AVEO Pharmaceuticals Inc. (NASDAQ: AVEO), a Reversal of Fortune, or Continued Slide?

Emerging Growth company
AVEO Pharmaceuticals Inc. (NASDAQ: AVEO), a Reversal of Fortune, or Continued Slide?

Miami, FL – December 11, 2018 (EmergingGrowth.com NewsWire) — EmergingGrowth.com, a leading independent small cap media portal with an extensive history of providing unparalleled content for the Emerging Growth markets and companies, reports on AVEO Pharmaceuticals, Inc. (NYSE: AVEO).

The shares of biopharmaceutical company AVEO Pharmaceuticals Inc. (NASDAQ: AVEO), are trading down 40% after hitting a peak near the end of September. This raises a question on whether the stock could continue the trend or reverse itself. Low sentiments on the stock, triggering more scope for decline is primarily due to legal proceedings, and funding challenges.

Misleading Investors?

David Johnston, former chief financial officer (CFO) of AVEO Pharmaceuticals and now CFO of biotechnology company ImmunoGen (NASDAQ: IMGN), was recently found guilty, by a federal jury in Boston of defrauding investors. The jury held him liable for not only violating regulations of the Securities and Exchange Commission (SEC) but also for two counts of fraud.

The court case started in 2013, when the Food and Drug Administration (FDA) rejected the company’s kidney cancer drug, known as tivozanib. The securities regulator accused the former CFO of having failed to disclose before the rejection that the FDA wanted the firm to conduct a follow-up trial. There were safety issues found during the initial study, and so the FDA wanted a second late-stage study conducted. The SEC alleged that such a measure would have invited AVEO to spend millions of dollars, thus delaying the approval further.

In 2016, the securities regulator slapped a suit against the company, Johnson, the former CEO Tuan Ha-Ngoc and former chief medical officer William Slichenmyer. While Johnson preferred to face trial, the others elected to pay fines totaling $4.13 million while other executives as well as the company struck a separate deal with the investors for $15 million.

Liquidity

Until now, AVEO Pharmaceuticals has funded its operations mainly from public offerings, private placements, milestone payments, license fees, and funding from strategic partners of research and development (R&D). The company has focused on drug development and other activities, and its success in the future will depend on creating product candidates, besides its ability to reach profitability.

By the end of September, the firm had about $20.4 million in cash, cash equivalents, and marketable securities, as well as working capital of $2.0 million. However, it had reached $616.8 million in accumulated deficit. In its Form 10-Q, the company admitted that it needs considerable capital for clinical R&D and does not have any enough cash to support its operation for a minimum of one year. This will put a strain on its continuing efforts toward advancing its programs. In the event the Company fails to optain funds, the company would have no other option but to delay or cut down its R&D programs. This will put any commercialization efforts on the block.

Net Loss

AVEO Pharmaceuticals suffered a loss of $22.2 million or a loss per share of 18 cents for the third quarter, which was narrower than a $26.4-million loss or 22 cents per share loss in the same period last year. Total revenue dropped to about $2.5 million from $4.6 billion, while cash, cash equivalents, and marketable securities fell to $20.4 million from $33.5 million.

Competitors

Advaxis Inc. (NASDAQ: ADXS), a biotechnology firm engaged in the development, discovery, and commercialization of immunotherapy products, is proceeding with its third-stage pivotal study to treat advanced cervical cancer. The company is also looking to start an investigator-sponsored study on head and neck cancer early next year. The company expects to use about $45 million cash to support its ongoing programs. Following these developments, there is some activity in the stock, though it has to go a long way to convince investors.

Another rival, biopharmaceutical firm Synergy Pharmaceuticals Inc. (NASDAQ: SGYP), is currently in talk with venture capital and private equity firm CRG Servicing LLC for a renegotiation of its term loan. Until now, the company has not been able to amend the agreement in respect of minimum liquidity and revenue covenants. As the waiver on the minimum market cap covenant expired on Nov. 12, the company is left with no alternative but to look for other options that are more aligned with its business. Therefore, there is a threat of defaulting loan, and that could lead to other issues.

Conatus Pharmaceuticals Inc. (NASDAQ:CNAT), on the other hand, is engaged in studying Encore-PH (portal hypertension), Encore-NF (NASH fibrosis), and Encore-LF (liver function) trials and the enrollment of patients. The company indicated that the trials are making progress, and it expects top-line results to be released in mid-2019, which is ahead of its earlier target of second half of next year. As far as liquidity is concerned, the company has $49.6 million at the end of the third quarter, which is down from $74.9 million at the end of 2017. While the company hopes to end the year with $35–$40 million cash, it is confident of maintaining operations until the end of 2019 with expected reimbursements.

Conclusion

At the end of the day, AVEO Pharmaceuticals remains a “sell” as the company continues to face challenges on both the legal and funding front. Liquidity and cash are key to continuing its clinical programs, and the absence of these will only hurt the company’s progress.

About EmergingGrowth.com

EmergingGrowth.com is a leading independent small cap media portal with an extensive history of providing unparalleled content for the Emerging Growth markets and companies.  Through its evolution, EmergingGrowth.com found a niche in identifying companies that can be overlooked by the markets due to, among other reasons, trading price or market capitalization.  We look for strong management, innovation, strategy, execution, and the overall potential for long- term growth.  Aside from being a trusted resource for the Emerging Growth info-seekers, we are well known for discovering undervalued companies and bringing them to the attention of the investment community.  Through our parent Company, we also have the ability to facilitate road shows to present your products and services to the most influential investment banks in the space.

All information contained herein as well as on the EmergingGrowth.com website is obtained from sources believed to be reliable but not guaranteed to be accurate or all-inclusive. All material is for informational purposes only, is only the opinion of EmergingGrowth.com and should not be construed as an offer or solicitation to buy or sell securities. The information may include certain forward-looking statements, which may be affected by unforeseen circumstances and / or certain risks.  EmergingGrowth.com, or its associates may have a position either long or short in any company mentioned herein. Please read our full disclosure, which can be found here, http://emerginggrowth.com/disclosure/. Please consult an investment professional before investing in anything viewed within this article or any other portion of EmergingGrowth.com. In addition, please make sure you read and understand the Terms of Use, Privacy Policy and the Disclosure posted on the EmergingGrowth.com website.

Add a Comment to this Post

comments