Buying AVEO ahead of FDA panel

AVEO’s (AVEO) controversial drug, tivozanib, will face an FDA’s advisory committee (Oncologic Drugs Advisory Committee or ODAC) on May 2nd. Despite the negative sentiment around AVEO, I still view tivozanib as an approvable drug with a compelling risk/benefit profile and expect an overwhelmingly positive ODAC recommendation. The FDA does not always follow the ODAC’s recommendations, but in tivozanib’s case it should be regarded as an important risk mitigation event.

The controversy around Tivozanib stems from a negative survival signal in the drug’s phase III trial in renal cancer (RCC). The trial, which compared tivozanib to Nexavar, demonstrated tivozanib’s superiority in terms of PFS (progression free survival) and side effects but median survival was slightly lower in the tivozanib arm (28.8 vs. 29.3 months). Albeit not statistically significant, this trend raised some questions about tivozanib’s chances of approval.

The negative sentiment increased in August 2012, after AVEO announced the FDA expressed concerns about the survival trend and would like to see additional analyses of the data. The market reacted accordingly: AVEO is down 45% since the announcement.

AVEO claims the negative survival trend is a result of the trial design, which allowed patients who progress on Nexavar to receive tivozanib. A retrospective analysis indeed showed that 72% of patients who failed Nexavar went on to receive effective 2nd line treatments (vast majority got tivozanib). In contrast, only 18% of patients who failed tivozanib received effective 2nd line treatments. Therefore, instead of comparing tivozanib to Nexavar, the trial compared (i) tivozanib to (ii) Nexavar followed by tivozanib.

tivo - treatment after progressionSource : Motzer R. ASCO GU 2013, #350

Although this explanation makes sense, it cannot be proven and there is always the theoretical possibility tivozanib is inferior to Nexavar in terms of OS. This led some to argue that the FDA will require AVEO to conduct a new phase III trial, pushing approval by 3-4 years.

Paradoxically, the negative OS trend can serve as an indication for tivozanib’s activity in the 2nd line setting. This was further demonstrated by the efficacy data in patients who crossed over to receive tivozanib. In this fairly large subset (141 patients), tivozanib led to a 13% response rate (19% unconfirmed) and a median PFS of 8.4 months. This compares favorably to 2nd line data with other agents such as Inlyta and Nexavar that had PFS of 4.8 and 3.4 months, respectively in 2nd line patients who had progressed on Sutent.

tivo as 2nd line

Source : Motzer R. ASCO GU 2013, #364

Market positioning

The market for 1st line RCC is highly competitive with an established leader (Sutent) and a next-generation competitor (Votrient). Since tivozanib has never been directly compared to these agents, AVEO’s main selling point will be the drug’s safety profile. If tivozanib reaches the market, investors will shift their attention to how much market share a differentiated safety profile can attain.

In oncology, drugs are judged primarily based on their efficacy but in this case Sutent’s safety profile leaves a lot of room for improvement. Sutent commonly leads to side effects such as hand-foot syndrome, neutropenia and GI toxicities that lead to dose reductions, treatment discontinuation and decreased quality of life. Tivozanib’s safety profile is dramatically better, with lower incidence of side effects across the board. This explains why there were dose reductions in 12% of patients receiving tivozanib, as opposed to 30-50% for Sutent in various trials.

Recently, a major overhang was removed following 1st line results for Votrient and Inlyta. In both cases, median PFS were numerically lower than that of tivozanib (Votrient – 8.4 months, Inlyta – 10.1 months, tivozanib – 12.7 months). This cross trial comparison does not prove AVEO has the most effective product but it can certainly make physicians more comfortable using it. As a result, physician and patient preference should enable tivozanib to get at least a third of the market (total of ~$1.2B).

PD-1/PD-L1 antibodies are a promising class of agents in renal cancer. Preliminary results with agents from BMS and Genentech already generated promising results. These drugs can be viewed as a threat to VEGFR inhibitors such as tivozanib but the 2 classes of drugs will probably be used sequentially or in combination. Thanks to its benign safety profile, tivozanib should be the most combinable agent.

Why I think tivozanib will be approved

  • To date, PFS has been an approvable endpoint in RCC including 2 recent approvals (Inlyta in 2012 and Votrient in 2009).
  • Tivozanib is the only drug that demonstrated a superior PFS over another VEGFR inhibitor in 1st line RCC (although Nexavar is considered the weakest of all VEGFR inhibitors).
  • Tivozanib demonstrated the highest ever PFS observed in 1st line RCC.
  • Tivozanib has the cleanest safety profile among VEGFR inhibitors.
  • Crossover trials are notorious for confounding OS results and the FDA should acknowledge tivozanib’s OS data are inherently hard to interpret.
  • All the points above should outweigh the small (but theoretically possible) chance that by some unexplained mechanism tivozanib leads to better PFS, fewer toxicities but also to inferior OS.

Portfolio update

We are adding a second position in AVEO in anticipation for a positive ODAC and subsequent FDA approval, which should result in at least a doubling in the share price. (My guess: $10.5 after a positive ODAC, $15 after FDA approval).

It is important to note that a negative ODAC recommendation or FDA rejection will probably send the stock to ~$3.

Portfolio holdings – April 14th, 2013

portfolio- Apr 14th 2013 - after changesbiotech etfs - Apr 14th 2013

140 thoughts on “Buying AVEO ahead of FDA panel

  1. Ohad,

    An article from the Street.com said this about the upcoming ASCO abstracts, whare most are being released this Wednesday, from SNTA “the Synta data have been classified as a “late breaker” and are therefore embargoed” Have you seen this before? I can’t imagine they’d embargo bad data.

    Too bad about Aveo. Articles after the 13-1 vote seem to point to the fact that it wasn’t a bad drug but more to do with how the company ran the trial. Interesting that the one vote was from the patients who would be closer to the needs.

    Good luck with the birth of your new child. Hope everything goes well.

    Thanks as always.

    Dan S.

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  2. Hi Ohad,
    You’re probably too busy to think about stocks but I thought I would alert you to Exelixis (if you do have the time). We exchanged emails back in early April because I was interested in your thoughts about possible accelerated approval for cabo in CRPC and you explained why you thought it would be unlikely. However, since then the company press released their upcoming abstracts at ASCO … abstract #5026 “An exploratory analysis of bone scan lesion area, circulating tumour cell change, pain reduction and overall survival (!!!) in pts with CRPC treated with cabo: Updated results of a Ph 2 nonrandomized expansion (NRE) cohort” . Gisela S. on the May 7th conference call indicated that the n was 144 men. So I’m going back to my old theory of accelerated approval … (1) efficacy (OS) in a reasonably sized Ph 2 trial although since the NRE wasn’t randomized you have to think about efficacy in terms of how long these patients with advanced disease normally live … BTW, Dr. Matthew Smith of Mass General said last year that the pts in the NRE cohort may be the most refractory pts ever studied prospectively (2) … Phase 3 trials are well underway (3) … and (4) cabo is already an approved drug … I think the #5026 abstract will be published after the close tomorrow … if the OS data is striking then I think the stock will react very positively. This would remove, or reduce, a lot of the uncertainty about what the unprecedented bone scan responses seen with cabo actually mean and as I said it may enable the Company to go for accelerated approval … best of luck, Mike Iles

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    • ??????, whats up with this neg sentiment? all my bio are up (aezs, thld, imgn, arry, astx, gen.co,………nothing is HIT HARD…exel snta price not change). Regardless, i would suggest we keep the Q’s or comments for relevant staff.

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  3. Hey Ohad
    have you been tracking Biodel (BIOD)? I was an investor three years ago when the FDA turned down their phase 3 ultra fast acting insulin due to injection site irritation. The result was very similar to what happened to AVEO recently…. stock plummeted from $5.70 tto $2.
    In the last two years the company has redeveloped the compound and advancing various versions of it into phase two. It also developed a new product (Glucagon, which regulates blood glucose levels).
    The stock has been more or less stagnant since the negative FDA decisions, and just recently there has been movement. Some large funds have been aquiring shares, but the market cap is at $40M. The company products are targeted at diabetes.

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    • I abandoned ship in the $2s (missed out on recent pop). They keep changing what is priority. Before stabilized glucagon was nearest drug to clinic then they said they needed to develop an unrefrigerated version and moved timeline back indefinitely. Didn’t like that. Also, the analog has been drug they have also given most buzz about and they have recently said they are still trying to develop a stable version of the drug. Finally, maybe the RHI data will cause more of a pop if positive but I think the analogs are the key and BIOD still doesn’t have a stable version. It’s cheap and maybe a big pharma will be truly interested but I gave up hope for time being myself given some of their recent comments.

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      • Yes, I know what you mean. It has been very frustrating. It seems that right now they are finally getting their act together. Or at least some investros believe so. Mostly I think, it’s that the clinical trials are moving closer to results.

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  4. Hi all,

    Back from “parental leave” thank you for your wishes.

    I plan to post my ASCO preview on Sunday.

    Re AVEO, have to admit I was struggling with what to do. Today’s decision sways me towards selling as I don’t have high hopes for the breast and colon studies. Even if I did, they are not near term catalysts.

    Ohad

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    • Welcome back Ohad! At least some of TNBC, CRC, and additional RCC data, including biomarkers, will be reported in 2014. I’m willing to hold here at just over $100M market cap. There is also still data to come on the ErbB3 drug and they still have the MET drug (though prior data was disappointing). Plenty of risks but I’ll gamble and hold on.

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