Analyst Downgrades Aravive: Grapples With Trial Setback, Strategic Alternatives

Monday, Aravive Inc ARAV filed its quarterly 10Q for the quarter ended 30 June with the SEC.

To preserve cash, the company terminated Phase 1b/P2 trials of batiraxcept in Clear Cell Renal Cell Carcinoma (ccRCC) and pancreatic adenocarcinoma. It will not continue either the ccRCC or the pancreatic adenocarcinoma programs unless it raises additional capital. 

Earlier this month, Aravive's Phase 3 AXLerate-OC trial evaluating batiraxcept in platinum-resistant ovarian cancer did not meet its primary endpoint of progression-free survival (PFS) in the pre-specified subset of patients naïve to prior bevacizumab treatment. 

Advancing ccRCC or pancreatic cancer program would require the company to raise significant additional capital or engage a strategic partner, which would be very difficult in light of recent PROC trial results and market conditions. 

Aravive estimated that a Phase 2 clinical trial of batiraxcept in renal cancer patients will require funding of between $30-$50 million and that a Phase 3 clinical trial of batiraxcept in ccRCC patients will require funding of between $80-$100 million. 

The company is exploring various strategic alternatives.

Suppose the company does not raise capital or successfully engage a strategic partner in the next several weeks. In that case, Aravive will be forced to cease operations, liquidate assets and possibly seek bankruptcy protection or engage in a similar process.

 In August, the company's Board of Directors approved a workforce reduction of approximately 70% of the current employee base. 

Cantor Fitzgerald downgraded the ARAV stock to Neutral from Overweight (OW) and lowered the price target to $0.25 from $18, driven by removing sales for batiraxcept.

Following the setback in platinum-resistant ovarian cancer, William Blair downgraded the stock to Market Perform.

The analysts Andy Hsieh and Alexandra Ramsey say that based on the minimal clinical activity of batiraxcept observed in the Phase III AXLerate-OC trial, confidence in its potential success in other indications is reduced.

Given the capital constraint, William Blair views the prospect of reinvigorating the batiraxcept program as unlikely, and it does not have sufficient visibility into management's plans to hold a favorable rating on the stock.

Price Action: ARAV shares closed 23.60% lower at $0.16 on Tuesday.