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Cancer Drug Developer Aveo Shares Sink as Study Data Falls Short of Investor Hopes

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Some analysts think the shares are worth picking up as the biotech appears to have a potentially approvable drug for advanced kidney cancer. A showdown with Pfizer looms.

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In the drug development business, sometimes being good isn't good enough. Aveo Pharmaceuticals (AVEO) said Tuesday that its experimental kidney cancer treatment worked better than an already approved drug. But some investors had much higher hopes for the study results.

Shares of Aveo fell more than 14% to $14.76 in midday trading Tuesday. The stock has dropped 23% in the past six months.

The company and development partner Astellas Pharma said their drug tivozanib helped patients with advanced kidney cancer in a late-stage study survive almost 12 months on average without the disease progressing. That was better than the 9-month average for patients on Nexavar, an approved drug sold by Onyx Pharmaceuticals (ONXX) and Bayer. Onyx shares fell 3% to $42.67. The stock is up 21% in the past six months.

Some investors were hoping tivozanib would beat Nexavar more handily, says RBC Capital Markets analyst Jason Kantor.

Though tivozanib "may have slightly missed the high efficacy hurdle set by the Street," Kantor says he still believes the drug has a good shot at being approved and being a commercial success. He recommends buying the stock.

Aveo plans to submit applications this year to sell the drug in the US and Europe. But Nexavar isn't the only drug tivozanib will have to go up against -- it also will compete with Pfizer's (PFE) Sutent, which is the best-selling medicine for advanced kidney cancer. (The Pfizer drug had $870 million in sales through the first nine months of last year.)

Earlier company research from Aveo suggested its drug was more effective and caused fewer side effects than Sutent, but Pfizer looms large for the company in another respect. The big pharmaceutical maker recently won backing of a US Food and Drug Administration panel of experts who recommended that Pfizer's drug Inlyta, or axitinib, be approved for sale.

Pfizer's drug is being considered for approval as a secondary treatment for kidney cancer but Canaccord Genuity analyst George Farmer says he believes the drug may also be used by doctors as a first-line treatment, creating even more competition.

"We see a challenging marketing battle ahead with axitinib," Farmer says. He says he expects the Pfizer drug will be approved in the US by a late April deadline set by the FDA.

Still, he recommends buying Aveo's stock.

The release of information from Aveo Tuesday was limited. Full results will be disclosed at a major cancer conference in June.

Twitter: @brettchase

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No positions in stocks mentioned.
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