AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO)

CAPS Rating: 3 out of 5

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Player Avatar zzlangerhans (99.77) Submitted: 11/14/2013 7:50:57 AM : Underperform Start Price: $2.00 AVEO Score: +21.19

It definitely hurts to liquidate my Aveo holdings and drop this red thumb, but I have to remain objective and I think the stock is likely headed sub 1. I'm not quite sure how much I lost on my outsized bet on a positive Ad Comm vote in May but I think it's in the area of $24000. Not enough to put me in the red for 2013, but definitely a large enough amount to make me reconsider whether it is ever a good idea to make a large bet on a binary catalyst in biopharma.

While my Aveo position was truly decimated, I still had capital worth preserving and after my latest review it didn't seem wise to allow it to continue to erode towards zero. Despite elimination of jobs and restructuring, the quarterly burn was still an unholy 24M and the cash position of 130M was starting to look like a value trap. I'd allowed holdings in Targacept to decline on the same rationale that cash was greater than the cap, but when there are no positive catalysts both will decline concomitantly. I don't see any short-term positive catalysts for tivozanib. Results of the phase II trial in colorectal cancer are expected at an unspecificed time point in 2014, which likely means late 2014. The phase II trial of tivozanib in metastatic triple negative breast cancer is enrolling slower than expected, which is definitely not a good indicator of how oncologists are feeling about tivozanib. The next drug in the pipeline, AV-203 ERB-B3 receptor antibody for solid tumors, is in expansion cohorts of a phase I trial. The company is planning clinical development of an antibody to treat cancer cachexia, a crowded indication that I despise (if you can't treat the cancer, at least keep them from dying skinny).

I see the only question at this point as whether Aveo will burn cash below 50M or try and scratch out another dilutive financing first, but either way I expect the share price to continue to decline and possibly drop below 1 before we see if tivozanib has a future.

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