dose cohort,of the phase I portion of the company’s phase I/II TiNivo study evaluating tivozanib in combination with Bristol-Myers Squibb’s (NYSE:BMY) Opdivo (nivolumab), in advanced RCC.

In Feb 2017, AVEO announced that its pivotal phase III trial, TIVO-3, to compare lead candidate tivozanib to Bayer’s (OTC:BAYRY) Nexavar in patients with refractory advanced renal cell carcinoma (RCC), has successfully completed the first safety review by Safety Monitoring Committee (SMC).

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.

2017 Guidance

AVEO expects that its present cash resources of $33.4 million will allow the company to fund its planned operations into the second quarter of 2018.

Our Take

The narrower-than-expected loss in the first-quarter 2017 was encouraging. We expect investor focus to remain 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.

Moreveover, 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. However, AVEO is heavily dependent on partnerships for pipeline development. Further, any hiccup in development and regulatory process of lead candidate tivozanib will pull down the stock significantly.

We also believe that securing Novartis AG (NYSE:NVS) as a partner for its cachexia candidate, AV-380, represents a huge positive for AVEO.

Zacks Rank & Stock to Consider

AVEO is a Zacks Rank #4 (Sell) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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