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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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July 15, 2013

Aveo: The Rubble Continues to Bounce Around

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Posted by Derek

Aveo Pharmaceuticals has, you'd think, enough problems already. Their failed attempt to get tivozanib through the FDA crashed their stock and led to a large number of their staff being laid off. But now they disclose that they've received a subpoena in the SEC. Given the sort of thing that went on during the run-up to the approval hearing, this shouldn't be too much of a surprise:

After finding out that the FDA had suggested a year ago that Aveo's late-stage work should be supplemented with a new trial, surprised analysts began to demand some answers of their own. Those questions grew more pointed as class action lawsuits began to pile up after the stock had been eviscerated in the subsequent rout.

Weeks after the review process, Aveo responded by laying off 140 staffers, 62% of its staff, including the commercial team that had been brought in after CEO Tuan Ha-Ngoc began to confidently assure investors that the company could explain the OS data and win approval.

And as that FierceBiotech piece notes, it took the company a week to disclose the SEC's inquiry. At this point, why anyone is holding this stock is something of a mystery - you have to be a very risk-tolerant investor with some long-shot money to spare. Or (more likely) you're stuck with a lot of sunk-cost Aveo stock, bought in a more hopeful era, and although you've probably written it off by now, you figure what the heck, you might be able to get a little of the money back if you let it ride. Good luck with that.

Comments (2) + TrackBacks (0) | Category: Business and Markets


1. BuyersStrike! on July 15, 2013 8:48 AM writes...

To a cranky, cynical, almost 100% dedicated short-seller, AVEO is actually interesting on the long side. Why? Strictly as a activist liquidation play.

Company managements need to learn that the shareholders are the owners, and that inept management will be fired and the company liquidated.

AVEO has 191mm in cash as of the last reported numbers and roughly 52mm shares outstanding. Even accounting for some continued burn, AVEO may be a perfect activist liquidation play.

One has to imagine the large investors (Capital Group, Blackrock, etc) would be happy to sell their giant blocks (16%, 10%) to a well-heeled activist group.

Tuan & Co., need to realize that by simply turning off the lights and never returning to work, their shareholders will see at least a 20% return from today's prices in liquidation even after accounting for all fees, and whatever current management manages to steal for themselves in the form of sweetheart deals, parachutes and the like.

Keep Tuan & Co., and the mostly septugenarian board in place, and shareholders will be left with worthless paper.

So, while I find most small cap bio-drecks perfect shorts, AVEO may actually end up being a long, just so long as the idiots in charge never show up at the office ever again.

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2. Anon on July 16, 2013 9:22 AM writes...

From a science perspective I can't see why someone would want to touch the stock. I guess you could just throw the drug at all the other cancers and see what sticks...but when each throw must be a clinical trial I couldn't bet on it.

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