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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 March 31, 2021

 

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)

(857400-0101

(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 May 7, 2021: 34,360,775.

 

 

 


 

 

AVEO PHARMACEUTICALS, INC.

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2021

TABLE OF CONTENTS

 

 

 

 

Page

No.

 

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

Item 1.

 

Financial Statements

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020

5

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020

6

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2021 and 2020

7

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020

8

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020

10

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

11

 

 

 

 

Item 2.

 

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

35

 

 

 

 

Item 4.

 

Controls and Procedures

47

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

48

 

 

 

 

Item 1A.

 

Risk Factors

48

 

 

 

 

Item 6.

 

Exhibits

82

 

 

 

 

 

 

Signatures

83

 


2


 

 

Cautionary Note Regarding Forward-Looking Statements and Industry Data

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties. All statements other than statements of historical fact contained in this report are statements that could be deemed forward-looking statements, including, without limitation, statements with respect to the plans, strategies and objectives of management for future operations; statements concerning product research, development and commercialization plans, timelines and anticipated results; statements of expectation or belief; statements with respect to clinical trials and studies; statements with respect to the therapeutic potential of product candidates; any expectations of revenue, expenses, earnings or losses from operations, or other financial results; and statements of assumptions underlying any of the foregoing. Without limiting the foregoing, the words “anticipates”, “believes”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “seeks”, “will”, “strategy”, “potential”, “should”, “would” and other similar language, whether in the negative or affirmative, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements may include, but are not limited to, statements about:

 

our plans to launch and commercialize FOTIVDA;

 

our plans to develop our clinical stage assets and commercialize our product candidates;

 

our manufacturing, marketing and sales capabilities and strategy;

 

the rate and degree of market acceptance and clinical utility of our products;

 

the initiation, timing, progress and results of future clinical trials, and our development programs;

 

our ability to secure new collaborations, maintain existing collaborations or obtain additional funding;

 

our intellectual property position;

 

the potential of ficlatuzumab, AV-380 or other product candidates that we in-license, or may elect to in-license, or may acquire in the future;

 

the timing or likelihood of regulatory filings and approvals;

 

the implementation of our business model, strategic plans for our business, product candidates and technology;

 

our competitive position;

 

developments and projections relating to our competitors and our industry;

 

impacts resulting from the COVID-19 pandemic and responsive actions relating thereto;

 

our estimates of the period in which we anticipate that existing cash, cash equivalents and investments will enable us to fund our current and planned operations; and

 

our estimates regarding expenses, future revenue, capital requirements and needs for additional financing.

Our actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors. We therefore caution you against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in these forward-looking statements include the factors discussed below under the heading “Risk Factor Summary,” and the risk factors detailed further in Item 1A., “Risk Factors” of Part I of this report and in our U.S. Securities and Exchange Commission reports filed after this report.

This report also includes statistical and other industry and market data that we obtained from industry publications and research, surveys, and studies conducted by third parties as well as our own estimates. All of the market data used in this report involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such data. Industry publications and third-party research, surveys, and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Our estimates of the potential market opportunities for our product candidates include several key assumptions based on our industry knowledge, industry publications, third-party research, and other surveys, which may be based on a small sample size and may fail to accurately reflect market opportunities. While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions.

The forward-looking statements included in this quarterly report represent our estimates as of the filing date of this quarterly report. We specifically disclaim any obligation to update these forward-looking statements in the future. These forward-looking statements should not be relied upon as representing our estimates or views as of any date subsequent to the date of this annual report.

3


 

Risk Factor Summary

Investment in our securities involves risk. You should carefully consider the following summary of what we believe to be the principle risks facing our business, in addition to the risks described more fully in Item 1A., “Risk Factors” of Part I of this Quarterly Report on Form 10-Q and other information included in this report. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations.

If any of the following risks occur, our business, financial condition and results of operations and future growth prospects could be materially and adversely affected, and the actual outcomes of matters as to which forward-looking statements are made in this report could be materially different from those anticipated in such forward-looking statements.

 

We have incurred significant operating losses, anticipate that we will continue to incur significant operating expenses for the foreseeable future and may never generate significant revenue or achieve or sustain profitability.

 

We may require substantial additional funding to advance our pipeline of clinical stage assets, and if we are unable to obtain this necessary capital when needed, we could be forced to delay, limit, reduce or terminate our research, product development or commercialization efforts.

 

We have only recently transitioned from a development stage biopharmaceutical company to a commercial and clinical development stage biopharmaceutical company, which may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

 

We depend heavily on the success of our product, FOTIVDA, and on our clinical stage assets, including tivozanib (in other indications), ficlatuzumab and AV-380. If we are unable to complete the clinical development of, obtain marketing approval for or successfully commercialize our product candidates, our business will be materially harmed.

 

If we or our collaborators experience delays or difficulties in the enrollment of patients in clinical trials, receipt of necessary regulatory approvals could be delayed or prevented.

 

If clinical trials of any product candidates that we, or any collaborators, may develop fail to satisfactorily demonstrate safety and efficacy to the FDA and other regulators, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of these product candidates.

 

We face substantial competition from existing approved products and our competitors may also discover, develop or commercialize new competing products before, or more successfully, than we do.

 

Adverse events or undesirable side effects caused by, or other unexpected properties of, product candidates that we develop may be identified during development and could delay or prevent their marketing approval or limit their use.

 

We rely in part on third parties to produce our preclinical and clinical product candidate supplies and to conduct clinical trials of our internally-developed product candidates, and those third parties may not perform satisfactorily, including by failing to deliver supplies on time or to meet deadlines for the completion of such trials, research or testing.

 

We rely on our licensee EUSA, over whom we have little control, for the sales, marketing and distribution efforts associated with the commercialization of FOTIVDA in certain European countries and any failure by EUSA to devote the necessary resources and attention to market and sell FOTIVDA effectively and successfully may materially impact our ability to generate revenue.

 

We may not be successful in establishing or maintaining strategic partnerships to further the development of our therapeutic programs. Additionally, if any of our current or future strategic partners fails to perform its obligations or terminates the partnership, the development and commercialization of the product candidates under such agreement could be delayed or terminated and, such failures or terminations could have a material adverse effect on our operations and business.

 

We could be unsuccessful in obtaining or maintaining adequate patent protection for one or more of our product candidates, or the scope of our patent protection could be insufficiently broad, which could result in competition and a decrease in the potential market share for our product candidates.

4


 

AVEO PHARMACEUTICALS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except par value amounts)

(Unaudited)

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

121,414

 

 

$

61,761

 

Marketable securities

 

 

 

 

 

 

Trade receivables, net

 

 

1,144

 

 

 

1,197

 

Partnership receivables

 

 

1,422

 

 

 

 

Clinical trial retainers

 

 

587

 

 

 

355

 

Other prepaid expenses and other current assets

 

 

1,495

 

 

 

2,195

 

Total current assets

 

 

126,062

 

 

 

65,508

 

Property and equipment, net

 

 

326

 

 

 

343

 

Operating lease right-of-use asset

 

 

790

 

 

 

903

 

Other assets

 

 

258

 

 

 

158

 

Total assets

 

$

127,436

 

 

$

66,912

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,963

 

 

$

3,380

 

Accrued clinical trial costs and contract research

 

 

5,285

 

 

 

4,550

 

Other accrued liabilities

 

 

4,723

 

 

 

4,463

 

Operating lease liability

 

 

331

 

 

 

369

 

Loans payable, net of discount

 

 

 

 

 

1,056

 

Deferred revenue

 

 

1,974

 

 

 

1,974

 

Deferred research and development reimbursements

 

 

112

 

 

 

164

 

PIPE Warrant liability (Note 7)

 

 

2,595

 

 

 

199

 

Other liabilities (Note 6)

 

 

790

 

 

 

790

 

Total current liabilities

 

 

19,773

 

 

 

16,945

 

Loans payable, net of current portion and discount

 

 

32,437

 

 

 

12,716

 

Deferred revenue, non-current

 

 

85

 

 

 

578

 

Operating lease liability, non-current

 

 

261

 

 

 

336

 

Other liabilities, non-current (Note 6)

 

 

2,432

 

 

 

1,043

 

Total liabilities

 

 

54,988

 

 

 

31,618

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $.001 par value: 5,000 shares authorized at March 31,

   2021 and December 31, 2020; no shares issued and outstanding at each of

   March 31, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $.001 par value: 50,000 shares authorized at March 31,

   2021 and December 31, 2020; 34,361 shares issued and outstanding at

   March 31, 2021 and 26,883 issued and outstanding at December 31, 2020

 

 

34

 

 

 

27

 

Additional paid-in capital

 

 

715,741

 

 

 

656,472

 

Accumulated deficit

 

 

(643,327

)

 

 

(621,205

)

Total stockholders’ equity

 

 

72,448

 

 

 

35,294

 

Total liabilities and stockholders’ equity

 

$

127,436

 

 

$

66,912

 

 

See accompanying notes.

 

5


 

 

AVEO PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Revenues:

 

 

 

 

 

 

 

 

FOTIVDA product revenue, net

 

$

1,066

 

 

$

-

 

Collaboration and licensing revenue

 

 

493

 

 

 

493

 

Partnership royalties

 

 

361

 

 

 

291

 

 

 

 

1,920

 

 

 

784

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of products sold

 

 

138

 

 

 

-

 

Research and development

 

 

5,797

 

 

 

7,826

 

Selling, general and administrative

 

 

15,100

 

 

 

3,672

 

 

 

 

21,035

 

 

 

11,498

 

Loss from operations

 

 

(19,115

)

 

 

(10,714

)

Other income (expense), net:

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(611

)

 

 

(315

)

Change in fair value of PIPE Warrant liability

 

 

(2,396

)

 

 

2,648

 

Other income (expense), net

 

 

(3,007

)

 

 

2,333

 

Net loss

 

$

(22,122

)

 

$

(8,381

)

 

 

 

 

 

 

 

 

 

Net loss per share - basic and diluted

 

$

(0.81

)

 

$

(0.52

)

Weighted average number of common shares outstanding

 

 

27,429

 

 

 

16,081

 

See accompanying notes.

6


 

AVEO PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Net loss

 

$

(22,122

)

 

$

(8,381

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Comprehensive loss

 

$

(22,122

)

 

$

(8,381

)

 

See accompanying notes.

 

7


 

 

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, 2020

 

 

26,883

 

 

$

27

 

 

$

656,472

 

 

$

 

 

$

(621,205

)

 

$

35,294

 

Issuance of common stock in a public

   offering

   (net of issuance costs of $3.6 million)

 

 

6,900

 

 

 

7

 

 

 

51,596

 

 

 

 

 

 

 

 

 

51,603

 

Issuance of common stock from the

   SVB Leerink sales agreement (net

   of issuance costs of $0.1 million)

 

 

331

 

 

 

 

 

 

3,377

 

 

 

 

 

 

 

 

 

3,377

 

Issuance of common stock in

   connection with warrant exercises

 

 

247

 

 

 

 

 

 

3,092

 

 

 

 

 

 

 

 

 

3,092

 

Stock-based compensation expense

   related to equity- classified awards

 

 

 

 

 

 

 

 

1,204

 

 

 

 

 

 

 

 

 

1,204

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,122

)

 

 

(22,122

)

Balance at March 31, 2021

 

 

34,361

 

 

$

34

 

 

$

715,741

 

 

$

 

 

$

(643,327

)

 

$

72,448

 

 

8


 

 

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

 

 

9


 

 

AVEO PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(22,122

)

 

$

(8,381

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

17

 

 

 

 

Stock-based compensation

 

 

1,204

 

 

 

543

 

Non-cash interest expense

 

 

140

 

 

 

109

 

Non-cash change in fair value of PIPE Warrant liability

 

 

2,396

 

 

 

(2,648

)

Amortization of premium and discount on investments

 

 

 

 

 

(51

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade receivables, net

 

 

(1,144

)

 

 

(1,148

)

Partnership receivables

 

 

(225

)

 

 

 

Prepaid expenses and other current assets

 

 

468

 

 

 

559

 

Operating lease right-of-use asset

 

 

113

 

 

 

(1,383

)

Other non-current assets

 

 

(100

)

 

 

 

Accounts payable

 

 

583

 

 

 

1,499

 

Accrued contract research

 

 

735

 

 

 

(580

)

Other accrued liabilities

 

 

260

 

 

 

(860

)

Operating lease liability

 

 

(38

)

 

 

438

 

Deferred revenue

 

 

(493

)

 

 

(493

)

Deferred research and development reimbursements

 

 

(52

)

 

 

117

 

Operating lease liability, non-current

 

 

(76

)

 

 

592

 

Net cash used in operating activities

 

 

(18,334

)

 

 

(11,687

)

Investing activities

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

 

 

 

(7,152

)

Proceeds from maturities and sales of marketable securities

 

 

 

 

 

15,000

 

Purchases of property and equipment

 

 

 

 

 

(100

)

Net cash provided by investing activities

 

 

 

 

 

7,748

 

Financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

54,980

 

 

 

 

Proceeds from issuance of loan payable

 

 

20,000

 

 

 

 

Proceeds from warrant exercises

 

 

3,092

 

 

 

 

Payment on principal of loan payable (Note 6)

 

 

 

 

 

(2,389

)

Payment of debt issuance costs

 

 

(85

)

 

 

 

Net cash provided by (used in) financing activities

 

 

77,987

 

 

 

(2,389

)

Net increase (decrease) in cash and cash equivalents

 

 

59,653

 

 

 

(6,328

)

Cash and cash equivalents at beginning of period

 

 

61,761

 

 

 

29,785

 

Cash and cash equivalents at end of period

 

$

121,414

 

 

$

23,457

 

Supplemental cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

362

 

 

$

368

 

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

 

$

 

 

$

1,225

 

 

 

See accompanying notes.

 

10


 

 

AVEO Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

March 31, 2021

(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 on the development and commercialization of its product candidates in North America, while leveraging partnerships to support development and commercialization in other geographies. With the approval of its first commercial product, FOTIVDA® (tivozanib), in the United States, the Company has transitioned from a clinical development stage biopharmaceutical company to a commercial and clinical development stage biopharmaceutical company.

FOTIVDA is the Company’s lead product and was approved by the U.S. Food and Drug Administration (“FDA”), for marketing and sale in the United States on March 10, 2021. FOTIVDA is approved in the United States for the treatment of adult patients with relapsed or refractory advanced renal cell carcinoma following two or more prior systemic therapies. FOTIVDA is an oral, next-generation vascular endothelial growth factor receptor (“VEGFR”) tyrosine kinase inhibitor (“TKI”). The FDA approval of FOTIVDA is based on the Company’s pivotal phase 3 randomized, controlled, multi-center, open-label clinical trial comparing tivozanib to an approved therapy, Nexavar® (sorafenib), in renal cell carcinoma (“RCC”) patients whose disease had relapsed or become refractory to two or three prior systemic therapies, which the Company refers to as the TIVO-3 trial. The approval is also supported by three additional trials in RCC and includes safety data from over 1,000 clinical trial subjects. FOTIVDA became commercially available in the United States on March 22, 2021. The Company is currently commercializing FOTIVDA in the United States through the support of approximately 65 field-based employees, which includes approximately 50 oncology sales professionals targeting practicing oncologists. FOTIVDA is available to patients through a network of specialty pharmacies and distributors.

FOTIVDA, through the Company’s partner EUSA Pharma (UK) Limited (“EUSA”), is also approved in the European Union (“EU”), New Zealand and South Africa and is reimbursed in the United Kingdom, Germany, Spain and certain other countries in EUSA’s territory. FOTIVDA is approved in the EU for the first line treatment of adult patients with advanced RCC and for adult patients who are VEGFR and mTOR pathway inhibitor-naïve following disease progression after one prior treatment with cytokine therapy for advanced RCC. FOTIVDA has been commercially available in the EU since 2017.

Based on FOTIVDA’s demonstrated anti-tumor activity, tolerability profile and reduction of regulatory T-cell production, the Company is seeking to advance FOTIVDA in additional cancer indications with significant unmet medical needs. The Company is studying FOTIVDA in combination with immune checkpoint inhibitors for the treatment of hepatocellular carcinoma, or HCC, and RCC in phase 2 and phase 3 clinical trials.

The Company is conducting the DEDUCTIVE trial through a drug supply and cost sharing collaboration with AstraZeneca PLC (“AstraZeneca”). The DEDUCTIVE trial is an open-label, multi-center, randomized phase 1b/2 clinical trial of tivozanib in combination with IMFINZI (durvalumab), AstraZeneca’s monoclonal antibody directed against programmed death-ligand 1 (“PD-L1”) in the first-line treatment of patients with advanced, unresectable HCC who have not received prior systemic therapy.

The Company is also seeking to advance its pipeline of three wholly owned humanized immunoglobulin G1 (“IgG1”) monoclonal antibody product candidates: ficlatuzumab, AV-380 and AV-203.

Ficlatuzumab is a potent humanized IgG1 monoclonal antibody that targets hepatocyte growth factor (“HGF”). The Company has previously reported promising early clinical data on ficlatuzumab in squamous cell carcinoma of the head and neck (“HNSCC”) pancreatic cancer and acute myeloid leukemia (“AML”). The Company is currently conducting a randomized phase 2 confirmatory study of ficlatuzumab (the “Phase 2 HNSCC Trial”), for the potential treatment of HNSCC and it expects to receive top line data from the Phase 2 HNSCC Trial in the middle of 2021. The Company has initiated manufacturing of the clinical supply for a potential phase 3 clinical trial of ficlatuzumab, and it continues to evaluate opportunities for the further clinical development of ficlatuzumab.

AV-380 is a potent humanized IgG1 monoclonal antibody that targets growth differentiation factor 15 (“GDF15”). In December 2020, the FDA approved the Company’s investigational new drug application (“IND”) for AV-380 for the potential treatment of cancer cachexia, and, in the first quarter of 2021, the Company initiated a phase 1 clinical trial in healthy volunteers.

AV-203 is a potent humanized IgG1 monoclonal antibody that targets ErbB3 (also known as HER3) to which the Company will regain worldwide rights in September 2021. It is exploring AV-203 as a potential oncology treatment.

11


 

AV-353 is an IgG1 monoclonal antibody that targets the Notch 3 pathway.

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 March 31, 2021, 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 commercialize FOTIVDA in the United States and to develop its clinical stage assets and, ultimately, upon the Company’s ability to create shareholder value. On March 10, 2021, the FDA approved FOTIVDA in the United States for the treatment of adult patients with relapsed or refractory advanced RCC following two or more prior systemic therapies. The Company’s future product revenues will depend upon the size of markets in which FOTIVDA, and any future products, have received approval, and its ability to achieve sufficient market acceptance, reimbursement from third-party payers and adequate market share for FOTIVDA and any future products in those markets. The likelihood of the Company’s long-term success must be considered in light of the expenses, difficulties and potential delays that may be encountered in the development and commercialization of new pharmaceutical products, competitive factors in the marketplace and the complex regulatory environment in which the Company operates. Absent the realization of sufficient revenues from product sales to support the Company’s cost structure, the Company may never attain or sustain profitability.

The Company has incurred recurring losses and cash outflows from operations since its inception, including an accumulated deficit of $643.3 million as of March 31, 2021. The Company anticipates that it will continue to incur significant operating expenses for the foreseeable future as it commercializes FOTIVDA in the United States and continues its planned development activities for its clinical stage assets. The Company may require substantial additional funding to advance its pipeline of clinical stage assets, and the timing and nature of these activities will be conducted subject to the availability of sufficient financial resources.

As of May 10, 2021, the date of issuance of these consolidated financial statements, the Company expects that its cash and cash equivalents of $121.4 million as of March 31, 2021, along with net product revenues from the commercial launch of FOTIVDA in the United States, will be sufficient to fund its current operations for more than twelve months from the date of filing this Quarterly Report on Form 10-Q.

Management’s expectations with respect to its ability to fund current planned operations is based on estimates that are subject to risks and uncertainties, including, without limitation, risks related to its ability to generate product revenue from sales of FOTIVDA in the United States, which became commercially available in the United States on March 22, 2021. If actual results are different from management’s estimates, the Company may need to seek additional strategic or financing opportunities sooner than would otherwise be expected. However, there is no guarantee that any of these strategic or financing opportunities would be executed or executed on favorable terms, and some could be dilutive to existing stockholders. If the Company is unable to obtain additional funding on a timely basis, it may be forced to significantly curtail, delay or discontinue one or more of its planned research or development programs or be unable to expand its operations or otherwise capitalize on its commercialization of its product and product candidates.

(2) Basis of Presentation

These 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.

12


 

The accompanying condensed consolidated financial statements have been prepared in accordance with United States 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 months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021 or any other future period.

The information presented in the condensed consolidated financial statements and related footnotes at March 31, 2021, and for the three months ended March 31, 2021 and 2020, is unaudited, and the condensed consolidated balance sheet amounts and related footnotes as of December 31, 2020 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, 2020, which was filed with the U.S. Securities and Exchange Commission (“SEC”) on March 16, 2021.

(3) Significant Accounting Policies

Revenue Recognition

Under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, 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.

Net Product Revenue

On March 10, 2021, the FDA approved FOTIVDA in the United States for the treatment of adult patients with relapsed or refractory advanced RCC after two prior systemic therapies. FOTIVDA became commercially available on March 22, 2021. FOTIVDA is the Company’s first commercial product. The Company sells its products principally through a limited distribution network comprised of two specialty pharmacies, Biologics and Onco360, and the following specialty distributors:  Amerisource Specialty Distribution, Oncology Supply, McKesson Plasma and Biologics, McKesson Specialty and Cardinal Specialty, or collectively, the Company’s Customers. These Customers subsequently resell the Company’s products to health care providers and patients. In addition to distribution agreements with Customers, the Company enters into arrangements with health care providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of the Company’s products. Revenues from product sales are recognized when the Customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the Customer.

Product Sales Discounts and Allowances

The Company records revenues from product sales at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established primarily from discounts, chargebacks, rebates, co-pay assistance, returns and other allowances that are offered within contracts between the Company and its Customers, health care providers, payors and other indirect customers relating to the sales of its products. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is deductible by the Customer from payments to the Company) or a current liability (if the amount is payable by the Company to a third party or Customer). Where appropriate, these estimates take into consideration a range of possible outcomes that are probability-weighted for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, forecasted Customer buying and payment patterns, and the Company’s historical experience that will develop overtime as FOTIVDA is the Company’s first commercial product. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of its contracts. The amount of variable consideration that is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenues and earnings in the period such variances become known.

13


 

Chargebacks: Chargebacks are discounts that occur when contracted customers purchase directly from a specialty distributor. Contracted customers, which currently consist primarily of Public Health Service institutions, Federal government entities purchasing via the Federal Supply Schedule, Group Purchasing Organizations, and health maintenance organizations, generally purchase the product at a discounted price. The specialty distributor, in turn, charges back to the Company the difference between the price initially paid by the specialty distributor and the discounted price paid to the specialty distributor by its contracted customer. The allowance for chargebacks is based on actual chargebacks received and an estimate of sales by the specialty distributor to its contracted customers.

Discounts for Prompt Payment: The Company’s Customers receive a discount of 2% for prompt payment. The Company expects its Customers will earn 100% of their prompt payment discounts and, therefore, the Company deducts the full amount of these discounts from total product sales when revenues are recognized.

Rebates: Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program, other government programs and commercial contracts. Rebate amounts owed after the final dispensing of the product to a benefit plan participant are based upon contractual agreements or legal requirements with public sector benefit providers, such as Medicaid. The allowance for rebates is based on statutory or contractual discount rates and expected utilization. The Company’s estimates for the expected utilization of rebates are based on Customer and payer data received from the specialty pharmacies and distributors and historical utilization rates that will develop overtime as FOTIVDA is the Company’s first commercial product. Rebates are generally invoiced by the payer and paid in arrears, such that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s shipments to the Company’s Customers, plus an accrual balance for known prior quarters’ unpaid rebates. If actual future rebates vary from estimates, the Company may need to adjust its accruals, which would affect net product revenues in the period of adjustment. Allowances for rebates also include amounts related to the Medicare Part D Coverage Gap Discount Program. In the United States during 2020, the Medicare Part D prescription drug benefit mandated participating manufacturers to fund 70% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients. The Company’s estimates for expected Medicare Part D coverage gap amounts are based on Customer and payer data received from specialty pharmacies and distributors and historical utilization rates that will develop overtime as FOTIVDA is the Company’s first commercial product. Funding of the coverage gap is invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s shipments to the Company’s Customers, plus an accrual balance for known prior quarters’ unpaid claims. If actual future funding varies from estimates, the Company may need to adjust its accruals, which would affect net product revenues in the period of adjustment.

Co-payment Assistance: Patients who have commercial insurance and meet certain eligibility requirements may receive co-payment assistance. The Company accrues a liability for co-payment assistance based on actual program participation and estimates of program redemption using Customer data provided by the third party that administers the copay program.

Other Customer Credits: The Company pays fees to its Customers for account management, data management and other administrative services. To the extent the services received are distinct from the sale of products to its Customers, the Company classifies these payments in selling, general and administrative expenses in its Consolidated Statements of Income.

The following table summarizes net product revenues for FOTIVDA earned in the three months ended March 31, 2021 and 2020, respectively (in thousands).

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Product revenues:

 

 

 

 

 

 

 

 

      Gross product revenues

 

$

1,256

 

 

$

 

      Discounts and allowances

 

 

(190

)

 

 

 

         Net product revenues

 

$

1,066

 

 

$

 

 

14


 

 

The following table summarizes the percentage of total product revenues for FOTIVDA by customer who individually accounted for 10% or more of total product revenues earned in the three months ended March 31, 2021 and 2020, respectively:

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

OncoMed Specialty, LLC (Onco360)

 

 

31

%

 

 

 

Affiliates of McKesson Corporation

 

 

33

%

 

 

 

Affiliates of AmerisourceBergen Corporation

 

 

23

%

 

 

 

Affiliates of Cardinal Health Specialty

 

 

13

%

 

 

 

 

 

 

100

%

 

 

 

 

Product Sales Discounts and Allowances

The activities and ending allowance balances for each significant category of discounts and allowances for FOTIVDA (which constitute variable consideration) for the three months ended March 31, 2021 were as follows (in thousands):

 

 

 

Chargebacks, Discounts for Prompt Pay and Other Allowances

 

 

Rebates, Customer Fees / Credits and Co-Pay Assistance

 

 

Totals

 

Provision related to sales made in:

 

 

 

 

 

 

 

 

 

 

 

 

      Current period

 

$

112

 

 

$

78

 

 

$

190

 

Payments and customer credits issued

 

 

 

 

 

 

 

 

 

Balance at March 31, 2021

 

$

112

 

 

$

78

 

 

$

190

 

 

The allowances for chargebacks, discounts for prompt payment and other allowances are recorded as a reduction of trade receivables, net, and the remaining reserves are recorded as rebates and fees due to customers in the accompanying Consolidated Balance Sheets.

Collaboration Revenues

The Company’s historical revenues have been 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. 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

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

15


 

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 less. The Company assessed each of its revenue generating arrangements in order to determine whether a significant financing component exists and concluded that a significant financing component does not exist in any of its arrangements.

The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time or over time, and if over time based on the use of an output or input method.

Licenses of Intellectual Property: The terms of the Company’s license agreements include the license of functional intellectual property, given the functionality of the intellectual property is not expected to change substantially as a result of the Company’s ongoing activities. If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from the portion of the transaction price allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises (that is, for licenses that are not distinct from other promised goods and services in an arrangement), the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Research and Development Funding: Arrangements that include payment for research and development services are generally considered to have variable consideration. If and when the Company assesses the payment for these services is no longer subject to the constraint on variable consideration, the related revenue is included in the transaction price.

16


 

Milestone payments: At the inception of each arrangement that includes non-refundable payments for contingent milestones, including preclinical research and development, clinical development and regulatory, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of the achievement of contingent milestones and the likelihood of a significant reversal of such milestone revenue, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration and licensing revenue in the period of adjustment. This quarterly assessment may result in the recognition of revenue related to a contingent milestone payment before the milestone event has been achieved.  

Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

The following table summarizes the total collaboration revenues earned in the three months ended March 31, 2021 and 2020, respectively, by partner (in thousands). Refer to Note 4, “Collaborations and License Agreements” regarding specific details.

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

EUSA

 

$

854

 

 

$

784

 

Total

 

$

854

 

 

$