AVEO Pharmaceuticals: Attractive Following Recent De-Risking Events

Ohad Hammer profile picture
Ohad Hammer

AVEO (NASDAQ:AVEO) is down 45% in less than 3 months due to uncertainties around its lead program, tivozanib. Tivozanib was recently submitted for FDA approval in renal cancer based on positive phase III data showing superiority over the approved drug, Nexavar. Although tivozanib led to superior progression-free survival (PFS) and was substantially safer than Nexavar, investors are concerned about Regulatory and market positioning risks.

The regulatory risk stems from concerns about a negative overall survival trend in the phase III trial. This might cause the FDA to require additional data or even worse, additional studies before approval. This uncertainty will be resolved next year, following FDA's decision to approve or reject tivozanib. Despite the inferior overall survival trend, I believe there is still a high (75%) likelihood of approval for reasons I will discuss below.

From a market positioning standpoint, tivozanib will have to compete with 2 similar drugs that are already approved for 1st line renal cancer. Pfizer's (PFE) Sutent is the market leader, approved in 2006. GSK 's (GSK) Votrient was approved in 2009 and is expected to steadily take market share from Sutent.

Originally, I was more worried about tivozanib's market position, as AVEO's trial did not include a comparison with Sutent. In a post published earlier this year, I suspected that based on the available data at the time, tivozanib was safer but less effective than either approved 1st line drugs or Inlyta, which was in phase III. Two recent data readouts imply my initial assessment was wrong and that tivozanib is indeed a best-in- class drug.

Regulatory risk

The regulatory risk centers on FDA's concerns over an inferior survival rate for tivozanib compared to the control arm (77% vs. 81% survival at 1 year). Although several renal cancer drugs have been approved based on PFS without a survival advantage, this is

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Ohad Hammer profile picture
Mr. Hammer is a biotechnology analyst, focusing on small and mid-cap biotech stocks. He holds a MS in Biotechnology and specializes in targeted therapies for cancer and autoimmune diseases. Visit his blog at http://www.hammerstockblog.com.

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