+ Watch AVEO
on My Watchlist
cash burn issues
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.
Short term play, based on chart action and news that this company is not dead yet: Near 52-week (or is it longer?) low, after approx 33% drop basd on bad news. The plan: Expect lots of price chop, so wait until the volatility takes it high and get out before news on tests breaks next month.
There are currently 1100 AVEO shares in my fund with break-even of around 15.55 USD.http://caps.fool.com/Blogs/fund-trades/705717.http://twitter.com/portefeuillefun.
AVEO's tivozanib works by inhibiting all three VEGF receptors (it is a pan-VEGF inhibitor). Genentech/Roche's Avastin is another drug that hits VEGF and it is one of the top selling Biologics on the market. Eventually it sounds like AVEO has plans to take on Avastin as a safer alternative, but that is probably a ways down the road. In the nearer term, the TIVO-1 PIII trial for Renal Cell Carcinoma (RCC) is going head to head against sorafenib (Nexavar®) with results expected in mid-2011. PII tivozanib data released by AVEO look good and Astellas liked the data enough to sign a nice partnership deal. The only thing that worries me a bit is that all the clinical sites for the PII trial were in Russia and India only. For me though, the bottom line with AVEO is the science is compelling and if AVEO succeeds with TIVO-1 it could have a blockbuster on its hands...I like the risk reward.
Poor Forward Earnings Estimate
I have RCC. Stinks but I am all for any biotech company that takes the time to perhaps find a cure. Phase 3 trials are looking good. So yea they are going to get any financing needed. Look forward to mid 2011!
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