The PFS/OS data from the Nexavar arm of the pivotal Aveo study (the green triangle) is another outlier on the graph. With a 9.1 month median PFS, the expectation would be for a median OS of around 22.5 months. If the median OS of the Nexavar control arm were even in that range, the OS hazard ratio for the tivoazanib phase III trial would have been under 1 (a positive survival trend) instead of 1.25 (a negative survival trend) and the vote of the FDA advisory panel might have gone Aveo's way. The OS anomaly in the Nexavar arm is also consistent with the argument that crossover in the control arm affected the OS results. While this does not prove the tivozanib results were completely accurate, the data seem more consistent with the contention that the Nexavar arm was atypical.
What does this analysis mean for tivozanib's future? Given the flaws in the trial design, I do not believe it was necessarily wrong for the FDA advisory panel to vote against tivozanib. With that said, the similarity between tivozanib and previously approved kidney cancer drugs implies the former is active. A better designed phase III study would likely produce data to support approval.
But let's try this: Ignore everything we know about Aveo's history and its more recent mistakes, and just view the stock as an oncology company with a phase II asset. Let's further assume the previous tivozanib phase III trial was really a phase II trial that provided evidence -- but not proof -- of efficacy. As an investor, ask yourself: How many companies such as this trade at a discount to cash on hand? Almost none ( see Clovis Oncology, Verastem and Geron Corporation as comparable) unless there is a real question about viability.
The FDA advisory panel punished Aveo for its poor trial design and the market has punished the company for the negative vote of the advisory panel. At $2.75, Aveo has lost almost 70% of its market value. That's an overreaction, in my opinion, given the tivozanib data and comparable biotech valuations. A more reasonable valuation is justified. It may take time and don't be surprised to see Aveo raise more money, but I see Aveo eventually trading for $5-6 per share based on tivozanib's potential.Sobek has no position in Aveo or any other stocks mentioned in this column.