AVEO Pharmaceuticals Q3 Loss Narrows, Focus On Fotivda

AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO) reported a third-quarter 2017 adjusted loss of 2 cents per share (excluding loss due to change in fair value of warrant liability), narrower than the Zacks Consensus Estimate of 5 cents as well as the year-ago loss of 8 cents. However, including loss related to change in fair value of warrant liability, net loss per share for the quarter was 22 cents.

Shares of the company rose more than 1.7% on Tuesday. In fact, AVEO’s share price movement shows that the stock has significantly outperformed the industry on a year-to-date basis. AVEO has surged 453.7% during this period, compared with the industry’s gain of 3.3%.

AVEO’s first drug, Fotivda (tivozanib) received EU approval in August for the first-line treatment of advanced renal cell carcinoma (RCC). The company will receive double-digit royalty payments from EUSA Pharma on net sales of the drug in Europe.

However, Fotivda did not record any sales this quarter and AVEO’s top line mainly comprises collaboration revenues, milestone and other payments. Total collaboration revenues in the third quarter were approximately $4.6 million compared with $1 million in the year-ago quarter. Revenues missed the Zacks Consensus Estimate of $6.5 million.

Quarterly Highlights

Research & development expenses were up 5% to about $4.7 million. However, general and administrative expenses decreased 1.9% year over year to $2.1 million.

Pipeline Updates

In June, the company announced the completion of enrollment in a phase III study, TIVO-3, evaluating Fotivda. Top-line data is expected in the first quarter of 2018. Subsequent to the quarter in October, based on a pre-planned futility analysis, AVEO announced that the study comparing tivozanib with Bayer’s (OTC:BAYRY) Nexavar in patients with refractory advanced RCC will continue unmodified.

The data from this study along with previously completed TIVO-1 study for first-line setting will support the regulatory application for approval of tivozanib in the United States as a first- and third-line treatment for RCC. A potential approval in the United States in this indication will provide further boost to the company.

In September, AVEO announced that EUSA Pharma has opted into a phase I/II TiNino study evaluating Fotivda in combination with Bristol-Myers Squibb Company’s (NYSE:BMY) Opdivo in RCC. EUSA Pharma may use the study data for regulatory or commercial purposes in exchange for a payment of $2 million.

2017 Guidance

AVEO expects that its present cash resources of $37.4 million will allow the company to fund its planned operations through the fourth quarter of 2018.

Our Take

The approval of Fotivda in the EU wass a huge boost for the company as the first-line RCC is a lucrative market in Europe. Moreover, it will also remove AVEO’s dependence on collaboration revenues and milestone payments.

AVEO Pharmaceuticals, Inc. Price, Consensus and EPS Surprise

AVEO Pharmaceuticals, Inc. Price, Consensus and EPS Surprise | AVEO Pharmaceuticals, Inc. Quote

Zacks Rank & Stock to Consider

AVEO Pharma carries a Zacks Rank #3 (Hold). A better-ranked stock in the health care sector is Exelixis, Inc. (NASDAQ:EXEL) ,carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Exelixis’ earnings per share estimates increased from 26 cents to 43 cents for 2017 and from 63 cents to 70 cents for 2018 over the last 30 days. The company delivered positive earnings surprise in all the four trailing quarters with an average beat of 572.92%. The company’s shares are up 78.3% so far this year.

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