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We've seen a lot of choppy trading in shares of in the oncology drug developer AVEO Pharmaceuticals (NASDAQ: AVEO), which has been struggling ever since August 2nd when it released some data from a phase III trial called "TIVO-1" that compared its flagship drug tivozanib with Onyx Pharmaceuticals' (NASDAQ: ONXX) Nexavar/sorafenib in the treatment of renal cell carcinoma (RCC).

In terms of raw survival after one year, it was seen that 77% of the patients treated with tivozanib survived while 81% of sorafenib-treated patients survived RCC.

As a result, AVEO dropped sharply from $13.30/share to $9.75/share on August 2nd and has remained troubled ever since. The question now is whether or not these preliminary phase III results actually mean that tivozanib is inferior to sorafenib, and whether this will result in a complete response letter to the NDA that AVEO recently submitted.

The company thinks that the 1-year survival data could be misleading, due to their claim that a large number of the patients who were assigned Onyx's sorafenib (just over half of them) were moved onto other therapies for tivozanib when their condition worsened while only 17% of tivozanib patients were given other treatments. This presents a problem when you try to evaluate the relative overall survival between both arms, since it's very possible that the sorafenib arm benefited from tivozanib's efficacy as a second-line treatment for RCC.

It's also worth noting that the study's primary endpoint, progression-free survival (PFS), showed statistically significant improvements in the tivozanib arm versus the sorafenib arm. The median PFS measurements were 11.9 months and 9.1 months for AVEO and Onyx's drug, respectively. The bulk of the patient population (70%) were naive for advanced RCC, and responded even better to tivozanib with media PFS of 12.7 months versus 9.1 months.

So, while the FDA has "expressed concern" about the implications of the weak overall survival ((OS)) data for tivozanib versus sorafenib the progression-free survival argument is still quite intact. It is also very well tolerated amongst patients, which significantly reduces its risk and increases its chances of approval. Judging by the movements in shares of AVEO in the last few months, I think the market might be a little too pessimistic about tivozanib's approval chances.

The market that is being targeted by tivozanib is quite large, at over $2.4 billion. Onyx's sorafenib was FDA approved for RCC in 2005, and is marketed by Bayer under the name Nexavar and brought the company €199 million in Q3 2011 (although it's worth mentioning that Bayer/Onyx have expanded its indication to other types of cancer since 2005). Sutent, one of Pfizer's (NYSE: PFE) most profitable drugs, also treats RCC and brought the company $294 million in Q3 2012.

AVEO also saw some major insider buying this month. The first significant purchase was made by one of AVEO's directors Raju Kucherlapati, who bought 15,000 shares (equating to $101,000) throughout the first week of the month. A much bigger buy was made by president and CEO Tuan Ha-Ngoc throughout the following week. He accumulated 75,000 shares which cost $499,000. This implies that there is substantial confidence in the success of tivozanib going forward.

It's worth mentioning that AVEO intends to expand the tivozanib indication to other types of cancer, including colorectal and breast cancer (following in the footsteps of their competitor sorafenib). The company also has two other compounds in its pipeline that could prove very interesting, including ficlatuzumab for non-small cell lung cancer (NSCLC) and AV-203 for solid tumors. These two other compounds are in phase II and phase I trials respectively. Still, I don't think the market will pay any attention to these drugs while the speculation over tivozanib's NDA submission builds.

The PDUFA action date for tivozanib's NDA is July 28, 2013. There will probably be an advisory committee that will vote on the drug's chances of approval prior to the actual decision date, but AVEO shareholders have little to do but wait for more developments at this point.

Source: Upcoming FDA Decision For AVEO's Tivozanib Builds Speculation