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Why AVEO Pharmaceuticals, Inc. Tanked 18.6% in October

What happened

Shares of AVEO Pharmaceuticals (NASDAQ: AVEO), a small-cap biopharma focused on cancer, fell 18.6% in October, according to data from S&P Global Market Intelligence. There doesn't appear to be any company-specific news that can justify the big downward movement. However, AVEO's shareholders have had to deal with a lot of volatility in the recent past, so October's double-digit plunge isn't exactly unprecedented.

So what

Here's a quick review of the news out of AVEO last month:

  • On Oct. 5, management announced that its pre-planned futility analysis related to its TIVO-3 trial was completed. This trial is designed to compare AVEO's drug Fotivda to Bayer's Nexavar in treating patients with refractory advanced renal-cell carcinoma. An independent statistician determined that the study should proceed as planned, which is good news. 
  • On Oct. 6, the company stated that results from its phase 1 TiNivo study would be presented at an international cancer symposium.

Since neither of these announcements can help explain the big sell-off, AVEO's investors should probably chalk up October's fall to normal small-cap biotech volatility.

Image source: Getty Images.

Now what

Fotivda was only recently approved for sale in Europe, so investors still don't know whether healthcare providers will use the drug. However, data from the TIVO-3 trial should be available in early 2018. If the trials show that Fotivda offers some clinical advantages over Nexavar, then it would certainly go a long way toward persuading providers to give the drug a try.  

Will the TIVO-3 trial swing in AVEO's favor? Only time will tell. In the meantime, AVEO will probably remain a heavily shorted stock that will rise or fall based on traders' emotions. Bulls and bears alike should continue to brace themselves for volatility. 

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Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.