AVEO Q4 Loss Narrower than Expected - Analyst Blog

AVEO Pharmaceuticals, Inc. AVEO reported a fourth-quarter 2013 loss of 32 cents per share (excluding one-time expenses), narrower than the year-ago loss of 43 cents per share and the Zacks Consensus Estimate of a loss of 40 cents. The narrower year-over-year loss was primarily due to lower operating expenses. Investors however reacted negatively to the news with the shares falling 4.74%.

The company's total collaboration revenue for the fourth quarter was $0.3 million as compared to $15.5 million in the year-ago period. Revenue in the fourth quarter 2012 was boosted by milestone payments and research funding from partners.

AVEO reported a full-year 2013 loss of $1.94 per share, narrower than the Zacks Consensus Estimate of a loss of $2.12 and the 2012 loss of $2.58 per share. Full year collaboration revenues of $1.3 million were much lower than $19.3 million recorded in 2012.

In the fourth quarter of 2013, research and development (R&D) expenses were $11.9 million, down 50.5% year over year. The decrease in R&D expenses was primarily because of a decrease in personnel-related expenses. A decrease in expenses pertaining to the development of ficlatuzumab and tivozanib also led to the reduction in R&D costs. General and administrative expenses decreased 52.5% to $4.5 million, reflecting cost efficiencies post restructuring initiatives and lower pre-commercialization costs associated with tivozanib.

Pipeline Update

Post termination of its development and commercialization agreement with Astellas Pharma, Inc. (ALPMY) for the oncology candidate, tivozanib, AVEO expects to gain full rights to the candidate in August.

AVEO has several other candidates in its pipeline including ficlatuzumab (phase II – first line non-small cell lung cancer), AV-380 (first human trial planned for the second half of 2015 – cancer cachexia) and AV-203 (phase I). Currently, AVEO is actively looking for a partner to support the development of AV-203, ficlatuzumab and tivozanib.

However, Biogen Idec Inc. BIIB currently has an option to develop AV-203 in ex-North America territories. Thus, AVEO plans to amend its agreement with Biogen before it enters into a collaboration agreement for AV-203. Meanwhile, AVEO also plans to evaluate partnership opportunities to develop AV-380 for the treatment of cachexia associated with other indications such as chronic kidney disease, congestive heart failure and chronic obstructive pulmonary disease.

Our Take

AVEO's shares have plunged more than 75% over the last one year given the disappointing news related to tivozanib. We expect the company to increase its focus on other pipeline candidates including AV-380. In the near term, we believe that investor focus will remain on the company's ability to secure a lucrative partnership deal.

AVEO carries a Zacks Rank #3 (Hold). Some better-ranked stocks include Alexion Pharmaceuticals, Inc. ALXN carrying a Zacks Rank #1 (Strong Buy).