First, two thumbs up to our military and intelligence services! While the march towards peace and stability continues, this feels good.

Now, back to learning about drugs that can benefit mankind and the companies that develop them.

Someone needs to walk through $AVEO’s cash burn to me. They reported $236MM cash 1Q11, and have guided at least $125MM cash by YE11. This means that they are on track to spend $111MM over the next 9-mo! Further, the cash on hand at year end is expected to take them through 2012, so they will spend another $125MM in 2012. Where is the cash going?

The biggest clinical expense this year is for TIVO-1 in P3 RCC, which is already more than halfway through to completion and is partly paid for by their partner, Astellas. I don’t recall the exact numbers, but If I am pretty generous (and why not, May is here, and we are one month closer to summer and BBQ season) and assume that the all-in cost per patient in an oncology trial is $50K/patient/trial, then for 500-pts, we are talking $25MM total. With data is expected later this year, I would guess that much of the trial costs have already been incurred.

So, what about their first internally developed asset, ficlatuzumab? Well, there appear to be two P1/P2 trials enrolling a little over 200 pts, so that can’t be it. They also spent $10M to purchase ficlatuzmab inventory from $MRK, they returned rights back to $AVEO last September, so mAb manufacturing/supply shouldn’t be the source of significant spend.

For the sake of discussion, let’s go wild and crazy, and pretend they spend an additional $25MM for TIVO-1/tivozanib development and another $25MM for progressing additional clinical programs, $10MM for research, and throw in $20MM for G&A (they spent $15MM in 2010), that still gets me to only to $80MM. These are pretty robust numbers, and I still can’t reach $100MM…for a single year.

One area I could be grossly underestimating is in research. Specifically, I wonder how much it costs to maintain a vivarium to house their nifty mouse models. If $LXRX taught us anything, it was that generating and housing all those mice could result in significant overhead costs for our furry little friends – maybe that’s where the burn heats up?

In any case, the PIPE investors back in October must see understand/something and it can’t be simply tivozanib in RCC (my crude assumptions/guess gets me to US $200-400MM peak sales – subject to revision and not supported by any primary research), otherwise, they would not have kicked in $61M for ficlatuzumab, would they?

To be fair, I think tivozanib has a pretty good chance for success in RCC and can be better than sorafenib with a better side effect profile (hypertension), and potentially sunitinib, though there won’t be any head-to-head data.

I’d just like to know how they spend so much capital so that I can better understand where future opportunities may lie.

No position