AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO)

CAPS Rating: 2 out of 5

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Member Avatar jed71 (98.71) Submitted: 6/9/2015 11:55:48 AM : Underperform Start Price: $2.19 AVEO Score: +31.39

If I were a shareholder here, I’d be extremely concerned about this company’s recent actions through its SEC filings. Recent 8-K:

“On May 28, 2015, the Company filed a certificate of amendment to its Restated Certificate of Incorporation (the "Certificate of Amendment") with the Secretary of State of the State of Delaware to increase the number of authorized shares of the Company's common stock, par value $0.001 per share, from 100,000,000 shares to 200,000,000 shares.”

So they just doubled the amount of stock they could issue from 100MM to 200MM common shares. This by itself isn’t a big deal. But add on the next few items, and I start to become worried. So why did they need to increase authorized shares so dramatically? Here’s one reason:

“As disclosed in the Current Report on Form 8-K of AVEO Pharmaceuticals, Inc. (the "Company") that was filed with the Securities and Exchange Commission on March 24, 2015, and which is incorporated by reference herein (the "Prior 8-K"), the Company has an annual cash incentive program, which is designed to provide cash bonus awards to the Company's employees, including the Company's executive officers. Corporate goals under the Company's annual cash incentive award program for the year ending December 31, 2015, which are set forth in the Prior 8-K, account for 100% of the performance metrics against which the Chief Executive Officer's eligibility for an annual cash incentive award will be measured. For all other executive officers of the Company, the corporate goals account for 80% of the performance metrics against which the annual cash incentive award will be measured, and individual goals account for the other 20%.”

If you dig through their financials, it’s pretty obvious the company will need additional capital in order to bring even one of their drugs to fruition. What else is there? Well, there’s this:

“Two class action lawsuits have been filed against the Company and certain present and former officers and members of the Company’s board of directors, (Tuan Ha-Ngoc, David N. Johnston, William Slichenmyer and Ronald DePinho), in the United States District Court for the District of Massachusetts, one captioned Paul Sanders v. Aveo Pharmaceuticals, Inc., et al., No. 1:13-cv-11157-JLT, filed on May 9, 2013, and the other captioned Christine Krause v. AVEO Pharmaceuticals, Inc., et al., No. 1:13-cv-11320-JLT, filed on May 31, 2013. On December 4, 2013, the District Court consolidated the complaints as In re AVEO Pharmaceuticals, Inc. Securities Litigation et al., No. 1:13-cv-11157-DJC, and an amended complaint was filed on February 3, 2014. The amended complaint purports to be brought on behalf of shareholders who purchased the Company’s common stock between January 3, 2012 and May 1, 2013. The amended complaint generally alleges that the Company and certain of its present and former officers and directors violated Sections 10(b) and/or 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and/or misleading statements concerning the phase 3 trial design and results for our TIVO-1 study in an effort to lead investors to believe that the drug would receive approval from the FDA.”

And this…

“On April 4, 2014, Karen J. van Ingen, a purported purchaser of AVEO stock, filed a derivative complaint allegedly on behalf of AVEO in the United States District Court for the District of Massachusetts, Civil Action No. 1:14-cv-11672-DJC, naming AVEO, as a nominal defendant and also naming as defendants present and former members of the Company’s board of directors, including Tuan Ha-Ngoc, Henri A. Termeer, Kenneth M. Bate, Anthony B. Evnin, Robert Epstein, Raju Kucherlapati, Robert C. Young, and Kenneth E. Weg. The complaint alleges breach of fiduciary duty and abuse of control between January 2012 and May 2013 with respect to allegedly misleading statements and omissions regarding tivozanib. The complaint seeks, among other relief, unspecified damages, costs and expenses, including attorneys’ fees, an order requiring the Company to implement certain corporate governance reforms, restitution from the defendants and such other relief as the court might find just and proper. On July 25, 2014, defendants filed a motion to dismiss the derivative complaint with prejudice. Plaintiff filed an opposition to the motion to dismiss on September 23, 2014, and the Company filed a reply to the opposition on October 23, 2014.”

And, of course, the SEC has stepped in…

“On July 3, 2013, the Company received a subpoena from the SEC, requesting documents and information concerning tivozanib, including related communications with the FDA, investors and others. The Company is fully cooperating with the SEC regarding this fact-finding inquiry. The SEC has informed the Company that this inquiry should not be construed as an indication that any violations of law have occurred or that the SEC has any negative opinion of any person, entity or security.”

None of this means the company has done anything wrong, but, in my view, there are piles of red flags on this issue. There are quite a few other items I could point out here but I will leave my pitch to these few items. I would highly recommend you understand the share dilution that is coming and their financial situation prior to buying shares. I would also spend some time understanding how many shares they are issuing to executives, which is quite "enlightening." I would personally avoid this stub.

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Member Avatar SmartAce (99.89) Submitted: 5/28/2015 10:46:26 AM : Underperform Start Price: $2.08 AVEO Score: +26.12

Madeline: I'm sorry, who are you again?
Fletch: I'm Frieda's boss.
Madeline: Who's Frieda?
Fletch: My secretary.

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Member Avatar zzlangerhans (99.71) Submitted: 12/24/2014 2:30:22 AM : Underperform Start Price: $0.86 AVEO Score: -74.61

After closing yet another failed bet on Aveo, I'd be surprised if I ever went long on this stock again. Then again, I have a bad habit of repeating the same stupid mistakes over and over. Aveo is a classic value trap, where a market cap lower than cash ropes in the dopes but the company never generates a positive catalyst to reverse the downward momentum. Meanwhile, an unrelenting burn continues to drag the cash downward to keep pace with the declining share price. Where will it end? Either with bankruptcy or a reverse split so that the process can continue ad infinitum.

I've concluded there is low likelihood of meaningful positive developments from the pipeline. Tivozanib appears to be dead except for a insiginficant licensing deal to Ophthotech. Aveo claims they will initiate a proof of concept trial of ficlatuzumab and erlotinib in NSCLC before the end of the year, but prior data for that indication has been unimpressive and I'd be surprised to see any catalysts from that trial in 2015. AV-203 development seems to be on hold pending a partnership which is unlikely to materialize, and clinical trials of uninspiring anti-cachexia candidate AV-380 won't begin until at least H2 2015.

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Member Avatar Aurum (73.82) Submitted: 7/29/2014 12:48:52 PM : Outperform Start Price: $1.26 AVEO Score: +14.14

Part of a broader pick of micro cap biotechs with encouraging preliminary clinical trial data and significant upside.

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Member Avatar rossodell3 (< 20) Submitted: 4/16/2014 7:29:44 AM : Outperform Start Price: $1.35 AVEO Score: -1.00

I was on an Aveo trial drug and it did it's job quite well I tried the other drugs and switched and now cancer free. I checked back with some that i got to know and they lost their battle so i thank with alittle time and with out other drug company intferance Aveo will grow in the next year Good Luck in the fight with this terrible diesase

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Member Avatar NoblyNaive (79.55) Submitted: 5/1/2013 2:37:31 PM : Outperform Start Price: $5.49 AVEO Score: -104.31

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.

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Member Avatar EclecticRecluse (81.40) Submitted: 2/22/2011 12:58:10 PM : Underperform Start Price: $13.89 AVEO Score: +147.63

Poor Forward Earnings Estimate

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Member Avatar 1963spencer (37.08) Submitted: 10/20/2010 11:02:11 AM : Outperform Start Price: $15.24 AVEO Score: -167.93

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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