|Written by GSCR Staff|
|Wednesday, 24 April 2013 07:03|
Good Morning! Almost exactly a year ago, in our inaugural edition of The 30-30 Report, we recommended buying Arena Pharmaceuticals (NASDAQ – ARNA) ahead of its meeting with an FDA advisory panel, regarding the potential approval of its weight management drug. It was approved 10 days later and the stock ran 30%. Today, we highlight a stock appearing before an FDA panel on May 2nd, and if approved, the stock will soar.
We have spent a fair amount of time following a variety of oncology drugs under development and we believe that Aveo Pharmaceuticals’ (NASDAQ – AVEO - $8.17) Tivozanib, a treatment for renal Cell Carcinoma, could very well likely get the nod, driving the stock sharply higher. RCC is a cancer that starts in the kidneys and worldwide it is estimated that more than 250,000 people are diagnosed and more than 100,000 people die from the disease each year.
The vascular endothelial growth factor (VEGF) pathway plays a significant role in angiogenesis, which is critical in cancer. Angiogenesis, the formation of new blood vessels, is essential for endothelial cell proliferation, migration and survival. There are five known VEGF ligands (A, B, C, D, PLGF) and three VEGF receptors and AVEO’s platform drug appears to inhibit the VEGF pathway it may be critical to effectively block all three VEGF receptors as each plays an important role in cancer angiogenesis.
Clinical trials not only demonstrated strong efficacy but fewer toxic side effects.
The stock has been trending only incrementally higher, but on ever-increasing volume and the stock is still $6, or 43% below its 52-week high. This signals to us that the Street is just starting to0 warm up to the potential, although it is not broadly sold on the possibility of approval. With that said, we believe downside risk is limited at current levels and if approved, those that do not hop on board could see this stock be a huge mover next week, approaching or even eclipsing its year-high.
With the risk reward in favor of the trader willing to take some risk, we recommend getting exposure to AVEO’s shares today via outright purchase or call options.
Have a great day!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
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