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1 AVEO Pharmaceuticals, Inc. May 4, 2017 BUY (AVEO, $0.61) Expecting 1Q18 TIVO-3 Success; TIVO-1 Confounded by Poor Design & Execution Rather Than Tivozanib: Initiating BUY/$3 TP Jonathan Aschoff, Ph.D We are initiating coverage of AVEO Pharmaceuticals, Inc. with a Buy rating and 12 month target price of $3. AVEO s lead candidate, tivozanib is a VEGFR TKI designed initially to treat renal cell carcinoma (RCC). Our valuation is based entirely upon projected future EU tivozanib royalties and US co-promotion revenue to AVEO, with product launches projected in 2H17 and 2H19, respectively, provided that the EMA approves tivozanib in mid-2017, and the drug succeeds in the Phase 3 TIVO-3 trial in 1Q18 that is required for FDA approval. AVEO shares have been kicked to the curb since the FDA did not approve tivozanib upon TIVO-1 data, and we see unappreciated value in TIVO-3. The most important investment catalyst for AVEO is the 1Q18 release of Phase 3 TIVO-3 results in third-line RCC. Clinical success in this setting will directly show third-line utility and also support the prior TIVO-1 trial results in the first-line RCC setting such that the FDA would likely approve tivozanib for use in both settings. TIVO-1 primary endpoint success was contradicted by a key secondary endpoint failure that resulted from the trial s poor execution and design rather than a tivozanib deficiency, and we fully expect TIVO-3 to demonstrate tivozanib s utility in RCC and resolve this outstanding issue. TIVO-3 should be fully enrolled in June. Nearer-term investment catalysts for AVEO include data from the Phase 1 portion of a Phase 1/2 trial in June, followed by a roughly mid-2017 EMA decision on tivozanib. The Phase 1/2 trial is testing the combination of tivozanib and nivolumab in advanced RCC, and positive results would support tivozanib use with the fast growing immuno-oncology drug class, which is important given the highly likely trend toward combination therapy in the first-line setting. EMA approval would importantly underscore our view that TIVO-1 results were confounded by trial design and not by any negative issue with tivozanib, and to that end AVEO s partner EUSA is preparing its oral presentation to the CHMP, which will occur in May and should, in our view, lead to a 2H17 approval in the EU. Competition is high among VEGF TKIs, but tivozanib has several differentiating features beyond its efficacy. Tivozanib thus far appears to demonstrate best-in-class safety results among the entire VEGFR TKI class, due to its high selectivity and low off-target effects. The most frequent adverse event with tivozanib was hypertension, but that is easily treated and does not require dose limiting or interruption. More importantly, tivozanib caused the lowest incidence of the far more problematic hand-foot syndrome. Favorable safety also greatly facilitates combination therapy, as toxicity from drug combinations often limits the ability to treat. Cash should last into 2Q18. AVEO had about $39M in current cash as of the end of 1Q17, including its recent capital raise that netted $15.5M, which should be sufficient to support its activities into 2Q18, by our projections. Source: Big Charts Rev ($M) 2016A 2017E 2018E Ticker AVEO 1Q A - Last Price $0.61 2Q 0.2 0E - Mkt Cap ($M) $67 3Q 1 4E - Fiscal YE 31-Dec 4Q 0.1 1E - 50d ADV (000) 476 Annual E 9.5E Short int (M) 1.2 S/O (M) EPS 2016A 2017E 2018E Annual Hi $1.15 1Q A - Annual Lo $0.50 2Q E - Cash ($M) $33 3Q E - Debt ($M) $15 4Q E - Annual E -0.25E *Note: pricing is as of market close on 5/3/17 Source: Company reports, Opus National Capital Markets estimates Please see pages for Important Disclosures 1

2 Exhibit 1: Product pipeline Source: Company document: RCC=renal cell carcinoma; SCCHN= squamous cell carcinoma of the head and neck; AML= acute myeloid leukemia; PAH= pulmonary arterial hypertension Valuation We derive our 1-year target price of $3 via a DCF analysis, assuming a 20% discount rate that is applied to all cash flows and the terminal value, which is based on a 4 multiple of our projected 2025 EBITDA of about $174 million. AVEO s most advanced drug candidate, tivozanib is currently in Phase 3 for third-line renal cell carcinoma (RCC) and is in regulatory review in the EU for first-line RCC. We base our valuation for AVEO solely on our forecasted revenue from tivozanib in the US and EU. We project tivozanib s annual cost to be about $132,000 in the US and $88,000 in the EU due to the stricter pricing scheme under the EU s universal healthcare system. We expect AVEO to build enough of a sales team for our projected co-promotion of tivozanib in the US. Given that a Marketing Authorization Application (MAA) has been filed for tivozanib in the EU and the application has progressed to the day 180 list of outstanding issues, we project tivozanib, if approved, to be marketed in the EU for first-line RCC in 2H17 and to attain a mid-high single-digit peak market penetration in that setting. Given that tivozanib is currently in the Phase 3 TIVO-3 trial for US approval in third-line RCC with results expected in 1Q18, we forecast a 2H18 New Drug Application (NDA) filing and a US launch in 2H19, assuming TIVO-3 success. When launched, with an s- shaped uptake curve, we project tivozanib to attain peak total US and EU revenue of almost $600 million in 2025 for RCC, with almost $250 million coming to AVEO ($201 million in US co-promotion revenue and $43 million in royalties from EUSA). Tiered double-digit royalties from EUSA start at a rate of about 10% and can potentially go as high as about 25%, depending on annual sales. Notably, our valuation is based solely upon revenue from tivozanib in RCC, and thus revenue from any additional indications or from earlier stage candidates such as ficlatuzumab for squamous cell carcinoma of the head and neck and acute myeloid leukemia, and AV-203 for esophageal cancer, would represent upside to our valuation. AVEO s current $67 million market value represents a valuation that we view as completely failing to factor in the high likelihood of TIVO-3 success and the likelihood of European approval based upon TIVO-1, a trial that clearly was compromised by design and execution, rather than by any tivozanib shortcomings. AVEO business overview AVEO is a biopharmaceutical company dedicated to advancing a broad portfolio of targeted therapeutics for oncology and other areas of unmet medical need. AVEO is focused on developing its lead Phase 3 candidate tivozanib, a potent, selective, long half-life inhibitor of vascular endothelial growth factor (VEGF) 1, 2, and 3 receptors, as a treatment for RCC. The company is also committed to the further development of tivozanib in follow-on indications and the advancement of other drug candidates, including ficlatuzumab, a Phase 1 hepatocyte growth factor inhibitory antibody for squamous cell carcinoma of the head and neck and acute myeloid leukemia, AV203, a Phase 1 anti-erbb3 specific monoclonal antibody with high ErbB3 affinity for esophageal cancer, AV-380, a preclinical humanized IgG1 May 4,

3 inhibitory monoclonal antibody targeting growth differentiating factor-15 for cachexia (fully in the hands of partner Novartis (NYSE:NVS- NR $77.59)), and AV-353, a preclinical monoclonal antibody targeting the Notch 3 pathway for pulmonary arterial hypertension. AVEO s lead drug candidate, tivozanib Tivozanib mechanism of action AVEO s lead product, tivozanib, is a Phase 3 oral, once-daily, VEGF tyrosine kinase inhibitor (TKI), in development as a treatment for RCC. Tivozanib acts as a potent, selective and long half-life inhibitor of all three VEGF receptors (VEGFR-1, 2 and 3) and is designed to optimize VEGF blockade while minimizing off-target effects, potentially resulting in improved efficacy and minimal dose modification. VEGF is an important signaling protein involved in both vasculogenesis via the formation of the circulating system and angiogenesis via the growth of blood vessels from pre-existing vasculature. VEGF expression is upregulated by events associated with cancer, such as hypoxia, protooncogene activation, loss of tumor suppressor gene expression, and growth factor stimuli in tumors. Its overexpression has been reported to correlate with the degree of vascularity, poor prognosis, and aggression of disease in the majority of human solid tumors, including, but not limited to, RCC as well as in some hematopoietic malignancies. VEGF ligands act through specific binding to three different cell membrane receptors: VEGFR-1, 2 and 3. In particular, VEGFR-1 is a potent, positive regulator of physiologic and developmental angiogenesis and is known to have a critical role in endothelial cell migration and differentiation. VEGFR-2 mediates vascular permeability, endothelial cell proliferation, invasion, migration, and survival. VEGFR-3 is involved in lymphangiogenesis, and its expression has been associated with the dissemination of tumor cells to regional lymph nodes and metastasis. Recently, studies have also demonstrated that VEGFR-1 s activation by VEGF family ligands can activate processes involved in tumor progression and metastasis. The well-established role of VEGF in promoting tumor angiogenesis and the pathogenesis of human cancers has led to the rational design and development of agents that selectively target this pathway, including tivozanib. The VEGFR TKIs are low-molecular-weight, ATP-mimetic proteins that bind to the ATP-binding catalytic site of the tyrosine kinase domain of VEGFRs, resulting in the blockade of intracellular signaling and thereby inhibition of cancer growth (see Exhibit 2). Tivozanib is highly selective for VEGFR-1, 2 and 3 such that any binding to an off-target kinase would require tivozanib to have an 8-fold increase in concentration, compared to 3-fold for axitinib or less for the rest of the VEGFR-TKI class (Nakamura K et al, 2006). Strong selectivity explains tivozanib s best-in-class safety and tolerability profile that was observed in its first Phase 3 trial. In addition, tivozanib has a favorable pharmacokinetic profile, given its long half-life of between 3.7 and 4.7 days, allowing for convenient once-daily dosing (1.5 mg) with consistent steady-state serum concentration (Eskens FA et al, 2011; Exhibit 3). Exhibit 2: Tivozanib mechanism of action Source: Company document May 4,

4 Exhibit 3: Tivozanib has a long half-life that supports its long-lasting effect Source: Company document Renal cell carcinoma disease landscape Kidney cancer, also known as renal cancer, develops when kidney cells become malignant and grow out of control to form a tumor. According to American Cancer Society (ACS), about 63,990 new cases of kidney cancer will occur in the US and about 14,400 patients will die from this disease in The most common type of kidney cancer is renal cell carcinoma (RCC), and it accounts for about 90% of all kidney cancers (ACS, 2014), with a current US annual incidence of about 57,000. RCC originates in the lining of the proximal convoluted tubule, a part of the small tubes in the kidneys that transport waste molecules from the blood to the urine. Since most patients with RCC do not show clinical symptoms at early stage, RCC often remains undiagnosed until the cancer is at an advanced stage and has spread. Although treatment options and recommendations for RCC depend on several factors, including tumor type, stage of cancer and possible side effects, kidney cancer is most often treated with surgery, targeted therapy and immunotherapy, or a combination of treatments. The current treatment scheme for RCC is only able to achieve an 8% 5-year survival rate for patients diagnosed at an advanced level. Targeted therapies, such as VEGFR TKIs, are treatments which target specific proteins that contribute to cancer growth and survival. This type of treatment blocks the growth and spread of cancer cells while limiting damage to healthy cells and thus is clearly more desirable than what is already commonplace in the treatment of kidney cancer. Sorafenib and sunitinib were the first VEGFR TKIs to gain regulatory approval and have been prominently established in the treatment of RCC, each showing antitumor activity in Phase 3 trials by prolonging progression free survival (PFS) compared to the control treatment of either interferon alfa or placebo. However, adverse events associated with these two agents, such as skin rash, hand-foot skin reaction and myelosuppression, may be caused by these drugs inhibiting other kinases, such as c-kit and FLT3, resulting in the need for an efficacious VEGFR TKI that is more selective. Such unmet need affords tivozanib the opportunity to maximize the therapeutic window and provide a safe treatment for RCC with minimal off-target toxicity. Clinical trials with tivozanib RCC first-line Phase 3 trial (TIVO-1) and extension trial Between 2009 and 2013, AVEO conducted a global, randomized, controlled, open-label Phase 3 trial (TIVO-1) to compare the efficacy and safety of tivozanib to sorafenib. Sorafenib was selected as the control based on its regulatory approval and widespread use in first-line treatment of RCC as a VEGFR TKI. The trial enrolled 517 patients with advanced RCC from 15 countries who were randomized into either the treatment arm (n=260) to receive 1.5 mg tivozanib once daily beginning on day 1 for 3 weeks followed by 1 week off treatment, or into the control arm (n=257) to receive 400 mg (200 mg twice daily) sorafenib daily beginning on day 1 for 4 weeks with no treatment pause. Both arms had a treatment cycle of 4 weeks and patients received repeated treatment every 4 weeks until documented May 4,

5 progression or unacceptable tolerability within the trial s 24-month time frame. TIVO-1 trial was designed to assess PFS as the primary endpoint and overall survival (OS), objective response rate (ORR) and duration of response along with safety and tolerability as key secondary endpoints. Importantly, TIVO-1 trial had a companion trial (TIVO-1 extension trial, or trial 902) that was designed as a one-way crossover from sorafenib to tivozanib in order to encourage patients who were reluctant to participate in the TIVO-1 trial due to concerns of not being randomized into the tivozanib arm. Between 2010 and 2015, AVEO conducted the TIVO-1 extension trial, in which, patients who were randomized to the sorafenib control arm in TIVO-1 received tivozanib as second-line treatment subsequent to disease progression. However, this extension trial was a one-way crossover; therefore, patients who were randomized to the tivozanib arm did not receive sorafenib as a second-line treatment following disease progression but only received subsequent treatment according to the regional standard of care (SOC), which was largely subject to treatment availability in that country and therefore highly variable and relatively ineffective. Patients were treated until documented progression or unacceptable tolerability in both arms in the TIVO-1 trial. These patients were then followed-up for OS, investigator assessed PFS, and long term safety. Final OS was conducted after all patients had died or were lost to follow-up, or when all patients in follow-up had been on the trial for at least 2 years, whichever occurred first. Final results of TIVO-1 and efficacy data from the extension trial were presented at the 2015 American Society of Clinical Oncology annual meeting (see Exhibit 4). TIVO-1 met its primary endpoint of PFS over sorafenib but showed a non-statistically significant trend favoring the sorafenib arm in its secondary endpoint of OS. More specifically, follow-up PFS from initial randomization for the 260 patients originally receiving tivozanib was 14.6 months comparing to 9.7 months for the 257 patients originally receiving sorafenib (hazard ratio(hr)=0.77, p<0.05). For the 163 patients who crossed over from sorafenib to receive second-line tivozanib, median PFS was 11.0 months from the start of second-line tivozanib therapy (total PFS=20.7 months), which was longer than the PFS in the first-line sorafenib of 9.7 months. Typically, response duration to a drug decreases as the line of therapy increases, due to drug resistance or further genetic mutations and advancement of the disease. The longer PFS of second-line tivozanib than first-line sorafenib (11.0 months > 9.7 months) clearly demonstrates clinically meaningful efficacy of tivozanib in a VEGFR TKI treatment refractory population, but also unfortunately led to numerically better OS in the control arm and thus the FDA to require another trial. Exhibit 4: Phase 3 TIVO-1 proven activity in first-line RCC as per PFS primary endpoint INDEPENDENT RADIOGRAPHIC Difference Between Treatment Treatment READ DATA IN JCO PAPER & NDA Treatment & Control Treatment Description Tivozanib Sorafenib Tivozanib vs. Sorafenib Number of Patients N/A Number of Evaluable Patients N/A Progression Free Survival 11.9 months 9.1 months 2.8 months Progression Free Survival Hazard Ratio N/A N/A (p=0.042) Overall Survival 28.8 months 29.3 months 0.5 months Overall Survival Hazard Ratio N/A N/A (p=0.105) INVESTIGATOR READ (ASCO 2015) Treatment Treatment Difference Between Treatment & Control Treatment Description Tivozanib Sorafenib Tivozanib vs. Sorafenib Number of Patients N/A Number of Evaluable Patients N/A Progression Free Survival 14.6 months 9.7 months 4.9 months Progression Free Survival Hazard Ratio N/A N/A 0.77 (p=0.008) Overall Survival 29.0 months 34.1 months 5.1 months Overall Survival Hazard Ratio N/A N/A 1.18 (p=0.078) Source: J Clin Oncol 33, 2015 pp ; and suppl; abstr 4557, ASCO 2015 Despite having presented two datasets in Exhibit 4, we will focus upon the radiographic results as read by independent investigators, as there is less bias and less reader-related variability. Statistically significant PFS results (11.9 months vs. 9.1 months; HR=0.797, p=0.042) favoring tivozanib were observed during the controlled portion of the trial, but OS analysis showed a numerical trend favoring sorafenib (28.8 months vs months; HR=1.245, p=0.105). In our view, there is substantial evidence that the discordance observed in the efficacy results between the PFS primary endpoint and the OS secondary endpoint was largely due to the suboptimal crossover design that resulted in far more control arm patients than tivozanib patients receiving active second-line therapy. A full 162 of the 257 (63%) May 4,

6 sorafenib patients received active targeted second-line therapy (156 received tivozanib), with 168 receiving some form of active secondline therapy. Only a minority of patients randomized to tivozanib (34 of 260; 13%) received active targeted second-line therapy, with only 68 (26%) receiving some form of active second-line therapy. This discrepancy in the receipt of second-line treatment, and in the type of second-line therapy received, is the most central point to our investment thesis, and was due to limitations regarding SOC that varied among such a wide array of participating countries, particularly Russia, Ukraine, and India. The majority of patients randomized to sorafenib received second-line therapy mainly due to the extension trial allowing them to cross over to tivozanib, regardless of their accessibility to SOC. More specifically, of the 260 patients randomized to tivozanib, 74% received no subsequent therapy, 7% received other VEGF therapy (not tivozanib), 6% received mtor inhibitor therapy, and 13% received nontargeted therapy. Conversely, of the 257 patients randomized to sorafenib, only 35% received no subsequent therapy, 61% received another VEGF therapy (almost all tivozanib), 2% received mtor inhibitor therapy, and 2% received non-targeted therapy. To elucidate the contribution of different geographies to the TIVO-1 second-line treatment discrepancy, a geographic subset analysis was performed, resulting in markedly different OS results based on geography. By stark contrast to the OS results in the intent-to-treat (ITT; n=517) group, the subset including only North America, Bulgaria, Czech Republic, France, UK, Hungary, Italy, Poland and Romania (North America+EU region; n=186), and the subset including only North America, UK, Italy and France (North America+EU5 region; n=40), exhibited OS trends favoring tivozanib. The ITT population (which included Ukraine, Russia, Serbia, Poland, India, Chile, and Argentina) involved countries where access to active SOC was severely limited or simply unavailable, and thus only 26% patients in the tivozanib arm received second-line therapy compared to 65% in the sorafenib arm, with tivozanib (which, importantly, was abundantly available, free, and only able to be given as second-line therapy to the control arm) being the overwhelmingly used second-line drug in the sorafenib arm and obviously unable to be used as second-line therapy in the tivozanib arm (see Exhibit 5). Unbalanced access to active second-line therapy was still observed in the North America+EU region, where 26% of patients in the tivozanib arm received follow-on treatment compared to 58% in the sorafenib arm, but the OS trend reversed to favor tivozanib. The 40 (only 7% of the total) patients from the North America+EU5 region, clearly being the most representative of western medicine, had the most balanced use of active second-line therapy between the arms (59% for tivozanib arm, 78% for sorafenib arm) and, consequently, the most favorable OS trend for tivozanib. This outcome is due to the far better established treatment guidelines and easy access to SOC in more developed countries. In our view, the TIVO-1 trial was poorly designed regarding its differential directing of second-line therapy between trial arms, and even more poorly executed regarding its liberal allowance of enrollment in countries with very limited active SOC therapy. In particular, the highly biased design of the extension portion of the trial, named 902, differentially encouraged highly active second-line therapy in the control arm versus the tivozanib arm. But perhaps the worst part of TIVO-1 was its execution, given that a full 64% of patients were from Ukraine, Russia, Serbia, Poland, India, Chile, and Argentina, where active second-line therapy for RCC was, at least at the time, not SOC. Unfortunately for TIVO-1, the Russian and Ukrainian sites were already familiar with tivozanib due to their Phase 2 experience with the drug, which facilitated a differentially rapid enrollment at these sites. Therefore, when you differentially encourage second-line therapy by trial design, and provide free drug to that end that obviously cannot also be used second-line in the tivozanib arm, problems like this are essentially guaranteed to occur. In light of what the ill -conceived TIVO-1 trial means for the ongoing, far more properly designed TIVO-3 trial, we note that TIVO-3 is enrolling from 188 sites, 152 (81%) of which are in the North America+EU5 region, by stark contrast to TIVO-1, which only had 15 of 86 (17%) of its sites in the North America+EU5 region. Another very important difference is that since TIVO- 3 is enrolling third-line RCC patients, rather than first-line RCC patients as in TIVO-1, there is nowhere near the opportunity to have the extent of subsequent active therapy that could yield a discordant OS result. Exhibit 5: Subset analysis of results on TIVO-1 and extension trials Source: Company documents May 4,

7 A similar clinical outcome was also observed with pazopanib, a VEGFR TKI approved for RCC that targets multiple VEGFRs. Pazopanib s original pivotal first-line RCC trial (the VEG trial; placebo controlled) included Eastern European countries and allowed placebo patients to take pazopanib after progression. 64% of placebo patients took active second-line therapy (51% took pazopanib second-line, 13% took something else), but only 34% of pazopanib patients received subsequent active therapy (22% took VEGFR or mtor inhibitors, 12% took something else) as second-line therapy following disease progression, resulting in a median OS HR of 0.92 and a failed trial. However, in a subsequent trial (the COMPARZ trial) that was conducted primarily in Western Europe to demonstrate the non-inferiority of pazopanib to sunitinib (Sutent), 60% of all patients received second-line treatment, resulting in a median OS of 28.4 months, a 5.5- month increase in OS from the original pivotal trial, and a successful trial. Best-in-class safety and tolerability Tivozanib appears to demonstrate best-in-class safety results among the entire VEGFR TKI class, due to its high selectivity and low offtarget effects. In TIVO-1, the most frequently reported adverse events occurring from both first-line and second-line treatment with tivozanib were hypertension, diarrhea, fatigue and hand-foot syndrome (HFS; see Exhibit 6). HFS, also known as palmar plantar erythrodysesthesia, can occur to the palms of hands and soles of feet with specific cancer treatments. HFS is often the dose-limiting toxicity and has a substantial detrimental effect on quality of life when the symptoms become unmanageable and patients are not able to work or carry out normal activities (Webster-Gandy, How, and Harrold, 2007). In cross-study comparisons of toxicity data on fatigue, HFS and diarrhea in Phase 3 trials involving all approved VEGFR TKIs and tivozanib, tivozanib had the most favorable toxicity profile in almost every category expect for fatigue, which was only 2% higher than the agent with the lowest value (18% vs. 16%; see Exhibit 7), sorafenib (Nexavar), and 15% lower (33% vs 18%) than the agent with the third lowest fatigue burden, axitinib (Inlyta). Tivozanib s exceptional safety profile among VEGFR TKIs is clear, in our view, given the difference between tivozanib toxicity and the average value in each toxicity category. For example, diarrhea occurred in only 22% of tivozanib patients compared to 32% with sorafenib, which was the agent with the second lowest incidence of diarrhea, and the majority of agents had a rate of diarrhea between 50% and 70%. Also, the far more problematic HFS occurred in only 13% of tivozanib patients, whereas between 26% and 50% of patients suffered from HPS with most other agents, excluding lenvatinib (Lenvima) which had a 15% HPS rate but essentially topped the charts regarding hypertension, diarrhea, and fatigue (see Exhibit 7). Exhibit 6: Common adverse events occurring in TIVO-1 and extension trials. Source: J Clin Oncol 33, 2015 pp May 4,

8 Exhibit 7 Cross-study comparison of the VEGFR TKI class on adverse events. Source: Company documents (1. Motzer, et al. ESMO 2012 (COMPARZ): 1st line study, Sutent vs. Votrient; 2. Choueri, et al. NEJM 2015: 2nd Line Study, cabozantinib vs. everolimus; 3. Motzer, et al. ASCO: 1st Line TIVO-1 Study, tivozanib vs. sorafenib; 4. Motzeret. Al Lancet Oncol2015; 16: ; 5. Hutson et.al. Lancet Oncol2013 ; 14: 1245; 1L study vs sorafenib) Regarding hypertension, tivozanib exhibited the highest incidence (50%) of hypertension, but this concern pales in comparison to HPS, as hypertension is far more easily treated with the wide array of available antihypertensives from which to choose, and also there is generally no need to necessarily lower or interrupt tivozanib dosing. More importantly, hypertension is likely an on-target effect, because historical data with VEGFR TKIs has shown a high correlation between hypertension and durability of response. Also, long-term safety assessment of patients who continued tivozanib indicated that the incidence of all-grade and grade 3/4 hypertension, along with another on-target adverse event, dysphonia, decreased over time (see Exhibit 8; but note that the values should not be confused with the higher values shown in Exhibit 6, which did not include the time cutoffs). For example, percentage of patients suffering from all-grade hypertension decreased from 32% in the first 2 months to 18.8% between 2 and 12 months, and further decreased to 6.2% beyond 12 months. A similar trend was also observed for dysphonia, the incidence of which decreased from 17.4% to 6.4% to 4.6% in the same three time intervals. Regarding quality of life as assessed by a RCC medical survey questionnaire (Wong M, et al. J Med Econ. 2012; 28:1), patients who received treatment of RCC and experienced adverse events were asked to identify their most intolerable toxicities, for the avoidance of which, they were willing to forego disease management in the form of PFS. Fatigue, gastrointestinal issues and hand-foot syndrome were the top-three, where tivozanib clearly demonstrates advantages, and hypertension was not identified as one of the top concerns at least in this survey. Exhibit 8: Common adverse events occurred in TIVO-1 and extension trials over time. Source: Company documents May 4,

9 The unique pharmacodynamics and structural design of each drug make drugs within the same drug class (e.g., VEGFR TKI) exhibit a different safety profile which may have distinct competitive advantages and disadvantages, making it difficult to compare one drug to another. Nonetheless, one way to evaluate this issue is to assess that how often doctors establish an intervention for the adverse event, such as dose reduction and dose interruption. Data shows that tivozanib resulted in the fewest dosing interventions among all of its drug class competitors (see Exhibit 9). For example, only 11% of tivozanib patients experienced dose reductions and 21% experienced dose interruptions, versus 37% and 38%, respectively, for sorafenib, in the TIVO-1 trial, compared to 52% and 54%, respectively, for sunitinib in its pivotal trial. Exhibit 9: Cross-study comparison of the VEGFR TKI class on adverse events. Source: Company documents (1. Motzeret.al JCO , Vol 31 No 30; 2. INLYTA USPI v ; 3.VotrientUSPI revised ; 4. Sutent USPI revised ; 5. Cabozantinib METEOR Trial NEJM 9/26/15; 6. Motzer et.al Lancet v16 Nov 2015.) EMA regulatory decision for tivozanib In 2Q15, following pre-submission advisory meetings to discuss the potential submission of a Marketing Authorization Application (MAA) for tivozanib in Europe for the treatment of RCC, AVEO received written confirmation of support from the Rapporteur and co-rapporteur for the filing of the MAA, based on tivozanib s existing dataset which included the TIVO-1 results. The Rapporteur (Portugal) and Co- Rapporteur (UK) are the two appointed members of the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA), who lead the evaluation of the MAA. At the advisory meeting, AVEO provided data demonstrating that the unfavorable OS result was highly likely to have been confounded by the highly unbalanced access to active second-line therapy that resulted from the ill-conceived crossover trial design combined with 64% of enrollment coming from countries without much in the way of useful second-line options. The final meeting minutes reflected that the Rapporteurs recognized the strong PFS data in the TIVO-1 trial, for which the only controlled environment even existed, did not find a blocking issue to approval from the unfavorable OS trend, and that AVEO clearly presented a credible story for tivozanib for the Rapporteurs to assess, but one which would need to be supported with very careful reasoning. The support received from the Rapporteurs facilitated AVEO s 4Q15 establishment of a partnership with EUSA Pharma for the commercialization of tivozanib in European countries and additional territories including South America and South Africa. Tivozanib had previously been granted orphan drug designation in Europe for the treatment of RCC. In 1Q16, EUSA Pharma submitted the tivozanib MAA to the EMA for RCC based primarily on the existing dataset which included the results from TIVO-1 trial, combined with the TIVO-1 extension trial along with earlier Phase 1 and Phase 2 trials in RCC. The EMA validated the MAA in 1Q16, confirming that the submission was complete and that it would initiate its review process. In 3Q16, EUSA received the Day 120 List of Questions from the CHMP, and submitted its response in 4Q16. In 1Q17, EUSA received the Day 180 List of Outstanding Issues (LOI) from the CHMP, signifying that the MAA is not approvable at the present time, and outlined outstanding deficiencies, which are then required to be satisfactorily addressed in an oral explanation and/or in writing prior to a final application decision. The Day 180 LOI does not introduce new issues but rather seeks clarification on what is contained in the Day 120 LOI, or is more simply a direct repeat of Day 120 LOI item(s). Early in 2Q17, EUSA May 4,

10 submitted its written response to the Day 180 LOI, and the EMA has tentatively scheduled EUSA to provide an oral explanation to the CHMP in May 2017, for which EUSA is actively preparing. We expect the CHMP to render its recommendation to the EMA in June (typically 30 days after an oral presentation by the drug sponsor), and if approved, EUSA should start marketing tivozanib in the EU in 2H17, by our projection. EUSA is responsible for the manufacture of all drug sold in its licensed territories, and AVEO already has produced years worth of bulk tivozanib. FDA regulatory decision on tivozanib Following the 2Q13 negative outcome from FDA s Oncologic Drug Advisory Committee (ODAC) vote (13 against to 1 for), the FDA issued a Complete Response Letter (CRL) informing AVEO that it would not approve tivozanib for the first-line treatment of RCC based solely on the TIVO-1 data due to the unfavorable OS benefit observed, despite the clearly strong PFS and safety data, and recommended that AVEO perform an additional Phase 3 trial adequately sized to assure the FDA that there is no adverse effect on OS. RCC third-line Phase 3 trial (TIVO-3) In order to address the FDA s OS concern from TIVO-1, in 3Q16, AVEO initiated another randomized, multi-center, open-label Phase 3 trial with tivozanib in the third-line treatment of refractory RCC, referred to as TIVO-3. TIVO-3 is to enroll about 322 patients from North America and the EU, randomized 1:1 to receive either tivozanib or sorafenib in order to examine the primary endpoint of PFS and secondary endpoints of OS, safety and ORR. Patients must have failed two systemic therapies, one of which must have been a VEGFR TKI, in order to enroll, and may have received prior immunotherapy, such as a checkpoint inhibitor, usefully reflecting the potentially evolving treatment landscape. Most importantly, unlike TIVO-1, TIVO-3 does not include a crossover design such that patients who progress on the original therapy will not be provided with a completely imbalanced opportunity to crossover to another therapy, eliminating the OS confounding error resulting from unequal access to next-line therapy that occurred in TIVO-1. Sorafenib was again selected as the control group therapy, as AVEO aims to draw as much connection as possible between TIVO-3 and TIVO-1. If successful, TIVO-3 will support a regulatory filing for US approval of tivozanib as both a third-line and first-line treatment for RCC, and it would be the only drug with a third-line RCC indication. Also, we believe that approval as first-line and third-line would easily allow for off label use in second-line, especially given the compelling results from second-line use in 163 TIVO-1 patients. In 1Q17, AVEO announced that a first safety review of TIVO-3 was successfully completed by the trial s Safety Monitoring Committee who concluded that no safety concern was observed for tivozanib and recommended that the small number of patients who dropped out prior to starting treatment be replaced by additional patients. AVEO expects to complete enrollment of TIVO-3 in June 2017, 2 months ahead of its prior guidance of August A preplanned futility analysis of the trial is expected to be performed around mid-2017, with topline data expected in 1Q18. Cross-study comparison data (see Exhibit 10) on second-line VEGFR TKIs shows that PFS for sorafenib refractory patients who later received tivozanib treatment was 11 months in TIVO-1, which is superior to the PFS with axitinib (6.5 months) and sorafenib (4.5 months) in sunitinib refractory patients in the Phase 3 AXIS trial, as well as to cabozantinib (overall 7.4 months; prior sunitinib subgroup: 9.1 months) in the Phase 3 METEOR trial. Also, the same trend was found with the OS data such that sorafenib followed by tivozanib led to OS of 21.6 months in TIVO-1, beating OS with axitinib (15.2 months) and sorafenib (16.5 months) in the AXIS trial, and with cabozantinib (21.4 months) in the METEOR trial. We note that cabozantinib went up against a weaker comparator (i.e., everolimus) than did tivozanib (i.e., sorafenib), and that the METEOR trial enrolled an easier to treat 75% ECOG 0 status patient group, whereas tivozanib did the same 21 month OS in less healthy patients (only 50% were ECOG 0 status). We note that cabozantinib, a drug that in large part supports the over $6 billion valuation of Exelixis, Inc. (OTC:EXEL-NR $22.52), won on efficacy and novel mechanism of action (inhibits MET; VEGFR-1, - 2, and -3; RET; KIT; TRKB; FLT-3; AXL; TIE-2; ROS1; TYRO3; and MER), and we view tivozanib as having a comparable market opportunity, given its strong efficacy and highly differentiated safety profile. We also note that conventional wisdom was that there was no need for another TKI drug in RCC, yet the market value of Exelixis strongly argues otherwise. Notably, going from second-line to third-line treatment of RCC, we observed that the PFS with sorafenib decreased by about 13%, from 4.5 months in the AXIS trial to 3.9 months in the Phase 3 dovitinib trial. Although we are not able to accurately predict the actual PFS for tivozanib going from second-line to third-line in the TIVO-3 trial, based on the findings with sorafenib, we note that TIVO-3 is well powered to show a statistically significant difference between a PFS of 6 months and 4 months, leaving plenty of room for PFS with tivozanib to drop in the third-line setting from the 11 months seen in TIVO-1 from second-line tivozanib, and still beat sorafenib. PFS generally decreases with each line of therapy, as the severity of disease increases in the more refractory RCC population and as the best therapies are generally used first. We note that the 2021 patent expiry for both sunitinib and axitinib could pressure tivozanib sales, but superior data with tivozanib should preserve its market share in settings relevant to such data. May 4,

11 Exhibit 10: Tivozanib efficacy in the VEGFR TKI refractory setting Source: Company documents (* n= 389; investigator assessed PFS; independent PFS = 4.8 mo vs. 3.4 mo, HR = (p=0.011); **investigator assessed PFS; ^Cabozantinib USPI) The well-founded rationale and previously proven safety and tolerability profile of tivozanib support our optimism for a successful TIVO-3 trial and increase the potential for tivozanib to gain regulatory approval for first-line and third-line RCC. If TIVO-3 PFS results are positive without any OS discordance, a NDA filing will likely take place in 2H18, followed by a 6 month regulatory review and launch of tivozanib in the US in 2H19, by our projection. Tivozanib used in combination with a PD-1 for RCC therapy PD-1 is a cell surface checkpoint receptor that plays an important role in down-regulating the immune system and promoting selftolerance by suppressing effector T-cell inflammatory activity. Tumors, like RCC, that express PD-1 can often be aggressive and carry a poor prognosis. A new class of drugs that block the activity of PD-1, referred to as PD-1 inhibitors, have emerged as a valuable alternative in the second-line disease management of RCC by activating the immune system to attack tumors. The median life expectancy of patients with RCC has increased with drugs targeting the VEGF pathway, but most patients still progress on current VEGFR TKI therapy. A logical next step is to treat with a combination of VEGFR TKI and PD-1 inhibitor in the first-line setting, as research has shown that the level of cytokines and other factors that drive myeloid-derived immunosuppressive cells increases as the tumors become resistant to VEGFR TKIs. Such findings suggest that immune suppression may be one factor that contributes to tumor progression and resistance to VEGFR TKIs, and thus PD-1 checkpoint inhibitors may help alleviate such resistance to VEGFR TKIs. Regulatory T cells (Tregs) induced by the PD-1 pathway are immunosuppressive and may downregulate induction and proliferation of effector T cells to fight cancer cells. Therefore, a further way of disinhibiting the immune system is to reduce the population of Tregs. In a previous study conducted by another party to investigate the influence of VEGFR TKIs on Tregs (16 hours after application) by flow cytometry demonstrated that only tivozanib (p=0.034) and sunitinib (p=0.002) significantly reduced the percentage of Tregs; whereas axitinib, pazopanib and sorafenib did not achieve statistical significance (Pawlowski N et al. AACR Poster 3971; see Exhibit 11). Although demonstrating the ability to reduce Tregs and thereby stimulate the immune system to attack cancer cells, sunitinib exhibited potentially prohibitive overlapping toxicity when used in combination with PD-1 inhibitors, as data in a previous Phase 1 trial showed that sunitinib combined with nivolumab resulted in a high incidence of hepatic and GI adverse events. Regarding liver toxicity, 39% of patients (n=33) experienced elevated ALT, over half of which were grade 3 or 4, and 36% of patients experienced elevated AST, 25% of which were grade 3 or 4. Also, regarding GI toxicity, 20% of patients experienced diarrhea, and about half of those were grade 3 or 4. Based on the high incidence of hepatic and GI adverse events, further development of the combination of sunitinib and nivolumab was suspended. May 4,

12 Exhibit 11: Results on a the influence of VEGFR TKI on Tregs Source: Company documents (Pawlowski N. et al. AACR Poster 3971.) In 1Q17, AVEO initiated a Phase 1/2 trial of tivozanib in combination with nivolumab, referred to as the TiNivo trial, for the treatment of RCC. The Phase 1 portion of the trial will primarily evaluate the safety of the combination at escalating doses of tivozanib and, assuming favorable results, is expected to be followed by a Phase 2 expansion portion at the dose established from the Phase 1 portion. There is a compelling scientific rationale for combining the antiangiogenic activity of VEGFR inhibitors with the immunologic activity of PD-1 inhibitors; yet, to date, the tolerability of these combinations has been a challenge with currently approved VEGFR TKIs and PD-1 inhibitors. Although we cannot accurately predict the toxicity of the combination therapy that is being investigated in the TiNivo trial, it is reasonable for us to expect a better toxicity profile, given tivozanib s highly favorable safety and tolerability profile seen in TIVO-1. Initial results from the Phase 1 portion of TiNivo are expected in June 2017, which should pave the way for starting the Phase 2 portion of the trial. The first dose cohort is enrolled and the second cohort has started enrolling. We note that AVEO could be relieved of a portion of the development costs of the combination therapy should Bristol-Myers Squibb (NYSE:BMY-NR $55.06) elect to fund some of the development in exchange for certain rights, or should current partner EUSA elect to pay $2 million for the combination therapy data rights in its territories. It remains to be seen if a pivotal combination therapy trial could be single arm or would need to be randomized. Competitive landscape for tivozanib in RCC Tivozanib is certainly not alone in the clinic, as there are several competing drugs and drug combinations in the RCC setting. There are trials with nivolumab/ipilimumab versus sunitinib in treatment naïve advanced/metastatic RCC (CheckMate 214 trial), pembrolizumab/axitinib versus sunitinib in treatment naïve advanced/metastatic RCC (KEYNOTE-426 trial), atezolizumab/bevacizumab versus sunitinib in treatment naïve advanced RCC, cabozantinib/nivolumab versus cabozantinib/nivolumab/ipilimumab in a number of urological cancers including RCC, a few trials of sunitinib versus pazopanib in advanced/metastatic RCC, alternating sunitinib and bevacizumab regimens in advanced RCC (CASA trial), drug-conjugated antibody AGS-16C3F versus axitinib in metastatic RCC, everolimus in advanced RCC, lenvatinib/everolimus versus lenvatinib/pembrolizumab versus sunitinib in advanced RCC, TRC 105/axitinib versus axitinib in advanced/metastatic RCC, atezolizumab/bevacizumab in non-clear-cell RCC, and avelumab/axitinib versus sunitinib in advanced RCC (JAVELIN Renal 101 trial). We fully expect first-line treatment to migrate toward therapy with an immuno-oncology agent given in combination with an oral VEGFR-TKI, hence the importance of the ongoing trial with tivozanib and nivolumab. Despite the heavy VEGFR-TKI competition awaiting tivozanib, if approved, in addition to drugs having other mechanisms of action, we view tivozanib as having a point of differentiation at least with its favorable safety profile, which should facilitate combination treatment relative to other VEGFR-TKIs. May 4,

13 Other drugs in clinical development Ficlatuzumab Ficlatuzumab, previously known as SCH or AV-299, is a potent hepatocyte growth factor (HGF) inhibitory antibody. HGF is the sole known ligand of the c-met receptor that has been evidenced to trigger many activities in cancer development and metastasis. Previously, AVEO conducted two Phase 1 trials of ficlatuzumab administered as a single agent and in combination with erlotinib, an endothelial growth factor receptor (EGFR TKI) in advanced solid tumors, lymphomas and multiple myeloma. Later in 2Q10, AVEO initiated a multi-center, randomized, open-label Phase 2 trial, evaluating ficlatuzumab in combination with gefitinib, another EGFR TKI, in first-line Asian patients with non-small cell lung cancer (NSCLC). The trial enrolled 203 patients randomized 1:1 to receive ficlatuzumab in combination with gefitinib or gefitinib alone in order to evaluate ORR as the primary endpoint and PFS and OS as key secondary endpoints. Patients who demonstrated disease progression during treatment with gefitinib alone would have the opportunity to crossover to the combination arm provided that safety was maintained and the patient continued to meet trial eligibility criteria. Although the trial failed to demonstrate a statistically significant benefit in the ITT population, a retrospective exploratory subgroup analysis utilizing a companion diagnostic (VeriStrat) from AVEO s partner, Biodesix, identified a subgroup with EGFR-mutated NSCLC and a BDX004 positive label (VeriStrat Poor; VSP) who reached statistically significant PFS and OS from the addition of ficlatuzumab to gefitinib. Later in 4Q14, AVEO, together with Biodesix, initiated another multi-center, randomized, double-blind, confirmatory Phase 2 trial of ficlatuzumab plus erlotinib versus placebo plus erlotinib in the previous defined subset of patients who had previously untreated metastatic NSCLC, referred to as the FOCAL trial. After receiving lower rates of positivity for the two biomarkers previously identified and therefore slower than expected enrollment, a blinded look at the FOCAL trial data from enrolled patients revealed that the patients who were selected for poor prognosis experienced materially higher discontinuation rates than observed in both the ITT population and the retrospective exploratory subgroup population of the prior Phase 2 trial. Based on the findings from the interim analysis, AVEO and Biodesix agreed to discontinue the FOCAL trial in 4Q16, as the results largely compromised the feasibility of the trial and commercial opportunity for ficlatuzumab. AVEO and Biodesix are also funding an investigator-sponsored Phase 1 trial of ficlatuzumab in combination with cetuximab in squamous cell carcinoma of the head and neck along with another investigator-sponsored Phase 1 trial of ficlatuzumab in combination with cytarabine in acute myeloid leukemia. Preliminary observations from both trials are expected to be presented in upcoming scientific conferences. At ASCO 2017, there will be two ficlatuzumab presentations from Phase 1 investigator-sponsored studies, one in head and neck squamous cell carcinoma and the other in acute myeloid leukemia. AV-203 AV-203 is a potent ErbB3 (also known as HER3)-targeted antibody that has been shown to inhibit the growth of both ligand-induced and ligand-independent ErbB3 signaling in cell-based models. AV-203 selectively binds with high affinity to ErbB3 and has demonstrated activity in a number of different tumor models including lung, breast, pancreatic, skin, prostate and gastric cancers in preclinical settings. A Phase 1 dose escalation trial with AV-203 established the recommended Phase 2 dose, demonstrated good tolerability and promising early signs of tumor-inhibiting activity and reached the maximum planned dose of AV-203 monotherapy. However, the expansion portion of this trial was suspended in 2014 due to AVEO s conservation of its capital resources. AV-203 is expected to be brought back into the clinic, for squamous cell esophageal cancer as its initial indication, in 2018 by AVEO s partner CANbridge. In 2Q17, AVEO received a $500,000 milestone payment from CANbridge, related to a technology transfer milestone for AV-203. Intellectual property With respect to tivozanib, AVEO has the following in-licensed patents. US: 3 granted patents with expirations ranging from 2018 to 2023, EU: 3 granted patents with expirations ranging from 2018 to 2023; Canada: 1 granted patent expiring in 2022; and Australia: 1 granted patent expiring in The US patent covering the tivozanib molecule and its therapeutic use is expected to expire in However, in view of the length of time that tivozanib has been under regulatory review at the FDA, a patent term extension of up to 5 years may be available under The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, which, if a 5 year extension were to be granted, would extend the term of this patent to May 4,

14 With respect to the anti-hgf platform, including ficlatuzumab, AVEO has 7 US patents covering our anti-hgf antibodies, nucleic acids and expression vectors encoding the antibodies, host cells, methods of making the antibodies, and methods of treatment using the antibodies that will expire from 2027 to With respect to AV-203, AVEO has 2 US patents covering its anti-erbb3 antibodies, nucleic acids and expression vectors encoding the antibodies, host cells, and methods of making the antibodies; an allowed US patent application directed to methods of treatment using its anti-erbb3 antibodies; and a pending US patent application directed to a method of predicting tumor response to AV-203 that will expire from 2031 to 2032, if granted. Licensing deals EUSA In 4Q15, AVEO entered into a license agreement with EUSA under which AVEO granted to EUSA the exclusive, sublicensable right to develop, manufacture and commercialize tivozanib in the territories of Europe (excluding Russia, Ukraine and the Commonwealth of Independent States), Latin America (excluding Mexico), Africa, Australasia and New Zealand for all diseases and conditions in humans, excluding non-oncologic diseases or conditions of the eye. Under the license agreement, EUSA made a R&D funding payment to AVEO of $2.5 million in 4Q15 and will owe AVEO another $4 million upon EMA approval. AVEO also stands to receive $2 million from EUSA upon reimbursement approval for tivozanib in each of France, Germany, Italy, Spain and the UK, and an additional $2 million for the grant of marketing approval in any 3 of the following 5 countries: Argentina, Australia, Brazil, South Africa and Venezuela. AVEO is also eligible to receive additional research funding, including up to $20 million for the data generated from AVEO s Phase 3 trial in third-line RCC if EUSA elects to utilize such data for regulatory or commercial purposes, and up to $2 million for the data generated from the Phase 1 combination trial with a checkpoint inhibitor if EUSA elects to utilize such data for regulatory or commercial purposes. AVEO is also eligible to receive a payment of $2 million in connection with a filing by EUSA with the EMA for marketing approval, if any, for tivozanib for the treatment of each of up to three additional indications and $5 million per indication in connection with the EMA s grant of marketing approval for each of up to three additional indications, as well as up to $335 million upon EUSA s achievement of certain sales thresholds. AVEO is also eligible to receive tiered double digit royalties on any net sales of licensed products in its licensed territories ranging from a low double digit up to mid-twenty percent depending on the level of annual net sales. Kyowa Hakko Kirin In 4Q06, AVEO entered into a license agreement with Kyowa Hakko Kirin (KHK) under which AVEO obtained an exclusive license, with the right to grant sublicenses subject to certain restrictions, to research, develop, manufacture and commercialize tivozanib, pharmaceutical compositions thereof and associated biomarkers. AVEO s exclusive license covers all territories in the world except for Asia and the Middle East, where KHK has retained the rights to tivozanib. Under the license agreement, AVEO obtained exclusive rights in its territory under certain KHK patents, patent applications and know-how related to tivozanib, to research, develop, make, have made, use, import, offer for sale, and sell tivozanib for the diagnosis, prevention and treatment of any and all human diseases and conditions. AVEO and KHK each has access to, and can benefit from, the other party s clinical data and regulatory filings with respect to tivozanib and biomarkers identified in the conduct of activities under the license agreement. CANbridge In 1Q16, AVEO and CANbridge Life Sciences announced an exclusive collaboration and license agreement in which AVEO has granted CANbridge Life Sciences worldwide rights, excluding the US, Canada, and Mexico, to AV-203. CANbridge Life Sciences paid AVEO $1 million upfront and may pay up to $133 million in potential reimbursement and milestone payments, assuming the successful achievement of specified development, regulatory and commercialization objectives. AVEO is also eligible for a tiered low double digit royalty on any net sales of AV-203 in the agreement s territories. CANbridge Life Sciences is responsible for costs associated with the execution of a development plan that includes additional manufacturing requirements as well as preclinical and clinical studies necessary to demonstrate proof-of-concept for AV-203 for squamous cell esophageal cancer, including a Phase 2a proof-of-concept study meeting mutually agreed upon criteria. Following completion of the proof-of-concept studies, AVEO and CANbridge will negotiate a possible agreement under which they may co-develop AV-203, with each party bearing a percentage of the cost of global development activities based on respective geographic rights. If the parties fail to reach such an agreement, CANbridge may continue the development of AV- 203 on its own in markets outside the US, Canada and Mexico. Biodesix May 4,

15 In 2Q14, AVEO and Biodesix entered into the Biodesix Agreement to develop and commercialize ficlatuzumab. Under the agreement, AVEO granted Biodesix perpetual, non-exclusive rights to certain intellectual property, including all clinical and biomarker data related to ficlatuzumab, to develop and commercialize VeriStrat, Biodesix s proprietary companion diagnostic test. Biodesix granted AVEO perpetual, non-exclusive rights to certain intellectual property, including diagnostic data related to VeriStrat, with respect to the development and commercialization of ficlatuzumab; each license includes the right to sublicense, subject to certain exceptions. Pursuant to a joint development plan, AVEO retains primary responsibility for clinical development of ficlatuzumab. In 3Q16, AVEO and Biodesix announced the termination of the FOCAL trial, a Phase 2 proof-of-concept study of ficlatuzumab in which VeriStrat was used to select clinical trial subjects. With the exception of the costs incurred for the FOCAL trial, AVEO and Biodesix are each required to contribute 50% of all clinical, regulatory, manufacturing and other costs to develop ficlatuzumab. Novartis In 3Q15, AVEO granted Novartis exclusive worldwide rights to develop and commercialize AVEO s proprietary antibody AV-380 and related AVEO antibodies that bind to growth differentiation factor 15 (GDF15) for all human indications. Novartis paid $15 million upfront, and in 4Q15 paid $3.45 million to acquire AVEO s inventory of clinical quality, AV-380 biological drug substance. AVEO is eligible to receive (a) up to $53 million in potential clinical milestone payments and up to $105 million in potential regulatory milestone payments tied to the commencement of clinical trials and to regulatory approvals of such products, and (b) up to $150 million in potential sales based milestone payments based on annual net sales of such products. Upon commercialization, AVEO is eligible to receive tiered royalties on net sales of approved products ranging from the high single digits to the low double digits. Novartis will develop, manufacture and commercialize the AVEO antibodies and any resulting approved therapeutic products. Financials Revenue. Our projected revenue for AVEO stems only from potential tivozanib sales in RCC in the US and EU and thus revenue from any additional indications, regions and products would represent upside to our valuation. Already having EUSA as a future royalty paying partner in many of the highest value ex-us markets, our model assumes AVEO to establish a 50/50 co-promotion in the US (given its deal structure history with prior partner Astellas) and collect royalties on all sales. With an estimated initial US price about $132,000 per year and an estimated initial average EU price of about $88,000 for RCC, we project tivozanib to generate about $600 million in global net sales, and almost $250 million in co-promotion and royalty revenue to AVEO for RCC in We project tivozanib to be launched in the EU in 2H17 for RCC, if approved on existing data, followed by a US launch in 2H19. Expense. We model AVEO as being responsible for all tivozanib R&D expense. With the ongoing Phase 3 trial in multiple centers worldwide, we forecast R&D expense to continue to increase, but less sharply in 2017, given the 84% of YoY increase in Since we project AVEO to establish a US 50/50 co-promotion partnership, we forecast AVEO s appropriate half of tivozanib COGS starting initially at 10% of sales, but decreasing to 8% as economies of scale allow. Spend on programs outside of tivozanib represent a minority of expense, with ficlatuzumab development being shared 50/50 with Biodesix and with that program utilizing investigator sponsored trials to minimize cost. Bottom Line. We project AVEO to be profitable in 2020, due primarily to tivozanib sales in the US and EU in RCC. As of March 31, 2017, AVEO had outstanding stock options and contingent consideration liabilities that can be converted into 26.3 million common shares. As of April 28, 2016, AVEO had about million shares of common stock outstanding. Finally, we are not projecting income tax until mid- 2025, given the amount of NOLs accumulated. Balance Sheet. The company s current cash position of $33.4 million should be sufficient to support its activities into 2Q18. AVEO also has about $15 million is debt, with about $2 million of that due over 2017; debt principle repayment begins in mid In order to borrow another $5 million from the same creditor, AVEO must have a minimum existing cash balance of $10 million. In 2Q17, we project stock price appreciation after our projected positive data from the Phase 1 TiNivo trial of tivozanib in combination with nivolumab, and a larger impact from our projected EU regulatory approval decision on tivozanib expected in 2H17. In addition, we project positive TIVO-3 trial results in 1Q18 that will serve as the largest positive stock catalyst. May 4,

16 Risks Clinical risk. AVEO s clinical stage products could fail to deliver statistically significant results in late-stage clinical trials, substantially reducing the value of AVEO s product candidates and therefore our target price. Regulatory risk. Even if successful in the clinic, AVEO s products could fail to be approved by domestic and/or foreign regulatory bodies, which would reduce AVEO s value and therefore our target price. Financing risk. AVEO could need capital to fund its operations, should its marketed or soon to be marketed products fail to deliver the anticipated revenue, and such financing may not occur or it could be substantially dilutive to existing investors. Competitive risk. For any approved AVEO products, they may not be well adopted in a competitive marketplace, which would adversely affect AVEO s value and therefore our target price. High stock price volatility. This issue is common among small-cap biotechnology companies with relatively low trading volumes. May 4,

17 AVEO PHARMACEUTICALS, INC Income Statement Fiscal Year ends December (in $000, except per share items) 2010A 2011A 2012A 2013A 2014A 2015A 2016A 1Q17A 2Q17E 3Q17E 4Q17E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E Collaborative revenue 44, ,849 19,286 1,293 18,123 19,024 2,515 2,532 4,000 6,532 6,500 4,000 2,000 Tivozanib ex-us royalty - 1,004 1,004 3,016 16,692 61,825 96, , , , ,947 Total Revenue 44, ,849 19,286 1,293 18,123 19,024 2,515 2,532-4,000 1,004 7,536 9,516 20,692 63,825 96, , , , ,947 50% tivozanib US COGS - 1,005 5,054 7,091 11,253 14,171 15,191 16,070 R&D 86, ,735 91,358 68,468 38,254 12,875 23,703 7,956 8,354 8,437 7,594 32,341 29,107 23,285 22,121 22,342 22,566 22,791 23,019 23,249 SG&A 14,763 29,167 36,932 28,712 18,589 14,217 8,205 2,331 2,214 2,325 2,441 9,312 12,106 24,211 26,632 27,964 29,362 29,656 29,952 30,252 Restructuring 2,633 8,017 11,729 4,358 Total Operating Expense 101, , , ,197 68,572 31,450 31,908 10,287 10,568 10,763 10,035 41,653 41,212 48,502 53,808 57,398 63,181 66,618 68,163 69,572 Operating Income (56,426) 33,947 (111,637) (103,904) (50,449) (12,426) (29,393) (7,755) (10,568) (6,763) (9,031) (34,116) (31,696) (27,810) 10,017 39,144 87, , , ,375 Other income (expense), net (123) 66 (289) (195) (1,035) (311) (342) (376) (2,063) (1,031) (1,011) (991) (971) ,125 1,688 Interest expense (3,389) (3,836) (3,501) (3,127) (2,388) (2,307) (1,949) Interest income ,751 Total other expense (2,363) (3,299) (2,757) (3,125) (2,290) (2,575) 2,607 (1,035) (311) (342) (376) (2,063) (1,031) (1,011) (991) (971) ,125 1,688 Pretax income (58,789) 30,648 (114,394) (107,029) (52,739) (15,001) (26,786) (8,790) (10,879) (7,104) (9,406) (36,179) (32,727) (28,820) 9,027 38,173 87, , , ,063 Provision for income tax (benefit) (101) (50) 35,213 Net Income (58,789) 30,648 (114,394) (107,029) (52,739) (15,001) (26,887) (8,740) (10,879) (7,104) (9,406) (36,179) (32,727) (28,820) 9,027 38,173 87, , , ,850 EPS (2.30) 0.77 (2.64) (2.10) (1.01) (0.27) (0.39) (0.11) (0.10) (0.06) (0.08) (0.35) (0.25) (0.21) EPS diluted, GAAP (2.30) 0.74 (2.64) (2.10) (1.01) (0.27) (0.39) (0.11) (0.10) (0.06) (0.08) (0.35) (0.25) (0.18) Basic shares outstanding 25,582 39,715 43,374 50,928 52,289 55,701 69,202 76, , , , , , , , , , , , ,066 Diluted shares outstanding 25,582 41,473 43,374 50,928 52,289 55,701 69,202 76, , , , , , , , , , , , ,344 Source: Company reports, Opus National Capital Markets estimates May 4,

18 IMPORTANT DISCLOSURES: Opus National Capital Markets is a DBA for National Securities Corporation 410 Park Avenue, 14th Floor, New York, NY REG AC ANALYST CERTIFICATION The research analyst named on this report, Jonathan Aschoff, Ph.D., certifies the following: (1) that all of the views expressed in this research report accurately reflect his personal views about any and all of the subject securities or issuers; and (2) that no part of his compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by him in this research report. IMPORTANT DISCLOSURES This publication does not constitute and should not be construed as an offer or the solicitation of any transaction to buy or sell any securities or any instruments or any derivatives of the securities mentioned herein, or to participate in any particular trading strategies. Although the information contained herein has been obtained from recognized services, and sources believed to be reliable, its accuracy or completeness cannot be guaranteed. Opinions, estimates or projections expressed in this report may make assumptions regarding economic, industry, company and political considerations, and constitute current opinions, at the time of issuance, which are subject to change without notice. This report is being furnished for informational purposes only, and on the condition that it will not form a primary basis for any investment decision. Any recommendation(s) contained in this report is/are not intended to be, nor should it / they construed or inferred to be, investment advice, as such investments may not be suitable for all investors. When preparing this report, no consideration to one s investment objectives, risk tolerance and other individual factors was given; as such, as with all investments, purchase or sale of any securities mentioned herein may not be suitable for all investors. By virtue of this publication, neither the Firm nor any of its employees shall be responsible for any investment decisions. Before committing funds to ANY investment, an investor should seek professional advice. Any information relating to the tax status of financial instruments discussed herein is not intended to provide tax advice, or to be used by anyone to provide tax advice. Investors are urged to consult an independent tax professional for advice concerning their particular circumstances. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, either expressed or implied, is made regarding future performance. National Securities Corporation (NSC) and its affiliated companies, shareholders, officers, directors and / or employees (including persons involved with the preparation or issuance of this report) may, from time to time, have long or short positions in, and buy or sell the securities or derivatives (including options) thereof, of the companies mentioned herein. One or more directors, officers, and / or employees of NSC and its affiliated May 4,

19 companies, or independent contractors affiliated with NSC may be a director of the issuer of the securities mentioned herein. NSC and / or its affiliated companies may have managed or co-managed a public offering of, or acted as initial purchaser or placement agent for a private placement of any of the securities of any issuer mentioned in this report within the last three (3) years, or may, from time to time, perform investment banking or other services for, or solicit investment banking business from any company mentioned in this report. This research may be distributed by affiliated entities of National Securities Corporation (NSC). Affiliated entities of NSC may include, but are not limited to, vfinance Investments, Inc., National Asset Management and other subsidiaries of our parent company, National Holdings Corporation. The securities mentioned in this document may not be eligible for sale in some states or countries, nor be suitable for all types of investors; their value and the income they produce if any, may fluctuate and/or be adversely affected by exchange rates, interest rates or other factors. Furthermore, NSC may follow emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. This report does not take into account the particular investment objectives, financial situation or needs of individual investors. Before acting on any advice or recommendation in this material, the investor should exercise independent judgment as to whether it is suitable in light of his/her particular circumstances and, if necessary, seek professional advice. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Additional information relative to securities, other financial products, or issuers discussed in this report is available upon request. Neither this entire report, nor any part thereof, may be reproduced, copied or duplicated in any form or by any means without the prior written consent of National Securities Corporation. All rights reserved. NSC is a member of both the Financial Industry Regulatory Authority (FINRA) and the Securities Investors Protection Corporation (SIPC). For disclosures inquiries, please call us at and ask for your NSC representative, or write us at National Securities Corporation, Attn. Richard Cohen - Research Department, 410 Park Avenue, 14th Floor, New York, NY 10022, or visit our website at Research Disclosures Legend Relevant Disclosures: 1, 2, 7, and 10 1 National Securities (NSC) is a market-maker in the securities of the subject company 2 In the past twelve (12) month period, NSC and / or its affiliates have received compensation for investment banking for services from the subject company 3 In the past twelve (12) month period, NSC and / or its affiliates have received compensation from the subject company for services other than those related to investment banking 4 In the past twelve (12) month period, NSC was a manager or a co-manager of a public offering of one May 4,

20 or more of the securities of the issuer 5 In the past twelve (12) month period, NSC was a member of the selling group of a public offering of the security (ies) of the issuer 6 One or more directors, officers, and / or employees of NSC and / or its affiliated companies is / are a director (s) of the issuer of the security which is the subject of this report 7 NSC and / or its affiliates expects to receive or intends to seek compensation for investment banking services from the subject company at some point during the next three (3) months 8 A research analyst or a member of his / her household has a financial interest in the securities of the subject company as follows: a) long common stock; b) short common stock; c) long calls; d) short calls; e) long puts; f) short puts; g) long rights; h) short rights; i) long warrants; j) short warrants; k) long futures; l) short futures; m) long preferred stock; n) short preferred stock 9 As of the end of the month immediately preceding the date of publication of this report or the end of the prior month if the publication is within ten (10) days following the end of the month, NSC and / or its affiliates beneficially owned one percent (1%) or more of any class of common equity securities of the subject company. 10 Please see below for other relevant disclosures Shares of this security may be sold to residents of all 50 states, Puerto Rico, Guam, the US Virgin Islands and the District of Columbia. Distribution of Ratings Investment Banking* Rating # % # % BUY % 5 9.1% NEUTRAL % 1 1.8% SELL 4 7.3% 2 3.6% *Investment banking services provided in the previous 12 months MEANING OF RATINGS: BUY: the stock is likely to generate a total return of at least 10% over the next 12 months and should outperform relative to the industry. NEUTRAL: the stock is likely to perform in-line with the industry over the next 12 months. SELL: the stock is likely to underperform (from a total return perspective) relative to the industry over the next 12 months. NR: Not Rated SP: Suspended May 4,

21 Charts AVEO Source: Big Charts AVEO Date Rating Price Target Initiation May 4, 2017 BUY $3 May 4,