On March 15, 2016 AVEO Oncology (NASDAQ:AVEO) reported financial results for the full year ended December 31, 2015 and provided a business update (Press release, AVEO, MAR 15, 2016, View Source;p=RssLanding&cat=news&id=2148504 [SID:1234509532]).
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"Over the course of 2015, AVEO has streamlined its organization and taken a fresh strategic direction to create increased shareholder value. In 2016, we are squarely focused on furthering the execution of this strategy," said Michael Bailey, president and chief executive officer. "We remain focused on retaining rights to develop our three oncology-focused clinical programs in North America, while seeing our pipeline advanced by partners in the lab, clinic and through the regulatory process in geographies or disease areas outside of our strategic focus." Mr. Bailey concluded: "We are evaluating all options for funding the clinical and regulatory development of tivozanib in North America, including TIVO-3, the Company’s Phase 3 U.S. pivotal study of tivozanib in the third line treatment of patients with renal cell cancer, and a PD1 combination study. Subject to the outcome of our settlement discussions with the SEC, the Company could be in a position to begin patient enrollment in the TIVO-3 Study in the second quarter of 2016."
Recent Updates
Exclusive Licensing Agreement for Tivozanib in Europe with EUSA Pharma and Submission of a Marketing Authorization Application for Tivozanib in Renal Cell Carcinoma. In February 2016, AVEO and EUSA Pharma announced that EUSA Pharma has submitted a Marketing Authorization Application (MAA) with the European Medicines Agency (EMA) for tivozanib as a first line treatment for renal cell carcinoma (RCC). In December 2015, AVEO and EUSA Pharma announced an exclusive license agreement in which AVEO granted EUSA Pharma European rights to tivozanib for the treatment of advanced RCC. The agreement also includes a number of additional territories outside North America, including South America and South Africa, and potential additional indications. Under the terms of the agreement, AVEO received an upfront research and development funding payment of $2.5 million, and is eligible for up to $394 million in potential payments and milestones, assuming successful achievement of specified development, regulatory and commercialization objectives, as well as a tiered royalty ranging from a low double-digit up to mid-twenty percent on net sales of tivozanib in the agreement’s territories. A percentage of milestone and royalty payments received by AVEO are due to Kyowa Hakko Kirin as a sublicensing fee.
Exclusive Licensing Agreement for Tivozanib in Russia and other territories with Pharmstandard Group and Acceptance of Registration Dossier for Tivozanib in RCC by the Ministry of Health of the Russian Federation. In February 2016, AVEO announced that a registration dossier seeking to obtain marketing authorization of tivozanib as a first line treatment of advanced RCC has been accepted by the Ministry of Health of the Russian Federation. The dossier was submitted in December 2015 by Pharmstandard Group. In August 2015, AVEO licensed Pharmstandard rights to the development, manufacture and commercialization of tivozanib in the territories of Russia, Ukraine and the Commonwealth of Independent States, for all indications other than non-oncologic diseases or conditions of the eye. AVEO is eligible to receive up to $7.5 million in connection with the first marketing authorization of tivozanib in Russia. AVEO is also eligible to receive a high single-digit royalty on net sales, if any, in the above mentioned territories. A percentage of any milestone and royalty payments received by AVEO are due to Kyowa Hakko Kirin as a sublicensing fee.
Settlement discussions with the Securities and Exchange Commission. AVEO previously announced that the staff (the "SEC Staff") of the Securities and Exchange Commission (the "SEC") and AVEO have entered into discussions for the settlement of potential claims that the SEC may bring against the Company asserting that the Company previously violated federal securities laws by omitting to disclose to investors a recommendation made to the Company by the U.S. Food and Drug Administration in May 2012 that the Company conduct an additional clinical trial with respect to tivozanib. The Company’s settlement discussions with the SEC have continued, and the Company has accrued an estimated settlement liability, for accounting purposes, of $4.0 million in its financial statements as of December 31, 2015. There can be no assurance, however, that a settlement will be achieved with the SEC, or that any settlement we enter into with the SEC will be within the estimated settlement liability accrued.
Receipt of $3.5 Million AV-380 Inventory Reimbursement Payment from Novartis. AVEO previously announced that Novartis exercised its right under its license agreement for AV-380, AVEO’s first-in-class, potent, humanized inhibitory antibody targeting growth differentiation factor 15 (GDF15), to acquire AVEO’s inventory of clinical quality drug substance. This reimbursement payment of approximately $3.5 million was received in the first quarter of 2016. Novartis acquired an exclusive, worldwide license for the development and commercialization of AV-380 and related antibodies in August 2015. Under terms of the agreement, AVEO received an upfront payment of $15 million and the reimbursement payment of approximately $3.5 million, and is eligible to receive clinical, regulatory and sales-based milestone payments totaling $308 million, assuming successful advancement of the product. AVEO will also be eligible to receive tiered royalties on product sales ranging from high single digits to a low double-digit.
Full Year 2015 Financial Highlights
AVEO ended 2015 with $34.1 million in cash and investments.
Total collaboration revenue for 2015 was approximately $19.0 million compared with $18.1 million for 2014. The increase was primarily due to the recognition of $18.5 million of revenue associated with the receipt of a $15.0 million upfront payment for our license of AV-380 to Novartis and Novartis’ subsequent purchase of clinical material for $3.5 million. These amounts were partially offset by a decrease of $3.6 million of revenue from Astellas following the termination of our collaboration agreement in 2014 and a decrease of $14.3 million of revenue recognized from our arrangement with Biogen due to the one-time recognition of previously deferred revenue following an amendment to our agreement in 2014.
Research and development (R&D) expense for 2015 was $12.9 million compared with $38.3 million for 2014. The decrease in R&D expense was primarily due to a reduction in personnel-related, IT, and facilities expenses following AVEO’s January 2015 strategic restructuring as well as a decrease in outsourced services costs primarily related to the completion of the manufacture of AV-380 material in 2014; and a decrease in medical affairs and external clinical trial costs associated with the decreased number of active patients enrolled in our clinical trials.
General and administrative (G&A) expenses for 2015 were $14.2 million compared to $18.6 million for 2014. The decrease is primarily the result of a decrease in personnel-related, facilities, IT, insurance and other infrastructure costs following the Company’s January 2015 strategic restructuring as well as a decrease in external legal costs associated with various ongoing legal matters. These amounts were partially offset by $4.0 million in expense incurred in 2015 related to the accrual of an estimated settlement liability, for accounting purposes, related to the potential SEC claims and an increase in depreciation expense due to the acceleration of depreciation in connection with the termination of our lease agreement of 650 East Kendall Street in September 2014.
Restructuring and lease exit expense for 2015 was $4.4 million compared with $11.7 million for 2014. The expenses incurred during 2015 relate to costs associated with elimination of our research function and the associated reductions in headcount as part of our January 2015 restructuring. The expenses incurred during 2014 relate to costs associated with partially vacating and subsequently terminating the agreement for our leased space at 650 East Kendall Street, which occurred in September 2014.
Net loss for 2015 was $15.0 million, or a loss of $0.27 per basic and diluted share compared with net loss of $52.7 million or a loss of $1.01 per basic and diluted share for 2014.
Updated Financial Guidance
AVEO believe that its cash resources would allow the Company to fund its current operations into the fourth quarter of 2017. This estimate does not include the payment of potential licensing milestones or the uncommitted costs of conducting any contemplated clinical trials, and assumes no milestone payments from AVEO’s partners, no additional funding from new partnership agreements, no equity financings, no debt financings or accelerated repayment thereof and no further sales of equity under the Company’s ATM. This estimate also does not include any amount AVEO may agree to pay in excess of the estimated settlement liability, for accounting purposes, that the Company has established with respect to a potential settlement of claims with the SEC, as described in the Company’s 2015 annual report filed on Form 10-K.
28th Annual ROTH Conference
In lieu of a financial results conference call, AVEO will be presenting a corporate update at the 28th Annual ROTH Conference tomorrow, March 16, 2016, at 9:00 a.m. Pacific Time. A live webcast of the presentation can be accessed by visiting the investors section of the company’s website at www.aveooncology.com. A replay of the webcast will be archived for 30 days following the presentation date.