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Aveo shares shellacked after Astellas drops EU game plan on kidney cancer

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Three weeks after an FDA panel overwhelmingly rejected Aveo's bid to gain approval for its kidney cancer drug tivozanib, the biotech has earned another vote of no confidence--this time from its pharma partner. In an SEC filing, Aveo tersely notified investors that Astellas has decided not to seek an approval to market the drug for kidney cancer in Europe and also wouldn't shell out any cash for research on the renal cell cancer indication.

The sour note took another bite out of Aveo's stock price ($AVEO), with shares sliding 18% on the news. Over the last few weeks the stock has plummeted 67% as class action lawsuits piled up at the biotech's front office.

A number of analysts say they were stunned by the FDA's harsh criticism of Aveo's late-stage R&D work, blindsided by the fact that the agency had signaled a year ago that Aveo should consider doing another trial geared to determine overall survival rates, with more U.S. patients in the mix. Tivozanib beat out Nexavar on progression-free survival in its pivotal study but lost on the OS matchup, and agency officials refused to buy into Aveo's argument that crossovers in the study-the migration of patients from the Nexavar arm to the tivozanib arm as their disease progressed-could explain the embarrassing failure.

A little more than two years ago, Astellas paid $125 million upfront and promised $1.3 billion in milestones to partner on the drug, grabbing the lead role for marketing the drug in Europe.

"I expect (Aveo) shares to be down a little because if Astellas had decided to go ahead and pursue the (renal cell cancer) indication as well then obviously they would have to bear half the cost of the study," RBC Capital Markets analyst Adnan Butt told Reuters. "It's not a total surprise that Astellas has decided not to fund it but it's a little bit disappointing."

In the SEC filing, Aveo said that the company "is currently evaluating the effect of Astellas' decision on the clinical and regulatory path forward for tivozanib in RCC." Astellas is also partnered with Aveo on colorectal and breast cancer and Butt told Reuters that that part of the agreement looks like it will survive intact.

In the meantime, Aveo has to sit tight while the FDA prepares its formal decision. Based on the panel review, though, a rejection appears to be close to a certainty.

- here's the SEC document
- here's the Reuters story

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