Last10K.com

Aveo Pharmaceuticals, Inc. (AVEO) SEC Filing 10-Q Quarterly report for the period ending Wednesday, September 30, 2020

Aveo Pharmaceuticals Inc

CIK: 1325879 Ticker: AVEO

 

 

 

Exhibit 99.1

AVEO Oncology Reports Third Quarter 2020 Financial Results
and Provides Business Update

- U.S. Commercial Launch Preparations Underway Supporting the
Tivozanib PDUFA Target Action Date of March 31, 2021 –

- Ficlatuzumab Worldwide Rights Regained; Final Results from Open Label Randomized Phase 2 HNSCC Study and Plans for Pivotal Program Expected in the Middle of 2021 –

- AV-380 IND Submission Expected by Year-end; Phase 1
Clinical Study Planned for the First Quarter of 2021 –

BOSTON, Mass. – November 9, 2020 – AVEO Oncology (Nasdaq: AVEO) today reported financial results for the third quarter ended September 30, 2020 and provided a business update.

“In advance of the Food and Drug Administration’s (FDA) March 31, 2021 Prescription Drug User Fee Act (PDUFA) target action date for our tivozanib New Drug Application, we are actively building out AVEO’s U.S. commercial infrastructure to support the FDA-pending U.S. launch of tivozanib in relapsed or refractory renal cell carcinoma (RCC),” said Michael Bailey, president and chief executive officer of AVEO. “Market data suggests that a significant and growing demand exists for effective and better tolerated treatment options for these patients. These data also suggest that roughly half of patients currently forego treatment in the third- and fourth-line of treatment.1 We believe tivozanib has the potential to help address some of these challenges and provide patients with a new option for continuing their fight against cancer.”

Mr. Bailey added, “Beyond our ongoing development of tivozanib as a potential monotherapy treatment, we are continuing our work in the immunotherapy combination setting as a key area of focus, given tivozanib’s tolerability profile and effects on reducing regulatory T-cells2 to potentially enhance activity of the immune system.  In addition, we further enhanced our pipeline by regaining full global rights to our second late-stage asset, ficlatuzumab, and have secured additional manufacturing capacity to enable a potential registrational Phase 3 trial in head and neck squamous cell cancer (HNSCC) in 2022. Finally, we remain on track to file an Investigational New Drug (IND) application by the end of the year for AV-380 for the treatment of cancer cachexia, with a potential Phase 1 study in the first quarter of 2021, following the IND safe to proceed letter.”

Tivozanib Updates

 

Announced Publication of Results from Phase 1b/2 TiNivo Study of Tivozanib in Combination with OPDIVO® (nivolumab) in RCC in Annals of Oncology. In November 2020, AVEO announced that previously reported results from the Phase 1b/2 TiNivo study of oral (PO) tivozanib (FOTIVDA®), AVEO’s next-generation vascular endothelial growth factor (VEGF) receptor tyrosine kinase inhibitor (TKI) drug candidate,


The following information was filed by Aveo Pharmaceuticals Inc (AVEO) on Monday, November 9, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

 

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 .

Commission file number 001-34655

 

AVEO PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

04-3581650

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

 

30 Winter Street, Boston, Massachusetts 02108

(Address of principal executive offices) (Zip Code)

(857) 400-0101

(Registrant’s telephone number, including area code)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

AVEO

Nasdaq Capital Market

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

  

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Number of shares of the registrant’s Common Stock, $0.001 par value, outstanding on November 6, 2020: 28,809,249

 

 

 


AVEO PHARMACEUTICALS, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2020

TABLE OF CONTENTS

 

 

 

 

Page

No.

 

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

Item 1.

 

Financial Statements

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019

3

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019

4

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2020 and 2019

5

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2020 and 2019, June 30, 2020 and 2019 and September 30, 2020 and 2019

6

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019

8

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

9

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

39

 

 

 

 

Item 4.

 

Controls and Procedures

58

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

59

 

 

 

 

Item 1A.

 

Risk Factors

59

 

 

 

 

Item 6.

 

Exhibits

99

 

 

 

 

 

 

Signatures

100

 

2


AVEO PHARMACEUTICALS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except par value amounts)

(Unaudited)

 

 

 

September 30,

2020

 

 

December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

39,848

 

 

$

29,785

 

Marketable securities

 

 

28,996

 

 

 

17,960

 

Accounts receivable

 

 

1,052

 

 

 

1,631

 

Clinical trial retainers

 

 

476

 

 

 

589

 

Other prepaid expenses and other current assets

 

 

1,270

 

 

 

635

 

Total current assets

 

 

71,642

 

 

 

50,600

 

Property and equipment, net

 

 

210

 

 

 

 

Operating lease right-of-use asset

 

 

1,012

 

 

 

 

Other assets

 

 

158

 

 

 

 

Total assets

 

$

73,022

 

 

$

50,600

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,999

 

 

$

1,466

 

Accrued clinical trial costs and contract research

 

 

5,925

 

 

 

5,680

 

Other accrued liabilities

 

 

3,411

 

 

 

2,336

 

Operating lease liability

 

 

436

 

 

 

 

Loans payable, net of discount

 

 

 

 

 

9,569

 

Deferred revenue

 

 

1,974

 

 

 

1,974

 

Deferred research and development reimbursements

 

 

240

 

 

 

93

 

PIPE Warrant liability (Note 7)

 

 

1,913

 

 

 

 

Other liabilities (Note 6)

 

 

790

 

 

 

 

Total current liabilities

 

 

16,688

 

 

 

21,118

 

Loans payable, net of current portion and discount

 

 

13,617

 

 

 

6,197

 

Deferred revenue

 

 

1,072

 

 

 

2,552

 

PIPE Warrant liability (Note 7)

 

 

 

 

 

5,097

 

Operating lease liability, non-current

 

 

379

 

 

 

 

Other liabilities (Note 6)

 

 

1,043

 

 

 

790

 

Total liabilities

 

 

32,799

 

 

 

35,754

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $.001 par value: 5,000 shares authorized at September 30,

   2020 and December 31, 2019; no shares issued and outstanding at each of

   September 30, 2020 and December 31, 2019

 

 

 

 

 

 

Common stock, $.001 par value: 50,000 shares authorized at September 30,

   2020 and December 31, 2019; 25,808 shares issued and outstanding at

   September 30, 2020 and 16,081 issued and outstanding at December 31, 2019

 

 

26

 

 

 

16

 

Additional paid-in capital

 

 

649,897

 

 

 

600,451

 

Accumulated other comprehensive income

 

 

1

 

 

 

 

Accumulated deficit

 

 

(609,701

)

 

 

(585,621

)

Total stockholders’ equity

 

 

40,223

 

 

 

14,846

 

Total liabilities and stockholders’ equity

 

$

73,022

 

 

$

50,600

 

 

See accompanying notes.

 

3


AVEO PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collaboration and licensing revenue

 

$

3,293

 

 

$

25,494

 

 

$

4,280

 

 

$

27,441

 

Partnership royalties

 

 

307

 

 

 

223

 

 

 

853

 

 

 

590

 

 

 

 

3,600

 

 

 

25,717

 

 

 

5,133

 

 

 

28,031

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

5,860

 

 

 

3,983

 

 

 

18,105

 

 

 

13,446

 

Selling, general and administrative

 

 

5,800

 

 

 

2,884

 

 

 

13,209

 

 

 

8,325

 

 

 

 

11,660

 

 

 

6,867

 

 

 

31,314

 

 

 

21,771

 

Income (loss) from operations

 

 

(8,060

)

 

 

18,850

 

 

 

(26,181

)

 

 

6,260

 

Other income (expense), net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(419

)

 

 

(467

)

 

 

(1,083

)

 

 

(1,482

)

Change in fair value of PIPE Warrant liability

 

 

86

 

 

 

(1,954

)

 

 

3,184

 

 

 

9,071

 

Other income (expense), net

 

 

(333

)

 

 

(2,421

)

 

 

2,101

 

 

 

7,589

 

Net income (loss)

 

$

(8,393

)

 

$

16,429

 

 

$

(24,080

)

 

$

13,849

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share

 

$

(0.33

)

 

$

1.02

 

 

$

(1.22

)

 

$

0.92

 

Weighted average number of common shares outstanding

 

 

25,808

 

 

 

16,074

 

 

 

19,773

 

 

 

15,079

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share

 

$

(0.33

)

 

$

1.02

 

 

$

(1.22

)

 

$

0.92

 

Weighted average number of common shares and dilutive

   common share equivalents outstanding

 

 

25,808

 

 

 

16,083

 

 

 

19,773

 

 

 

15,129

 

 

See accompanying notes.

4


AVEO PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income (loss)

 

$

(8,393

)

 

$

16,429

 

 

$

(24,080

)

 

$

13,849

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on available-for-sale securities

 

 

2

 

 

 

(1

)

 

 

1

 

 

 

(1

)

Comprehensive income (loss)

 

$

(8,391

)

 

$

16,428

 

 

$

(24,079

)

 

$

13,848

 

 

See accompanying notes.

 

5


AVEO PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

 

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Par Value

 

 

Additional

Paid-in

Capital

 

 

 

 

Accumulated

Other

Comprehensive

Income

 

 

Accumulated

Deficit

 

 

Total

Stockholders'

Equity

 

Balance at December 31, 2019

 

 

16,081

 

 

$

16

 

 

$

600,451

 

 

 

 

$

 

 

$

(585,621

)

 

$

14,846

 

Stock-based compensation expense

   related to equity- classified awards

 

 

 

 

 

 

 

 

543

 

 

 

 

 

 

 

 

 

 

 

543

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,381

)

 

 

(8,381

)

Balance at March 31, 2020

 

 

16,081

 

 

$

16

 

 

$

600,994

 

 

 

 

$

 

 

$

(594,002

)

 

$

7,008

 

Issuance of common stock in a public

   offering, excluding to related parties

   (net of issuance costs of $3.3 million)

 

 

5,221

 

 

 

5

 

 

 

24,074

 

 

 

 

 

 

 

 

 

 

 

24,079

 

Issuance of common stock in a public

   offering, to related parties

 

 

4,504

 

 

 

5

 

 

 

23,639

 

 

 

 

 

 

 

 

 

 

 

23,644

 

Stock-based compensation expense

   related to equity-classified awards

 

 

 

 

 

 

 

 

578

 

 

 

 

 

 

 

 

 

 

 

578

 

Issuance of common stock under

   employee stock purchase plan

 

 

2

 

 

 

 

 

 

18

 

 

 

 

 

 

 

 

 

 

 

18

 

Change in unrealized gain (loss) on

   investments

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,306

)

 

 

(7,306

)

Balance at June 30, 2020

 

 

25,808

 

 

$

26

 

 

$

649,303

 

 

 

 

$

(1

)

 

$

(601,308

)

 

$

48,020

 

Stock-based compensation expense

   related to equity-classified awards

 

 

 

 

 

 

 

 

594

 

 

 

 

 

 

 

 

 

 

 

594

 

Change in unrealized gain (loss) on

   investments

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

2

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,393

)

 

 

(8,393

)

Balance at September 30, 2020

 

 

25,808

 

 

$

26

 

 

$

649,897

 

 

 

 

$

1

 

 

$

(609,701

)

 

$

40,223

 

 

6


AVEO PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(In thousands)

(Unaudited)

 

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Par Value

 

 

Additional

Paid-in

Capital

 

 

 

 

Accumulated

Other

Comprehensive

Income

 

 

Accumulated

Deficit

 

 

Total

Stockholders'

Equity (Deficit)

 

Balance at December 31, 2018

 

 

12,648

 

 

$

13

 

 

$

567,768

 

 

 

 

$

1

 

 

$

(595,009

)

 

$

(27,227

)

Issuance of common stock from the

   SVB Leerink sales agreement

   (net of issuance costs of $0.2

   million)

 

 

1,252

 

 

 

1

 

 

 

7,511

 

 

 

 

 

 

 

 

 

 

 

7,512

 

Stock-based compensation expense

   related to equity-classified awards

 

 

 

 

 

 

 

 

584

 

 

 

 

 

 

 

 

 

 

 

584

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

555

 

 

 

555

 

Balance at March 31, 2019

 

 

13,900

 

 

$

14

 

 

$

575,863

 

 

 

 

$

1

 

 

$

(594,454

)

 

$

(18,576

)

Issuance of common stock and

   warrants in a public offering,

   excluding to related parties

   (net of issuance costs of

   $2.3 million)

 

 

1,739

 

 

 

2

 

 

 

17,765

 

 

 

 

 

 

 

 

 

 

 

17,767

 

Issuance of common stock and

   warrants in a public offering,

   to related parties

 

 

435

 

 

 

 

 

 

5,000

 

 

 

 

 

 

 

 

 

 

 

5,000

 

Stock-based compensation expense

   related to equity-classified awards

 

 

 

 

 

 

 

 

584

 

 

 

 

 

 

 

 

 

 

 

584

 

Exercise of stock options

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

 

 

3

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,135

)

 

 

(3,135

)

Balance at June 30, 2019

 

 

16,074

 

 

$

16

 

 

$

599,215

 

 

 

 

$

1

 

 

$

(597,589

)

 

$

1,643

 

Stock-based compensation expense related to equity-classified

   awards

 

 

 

 

 

 

 

 

686

 

 

 

 

 

 

 

 

 

 

 

686

 

Change in unrealized gain (loss) on

   investments

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,429

 

 

 

16,429

 

Balance at September 30, 2019

 

 

16,074

 

 

$

16

 

 

$

599,901

 

 

 

 

$

 

 

$

(581,160

)

 

$

18,757

 

 

7


AVEO PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

Operating activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(24,080

)

 

$

13,849

 

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

9

 

 

 

 

Stock-based compensation

 

 

1,715

 

 

 

1,854

 

Non-cash interest expense

 

 

314

 

 

 

445

 

Non-cash change in fair value of PIPE Warrant liability

 

 

(3,184

)

 

 

(9,071

)

Amortization of premium and discount on investments

 

 

(99

)

 

 

(1

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

579

 

 

 

1,936

 

Prepaid expenses and other current assets

 

 

(522

)

 

 

(534

)

Operating lease right-of-use asset

 

 

(1,170

)

 

 

 

Accounts payable

 

 

533

 

 

 

(1,316

)

Accrued contract research

 

 

245

 

 

 

(1,155

)

Other accrued liabilities

 

 

1,075

 

 

 

(893

)

Operating lease liability

 

 

436

 

 

 

 

Deferred revenue

 

 

(1,480

)

 

 

(441

)

Deferred research and development reimbursements

 

 

147

 

 

 

(221

)

Operating lease liability, non-current

 

 

379

 

 

 

 

Net cash (used in) provided by operating activities

 

 

(25,103

)

 

 

4,452

 

Investing activities

 

 

 

 

 

 

 

 

     Purchases of marketable securities

 

 

(36,133

)

 

 

 

Proceeds from maturities and sales of marketable securities

 

 

25,200

 

 

 

 

Purchases of property and equipment

 

 

(219

)

 

 

 

Net cash used in investing activities

 

 

(11,152

)

 

 

 

Financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock and warrants, net of issuance costs

 

 

24,079

 

 

 

25,279

 

Proceeds from issuance of common stock and warrants to related parties

 

 

23,644

 

 

 

5,000

 

Proceed from issuance of loan payable

 

 

5,329

 

 

 

 

 

Proceeds from issuance of common stock for stock-based compensation arrangements

 

 

18

 

 

 

3

 

Payment of principal of loan payable

 

 

(6,497

)

 

 

(1,507

)

Payment of debt issuance costs

 

 

(255

)

 

 

 

 

Net cash provided by financing activities

 

 

46,318

 

 

 

28,775

 

Net increase in cash and cash equivalents

 

 

10,063

 

 

 

33,227

 

Cash and cash equivalents at beginning of period

 

 

29,785

 

 

 

24,427

 

Cash and cash equivalents at end of period

 

$

39,848

 

 

$

57,654

 

Supplemental cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

971

 

 

$

1,539

 

Right-of-use asset obtained in exchange for operating lease liabilities

 

$

1,225

 

 

$

 

 

 

See accompanying notes.

 

8


AVEO Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

September 30, 2020

(1) Organization

AVEO Pharmaceuticals, Inc. (the “Company”) is an oncology-focused biopharmaceutical company committed to delivering medicines that provide a better life for cancer patients. The Company’s strategy is to focus its resources toward development and commercialization of its product candidates in North America, while leveraging partnerships to support development and commercialization in other geographies.  

The Company’s lead candidate is tivozanib (FOTIVDA), a vascular endothelial growth factor receptor tyrosine kinase inhibitor. FOTIVDA is approved through the Company’s development partner EUSA Pharma (UK) Limited (“EUSA”) in the European Union, the United Kingdom, Norway, New Zealand and Iceland for the first-line treatment of adult patients with advanced renal cell carcinoma (“RCC”). The Company is working to develop and potentially commercialize tivozanib in the U.S. as a treatment for RCC and hepatocellular carcinoma, or HCC. In March 2020, the Company submitted an application for marketing approval (“NDA”) to the U.S. Food and Drug Administration (“FDA”) for tivozanib as a treatment for relapsed or refractory RCC. In June 2020, the FDA accepted the NDA for substantive review and assigned it a Prescription Drug User Fee Act (“PDUFA”) target date of March 31, 2021. The Company completed an application orientation meeting with the FDA on May 14, 2020 and a mid-cycle review meeting on July 31, 2020. The FDA has conditionally accepted the Company’s proposed brand name, FOTIVDA, for tivozanib in the United States. The FDA has also notified the Company that it does not currently plan to convene an Oncologic Drugs Advisory Committee meeting in connection with its NDA review. In addition to developing tivozanib as a potential monotherapy, and based on tivozanib’s demonstrated anti-tumor activity and tolerability profile, the Company is studying tivozanib in combination with immune checkpoint inhibitors for the treatment of RCC and HCC in phase 2 clinical trials.

The Company’s pipeline of product candidates also includes ficlatuzumab, a hepatocyte growth factor (“HGF”) inhibitory antibody. The Company has previously reported promising early clinical data on ficlatuzumab in squamous cell carcinoma of the head and neck (“HNSCC”), acute myeloid leukemia (“AML”) and pancreatic cancer. The Company is currently conducting a randomized phase 2 confirmatory study of ficlatuzumab for the potential treatment of HNSCC. The Company’s earlier stage pipeline under development includes AV-203, an anti-ErbB3 monoclonal antibody, as a potential oncology treatment; AV-380, a humanized IgG1 inhibitory monoclonal antibody targeting growth differentiation factor 15 (“GDF15”), a divergent member of the TGF-ß family, for the potential treatment of cancer cachexia; and AV-353, which targets the Notch 3 pathway, as a potential oncology treatment.  

The Company is subject to a number of risks, including the need for substantial additional capital to continue its development programs and to fulfill its planned operating goals. In particular, the Company’s currently planned operating and capital requirements include the need for substantial working capital to support the development and commercialization activities for its lead product candidate, tivozanib.

As used throughout these condensed consolidated financial statements, the terms “AVEO,” and the “Company” refer to the business of AVEO Pharmaceuticals, Inc. and its three wholly-owned subsidiaries, AVEO Pharma Limited, AVEO Pharma (Ireland) Limited and AVEO Securities Corporation.

Liquidity and Going Concern

In accordance with Accounting Standards Update (“ASU”) No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The Company’s financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. Through September 30, 2020, the Company has financed its operations primarily through private placements and public offerings of its common stock and preferred stock, license fees, milestone payments and research and development funding from strategic partners, and loan proceeds. The Company has devoted substantially all of its resources to its drug development efforts, comprising research and development, manufacturing, conducting clinical trials for its product candidates, protecting its intellectual property and general and administrative functions relating to these operations. The future success of the Company is dependent on its ability to develop its product candidates and ultimately upon its ability to attain profitable operations.

The Company has incurred recurring losses and cash outflows from operations since its inception, including an accumulated deficit of $609.7 million as of September 30, 2020. The Company expects to continue to generate operating losses for the foreseeable future.  As of November 9, 2020, the date of issuance of these unaudited condensed consolidated financial statements, the Company expects that its cash, cash equivalents and marketable securities of $68.8 million as of September 30, 2020  will not be sufficient to fund its current operations for more than twelve months from the date of filing this Quarterly Report on Form 10-Q. This condition raises substantial doubt about the Company’s ability to continue as a going concern.

 

9


 

The Company’s plans to address this condition include pursuing one or more of the following options to secure additional funding, none of which can be guaranteed or are entirely within the Company’s control:

 

Earn royalty payments pursuant to the Company’s license agreement (the “EUSA Agreement”) with EUSA for EUSA’s sales of tivozanib in its territory.

 

Earn milestone payments pursuant to the collaboration and license agreements described in Note 4 or restructure / monetize existing potential milestone and/or royalty payments under those collaboration and license agreements.

 

Raise funding through the possible additional sale of the Company’s common stock, including public or private equity financings and / or sales of the Company’s common stock under the Leerink Sales Agreement, as defined and discussed in Note 7.

 

Drawdown  potential future borrowings pursuant to the loan agreement with Hercules Funding III, LLC and Hercules Capital, Inc. (collectively “Hercules”), subject to the satisfaction of the conditions to future borrowing.

 

Partner a portion or all rights to the Company’s portfolio candidates to secure potential additional non-dilutive funds.

Pursuant to the EUSA Agreement, the Company is entitled to receive up to an additional $4.0 million in milestone payments of $2.0 million per country upon reimbursement approval for RCC, if any, in each of France and Italy, and an additional $2.0 million milestone payment for the grant of marketing approval, if any, in three of the licensed countries outside of the European Union (the “EU”), as mutually agreed by the parties. These milestone payments are subject to the 30% sublicense fee payable to Kyowa Kirin Co. (formerly Kirin Brewery Co., Ltd.) (“KKC”) pursuant to the Company’s license agreement with KKC (the “KKC Agreement”). The Company is also eligible to receive additional research and development reimbursement payments from EUSA   if EUSA elects to opt-in to the TIVO-3 study.Refer to Note 4 “Collaborations and License Agreements - InLicense Agreements – Kyowa Kirin Co. (KKC)” for further details.

The Company is also eligible, at its option, to borrow up to an additional $20.0 million under the amendment to the loan agreement with Hercules, subject to certain terms and conditions including FDA approval of FOTIVDA and, if approved, the Company’s net product revenues from sales of FOTIVDA reaching $20.0 million within a specified time frame. There can be no assurance, however, that the FDA will approve FOTIVDA or that the other conditions to the funding of such loan amounts will be satisfied.  Refer to Note 6 “Hercules Loan Facility” for further details.

However, there can be no assurance that the Company will receive cash proceeds from any of these potential resources or to the extent cash proceeds are received such proceeds would be sufficient to support the Company’s current operating plan for more than twelve months from the date of filing this Quarterly Report on Form 10-Q.

When substantial doubt exists after performing the initial valuation under Subtopic 205-40, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. 

Under ASC 205-40, the future receipt of potential funding from the Company’s collaborators and funding that is contingent on FDA approval of FOTIVDA, such as the potential future borrowings pursuant to the loan agreement with Hercules and product revenues from the sales of FOTIVDA, cannot be considered probable at this time because none of the Company’s current plans have been finalized at the time of filing this Quarterly Report on Form 10-Q and the implementation of any such plan is not probable of being effectively implemented as none of the plans are entirely within the Company’s control. Accordingly, substantial doubt is deemed to exist about the Company’s ability to continue as a going concern within one year after the date these financial statements are issued.

If the Company is unable to obtain sufficient capital to continue to advance its programs, the Company would be forced to delay, reduce or eliminate its research and development programs and any future commercialization efforts.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

10


 

(2) Basis of Presentation

These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, AVEO Pharma Limited, AVEO Pharma (Ireland) Limited and AVEO Securities Corporation. The Company has eliminated all significant intercompany accounts and transactions in consolidation.

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals and revisions of estimates, considered necessary for a fair presentation of the condensed consolidated financial statements have been included. Interim results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2020 or any other future period.

The information presented in the condensed consolidated financial statements and related footnotes at September 30, 2020, and for the three months and nine months ended September 30, 2020 and 2019, is unaudited, and the condensed consolidated balance sheet amounts and related footnotes as of December 31, 2019 have been derived from the Company’s audited financial statements. For further information, refer to the consolidated financial statements and accompanying footnotes included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2019, which was filed with the U.S. Securities and Exchange Commission (“SEC”) on March 16, 2020.

Effective as of 5:00 p.m. Eastern Time on February 19, 2020, the Company effected a 1-for-10 reverse stock split of its common stock. All references to shares of common stock outstanding and per share amounts in these condensed consolidated financial statements and the notes to the condensed consolidated financial statements have been restated to reflect the reverse stock split on a retroactive basis. Refer to Note 7, “Common Stock – Reverse Stock Split – February 2020” for further details.

(3) Significant Accounting Policies

Revenue Recognition

The Company’s revenues are generated primarily through collaborative research, development and commercialization agreements. The terms of these agreements generally contain multiple promised goods and services, which may include (i) licenses, or options to obtain licenses, to the Company’s technology, (ii) research and development activities to be performed on behalf of the collaborative partner, and (iii) in certain cases, services in connection with the manufacturing of preclinical and clinical material. Payments to the Company under these arrangements typically include one or more of the following: non-refundable, upfront license fees; option exercise fees; funding of research and/or development efforts; milestone payments; and royalties on future product sales.

Collaboration Arrangements Within the Scope of ASC 808, Collaborative Arrangements

The Company analyzes its collaboration arrangements to assess whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities and are therefore within the scope of ASC Topic 808, Collaborative Arrangements (“ASC 808”). This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement.  For collaboration arrangements that are deemed to be within the scope of ASC 808, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and therefore within the scope of ASC 606, Revenue from Contracts with Customers (“ASC 606”). The Company’s policy is generally to recognize amounts received from collaborators in connection with joint operating activities that are within the scope of ASC 808 as a reduction in research and development expense.

Arrangements Within the Scope of ASC 606, Revenue from Contracts with Customers

11


 

Under ASC 606, the Company recognizes revenue when its customers obtain control of promised goods or services, in an amount that reflects the consideration which the Company determines it expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies its performance obligation(s). As part of the accounting for these arrangements, the Company must make significant judgments, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each performance obligation.

Once a contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within the contract and determines those that are performance obligations. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the customer and if so, they are considered performance obligations. The exercise of a material right is accounted for as a contract modification for accounting purposes.

The Company assesses whether each promised good or service is distinct for the purpose of identifying the performance obligations in the contract. This assessment involves subjective determinations and requires management to make judgments about the individual promised goods or services and whether such are separable from the other aspects of the contractual relationship. Promised goods and services are considered distinct provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (that is, the good or service is capable of being distinct) and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the promise to transfer the good or service is distinct within the context of the contract). In assessing whether a promised good or service is distinct, the Company considers factors such as the research, manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. The Company also considers the intended benefit of the contract in assessing whether a promised good or service is separately identifiable from other promises in the contract. If a promised good or service is not distinct, an entity is required to combine that good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct.

The transaction price is then determined and allocated to the identified performance obligations in proportion to their standalone selling prices (“SSP”) on a relative SSP basis. SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance obligations are satisfied. Determining the SSP for performance obligations requires significant judgment. In developing the SSP for a performance obligation, the Company considers applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs. The Company validates the SSP for performance obligations by evaluating whether changes in the key assumptions used to determine the SSP will have a significant effect on the allocation of arrangement consideration between multiple performance obligations.

If the consideration promised in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the promised goods or services to a customer. The Company determines the amount of variable consideration by using the expected value method or the most likely amount method. The Company includes the unconstrained amount of estimated variable consideration in the transaction price. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, the Company re-evaluates the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment.

In determining the transaction price, the Company adjusts consideration for the effects of the time value of money if the timing of payments provides the Company with a significant benefit of financing. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or