+ Watch AVEO
on My Watchlist
start of some welcome upside
I threw in the towel on my Aveo trade just recently, sold almost all my shares for a huge loss, and switched to a red thumb. I have to say it was a good move because the stock continued to perform weakly despite having more cash than market capitalization, and then plunged anew on word that the BATON phase II trial of tivozanib in colorectal cancer was unlikely to meet the primary endpoint. At the low of 1.53, Aveo had a market cap of 79M and an asset balance of 109M.I had pointed out in my underperform pitch that biopharmas trading below cash tend to be value traps, but experienced traders know how to steal the cheese from the traps before the jaws snap shut. The stocks tend to be springy, plunging fast and then bouncing back as "value" investors swoop in once the sellers are out. You just need to be sure the sellers are done for the day so you don't get sucked into the trap. I was a little slow to catch the rebound but I went in with large volume and was out before the close to make back $1500 of the $24000+ I lost on the stock this year.I'm not sure if or how I'll approach Aveo with real money again in the near term. For the medium term, I'm comfortable with my green thumb at least until the next quarterly earnings in February or March, when another 20M+ in cash will be subtracted from the asset balance and the value equation will readjust. Until then, Aveo is likely to rebound on even mildly positive news. They could choose to utilize what I call the Merrimack effect from the failed CRC trial - claiming activity of tivozanib in biomarker subsets. There are also BATON trials in progress in renal cell carcinoma and breast cancer. Aveo also has an early stage pipeline outside of tivozanib. The most promising drug from the pipeline is AV-203, an ErbB3 antibody in phase I for solid tumors.I have a lot of ground to claw back to get even with Aveo, in CAPS and in real life, so I expect to be following future developments closely. The last thing I want to do is donate more cash to other Aveo traders.
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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