AVEO-Biodesix Ink Deal - Analyst Blog

AVEO Pharmaceuticals, Inc. AVEO entered into an agreement with Biodesix, Inc., a molecular diagnostics company, to develop and commercialize AVEO's oncology candidate, ficlatuzumab with Biodesix' companion diagnostic test, VeriStrat.

Ficlatuzumab works by inhibiting the hepatocyte growth factor HGF/c-Met pathway. AVEO has evaluated the candidate in two phase I studies and a phase II study so far. The phase II study evaluating ficlatuzumab in combination with AstraZeneca's AZN Iressa (gefitinib) in treatment-naive non-small cell lung cancer (NSCLC) patients failed to meet its primary endpoint. Statistically significant improvement in overall response rate or progression-free survival PFS in treatment-naïve NSCLC patients was not observed by adding ficlatuzumab to Iressa.

However, an exploratory analysis using VeriStrat identified a patient sub-population that experienced a PFS and overall survival benefit after using ficlatuzumab plus Iressa. Thus, we are positive on AVEO's deal with Biodesix. We note that AVEO had been looking for a partner to pursue further development of ficlatuzumab for quite some time now.

Terms of the Deal

As per the terms of the deal, AVEO will initiate a proof-of-concept study later this year, evaluating ficlatuzumab in combination with Roche/Astellas Pharma, Inc.'s (RHHBY/ALPMY) Tarceva (erlotinib) in patients suffering from advanced NSCLC, selected using VeriStrat.

AVEO will receive up to $15 million funding from Biodesix for the study. The companies will share profits and development, regulatory and commercial costs for ficlatuzumab beyond the proof-of-concept study equally.

While Biodesix will be responsible for all development activities and sales and marketing costs for VeriStrat, AVEO will undertake the global commercialization responsibility of ficlatuzumab. Biodesix will record all revenues related to VeriStrat.

We note that several other companies are developing oncology candidates targeting the HGF/c-Met pathway.

AVEO carries a Zacks Rank #3 (Hold). Some better-ranked stocks include Astellas carrying a Zacks Rank #2 (Buy).