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Why AVEO Pharmaceuticals Stock Tanked Last Month

By George Budwell – Dec 10, 2018 at 2:00PM

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The company's meager cash position is worrying investors.

What happened

Shares of the early commercial-stage biotech AVEO Pharmaceuticals (AVEO) slipped by a stunning 19.8% in November, according to data from S&P Global Market Intelligence. The culprit? 

AVEO's shares broke down last month after the company released its third-quarter earnings on Nov. 9. The problem was the company's admission that its current cash position is only sufficient to fund operations into the second quarter of 2019 -- despite a recent $8.4 million capital raise and the receipt of a $2 million milestone payment from its partner EUSA Pharma for the launch of the duo's kidney cancer drug Fotivda (tivozanib) in Germany.  

A red, downward pointing arrow superimposed over an image of a man turning out his empty pocket.

Image Source: Getty Images.

So what

AVEO's worrisome financial position arguably ruined what should have been a banner month for the company and its share price. The company announced early in the month that tivozanib's late-stage trial for third- and fourth-line kidney cancer met its primary endpoint, paving the way for a regulatory filing in the U.S. next year. 

Now what

AVEO's current plan is to have tivozanib under regulatory review in the U.S. by mid-2019. That estimated timeline would thus have the drug's commercial launch taking place sometime toward the back end of 2020. So, as things stand, AVEO needs to find a way to float the company for about a year, and then come up with the cash to actually launch the drug stateside.

The drugmaker does have a few viable options to pull off this endeavor -- such as additional debt financing, selling itself, or perhaps a merger. But there's also the strong possibility that AVEO will continue to dilute current shareholders as it works toward this all-important regulatory filing. As such, investors may want to remain on the sidelines for the time being. 

George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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