AVEO Pharmaceuticals
Annual Report 2015

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One)xxANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended: December 31, 2015OrooTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission file number: 001-34655 AVEO PHARMACEUTICALS, INC.(Exact Name of Registrant as Specified in Its Charter) Delaware 04-3581650(State or Other Jurisdiction ofIncorporation or Organization) (I.R.S. EmployerIdentification No.)One Broadway, 14th FloorCambridge, Massachusetts 02142(Address of Principal Executive Offices) (zip code)Registrant’s telephone number, including area code: (617) 588-1960Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $.001 par value NASDAQ Global Select MarketSecurities registered pursuant to Section 12(g) of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90days. Yes x No oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submittedand posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submitand post such files). Yes x No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. oIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “largeaccelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer o Accelerated filer xNon-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company oIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No xThe aggregate market value of the registrant’s common stock, $0.001 par value per share (“Common Stock”), held by non-affiliates of the registrant, based on the lastreported sale price of the Common Stock on the NASDAQ Global Select Market at the close of business on June 30, 2015, was $93,586,098.The number of shares outstanding of the registrant’s Common Stock as of March 9, 2016: 58,181,715. Documents incorporated by reference:Portions of our definitive proxy statement for our 2016 annual meeting of stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K. AVEO PHARMACEUTICALS, INC.TABLE OF CONTENTS Page No. PART I2 Item 1.Business2 Item 1A.Risk Factors30 Item 1B.Unresolved Staff Comments58 Item 2.Properties58 Item 3.Legal Proceedings58 Item 4.Mine Safety Disclosures59 PART II60 Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities60 Item 6.Selected Financial Data61 Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations63 Item 7A.Quantitative and Qualitative Disclosures about Market Risk86 Item 8.Financial Statements and Supplementary Data87 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure121 Item 9A.Controls and Procedures121 Item 9B.Other Information123 PART III124 Item 10.Directors, Executive Officers and Corporate Governance124 Item 11.Executive Compensation124 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters124 Item 13.Certain Relationships and Related Person Transactions, and Director Independence124 Item 14.Principal Accountant Fees and Services124 PART IV125 Item 15.Exhibits and Financial Statement Schedules125 SIGNATURES126 References to AVEOThroughout this Form 10-K, the words “we,” “us,” “our” and “AVEO”, except where the context requires otherwise, refer to AVEO Pharmaceuticals,Inc. and its consolidated subsidiaries, and “our board of directors” refers to the board of directors of AVEO Pharmaceuticals, Inc.Forward-Looking InformationThis report contains forward-looking statements regarding, among other things, our and our collaborators’ future discovery, development andcommercialization efforts, plans, timelines and strategies, our collaborations, our future operating results, future prospects and financial position, our businessstrategy, and other objectives for our operations. You can identify these forward-looking statements by their use of words such as “anticipate,” “believe,”“estimate,” “expect,” “forecast,” “intend,” “plan,” “project,” “target,” “will” and other words and terms of similar meaning. You also can identify them by thefact that they do not relate strictly to historical or current facts. There are a number of important risks and uncertainties that could cause our actual results todiffer materially from those indicated by forward-looking statements. These risks and uncertainties include those inherent in pharmaceutical research anddevelopment, such as adverse results in our drug discovery, preclinical trials and clinical development activities, our dependence on our existing and futurestrategic partners, our ability to obtain any necessary financing to conduct our planned activities, decisions made by the U.S. Food and Drug Administrationand other regulatory authorities with respect to the development and commercialization of our drug candidates, our ability to obtain, maintain and enforceintellectual property rights for our drug candidates and other risk factors. Please refer to the section entitled “Risk Factors” in Part I—Item 1A of this report fora description of these risks and uncertainties. Unless required by law, we do not undertake any obligation to publicly update any forward-looking statements. 1PART I ITEM 1.BusinessOverviewWe are a biopharmaceutical company dedicated to advancing a broad portfolio of targeted therapeutics for oncology and other areas of unmet medicalneed. Our proprietary platform has delivered unique insights into cancer and related diseases. Our strategy is to leverage these biomarker insights and partnerresources to advance the development of our clinical pipeline. We are focused on developing our lead candidate tivozanib in North America as a treatmentfor renal cell carcinoma and other cancers. We have entered into partnerships to fund the further development of three of our four clinical stage assets,including AV-380, ficlatuzumab, and tivozanib in non-oncologic indications worldwide and oncology indications outside North America. We are alsoseeking a partnership for AV-203, our fourth development program. These programs and partnerships are described as follows: ·Tivozanib: Tivozanib is a potent, selective, long half-life vascular endothelial growth factor (“VEGF”) tyrosine kinase inhibitor (“TKI”) ofVEGF receptors 1, 2 and 3. In 2006, we acquired the exclusive rights to develop and commercialize tivozanib in all countries outside of Asiaunder a license from Kyowa Hakko Kirin Co., Ltd. (formerly Kirin Brewery Co. Ltd.), or KHK. We have programs to evaluate tivozanib inseveral tumor types, including renal cell, colorectal and breast cancer. We are evaluating all options for funding the clinical and regulatoryadvancement of tivozanib in the programs discussed below, including through partnership with one or more third parties.RCC First Line Phase 3 Trial (TIVO-1): We conducted a global phase 3 clinical trial comparing the efficacy and safety of tivozanib withNexavar® (sorafenib), an approved therapy, for first-line treatment of renal cell carcinoma, or RCC. The trial met its primary endpoint forprogression-free survival, or PFS, but showed a non-statistically significant trend favoring the sorafenib arm in overall survival, or OS. In June2013, the U.S. Food and Drug Administration, or FDA, issued a complete response letter informing us that it would not approve tivozanib forthe treatment of first line advanced RCC based on the study data from this trial, and recommended that we perform an additional studyadequately sized to assure the FDA that there is no adverse effect on OS. In January 2015, we announced our receipt of confirmation from the European Medicines Agency, or EMA, that tivozanib is eligible forsubmission of an application for a European Union Marketing Authorization under the Agency’s centralized procedure for the treatment ofRCC. Confirmation of eligibility for submission is not predictive of the EMA’s approval of a Marketing Authorization Application, or MAA.Tivozanib has previously been granted orphan drug designation in Europe for the treatment of RCC. Our partner, EUSA Pharma (UK) Limited,or EUSA, submitted a MAA for tivozanib for the treatment of RCC to the EMA in February 2016 based on our existing dataset, which includesthe results from the TIVO-1 study of tivozanib in the first-line treatment of RCC.TIVO-1 Extension Study (One-way Crossover from Sorafenib to Tivozanib): We have completed a TIVO-1 extension study, known as Study902, in which patients with advanced RCC received tivozanib as second-line treatment subsequent to disease progression on the sorafenib armin the TIVO-1 first-line RCC trial. We presented the final results at the 2015 American Society of Clinical Oncology (ASCO) Annual Meetingon June 1, 2015. The final results show a median PFS of 11.0 months and median OS of 21.6 months, demonstrating the clinically meaningfulefficacy of tivozanib in a VEGF treatment refractory population. We believe that the long OS derived from tivozanib following sorafenib inStudy 902 contributed to the discordance in the results between the PFS benefit which significantly favored tivozanib and the OS whichtrended in favor of sorafenib in the TIVO-1 trial. RCC Third Line Phase 3 Trial (TIVO-3): We are planning to conduct a phase 3 trial of tivozanib in the third-line treatment of patients withrefractory RCC. The study will use PFS as the primary endpoint and OS as a secondary endpoint to support a request for regulatory approval oftivozanib as a third-line treatment and to address the overall survival concerns from TIVO-1 as a first-line treatment presented in the June 2013complete response letter from the FDA. Our study design, which we have shared with the FDA, contemplates a randomized, controlled, multi-center, open-label phase 3 study of approximately 322 subjects randomized 1:1 to receive either tivozanib or sorafenib. Subjects enrolled inthe study may include those who have received prior immunotherapy, including immune checkpoint (PD-1) inhibitors, reflecting a potentiallyevolving treatment landscape. The primary objective of the study would be to show improved PFS. Secondary endpoints would include OS andobjective response rate, or ORR, as well as safety and pharmacokinetic endpoints. RCC PD-1 Combination Trial: We are designing a phase 1 study of tivozanib combined with a PD-1 inhibitor for the treatment of patients withRCC. We are evaluating all options for funding, including partnerships, for the clinical and regulatory advancement of tivozanib incombination with PD-1 inhibitors in RCC.CRC Phase 2 Results: In March 2015, we announced results from a predefined biomarker analysis of our BATON-CRC study, a randomizedphase 2 clinical trial of modified FOLFOX6, a commonly used chemotherapy, combined with tivozanib or Avastin® (bevacizumab), whichboth target angiogenesis signaling pathways, in first line treatment of metastatic CRC. In this study, among prospectively defined biomarkers,patients with low (below the median,2representing 50% of the population) serum neuropilin-1, or NRP-1, a cell surface protein that modulates blood vessel development, showed animproved PFS versus patients with high serum NRP-1 in both treatment arms, supporting the value of serum NRP-1 as a potential prognosticmarker for angiogenesis inhibitors. Further, in the subgroup with samples available at the interim analysis, patients identified using a research-use assay to have low serum NRP-1 demonstrated longer PFS when treated with tivozanib compared to bevacizumab, which suggests that firstline colorectal cancer patients with low NRP-1 levels may benefit from treatment with tivozanib over bevacizumab, a standard of care in thisdisease. In April 2015, we presented the results from the phase 2 BATON-CRC study and the Company’s ongoing assay development efforts tothe FDA in connection with our evaluation of a proposed pivotal phase 3 trial of tivozanib in CRC. In response to questions we posed to theFDA regarding this proposed trial, the FDA suggested that we continue work on the development of our biomarker assay to address variabilitybetween assays presented. As such, we hope to identify a commercially viable assay, which may enable a prospectively defined, randomizedPhase 2 or Phase 3 study.Tivozanib Partnerships: EUSA License Agreement: In December 2015, we entered into a license agreement with EUSA under which we granted EUSA the rightto develop and commercialize tivozanib for all diseases and conditions in humans, excluding non-oncologic diseases or conditions of the eye,in Europe (excluding Russia, Ukraine and the Commonwealth of Independent States), Latin America (excluding Mexico), Africa, Australasiaand New Zealand. EUSA submitted a MAA for tivozanib for the treatment of RCC with the EMA in February 2016.Pharmstandard License Agreement: In August 2015, we entered into a license agreement under which we granted to a subsidiary ofPharmstandard OJSC, or Pharmstandard, the exclusive right to develop, manufacture and commercialize tivozanib in the territories of Russia,Ukraine and the Commonwealth of Independent States, or CIS, for all conditions excluding non-oncologic ocular conditions. Under thisagreement, Pharmstandard is responsible for all activities and costs associated with the further development, regulatory filings, health servicesand commercialization of tivozanib in the specified territories. In December 2015, Pharmstandard submitted an application for marketingauthorization for tivozanib based on TIVO-1 results in Russia that was accepted by the Ministry of Health in February 2016.Ophthotech Option for Ocular Conditions (Non-Oncologic): In November 2014, we entered into a research and exclusive optionagreement with Ophthotech Corporation, or Ophthotech, under which we granted Ophthotech an option to develop and commercializetivozanib outside of Asia for the potential diagnosis, prevention and treatment of non-oncologic diseases or conditions of the eye in humans. ·Ficlatuzumab: Ficlatuzumab is a potent Hepatocyte Growth Factor, or HGF, inhibitory antibody. HGF is the sole known ligand of the c-Metreceptor which is believed to trigger many activities that are involved in cancer development and metastasis. We have completed two phase 1clinical studies of ficlatuzumab administered as a single agent and in combination with erlotinib, a TKI, of the epidermal growth factorreceptor, or EGFR, and a phase 2 clinical study evaluating ficlatuzumab in combination with gefitinib, an EGFR TKI, in first line non-smallcell lung cancer, or NSCLC. The phase 2 trial failed to demonstrate a statistically significant benefit in the intent-to-treat population. However,an exploratory analysis using a serum-based proteomic diagnostic test, known as VeriStrat®, identified a sub-population of patients whoexperienced a progression free survival and overall survival benefit from the addition of ficlatuzumab to gefitinib. VeriStrat is commerciallyavailable to help physicians guide treatment decisions for patients with second line advanced NSCLC. Data from the exploratory analyses withVeriStrat prompted the development of a separate investigational companion diagnostic test called BDX004. Based upon the exploratoryanalyses, BDX004 may be indicative of a predictive biomarker for the combination of ficlatuzumab and EGFR TKI over EGFR TKI alone in thefirst line EGFR mutation patients who have been previously identified to not respond well to the current standard of care.In April 2014, we entered into a worldwide agreement with Biodesix, Inc., or Biodesix, to develop and commercialize ficlatuzumab withBDX004, a serum based diagnostic test which has been derived from the VeriStrat test, employing the same methodology and data processingalgorithms as VeriStrat, for use in a confirmatory clinical trial. Pursuant to the Biodesix agreement, in December 2014 we initiated a phase 2confirmatory study of ficlatuzumab, which we refer to as the FOCAL study, in combination with erlotinib in first line advanced NSCLCpatients who have an EGFR mutation and who are identified by the BDX004 test as being most likely to benefit from the addition officlatuzumab to the EGFR TKI. We began enrolling patients during the second half of 2015. Biodesix will fund up to $15 million of the cost ofthis study, as well as all of the costs associated with development and registration of BDX004, and any additional development, regulatory andcommercial costs for ficlatuzumab will be shared equally. Under the Biodesix agreement, subject to regulatory approval, AVEO would leadworldwide commercialization of ficlatuzumab. ·AV-203: AV-203 is a potent anti-ErbB3 (also known as HER3) specific monoclonal antibody with high ErbB3 affinity. We have observedpotent anti-tumor activity in mouse models. AV-203 selectively inhibits the activity of the ErbB3 receptor, and our preclinical studies suggestthat neuregulin-1, or NRG1 (also known as heregulin), levels predict AV-203 anti-tumor activity in preclinical models. We have completed aphase 1 dose escalation study of AV-203, which3 established a recommended phase 2 dose of AV-203 at 20mg/kg intravenously every 2 weeks, demonstrated good tolerability and promisingearly signs of activity, and reached the maximum planned dose of AV-203 monotherapy. No anti-drug antibodies were detected, andpharmacokinetic results indicated a dose-proportional increase in levels of AV-203.The expansion cohort of this study among patients with a specific biomarker has been discontinued. We are seeking to pursue further clinicaldevelopment of AV-203 with a strategic partner. ·AV-380: AV-380 is a potent humanized IgG1 inhibitory monoclonal antibody targeting growth differentiating factor-15, or GDF15, adivergent member of the TGF-ß family, for the potential treatment or prevention of cachexia. Cachexia is defined as a multi-factorial syndromeof involuntary weight loss characterized by an ongoing loss of skeletal muscle mass (with or without loss of fat mass) that cannot be fullyreversed by conventional nutritional support and leads to progressive functional impairment. Cachexia is associated with various cancers aswell as diseases outside of cancer including chronic kidney disease, congestive heart failure, and chronic obstructive pulmonary disease, orCOPD. We believe that AV-380 represents a unique approach to treating cachexia because it addresses key underlying mechanisms of thesyndrome and focuses on a significant area of patient need. It is estimated that approximately 30% of all cancer patients die due to cachexiaand over half of cancer patients who die do so with cachexia present. (J Cachexia Sarcopenia Muscle 2010). In the United States alone, theestimated prevalence of cancer cachexia is over 400,000 patients, and the prevalence of cachexia due to cancer, COPD, congestive heart failure,frailty and end stage renal disease combined is estimated to total more than 5 million patients (Am J Clin Nutr 2006). In September 2014, we presented the results from four preclinical studies of AV-380 in various in vivo cachexia models and in vitro assays atthe 2nd Cancer Cachexia Conference held in Montreal Canada. Our research was also selected for presentation in an oral session at theconference. In April 2015, we also presented the results from a preclinical study of AV-380 in a cachectic human tumor xenograft model at theAnnual Meeting of the American Association of Cancer Research. We have established preclinical proof of concept for GDF15 as a key driverof cachexia by demonstrating, in animal models, that the administration of GDF15 induces cachexia, and that inhibition of GDF15 reversescachexia and provides a potential indication of an overall survival benefit.In August 2015, we entered into a license agreement under which we granted Novartis International Pharmaceutical Ltd., or Novartis, theexclusive right to develop and commercialize AV-380 and related AVEO antibodies. Under this agreement, Novartis is responsible for allactivities and costs associated with the further development, regulatory filing and commercialization of AV-380 worldwide.In connection with the AV-380 program, we have in-licensed certain patents and patent applications from St. Vincent’s Hospital in Sydney,Australia. We have demonstrated preclinical proof-of-concept for AV-380 in multiple cancer cachexia models and have completed cell linedevelopment.Product PipelineWe were founded with the goal of developing a fundamentally new kind of pre-clinical cancer model designed to overcome many of the limitations oftraditional xenograft models, and thereby improve the probability of success in developing new cancer drugs. We utilized these novel models to identify andvalidate target genes that drive tumor growth, to identify drugs that can block the function of these targets, and to identify patients who are most likely torespond favorably to treatment with such drugs. Our cancer models, together with the various techniques we developed to use these models to aid in thediscovery and development of new cancer drugs, were used to develop our product pipeline and are collectively referred to as our Human Response Platform.Tivozanib: Inhibitor of VEGF Receptors 1, 2 & 3Tivozanib is a potent, selective long half-life inhibitor of all three VEGF receptors that is designed to optimize VEGF blockade while minimizing off-target toxicities. The demonstrated clinical results for tivozanib are supported by its core biochemical properties of potency, selectivity and long half-lifeinhibition of all three VEGF receptors. The potency of tivozanib across VEGF receptors 1, 2 and 3 provides a comprehensive blockade of the VEGF pathway.Its high level of selectivity for all three VEGF receptors is designed to minimize unintended side effects, such as fatigue, diarrhea and hand-foot syndrome,which are often associated with the currently approved therapies. Hypertension and dysphonia were the most commonly reported side effects in patientstreated with tivozanib.In 2012, we announced detailed data from our global, phase 3 clinical trial comparing the efficacy and safety of tivozanib with Nexavar® (sorafenib),an approved therapy, for first-line treatment of RCC. This phase 3 trial met its primary endpoint PFS but showed a non-statistically significant trend favoringthe sorafenib arm in overall survival. Based on a review of our application for approval of the use of tivozanib for the treatment of first line advanced RCC, inJune 2013, the U.S. Food and Drug Administration issued a complete response letter informing us that they would not approve tivozanib at this time based onthese study data.4In August 2014, our collaboration and license agreement with Astellas terminated, at which time all rights for the development and commercializationof tivozanib reverted to AVEO. We had entered into the collaboration and license agreement with Astellas in February 2011, pursuant to which we andAstellas shared responsibility for tivozanib, including expenses for continued development and any future commercialization of tivozanib, in North Americaand Europe. Upon reversion back to AVEO of rights previously granted to Astellas, we reevaluated our tivozanib regulatory and development strategy, aswell as partnering opportunities.In January 2015, we announced our receipt of confirmation from the European Medicine Agency that tivozanib is eligible for submission of anapplication for a European Union Marketing Authorization under the Agency’s centralized procedure for the treatment of RCC. Confirmation of eligibilityfor submission is not predictive of the European Medicines Agency’s approval of a Marketing Authorization Application. Tivozanib has previously beengranted orphan drug designation in Europe for the treatment of RCC. In December 2015, we entered into a license agreement with EUSA, under which wegranted EUSA the right to develop and commercialize tivozanib for all diseases and conditions in humans, excluding non-oncologic diseases or conditionsof the eye, in Europe (excluding Russia, Ukraine and the Commonwealth of Independent States), Latin America (excluding Mexico), Africa, Australasia andNew Zealand. EUSA submitted a MAA for tivozanib for the treatment of RCC with the EMA in February 2016.In August 2015, we entered into a license agreement under which we granted Pharmstandard the exclusive right to develop, manufacture andcommercialize tivozanib in the territories of Russia, Ukraine and the Commonwealth of Independent States, or CIS, for all conditions excluding non-oncologic ocular conditions. Under this agreement, Pharmstandard is responsible for all activities and costs associated with the further development,regulatory filings, health services and commercialization of tivozanib in the specified territories. In December 2015, Pharmstandard submitted an applicationfor marketing authorization for tivozanib based on TIVO-1 results in Russia that was accepted by the Ministry of Health in February 2016.We also have evaluated tivozanib in additional clinical programs including our BATON (Biomarker Assessment of Tivozanib in ONcology) program,assessing biomarkers in solid tumors that may be predictive of clinical response to tivozanib in patients with metastatic colorectal cancer, and other clinicaltrials assessing locally recurrent or metastatic triple negative breast cancer.The BATON-BC study in patients with breast cancer, led by AVEO, initiated patient enrollment in December 2012 in a randomized, double-blind,multi-center phase 2 clinical trial, evaluating the efficacy of tivozanib in combination with paclitaxel compared to placebo in combination with paclitaxel inpatients with locally recurrent or metastatic triple negative breast cancer who have received no more than one systemic therapy for advanced or metastaticbreast cancer. On January 30, 2014, we announced that we and Astellas jointly decided to discontinue the BATON-BC clinical trial, due to insufficientenrollment.The BATON-CRC study, led by Astellas, which enrolled a total of 265 patients randomized 2 to 1, was an open-label, phase 2 study with a primaryendpoint evaluating the superiority of tivozanib in combination with modified FOLFOX6, a standard chemotherapy, compared to bevacizumab incombination with modified FOLFOX6 as first-line treatment in patients with advanced metastatic colorectal cancer. On December 13, 2013, we announcedthat the study was unlikely to meet the primary endpoint in the intent-to-treat population and on February 14, 2014, we announced that we and Astellasagreed to discontinue this study. The data from the preplanned interim analysis of this study was presented at the European Society for Medical Oncology, orESMO, on September 29, 2014. The final data through February 28, 2014, including predefined biomarker data from the study, were presented at theAmerican Association for Cancer Research, or AACR Tumor Angiogenesis and Vascular Normalization Conference in March 2015.An objective of the BATON-CRC study was the assessment of prospectively defined biomarkers that may be predictive of response in selected patientsubpopulations. Among these, patients with low (below the median, representing 50% of the patient population) neuropilin-1, or NRP-1, showed animproved PFS versus patients with high NRP-1 in both treatment arms, supporting the value of NRP-1 as a potential prognostic marker for angiogenesisinhibitors. Further, patients with low serum NRP-1 demonstrated longer PFS when treated with tivozanib (17.9 months, n=52), compared to bevacizumab(11.2 months, n=28) (HR=0.380, p=0.0075). Patients with high NRP-1 had inferior PFS outcomes regardless of treatment assignment, with progression freesurvival of 7.3 months and 7.5 months for the tivozanib and bevacizumab arms, respectively. As soluble NRP-1 is known to bind to VEGF and is believed toinhibit VEGF binding to VEGF Receptor 2, we hypothesize that VEGF inhibitors may only be effective in patients with low serum NRP-1 levels, and that inpatients with low serum NRP-1, a more complete blockade of VEGF pathway inhibition may be beneficial. Of note, exploratory biomarker analyses from twoprior studies with tivozanib in RCC presented at the 17th Annual Symposium on Anti-Angiogenesis and Immune Therapies in February 2015 indicated thatNRP-1 is a possible biomarker of tivozanib efficacy in patients with RCC. We hope to identify a commercially viable assay, which may enable aprospectively defined, randomized Phase 2 or Phase 3 study.We are planning to conduct a phase 3 trial of tivozanib in the third-line treatment of patients with refractory RCC. The study will use PFS as theprimary endpoint and OS as a secondary endpoint to support a request for regulatory approval of tivozanib as a third-line treatment and to address the overallsurvival concerns from TIVO-1 as a first line treatment presented in the June 2013 complete response letter from the FDA. Our study design, which we haveshared with the FDA, contemplates a randomized, controlled, multi-center, open-5label phase 3 study of approximately 322 subjects randomized 1:1 to receive either tivozanib or sorafenib. Subjects enrolled in the study may include thosewho have received prior immunotherapy, including immune checkpoint (PD-1) inhibitors, reflecting a potentially evolving treatment landscape. The primaryobjective of the study would be to show improved PFS. Secondary endpoints would include OS and objective response rate, or ORR, as well as safety andpharmacokinetic endpoints. We are evaluating all options for funding, including partnerships, for the clinical and regulatory advancement of tivozanib inRCC as well as colorectal cancer, or CRC. In November 2014, we entered into a Research and Exclusive Option Agreement with Ophthotech Corporation, pursuant to which we providedOphthotech an exclusive option to enter into a definitive license agreement under which we would grant Ophthotech the right to develop and commercializetivozanib outside of Asia for the potential diagnosis, prevention and treatment of non-oncologic diseases or conditions of the eye in humans. Pursuant to thisoption agreement, we granted to Ophthotech an exclusive, royalty free license or sublicense, as applicable, under our intellectual property rights solely toperform the research and development activities related to the use of tivozanib as set forth in the development plan during the option period described below.These activities include formulation work for ocular administration, preclinical research and the conduct of a phase 1/2a, proof of concept clinical trial of aproduct containing tivozanib in patients with wet age-related macular degeneration. Ophthotech may exercise its option at any time until the latest to occurof: (i) twelve (12) months after the achievement of a certain clinical efficacy milestones, (ii) ninety (90) days after the date Ophthotech is required to makecertain clinical efficacy milestone payments, and (iii) thirty (30) days after AVEO and Ophthotech agree as to the definitive form of license agreement.Ficlatuzumab: Hepatocyte Growth Factor (HGF) Inhibitory AntibodyThrough the use of our Human Response Platform, our scientists identified the HGF/c-Met pathway as a significant driver of tumor growth. HGF is aprotein that circulates in the blood and binds to and activates a receptor called c-Met. HGF is the sole known ligand of c-Met receptor, which is believed totrigger many activities that are involved in cancer development and metastasis. Altered HGF/c-Met signaling is observed in many tumors including lung,head and neck, gastric, bladder, breast, ovarian, prostate and colorectal cancers, certain sarcomas and in multiple myeloma and leukemias. There are noapproved therapies that selectively target the HGF/c-Met pathway.In September 2014, at the 2014 Congress of the European Society for Medical Oncology, or ESMO, we presented the results of our exploratoryanalysis using a serum-based molecular diagnostic test to identify a patient sub-population that experienced a progression free survival and overall survivalbenefit on the combination therapy in the ficlatuzumab phase 2 trial. The results suggest that VeriStrat, a serum protein test that is commercially available tohelp physicians guide treatment decisions for patients with NSCLC, may be selective of positive clinical response for ficlatuzumab plus gefitinib overgefitinib alone. For this retrospective exploratory analysis, 180 pre-treatment serum samples analyzed with VeriStrat and were assigned a label of either“VeriStrat Good” (VSG) or “VeriStrat Poor” (VSP) (VSG=145, VSP=35). While the study failed to demonstrate improved OS or PFS over gefitinib alone in theintent-to-treat population, the addition of ficlatuzumab to gefitinib provided significant clinical benefit to the VSP subgroup.Based on this data, in April 2014, we entered into a worldwide agreement with Biodesix, Inc. to develop and commercialize HGF inhibitory antibodyficlatuzumab, with Biodesix’s proprietary companion diagnostic test, BDX004, a serum protein test derived from Veristrat. Pursuant to this agreement, we areconducting the FOCAL study, a phase 2, global, randomized, double-blind, placebo controlled clinical study, evaluating ficlatuzumab, our HGF inhibitoryantibody, in combination with erlotinib (Tarceva®), an epidermal growth factor receptor tyrosine kinase inhibitor (EGFR TKI) in first line EGFR-mutatedNSCLC patients. BDX004 will be used to select patients for entry into the trial.AV-203: Anti-ErbB3 AntibodyThrough the use of our Human Response Platform, we identified the importance of the ErbB3 receptor in tumor growth. ErbB3 belongs to a family ofproteins that also includes epidermal growth factor receptor, or EGFR, and HER2, all of which have been implicated in promoting the growth of significantnumbers of tumor types.ErbB3 is believed to be an important receptor regulating cancer cell growth and survival, and high ErbB3 levels have been shown to correlate withpoor prognoses in several tumor types. It has also been implicated in resistance to certain drugs which target EGFR in lung cancer and with resistance toradiotherapy. AV-203 inhibits the activity of the ErbB3 receptor and our preclinical studies suggest that neuregulin-1, or NRG1, levels predict AV-203 anti-tumor activity and we have filed a U.S. patent application relating to a method of predicting tumor response to ErbB3 inhibitors based on NRG1 levels.In March 2014, we amended our option and license agreement with Biogen Idec GMbH Inc., or Biogen, regarding the development andcommercialization of our ErbB3-targeted antibodies for the potential treatment and diagnosis of cancer and other diseases in humans. Pursuant to theamendment, Biogen agreed to terminate its rights and obligations under our agreement, including Biogen’s option to (i) obtain a co-exclusive (with AVEO)license to develop and manufacture ErbB3 targeted antibodies and6(ii) obtain exclusive commercialization rights to ErbB3 products in countries in the world other than North America. Pursuant to the amendment, we areobligated to pay Biogen a specified percentage of milestone payments received by us from future partnerships after March 28, 2016 and single digit royaltypayments on net sales related to the sale of ErbB3 products, up to cumulative maximum amount of $50 million. As a result, we retain worldwide rights to AV-203, a clinical stage ErbB3-targeted antibody and are obligated to in good faith use reasonable efforts to seek a collaboration partner for the purpose offunding further development and commercialization of ErbB3 targeted antibodies. We are currently exploring partnership opportunities to advance theclinical development of AV-203.AV-380 Program in CachexiaIn 2012, we initiated a program focusing on cachexia, which we refer to as our AV-380 program. AV-380 is a potent humanized IgG1 inhibitorymonoclonal antibody targeting growth differentiating factor-15, or GDF15, a divergent member of the TGF-ß family, for the potential treatment or preventionof cachexia. Cachexia is a serious and common complication of advanced cancer and a number of chronic diseases. It is defined as a multi-factorial syndromeof involuntary weight loss characterized by an ongoing loss of skeletal muscle mass (with or without loss of fat mass) that cannot be fully reversed byconventional nutritional support and leads to progressive functional impairment. The pathophysiology is characterized by a negative protein and energybalance driven by a variable combination of reduced food intake and abnormal metabolism. Other symptoms or conditions associated with cachexia includeanemia, breathing difficulties, edema, insulin resistance, muscle weakness/asthenia, and fatigue.In September 2014, we presented the results from four preclinical studies of AV-380 in various in vivo cachexia models and in vitro assays at the 2ndCancer Cachexia Conference held in Montreal Canada. Our research was also selected for presentation in an oral session at the conference. We believe ourresearch set forth our proof of concept for GDF15, by demonstrating that GDF15 is elevated in cachectic animal models and patients versus non-cachectic,administration of GDF15 induces cachexia and inhibition of GDF15 reverses cachexia.In connection with the AV-380 program, we have in-licensed certain patents and patent applications from St. Vincent’s Hospital in Sydney, Australia.We have completed cell line development and manufacturing of the first cGMP batch of AV-380.We believe that cachexia represents a significant area of patient need, particularly in cancer patients. Weight loss during cancer treatment is associatedwith more chemotherapy-related side effects, fewer completed cycles of chemotherapy, a reduction in response to therapy and decreased survival rates (JGastroenterol 2013; Eur J Cancer 1998; Br J Cancer 2004). In a cohort of over 3,000 patients in the U.S. studied by the Eastern Cooperative OncologyGroup, or ECOG, the prevalence of weight loss even before starting chemotherapy was observed to be substantial across several cancers: over 80% inpancreatic and gastric cancers and over 50% in prostate, colorectal and lung cancers (Am Med Journal 1980). It is estimated that more than 30% of all cancerpatients die due to cachexia and over half of cancer patients who die do so with cachexia present. (J Cachexia Sarcopenia Muscle 2010). In the United Statesalone, the estimated prevalence of cancer cachexia is over 400,000 patients, and the prevalence of cachexia due to cancer, COPD, congestive heart failure,frailty and end stage renal disease combined is estimated to total more than 5 million patients (Am J Clin Nutr 2006).In August 2015, we entered into a license agreement under which we granted Novartis International Pharmaceutical Ltd. the exclusive right to developand commercialize AV-380 and related AVEO antibodies. Under this agreement, Novartis is responsible for all activities and costs associated with the furtherdevelopment, regulatory filing and commercialization of AV-380 worldwide. In connection with the license, Novartis has also acquired our inventory of AV-380 clinical quality drug substance.CompetitionThe biotechnology and pharmaceutical industries are highly competitive. There are many pharmaceutical companies, biotechnology companies,public and private universities and research organizations actively engaged in the research and development of products that may be similar to our products.A number of multinational pharmaceutical companies, as well as large biotechnology companies, including, but not limited to, Roche Laboratories, Inc., orRoche, Pfizer Inc., or Pfizer, Bayer HealthCare AG, or Bayer, Amgen, Inc., Eli Lilly and Company, or Lilly, GlaxoSmithKline plc, or GSK, GTx, Inc., Helsinnand XBiotech, Novartis, Bristol-Myers Squibb, Merck, Merrimack Pharmaceuticals, Inc., Arqule, Inc., Exelixis, Inc., Easai Co., Ltd. and AstraZeneca arepursuing the development or are currently marketing pharmaceuticals that target VEGF, HGF, ErbB3, and cachexia, or other oncology pathways on which weare focusing. It is probable that the number of companies seeking to develop products and therapies for the treatment of unmet needs in the lives of peoplewith cancer will increase.Many of our competitors, either alone or with their strategic partners, have greater financial, technical and human resources than we do and greaterexperience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products, and the commercialization ofthose products. Accordingly, our competitors may be more successful than we may be in obtaining approval for drugs and achieving widespread marketacceptance. Our competitors’ drugs may be safer and more effective, or7more effectively marketed and sold, than any drug we may commercialize and may render our product candidates obsolete or non-competitive before we canrecover the expenses of developing and commercializing any of our product candidates. We anticipate that we will face intense and increasing competitionas new drugs enter the market and advanced technologies become available.Tivozanib CompetitionThere are currently ten FDA-approved drugs in oncology which target the VEGF receptors. Seven of the FDA-approved VEGF pathway inhibitors areoral small molecule receptor tyrosine kinase inhibitors, or TKIs. Nexavar (sorafenib) and Stivarga (regorafenib) are marketed by Bayer and Onyx, a subsidiaryof Amgen, Sutent (sunitinib) and Inlyta (axitinib) are marketed by Pfizer, and Votrient (pazopanib) is marketed by Novartis. Most of these approved VEGFRTKIs are not specific to the VEGF 1, 2 and 3 receptors. Nexavar is approved for advanced RCC and unresectable hepatocellular cancer. Stivarga is approvedfor refractory metastatic colorectal cancer, or mCRC, and refractory gastrointestinal stromal tumors, or GIST. Sutent is approved for advanced RCC, GIST, andprogressive, well-differentiated pancreatic neuroendocrine tumors. Inlyta is approved for advanced RCC after failure of one prior systemic therapy. Votrient isapproved for advanced RCC and advanced soft tissue sarcoma after prior chemotherapy. Caprelsa (vandetanib), marketed by AstraZeneca, and Cometriq(cabozantinib), marketed by Exelixis, are approved for medullary thyroid carcinoma.Avastin (bevacizumab), marketed by Roche/Genentech, is an infused monoclonal antibody approved in combination with other anti-cancer agents forthe treatment of mCRC, non-squamous non-small cell lung cancer, and metastatic RCC. It is also approved as a monotherapy for the treatment ofglioblastoma in patients with progressive disease following prior therapy. Zaltrap (zif-aflibercept), marketed by Sanofi and Regeneron, is a VEGF-trapmolecule that binds to multiple circulating VEGF factors, and is approved in combination with standard chemotherapy agents for treatment of second linemetastatic CRC. Cyramza (ramucirumab), marketed by Lilly, is an antibody that binds to the VEGFR-2 receptor that is approved for the treatment ofadvanced gastric or gastro-esophageal junction adenocarcinoma and in combination with docetaxel for the treatment of NSCLC.Many of the approved VEGF pathway inhibitor agents are in ongoing development in additional cancer indications including RCC. Additionally, weare aware of a number of companies that have ongoing programs to develop both small molecules and biologics that target the VEGF pathway.In addition, the emergence of PD1/PDL1 inhibitor therapies present additional competition for tivozanib in advanced RCC. For example, Opdivo(nivolumab), marketed by Bristol-Myers Squibb, is an approved anti-PD1 for second line RCC. Additional clinical trials as mono and combination therapiesof PD1/PDL1 with VEGF TKIs are in the pipeline targeting RCC.Ficlatuzumab CompetitionWe believe the products that are considered competitive with ficlatuzumab include those agents targeting the HGF/c-Met pathway. The agentsexclusively targeting this pathway consist of the only other HGF-targeted antibody, Amgen’s AMG-102 (rilotumumab), initiated in a phase 3 clinical trial(which has been discontinued), as well as Lilly’s c-Met receptor antibody LY-2875358, currently in multiple phase 2 trials. In addition, Roche has conductedmultiple phase 3 trials for a c-Met receptor antibody onartuzumab (MetMAb/ 5D5 Fab). Roche announced that an independent data monitoring committeerecommended that its phase 3 trial of onartuzumab in second and third line NSCLC be stopped due to lack of efficacy.Other marketed or late clinical-stage drugs which target the HGF/c-Met pathway, though not exclusively, include Pfizer’s PF-2341066 (Xalkori,crizotinib), Exelixis Inc.’s XL-184 (Cometriq, cabozantinib), ArQule, Inc.’s/ Daiichi Sankyo, Inc.’s ARQ-197 (tivantanib), Mirati Therapeutics’ (formerlyMethylGene) MGCD-265, Eisai Co. Ltd.’s E-7050 (golvatinib), Exelixis Inc.’s and GSK’s XL-880 (foretinib), Incyte Corp.’s and Novartis’s INCB-028060and Sanofi-Aventis’s SAR-125844, EMD Serono’s MSC2156119J, Amgen Astellas BioPharma’s AMG 337, Lilly’s merestinib (LY2801653), LesLaboratoires Servier SAS’s S-49076, AstraZeneca and Hutchison MediPharma’s savolitinib, Merck KGaA’s tepotinib, AbbVie’s ABT-700, DecipheraPharma’s altiratinib, Amgen’s AMG-208, Betta Pharmaceutical’s BPI-9016 and Bristol-Myers Squibb Company’s and Aslan Pharmaceuticals’ BMS-777607.AV-203 Program CompetitionWe believe the most direct competitors to our AV-203 program are monoclonal antibodies that specifically target the ErbB3 receptor, includingMerrimack Pharmaceuticals, Inc.’s MM-121, which is currently in phase 2 clinical development, and Daiichi Sankyo, Inc.’s and Amgen, Inc.’s patritumab(AMG-888), which recently entered phase 3 clinical development for non-small cell lung cancer. Other clinical-stage ErbB3-specific competitors includeRoche’s RG-7116, Novartis’s elgemtumab, Regeneron’s REGN1400, GSK’s GSK-2849330, Kolltan’s KTN-3379, Merus’s MCLA-128, AstraZeneca’ssapitinib, Koltan Pharma’s KTN-3379 and Sihuan Pharma’s pirotinib and sirotinib, . Clinical stage competitor’s targeting ErbB3 in addition to other targetsinclude Roche’s MEHD7945A, and Merrimack Pharmaceuticals, Inc.’s MM-111 and MM-141.8AV-380 Program in Cachexia CompetitionOnly a limited number of agents have been approved for the treatment or prevention of cachexia caused by any disease. In the United States, Megaceis the only approved agent for the treatment of cachexia (in patients with the diagnosis of AIDS). Megace and medroxyprogesterone are approved for cancercachexia in Europe. Three agents have recently completed or are currently being studied in phase 3 trials. One agent, GTx, Inc.’s selective androgen receptormodulator, or SARM, called enobosarm (GT-024) recently completed two phase 3 trials for the prevention and treatment of muscle wasting in newlydiagnosed locally advanced or metastatic non-small cell lung cancer patients. The trials suggested limited benefits in a larger patient population and thecompany has discontinued its commercialization efforts. Another agent that has recently completed phase 3 trials is Helsinn’s anamorelin, for which Helsinnrecently filed for EMA approval for treating locally advanced non-small cell lung cancer patients who have cachexia,. A third agent, XBiotech’s xilonix(MABp1), is in a phase 3 trial for metastatic colorectal cancer patients who are cachectic and refractory to standard therapies and has shown encouragingoverall survival results.A number of agents with different mechanisms of action have completed or are currently being studied in phase 2 trials in cachexia or muscle wasting.Agents targeting the muscle regulatory molecule myostatin include Lilly’s LY2495655, Regeneron’s REGN-1033, and Atara Biosciences’ PINTA 745, whichwas recently announced to have failed to demonstrate clinical proof of concept in its phase 2 study. Novartis is currently studying bimagrumab (BYM-338),an agent targeting the activin receptor. Drugs with other mechanisms currently in or recently completing phase 2 clinical trials include Alder Biosciences’clazakizumab (ALD-518, targeting IL-6), PsiOxus’ MT-102 (dual acting catabolic/anabolic transforming agent), Acacia’s APD-209 (progestin/ß2 antagonist)and Ohr Pharmaceuticals’ OHR118 (cytoprotectant/immunomodulator). PsiOxus’s espindolol has completed Phase-1 trialsStrategic PartnershipsWe are party to the following collaboration and license agreements:EUSAIn December 2015, we entered into a license agreement with EUSA under which we granted to EUSA the exclusive, sublicensable right to develop,manufacture and commercialize tivozanib in the territories of Europe (excluding Russia, Ukraine and the Commonwealth of Independent States), LatinAmerica (excluding Mexico), Africa, Australasia and New Zealand for all diseases and conditions in humans, excluding non-oncologic diseases or conditionsof the eye.Under the license agreement, EUSA made a research and development funding payment to us of $2.5 million and is required to make a paymentof $4.0 million upon the grant by the European Medicines Agency, or the EMA, of marketing approval for tivozanib for treatment of renal cell carcinoma. Weare eligible to receive additional research funding from EUSA, including up to $20.0 million if EUSA elects to utilize data generated by our planned phase 3study in third line renal cell carcinoma, and up to $2.0 million for a potential phase 1 combination study with a checkpoint inhibitor. We will be entitled toreceive milestone payments of $2.0 million per country upon reimbursement approval for renal cell carcinoma in each of France, Germany, Italy, Spain andthe United Kingdom, and an additional $2.0 million for the grant of marketing approval in three of the following five countries: Argentina, Australia, Brazil,South Africa and Venezuela. We will also be eligible to receive a payment of $2.0 million in connection with EUSA’s filing with the EMA for marketingapproval for tivozanib for the treatment of each of up to three additional indications and $5.0 million per indication in connection with the EMA’s grant ofmarketing approval for each of up to three additional indications, as well as potentially up to $335.0 million upon EUSA’s achievement of certain salesthresholds. We will also be eligible to receive tiered double digit royalties on net sales, if any, of licensed products in the licensed territories ranging from alow double digit up to mid-twenty percent depending on the level of annual net sales. A percentage of any milestone and royalty payments we receive aredue to Kyowa Hakko Kirin Co., Ltd. (formerly Kirin Brewery Co., Ltd.), or KHK, as a sublicensing fee under the license agreement between us and KHK datedas of December 21, 2006.EUSA is obligated to use commercially reasonable efforts to develop and commercialize tivozanib throughout the licensed territories. With theexception of certain support to be provided by us prior to the grant of marketing approval by the EMA, EUSA has responsibility for all activities and costsassociated with the further development, manufacture, regulatory filings and commercialization of tivozanib in the licensed territories. EUSA is obligated touse commercially reasonable efforts to file an application with the EMA for approval of marketing authorization for tivozanib for the treatment of renal cellcarcinoma, which EUSA filed in February 2016.The term of the license agreement commenced on the effective date and will continue on a product-by-product and country-by-country basis until thelater to occur of (a) the expiration of the last valid patent claim for such product in such country, (b) the expiration of market or regulatory data exclusivityfor such product in such country or (c) the 10th anniversary of the effective date. Either party may terminate the license agreement in the event of thebankruptcy of the other party or a material breach by the other party that remains uncured, following receipt of written notice of such breach, for a period of(a) thirty (30) days in the case of breach9for nonpayment of any amount due under the license agreement, and (b) ninety (90) days in the case of any other material breach. EUSA may terminate thelicense agreement at any time upon one hundred eighty (180) days’ prior written notice. In addition, we may terminate the license agreement upon thirty(30) days’ prior written notice if EUSA challenges any of the patent rights licensed under the license agreement.NovartisIn August 2015, we entered into a license agreement with Novartis International Pharmaceutical Ltd., which we refer to as Novartis, under which wegranted Novartis the exclusive right to develop and commercialize AV-380 and our related antibodies that bind to GDF-15 worldwide. Under this agreement,Novartis is responsible for all activities and costs associated with the further development, regulatory filing and commercialization of AV-380 worldwide.Novartis made an upfront payment to us of $15.0 million during September 2015. We will also be eligible to receive (a) up to $53 million in potentialclinical milestone payments and up to $105 million in potential regulatory milestone payments tied to the commencement of clinical trials and to regulatoryapprovals of products developed under the license agreement in the United States, the European Union and Japan; and (b) up to $150 million in potentialsales based milestone payments based on annual net sales of such products. Upon commercialization, we are eligible to receive tiered royalties on net sales ofapproved products ranging from the high single digits to the low double digits. Novartis has responsibility under the license agreement for the development,manufacture and commercialization of the licensed antibodies and any resulting approved therapeutic products.The term of the license agreement commenced in August 2015 and will continue on a country-by-country basis until the later to occur of the 10thanniversary of the first commercial sale of a product in such country or the expiration of the last valid patent claim for a product in that country. We orNovartis may terminate the license agreement in the event of a material breach by the other party that remains uncured for a period of sixty (60) days, whichperiod may be extended an additional thirty (30) days under certain circumstances. Novartis may terminate the license agreement, either in its entirety or withrespect to any individual products or countries, at any time upon sixty (60) days’ prior written notice. In addition, we may terminate the license agreementupon thirty (30) days’ prior written notice if Novartis challenges certain patents controlled by us related to our antibodies.Novartis also exercised its right under the license agreement to acquire our inventory of clinical quality drug substance, reimbursing us forapproximately $3.5 million for such existing inventory.Pharmstandard GroupIn August 2015, we entered into an exclusive license agreement with JSC “Pharmstandard-Ufimskiy Vitamin Plant”, or Pharmstandard, a subsidiary ofPharmstandard OJSC, under which we granted Pharmstandard the exclusive right to develop, manufacture and commercialize tivozanib in the territories ofRussia, Ukraine and the Commonwealth of Independent States for all conditions excluding non-oncologic ocular conditions. Pharmstandard is obligated to use commercially reasonable efforts to develop and commercialize tivozanib throughout the licensed territories,and Pharmstandard has responsibility for all activities and costs associated with the further development, manufacture, regulatory filings andcommercialization of tivozanib in the licensed territories. In December 2015, Pharmstandard filed an application for marketing authorization in Russia fortivozanib for the treatment of renal cell carcinoma.Pharmstandard made an upfront payment to us of $1.0 million and will be obligated to pay an additional $0.5 million upon registration of the licenseagreement with a Russian regulatory agency. Pharmstandard submitted an application for marketing authorization in Russia during December 2015. We arealso eligible to receive $7.5 million in connection with the first marketing authorization of tivozanib in Russia. If Russian regulatory authorities requireadditional studies to be conducted prior to approval, this amount would be reduced to $3.0 million. In addition, we are eligible to receive $3.0 million foreach additional approved indication of tivozanib, if Pharmstandard elects to seek any such approvals, as well as a high single-digit royalty on net sales in thesublicensed territories. A percentage of all upfront, milestone and royalty payments we receive under the agreement are due to KHK as a sublicensing feeunder our license agreement with KHK.The term of the license agreement commenced in August 2015 and will continue on a product-by-product and country-by-country basis until the laterto occur of (a) the expiration of the last valid patent claim for such product in such country, (b) the expiration of the last marketing authorization for suchproduct in such country or (c) the 10th anniversary of the first commercial sale of such product in such country. Either party may terminate the licenseagreement in the event of a material breach by the other party that remains uncured, following receipt of written notice of such breach, for a period of (a)thirty (30) days, in the case of breach for nonpayment of any amount due under the license agreement, and (b) ninety (90) days, in the case of any othermaterial breach. After the first anniversary, Pharmstandard may terminate the license agreement at any time upon ninety (90) days’ prior written notice. In10addition, we may terminate the license agreement upon thirty (30) days’ prior written notice if Pharmstandard challenges certain patents controlled by us orour licensor, KHK, related to tivozanib. Ophthotech CorporationIn November 2014 we entered into a Research and Exclusive Option Agreement, or Option Agreement, with Ophthotech Corporation pursuant towhich we provided Ophthotech an exclusive option to enter into a definitive license agreement whereby we would grant Ophthotech the right to develop andcommercialize our VEGF receptor tyrosine kinase inhibitor, tivozanib, outside of Asia for the potential diagnosis, prevention and treatment of non-oncologicdiseases or conditions of the eye in humans.Pursuant to this Option Agreement, we granted to Ophthotech an exclusive, royalty free license or sublicense, as applicable, under intellectualproperty rights controlled by us solely to perform the research and development activities related to the use of tivozanib for the specific purposes outlined inthe agreement during the option period (as defined below). These activities include formulation work for ocular administration, preclinical research and theconduct of a phase 1/2a, proof of concept clinical trial of a product containing tivozanib in patients with wet age-related macular degeneration, or the POCStudy.Ophthotech paid us $500,000 in consideration for the grant of the option. Such amount is non-refundable and not creditable against any otheramounts due under the agreement. We are obligated to make available to Ophthotech, at no cost to Ophthotech, certain quantities of tivozanib hydrochloridesolely for conducting its option period research including manufacturing additional quantities of tivozanib in the event stability data indicates that thecurrent supply will expire prior to the end of February 2017.During the option period, if Ophthotech elects to continue the development of tivozanib for non-oncologic diseases of the eye, we are entitled toreceive a one-time milestone payment of $2.0 million upon acceptance of the first Investigational New Drug application for the purpose of conducting ahuman clinical study of tivozanib in ocular diseases, which we refer to as the IND Submission Milestone Payment. We are also entitled to receive a one-timemilestone payment of $6.0 million, which we refer to as the Clinical Efficacy Milestone Payment, on the earlier of (a) December 31, 2016 and (b) the later tooccur of: (i) the achievement of a clinical milestone in the POC Study, or the Clinical Efficacy Milestone and (ii) the earlier of (A) the date twelve(12) months after our and Ophthotech’s agreement as to the form and substance of the KHK Amendment (as defined below) or (B) the date ninety (90) daysafter the entry into the KHK Amendment, subject to our right to terminate the Option Agreement on 90 days’ written notice (the date on which such paymentis due, referred to as the Clinical Efficacy Milestone Payment Trigger Date).Ophthotech may exercise the option at any time until the latest to occur of: (i) twelve (12) months after the achievement of the Clinical EfficacyMilestone, (ii) ninety (90) days after the Clinical Efficacy Milestone Payment Trigger Date, and (iii) thirty (30) days after we and Ophthotech agree as to thedefinitive form of license agreement, which we refer to as the Option Period.During the Option Period, we will not grant a license to any third party that would preclude us from being able to grant to Ophthotech the rights andlicenses that are contemplated by the definitive license agreement, and we will not engage in any research, development or commercialization of tivozanib inthe field covered by the contemplated definitive license agreement, except as specified in the Option Agreement.The terms of the Option Agreement are subject to our obligations to Kirin Brewery Co. Ltd. (now Kyowa Hakko Kirin), or KHK, under a licenseagreement entered into by us with KHK in 2006, pursuant to which we acquired exclusive rights to develop and commercialize tivozanib for all humandiseases outside of Asia, referred to as the KHK License Agreement. A percentage of all payments received by us under the Option Agreement and anydefinitive license agreement must be paid to KHK. We are required to maintain the KHK Agreement in effect, and not enter into any amendment ortermination thereof that would adversely affect our rights, during the option period.During the option period, we and Ophthotech are obligated to negotiate in good faith the form and substance of a definitive license agreement, as wellas the form and substance of an amendment to our license agreement with KHK (such amendment referred to as the KHK Amendment) to modify certain rightsand obligations of the parties and sublicensees thereunder, particularly with respect to rights to improvements that are not specifically related to tivozanib,and regulatory affairs matters.Upon exercise of the option, Ophthotech is required to pay us a one-time option exercise fee of $2.0 million in addition to the IND SubmissionMilestone Payment if such payment has not then been previously paid. If upon exercise of the option, the Clinical Efficacy Milestone Payment Trigger Datehas not yet occurred, we shall be entitled to the Clinical Efficacy Milestone Payment at such time that the Clinical Efficacy Milestone Payment Date doesoccur if the license agreement remains in effect as of such date. The license agreement, if entered into upon Ophthotech’s exercise of the Option, will providefor us to be entitled to receive (i) $10.0 million upon meeting certain efficacy and safety endpoints in phase 2 clinical trials that would enable thecommencement of a phase 3 clinical trial, (ii) $20.0 million upon marketing approval in the United States, (iii) $20.0 million upon marketing approval in theUK,11Germany, Spain, Italy and France and (iv) up to $45.0 million in sales-based milestone payments. Ophthotech would also be required to pay tiered, doubledigit royalties, up to a mid-teen percentage, on net sales of tivozanib or products containing tivozanib.Either party may terminate the Option Agreement in the event of an uncured material breach of the Option Agreement by the other party whichremains uncured for a period of ninety (90) days (or thirty (30) days for a breach relating to non-payment), or upon bankruptcy or like proceedings relating tothe other party. Ophthotech may terminate the Option Agreement at any time upon ninety (90) days’ prior written notice to us. In addition, we may terminatethe Option Agreement upon thirty (30) days’ prior written notice to Ophthotech if Ophthotech challenges certain patents controlled by us related totivozanib. Unless terminated as provided above, the Option Agreement will expire upon the expiration of the option or the entry into the definitive licenseagreement.BiodesixIn April 2014, we entered into a worldwide agreement with Biodesix to develop and commercialize our HGF inhibitory antibody ficlatuzumab, withBDX004, a proprietary companion diagnostic test developed by Biodesix and based upon the exploratory analyses with VeriStrat®, a serum protein test thatis commercially available to help physicians guide treatment decisions for patients with advanced NSCLC.Under the agreement, we granted Biodesix perpetual, non-exclusive rights to certain intellectual property, including all clinical and biomarker datarelated to ficlatuzumab, to develop and commercialize BDX004. Biodesix granted us perpetual, non-exclusive rights to certain intellectual property,including diagnostic data related to BDX004, with respect to the development and commercialization of ficlatuzumab; each license includes the right tosublicense, subject to certain exceptions. Pursuant to a joint development plan, as monitored by a joint steering committee, we retain primary responsibilityfor clinical development of ficlatuzumab in a phase 2 proof of concept, or POC, clinical study of ficlatuzumab for non-small cell lung cancer, in whichBDX004, a diagnostic test derived from VeriStrat will be used to select clinical trial subjects, referred to as the FOCAL study. The FOCAL study will be fullyfunded by Biodesix up to a maximum of $15 million, referred to as the Cap. Biodesix will also be responsible for all of the costs associated with developmentand registration of BDX004. After the Cap is reached, we and Biodesix will share equally in the costs of the FOCAL study, and we and Biodesix will each beresponsible for 50% of development and regulatory costs associated with all future ficlatuzuamab clinical development trials agreed-upon by Biodesix andus, including all milestone payments and royalties payable to third parties, if any.Pending marketing approval of ficlatuzumab and subject to a commercialization agreement to be entered into after receipt of results from the FOCALstudy, each party would share equally in commercialization profits and losses, subject to our right to be the lead commercialization party.Biodesix is solely responsible for the BDX004 development costs, as well as BDX004 sales and marketing costs. Subject to and following theapproval of the BDX004 test as a companion diagnostic for ficlatuzumab, Biodesix has agreed to make the BDX004 test available and use commerciallyreasonable efforts to seek reimbursement in all geographies where ficlatuzumab is approved. We have agreed to reimburse Biodesix a pre-specified amount,under certain circumstances for VeriStrat tests performed.Prior to the first commercial sale of ficlatuzumab and after the earlier of (i) the Cap being reached or (ii) the completion of the FOCAL study, eachparty has the right to elect to discontinue participating in further development or commercialization efforts with respect to ficlatuzumab, which is referred toas an Opt-Out. If either we or Biodesix elects to Opt-Out, with such party referred to as the Opting-Out Party, then the Opting-Out Party shall not beresponsible for any future costs associated with developing and commercializing ficlatuzumab other than any ongoing clinical trials. After election of anOpt-Out, the non-opting out party shall have sole decision-making authority with respect to further development and commercialization of ficlatuzumab.Additionally, the Opting-Out Party shall be entitled to receive, if ficlatuzumab is successfully developed and commercialized, a royalty equal to 10% of netsales of ficlatuzumab throughout the world, if any, subject to offsets under certain circumstances.If Biodesix elects to Opt-Out, it will continue to be responsible for its development and commercialization obligations with respect to BDX004. If weelect to Opt-Out, we will continue to make the existing supply of ficlatuzumab available to Biodesix for the purposes of enabling Biodesix to complete thedevelopment of ficlatuzumab, and Biodesix will have the right to commercialize ficlatuzumab.Prior to any Opt-Out, the parties shall share equally in any payments received from a third party licensee; provided, however, after any Opt-Out, theOpting-Out Party shall be entitled to receive only a reduced portion of such third party payments. The agreement will remain in effect until the expiration ofall payment obligations between the parties related to development and commercialization of ficlatuzumab, unless earlier terminated.12St. Vincent’s HospitalIn July 2012, we entered into a license agreement with St. Vincent’s Hospital Sydney Limited, which we refer to as St. Vincent’s, which was amendedand restated in August 2015, under which we obtained an exclusive, worldwide license to research, develop, manufacture and commercialize products fortherapeutic applications that benefit from inhibition or decreased expression or activity of MIC-1, which is also known as GDF15. We believe GDF15 is anovel target for cachexia and we are using this license in our AV-380 program for cachexia. Under the agreement, we have the right to grant sublicensessubject to certain restrictions. We have a right of first negotiation to obtain an exclusive license to certain improvements that St. Vincent’s or third partiesmay make to licensed therapeutic products. Under the license agreement, St. Vincent’s also granted us non-exclusive rights for certain related diagnosticproducts and research tools.Under the license agreement, we (or a sublicensee) are obligated to use diligent efforts to conduct research and clinical development and commerciallylaunch at least one licensed therapeutic product, and to maximize profits from licensed therapeutic products for the benefit of us and St. Vincent’s. Subject tocertain conditions, we have also agreed to achieve specified research, development and regulatory milestones by specified dates. If we (or a sublicensee) donot achieve a given milestone by the agreed date, we have the option of paying the amount we would have been obligated to pay had we timely achieved themilestone, and, if we do so, St. Vincent’s will not have the right to terminate the license agreement based on our failure to timely achieve such milestone.We have also agreed that, for as long as there is a valid claim in the licensed patents, we will not, and we will ensure that our affiliates and oursublicensees do not, develop or commercialize any product, other than a licensed therapeutic product, for the treatment, prevention or prophylaxis ofcachexia, decreased appetite or body weight, that binds to GDF15 or the GDF15 receptor and that is a GDF15 antagonist, and will not license or induce anyother person to do the same.In connection with entering into the original license agreement with St. Vincent’s in July 2012, we paid St. Vincent’s an upfront license fee of $0.7million and a low five-figure amount to reimburse St. Vincent’s for patent-related expenses it incurred with respect to a specified licensed patent. Inconnection with the amendment and restatement of the original license agreement in August 2015, we made an additional upfront payment of $1.5 million.Under our license agreement with St. Vincent’s, we may be required to: ·make milestone payments, up to an aggregate total of $18.9 million, upon achievement of specified development and regulatory milestones forthe first three indications for licensed therapeutic products, some of which payments may be increased by a mid to high double-digitpercentage rate for milestones payments made after we grant any sublicense under the license agreement, depending on the sublicensedterritory or territories; ·pay tiered royalty payments equal to a low-single-digit percentage of any net sales we or our sublicensees make from licensed therapeuticproducts, an obligation we share with Novartis equally. The royalty rate escalates within the low-single-digit range during each calendar yearbased on increasing licensed therapeutic product sales during such calendar year. Our royalty payment obligations for a licensed therapeuticproduct in a particular country end on the later of 10 years after the date of first commercial sale of such licensed therapeutic product in suchcountry or expiration of the last-to-expire valid claim of the licensed patents covering such licensed therapeutic product in such country, andare subject to offsets under certain circumstances; and ·reimburse St. Vincent’s for some or all of the reasonable costs and expenses it incurs in patent management, filing, prosecuting and maintainingthe licensed patents.The license agreement will remain in effect until the later of 10 years after the date of first commercial sale of licensed therapeutic products in the lastcountry in which a commercial sale is made, or expiration of the last-to-expire valid claim of the licensed patents, unless we elect, or St. Vincent’s elects, toterminate the license agreement earlier.St. Vincent’s has the right to terminate the agreement due to any patent-related challenge by us, our affiliates or any sublicensee, or if we or ouraffiliates or any sublicensee cause or induce any other person to make a patent-related challenge, and such challenge continues after a specified cure period.We have the right to terminate the agreement on six months’ notice if we terminate our GDF15 research and development programs as a result of thefailure of a licensed therapeutic product in pre-clinical or clinical development, or if we form the reasonable view that further GDF15 research anddevelopment is not commercially viable, and we are not then in breach of any of our obligations under the agreement. If we form the reasonable view thatfurther GDF15 research and development is not commercially viable and terminate the agreement before we start a phase 1 clinical trial on a licensedtherapeutic product, we will be required to pay St. Vincent’s a low-to-mid six-figure termination payment.13Any termination of the agreement, in whole or in part, will result in a loss of our rights to the relevant licensed patents and know-how. If St. Vincent’sterminates the agreement in its entirety due to our breach, insolvency or a patent-related challenge, or we terminate the agreement due to a developmentfailure or lack of commercial viability, as described above, St. Vincent’s will have a non-exclusive license from us to certain intellectual property rights andknow-how relating to the licensed therapeutic products, and we must transfer to St. Vincent’s certain then-existing regulatory approvals and relateddocuments for the licensed therapeutic products.Astellas PharmaIn February 2011, we entered into a collaboration and license agreement with Astellas and certain of its indirect wholly-owned subsidiaries pursuantto which we and Astellas made plans to develop and seek to commercialize tivozanib for the treatment of a broad range of cancers. On February 12, 2014,Astellas exercised its right to terminate the agreement. The termination of the agreement became effective August 11, 2014, at which time tivozanib rightsreturned to us. In accordance with the collaboration and license agreement, we and Astellas agreed to equally share committed development costs, includingthe costs of completing certain tivozanib clinical development activities that were initiated as part of our partnership with Astellas. For additionalinformation regarding the terms of this agreement, see “Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results ofOperations ─ Strategic Partnerships.”Biogen IdecIn March 2009, we entered into an exclusive option and license agreement with Biogen Idec International GmbH, or Biogen Idec, regarding thedevelopment and commercialization of our discovery-stage ErbB3-targeted antibodies for the potential treatment and diagnosis of cancer and other diseasesin humans outside of North America. Under the agreement, we were responsible for developing ErbB3 antibodies through completion of the first phase 2clinical trial designed in a manner that, if successful, would generate data sufficient to support advancement to a phase 3 clinical trial. In March 2014, weamended our agreement with Biogen Idec, whereby Biogen Idec agreed to the termination of its rights and obligations under the agreement, includingBiogen Idec’s option to (i) obtain a co-exclusive (with us) license to develop and manufacture ErbB3 targeted antibodies and (ii) obtain exclusivecommercialization rights to ErbB3 products in countries in the world other than North America. As a result, we retain worldwide rights to AV-203, a clinicalstage ErbB3-targeted antibody. Pursuant to the amendment, we are obligated to in good faith use reasonable efforts to seek a collaboration partner for thepurpose of funding further development and commercialization of ErbB3-targeted antibodies. Pursuant to the amendment, we are obligated to pay BiogenIdec a percentage of milestone payments received by us from future partnerships after March 28, 2016 and single digit royalty payments on net sales relatedto the sale of ErbB3 products, up to cumulative maximum amount of $50.0 million.Kyowa Hakko KirinIn December 2006, we entered into a license agreement with Kirin Brewery Co. Ltd. (now Kyowa Hakko Kirin), which we sometimes refer to as KHK,under which we obtained an exclusive license, with the right to grant sublicenses subject to certain restrictions, to research, develop, manufacture andcommercialize tivozanib, pharmaceutical compositions thereof and associated biomarkers. Our exclusive license covers all territories in the world, except forAsia. KHK has retained rights to tivozanib in Asia. Under the license agreement, we obtained exclusive rights in our territory under certain KHK patents,patent applications and know-how related to tivozanib, to research, develop, make, have made, use, import, offer for sale, and sell tivozanib for the diagnosis,prevention and treatment of any and all human diseases and conditions. We and KHK each have access to and can benefit from the other party’s clinical dataand regulatory filings with respect to tivozanib and biomarkers identified in the conduct of activities under the license agreement.Under the license agreement, we are obligated to use commercially reasonable efforts to develop and commercialize tivozanib in our territory,including meeting certain specified diligence goals. Prior to the first anniversary of the first post-marketing approval sale of tivozanib in our territory, neitherwe nor any of our subsidiaries has the right to conduct certain clinical trials of, seek marketing approval for or commercialize any other cancer product thatalso works by inhibiting the activity of the VEGF receptor.Upon entering into the license agreement with KHK, we made a one-time cash payment in the amount of $5.0 million. In March 2010, we made a$10.0 million milestone payment to KHK in connection with the dosing of the first patient in our phase 3 clinical trial of tivozanib. In December 2012, wemade a $12.0 million milestone payment to KHK in connection with the acceptance by the FDA of our NDA filing for tivozanib. The total remainingpayments for clinical and regulatory milestones under our license agreement with KHK are $38.0 million, in the aggregate, provided that the associatedclinical and regulatory milestones specific to licensed territories will be replaced by a specified percentage of any non-research and development amounts wereceive from any third parties in the event we sublicense our rights under the agreement..14We also made a $22.5 million payment to KHK during the year ended December 31, 2011 related to the up-front license payment received under thecollaboration and license agreement with Astellas which we entered into in February 2011. We are also required to pay tiered royalty payments on net saleswe make of tivozanib in our territory, which range from the low to mid-teens as a percentage of net sales. The royalty rate escalates within this range based onincreasing tivozanib sales. Our royalty payment obligations in a particular country in our territory begin on the date of the first commercial sale of tivozanibin that country, and end on the later of 12 years after the date of first commercial sale of tivozanib in that country or the date of the last to expire of thepatents covering tivozanib that have been issued in that country. In the event we sublicense the rights licensed to us under the license agreement with KHK,the associated clinical and regulatory milestones specific to licensed territories will be replaced by a specified percentage of any amounts we receive fromany third party sublicensees. This provision does not apply to amounts we receive in respect of research and development funding or equity investments,subject to certain limitations.The license agreement will remain in effect until the expiration of all of our royalty and sublicense revenue obligations to KHK, determined on aproduct-by-product and country-by-country basis, unless we elect to terminate the license agreement earlier. If we fail to meet our obligations under theagreement and are unable to cure such failure within specified time periods, KHK can terminate the agreement, resulting in a loss of our rights to tivozaniband an obligation to assign or license to KHK any intellectual property or other rights we may have in tivozanib, including our regulatory filings, regulatoryapprovals, patents and trademarks for tivozanib.Intellectual Property RightsPatent RightsWe have built a strong intellectual property portfolio, and, whenever possible, we have multiple tiers of patent protection for our product candidates.With respect to tivozanib, we have exclusively licensed patents that cover the molecule and its therapeutic use (patent expiration 2022, with the possibilityof patent term extension to 2027 in the United States and Europe), a key step in manufacturing the molecule, and a crystal form of the molecule, i.e., apolymorph with low hygroscopicity used in the clinical formulation.TivozanibWith respect to tivozanib, we have: ·U.S. patents: 3 issued; none pending; expirations ranging from 2018 to 2023 ·European patents: 3 granted; none pending; expirations ranging from 2018 to 2023 ·Canadian patents: 1 granted; none pending; expiration 2022 ·Australian patents: 1 granted; none pending; expiration 2022Complementing these in-licensed patents relating to tivozanib are two of our own issued U.S. patents that cover different biomarker tests foridentifying human patients likely to respond to treatment with tivozanib, and one pending international PCT patent application relating to the use ofNeuropilin-1, as a serum-based biomarker for identifying patients, including patients with colorectal cancer, likely to respond to treatment with tivozanib. With respect to tivozanib related technologies, we have: ·U.S. patents: 2 issued; 1 pending; expirations ranging from 2029 to 2036 ·Australian patents: none granted; 1 pending; expiration 2030 ·International applications: 1 pendingFiclatuzumabWith respect to our anti-HGF antibodies, including ficlatuzumab, we have eight U.S. patents covering our anti-HGF antibodies, nucleic acids andexpression vectors encoding the antibodies, host cells, methods of making the antibodies, and methods of treatment using the antibodies. With respect to ouranti-HGF antibody program we have: ·U.S. patents: 8 granted; expirations ranging from 2027 to 2028 ·European patents: 1 granted; none pending; expirations 2027 ·Japanese patents: 3 granted; 0 pending; expirations 202715 ·Canadian patents: 0 granted; 1 pending; expirations 2027 ·Australian patents: 1 granted; none pending; expiration 2027AV-203With respect to our anti-ErbB3 antibodies, including AV-203, we have two U.S. patents covering our anti-ErbB3 antibodies, nucleic acids andexpression vectors encoding the antibodies, host cells, and methods of making the antibodies, a U.S. patent application relating to related embodiments, anda U.S. patent application relating to a method of predicting tumor response to our anti-ErbB3 antibody. With respect to our anti- ErbB3 antibody program wehave: ·U.S. patents: 2 granted; 2 pending; expirations ranging from 2031 to 2032 ·European patents: 1 granted; 1 pending; expirations ranging from 2031 to 2032 ·Japanese patents: none granted; 2 pending; expirations ranging from 2031 to 2032 ·Canadian patents: none granted; 2 pending; expirations ranging from 2031 to 2032 ·Australian patents: none granted; 2 pending; expirations ranging from 2031 to 2032Anti-GDF15 AntibodiesWith respect to our anti-GDF15 antibodies, we have exclusively licensed certain patent rights from Saint Vincent’s Hospital in the field of GDF15inhibition for therapeutic, preventative and palliative applications, including increasing appetite and/or body weight in subjects where decreased appetiteand/or body weight loss due to elevated expression or amounts of GDF15. A U.S. Patent covering method of increasing appetite and /or body weightadministering an effective amount of an anti-GDF15 antibody is expected to expire in 2029, which includes approximately 4 years of patent term adjustmentgranted by the U.S. Patent and Trademark Office. We also have rights in a granted European patent in the field of GDF15 inhibition for decreased appetiteand/or body weight due to elevated expression or amounts of GDF15 in patients with cancer, and are pursuing broader claims in a divisional patentapplication. The granted European patents will expire in 2025.With respect to the licensed technologies, we have: ·U.S. patents: 2 issued; 1 pending; expirations ranging from 2025 to 2029 ·European patents: 3 granted; 1 pending; expirations ranging from 2016 to 2052 ·Japanese patents: 3 granted; 1 pending; expirations in 2025. ·Canadian patents: 1 granted; 1 pending; expiration 2016 to 2025 ·Australian patents: 3 granted; none pending; expiration 2016 to 2028Complementing these in-licensed patents relating to GDF15 inhibition is our own issued U.S. patent covering our inhibitory GDF15 antibodies, whichis expected to expire in 2033. Additionally, we have a filed U.S. application and international patent applications that cover our GDF15 antibodies, nucleicacids and expression vectors encoding the antibodies, host cells, and methods of making the antibodies. These patents, if issued, would also be expected toexpire in 2033. We have also filed three international patent applications covering the use of our inhibitory GDF15 antibodies in improving cardiac andrenal function in patients with congestive heart failure and chronic kidney disease, respectively, as well as use in conjunction with chemotherapeutic agentsto increase survival in a cancer cachexia patient. These patents, if issued would be expected to expire in 2035 and early 2036.OtherIn addition to patents relating to tivozanib and our ficlatuzumab, AV-203, and anti-GDF15 antibody programs, our patent portfolio contains a numberof other patents and patent applications relevant to our business. We own a granted U.S. patent and issued foreign counterparts covering a method of makinga chimeric mouse cancer model. We also own a granted U.S. patent and an issued foreign counterparts covering a method of producing primary tumormaterial via directed complementation. We also own a granted U.S. patent and pending U.S. patent application covering a mouse model that contains ahuman breast tumor. We own pending patent applications that cover a general method for identifying new, multi-gene biomarkers for predicting response toan anti-cancer drug of interest, as well as specific multi-gene biomarkers identified by using the same method.16Technology PlatformWith respect to our technology platforms, we have: ·U.S. patents: 3 issued; 1 pending; expirations ranging from 2024 to 2026 ·European patents: 1 granted; expiration in 2024 ·Japanese patents: 1 granted; expiration in 2024 ·Australian patents: 1 granted; 1 pending; expirations ranging from 2024 to 2032The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which wefile, the patent term is 20 years from the earliest date of filing a non-provisional patent application. In the United States, a patent’s term may be lengthened bypatent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office in granting a patent. A U.S. patentterm may be shortened, if a patent is terminally disclaimed by its owner, over another patent.The patent term of a patent that covers an FDA-approved drug may also be eligible for patent term extension, which permits patent term restoration ascompensation for the patent term lost during the FDA regulatory review process. The Drug Price Competition and Patent Term Restoration Act of 1984, or theHatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration of the patent. The length of the patent term extension is relatedto the length of time the drug is under regulatory review. Patent extension cannot extend the remaining term of a patent beyond a total of 14 years from thedate of product approval, and only one patent applicable to an approved drug may be extended. Similar provisions are available in Europe and other foreignjurisdictions to extend the term of a patent that covers an approved drug. In the future, if and when our pharmaceutical products receive FDA approval, weexpect to apply for patent term extensions on patents covering those products.Many pharmaceutical companies, biotechnology companies and academic institutions are competing with us in the field of oncology and filingpatent applications potentially relevant to our business. With regard to tivozanib, we are aware of a third party United States patent, and correspondingforeign counterparts, that contain broad claims related to the use of an organic compound that, among other things, inhibits tyrosine phosphorylation of aVEGF receptor caused by VEGF binding to such VEGF receptor. We are also aware of third party United States patents that contain broad claims related tothe use of a tyrosine kinase inhibitor in combination with a DNA damaging agent such as chemotherapy or radiation and we have received written noticefrom the owners of such patents indicating that they believe we may need a license from them in order to avoid infringing their patents. With regard toficlatuzumab, we are aware of two separate families of United States patents, United States patent applications and foreign counterparts, with each of the twofamilies being owned by a different third party, that contain broad claims related to anti-HGF antibodies having certain binding properties and their use. Withregard to AV-203, we are aware of a third party United States patent that contains broad claims relating to anti-ErbB3 antibodies. In the event that an owner ofone or more of these patents were to bring an infringement action against us, we may have to argue that our product, its manufacture or use does not infringe avalid claim of the patent in question. Furthermore, if we were to challenge the validity of any issued United States patent in court, we would need toovercome a statutory presumption of validity that attaches to every United States patent. This means that in order to prevail, we would have to present clearand convincing evidence as to the invalidity of the patent’s claims. There is no assurance that a court would find in our favor on questions of infringement orvalidity.Over the years, we have attempted to identify potential third party intellectual property issues during the early stages of research of our researchprograms, in order to minimize the cost and disruption of resolving such issues. From time to time, we have found it necessary or prudent to obtain licensesfrom third party intellectual property holders. Where licenses are readily available at reasonable cost, such licenses are considered a normal cost of doingbusiness. In other instances, however, we may have used the results of freedom-to-operate studies to guide our research away from areas where we believed wewere likely to encounter obstacles in the form of third party intellectual property. For example, where a third party holds relevant intellectual property and isa direct competitor, a license might not be available on commercially reasonable terms or available at all.In spite of our efforts to avoid obstacles and disruptions arising from third party intellectual property, it is impossible to establish with certainty thatour technology platform or our product programs will be free of claims by third party intellectual property holders. Even with modern databases and on-linesearch engines, literature searches are imperfect and may fail to identify relevant patents and published applications. Even when a third party patent isidentified, we may conclude upon a thorough analysis, that we do not infringe the patent or that the patent is invalid. If the third party patent owner disagreeswith our conclusion and we continue with the business activity in question, patent litigation may be initiated against us. Alternatively, we might decide toinitiate litigation in an attempt to have a court declare the third party patent invalid or non-infringed by our activity. In either scenario, patent litigationtypically is costly and time-consuming, and the outcome is uncertain. The outcome of patent litigation is subject to uncertainties that cannot be quantified inadvance, for example, the credibility of expert witnesses who may disagree on technical interpretation of scientific data. Ultimately, in the case of an adverseoutcome in litigation, we could be prevented from commercializing a product or17using certain aspects of our technology platform as a result of patent infringement claims asserted against us. This could have a material adverse effect on ourbusiness.To protect our competitive position, it may be necessary to enforce our patent rights through litigation against infringing third parties. Litigation toenforce our own patent rights is subject to the same uncertainties discussed above. In addition, however, litigation involving our patents carries the risk thatone or more of our patents will be held invalid (in whole or in part, on a claim-by-claim basis) or held unenforceable. Such an adverse court ruling couldallow third parties to commercialize our products or our platform technology, and then compete directly with us, without making any payments to us.Trade SecretsFor some aspects of our proprietary technology, trade secret protection is more appropriate than patent protection. For example, our proprietarybioinformatics software tools and databases are protected as trade secrets. Our bioinformatics tools and databases give us the means to store, analyze, interpretand integrate the large volume of data generated from our various tumor models and from analysis of human clinical samples from clinical trials. Wecontinually make incremental improvements in our proprietary software tools, as we tailor them to the changing needs of our development programs. Ingeneral, trade secret protection can accommodate this continuing evolution of our bioinformatics system better than other forms of intellectual propertyprotection.TrademarksWe seek trademark protection in the U.S. and foreign jurisdictions where available and when appropriate. We have filed to register several trademarksintended for potential use in the marketing of tivozanib. We own a U.S. trademark that we use in connection with our research and development (HumanResponse Platform). We also own a U.S. trademark (The Human Response™) and a U.S. trademark application (AVEO Oncology The Human Response™)that we use in connection with our business, in general.ManufacturingWe currently contract with third parties, to the extent we require, for the manufacture of our product candidates and intend to do so in the future forboth clinical and potential commercial needs. We do not own or operate manufacturing facilities for the production of clinical or commercial quantities ofour product candidates. We currently have no plans to build our own clinical or commercial scale manufacturing capabilities. Although we rely on contractmanufacturers, we have personnel with extensive manufacturing experience to oversee the relationships with our contract manufacturers.One of our contract manufacturers has manufactured what we believe to be sufficient quantities of tivozanib’s drug substance to support our ongoingand planned clinical trials. In addition, we currently engage a separate contract manufacturer to manufacture, package, label and distribute clinical suppliesof tivozanib on an as–needed basis.We are responsible for all process development and all manufacturing of ficlatuzumab for future development and commercialization and have anagreement with Boehringer Ingelheim for large-scale process development and clinical manufacturing of ficlatuzumab. In connection with the agreement,Boehringer Ingelheim has produced ficlatuzumab at its biopharmaceutical sites in Fremont, California (drug substance) and Biberach, Germany (drugproduct).To date, our third-party manufacturers have met our manufacturing requirements. We believe that there are alternate sources of supply that can satisfyour current clinical requirements, although we cannot be certain that identifying and establishing relationships with such sources, if necessary, would notresult in significant delay or material additional costs.Government Regulation and Product ApprovalGovernment authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions, including the EuropeanUnion, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, packaging, storage,recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and import and export of pharmaceuticalproducts. The processes for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliancewith applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.Review and Approval of Drugs and Biologics in the United StatesIn the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and related regulations. Drugs are alsosubject to other federal, state and local statutes and regulations. Biological products are subject to18regulation by the FDA under the Public Health Service Act, or PHSA, FDCA and related regulations, and other federal, state and local statutes andregulations. An applicant seeking approval to market and distribute a new drug or biological product in the United States must typically undertake thefollowing: ·completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice, orGLP, regulations; ·submission to the FDA of an IND, which must take effect before human clinical trials may begin; ·approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated; ·performance of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, to establish the safetyand efficacy of the proposed drug product for each indication; ·preparation and submission to the FDA of a new drug application, or NDA, for a drug candidate product and a biological licensing application,or BLA, for a biological product requesting marketing for one or more proposed indications; ·review by an FDA advisory committee, where appropriate or if applicable; ·satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components thereof,are produced to assess compliance with current Good Manufacturing Practices, or cGMP, requirements and to assure that the facilities, methodsand controls are adequate to preserve the product’s identity, strength, quality and purity; ·satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data; ·payment of user fees and securing FDA approval of the NDA or BLA; and ·compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy,or REMS, and the potential requirement to conduct post-approval studies.Preclinical StudiesBefore an applicant begins testing a compound with potential therapeutic value in humans, the product candidate enters the preclinical testingstage. Preclinical studies include laboratory evaluation of the purity and stability of the manufactured substance or active pharmaceutical ingredient and theformulated product, as well as in vitro and animal studies to assess the safety and activity of the product candidate for initial testing in humans and toestablish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations. Theresults of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical studies,among other things, are submitted to the FDA as part of an IND. Some long-term preclinical testing, such as animal tests of reproductive adverse events andcarcinogenicity, and long term toxicity studies, may continue after the IND is submitted.The IND and IRB ProcessesAn IND is an exemption from the FDCA that allows an unapproved product candidate to be shipped in interstate commerce for use in aninvestigational clinical trial and a request for FDA authorization to administer an investigational drug to humans. Such authorization must be secured priorto interstate shipment and administration of any new drug or biologic that is not the subject of an approved NDA or BLA. In support of a request for an IND,applicants must submit a protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. Inaddition, the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans forclinical trials, among other things, are submitted to the FDA as part of an IND. The FDA requires a 30-day waiting period after the filing of each IND before clinical trials may begin. This waiting period is designed to allow the FDA to review the IND to determine whether human research subjects will be exposedto unreasonable health risks. At any time during this 30-day period, or thereafter, the FDA may raise concerns or questions about the conduct of the trials asoutlined in the IND and impose a clinical hold or partial clinical hold. In this case, the IND sponsor and the FDA must resolve any outstanding concernsbefore clinical trials can begin.In addition to the foregoing IND requirements, an IRB representing each institution participating in the clinical trial must review and approve the planfor any clinical trial before it commences at that institution, and the IRB must conduct continuing review and reapprove the study at least annually. The IRBmust review and approve, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate incompliance with FDA regulations. Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health,or NIH, for public dissemination on its ClinicalTrials.gov website. An IRB can suspend or terminate approval of a clinical trial at its institution, or aninstitution it represents,19if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product candidate has been associated with unexpected seriousharm to patients.The FDA’s primary objectives in reviewing an IND are to assure the safety and rights of patients and to help assure that the quality of the investigationwill be adequate to permit an evaluation of the drug’s effectiveness and safety and of the biological product’s safety, purity and potency. The decision toterminate development of an investigational drug or biological product may be made by either a health authority body such as the FDA, an IRB or ethicscommittee, or by us for various reasons. Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor,known as a data safety monitoring board or committee. This group provides authorization for whether or not a trial may move forward at designated checkpoints based on access that only the group maintains to available data from the study. Suspension or termination of development during any phase of clinicaltrials can occur if it is determined that the participants or patients are being exposed to an unacceptable health risk. Other reasons for suspension ortermination may be made by us based on evolving business objectives and/or competitive climate.Human Clinical Studies in Support of an NDA or BLAClinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators inaccordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writingbefore their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the inclusion andexclusion criteria, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated.The clinical investigation of an investigational drug or biological product is generally divided into four phases. Although the phases are usuallyconducted sequentially, they may overlap or be combined. The four phases of an investigation are as follows: ·Phase 1. Phase 1 includes the initial introduction of an investigational new drug or biological product into humans. Phase 1 clinical trials aretypically closely monitored and may be conducted in patients with the target disease or condition or healthy volunteers. These studies aredesigned to evaluate the safety, dosage tolerance, metabolism and pharmacologic actions of the investigational drug or biological product inhumans, the side effects associated with increasing doses, and if possible, to gain early evidence on effectiveness. During phase 1 clinical trials,sufficient information about the investigational drug’s or biological product’s pharmacokinetics and pharmacological effects may be obtainedto permit the design of well-controlled and scientifically valid phase 2 clinical trials. The total number of participants included in phase 1clinical trials varies, but is generally in the range of 20 to 80. ·Phase 2. Phase 2 includes the controlled clinical trials conducted to preliminarily or further evaluate the effectiveness of the investigationaldrug or biological product for a particular indication(s) in patients with the disease or condition under study, to determine dosage tolerance andoptimal dosage, and to identify possible adverse side effects and safety risks associated with the drug or biological product. Phase 2 clinicaltrials are typically well-controlled, closely monitored, and conducted in a limited patient population, usually involving no more than severalhundred participants. ·Phase 3. Phase 3 clinical trials are generally controlled clinical trials conducted in an expanded patient population generally at geographicallydispersed clinical trial sites. They are performed after preliminary evidence suggesting effectiveness of the drug or biological product has beenobtained, and are intended to further evaluate dosage, clinical effectiveness and safety, to establish the overall benefit-risk relationship of theinvestigational drug or biological product, and to provide an adequate basis for product approval. Phase 3 clinical trials usually involveseveral hundred to several thousand participants. ·Phase 4. Post-approval studies may be conducted after initial marketing approval. These studies are used to gain additional experience fromthe treatment of patients in the intended therapeutic indication.Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse eventsoccur. In addition, IND safety reports must be submitted to the FDA for any of the following: serious and unexpected suspected adverse reactions; findingsfrom other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the drug; and any clinically important increase in the caseof a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The FDA or the sponsor or the data monitoring committeemay suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptablehealth risk. The FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted.20Review of an NDA or BLA by the FDAIn order to obtain approval to market a drug or biological product in the United States, a marketing application must be submitted to the FDA thatprovides data establishing the safety and effectiveness of the proposed drug product for the proposed indication, and the safety, purity and potency of thebiological product for its intended indication. The application includes all relevant data available from pertinent preclinical and clinical trials, includingnegative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls andproposed labeling, among other things. Data can come from company-sponsored clinical trials intended to test the safety and effectiveness of a use of aproduct, or from a number of alternative sources, including studies initiated by investigators. To support marketing approval, the data submitted must besufficient in quality and quantity to establish the safety and effectiveness of the investigational drug product and the safety, purity and potency of thebiological product to the satisfaction of the FDA.The NDA and BLA are thus the vehicles through which applicants formally propose that the FDA approve a new product for marketing and sale in theUnited States for one or more indications. Every new product candidate must be the subject of an approved NDA or BLA before it may be commercialized inthe United States. Under federal law, the submission of most NDAs and BLAs is subject to an application user fee, currently exceeding $2.3 million, and thesponsor of an approved NDA or BLA is also subject to annual product and establishment user fees, currently exceeding $114,000 per product and $585,000per establishment. These fees are typically increased annually. Certain exceptions and waivers are available for some of these fees, such as an exception fromthe application fee for drugs with orphan designation and a waiver for certain small businesses, an exception from the establishment fee when theestablishment does not engage in manufacturing the drug during a particular fiscal year, and an exception from the product fee for a drug that is the same asanother drug approved under an abbreviated pathway.Following submission of an NDA or BLA, the FDA conducts a preliminary review of the application generally within 60 calendar days of its receiptand strives to inform the sponsor by the 74th day after the FDA’s receipt of the submission to determine whether the application is sufficiently complete topermit substantive review. The FDA may request additional information rather than accept the application for filing. In this event, the application must beresubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submissionis accepted for filing, the FDA begins an in-depth substantive review. The FDA has agreed to specified performance goals in the review process of NDAs andBLAs. Under that agreement, 90% of applications seeking approval of New Molecular Entities, or NMEs, are meant to be reviewed within ten months fromthe date on which FDA accepts the NDA for filing, and 90% of applications for NMEs that have been designated for “priority review” are meant to bereviewed within six months of the filing date. For applications seeking approval of products that are not NMEs, the ten-month and six-month review periodsrun from the date that FDA receives the application. The review process and the Prescription Drug User Fee Act goal date may be extended by the FDA forthree additional months to consider new information or clarification provided by the applicant to address an outstanding deficiency identified by the FDAfollowing the original submission.Before approving an application, the FDA typically will inspect the facility or facilities where the product is or will be manufactured. These pre-approval inspections may cover all facilities associated with an NDA or BLA submission, including drug component manufacturing (e.g., activepharmaceutical ingredients), finished drug product manufacturing, and control testing laboratories. The FDA will not approve an application unless itdetermines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. Additionally, before approving an NDA or BLA, the FDA will typically inspect one or more clinical sites to assurecompliance with GCP. In addition, as a condition of approval, the FDA may require an applicant to develop a REMS. REMS use risk minimization strategiesbeyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDAwill consider the size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment,seriousness of known or potential adverse events, and whether the product is a new molecular entity. The FDA may refer an application for a novel product to an advisory committee or explain why such referral was not made. Typically, an advisorycommittee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as towhether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but itconsiders such recommendations carefully when making decisions.The FDA’s Decision on an NDA or BLAOn the basis of the FDA’s evaluation of the application and accompanying information, including the results of the inspection of the manufacturingfacilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the product with specificprescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantialadditional testing or information in order for the FDA21to reconsider the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issuean approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. Even withsubmission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.If the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings or precautions beincluded in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess the drug’s safety afterapproval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distributionrestrictions or other risk management mechanisms, including REMS, which can materially affect the potential market and profitability of the product. TheFDA may prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs. After approval, many types ofchanges to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testingrequirements and FDA review and approval.Fast Track, Breakthrough Therapy and Priority Review DesignationsThe FDA is authorized to designate certain products for expedited review if they are intended to address an unmet medical need in the treatment of aserious or life-threatening disease or condition. These programs are fast track designation, breakthrough therapy designation and priority review designation.Specifically, the FDA may designate a product for fast track review if it is intended, whether alone or in combination with one or more other drugs, forthe treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease orcondition. For fast track products, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a fast track product’sNDA before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinical data submittedby the sponsor, that a fast track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of theremaining information and the sponsor must pay applicable user fees. However, the FDA’s time period goal for reviewing a fast track application does notbegin until the last section of the NDA is submitted. In addition, the fast track designation may be withdrawn by the FDA if the FDA believes that thedesignation is no longer supported by data emerging in the clinical trial process.Second, in 2012, Congress enacted the Food and Drug Administration Safety and Improvement Act. This law established a new regulatory schemeallowing for expedited review of products designated as “breakthrough therapies.” A product may be designated as a breakthrough therapy if it is intended,either alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidenceindicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such assubstantial treatment effects observed early in clinical development. The FDA may take certain actions with respect to breakthrough therapies, includingholding meetings with the sponsor throughout the development process; providing timely advice to the product sponsor regarding development andapproval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and taking other steps to designthe clinical trials in an efficient manner.Third, the FDA may designate a product for priority review if it is a drug that treats a serious condition and, if approved, would provide a significantimprovement in safety or effectiveness. The FDA determines, on a case-by-case basis, whether the proposed drug represents a significant improvement whencompared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition,elimination or substantial reduction of a treatment-limiting drug reaction, documented enhancement of patient compliance that may lead to improvement inserious outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to direct overall attention andresources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on a marketing application from ten months to six months.Post-Approval RegulationDrugs and biologics manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including,among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reportingof adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, aresubject to prior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at whichsuch products are manufactured, as well as new application fees for supplemental applications with clinical data.In addition, manufacturers and other entities involved in the manufacture and distribution of approved products are required to register theirestablishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliancewith cGMP requirements. Changes to the manufacturing process are strictly regulated and often22require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and imposereporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly,manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or ifproblems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events ofunanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to theapproved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distributionor other restrictions under a REMS program. Other potential consequences include, among other things: ·restrictions on the marketing or manufacturing of the product, suspension of the approval, or complete withdrawal of the product from themarket or product recalls; ·fines, warning letters or holds on post-approval clinical trials; ·refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product license approvals; ·product seizure or detention, or refusal to permit the import or export of products; or ·injunctions or the imposition of civil or criminal penalties.The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Products may be promoted onlyfor the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws andregulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significantliability.In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, and itsimplementing regulations, as well as the Drug Supply Chain Security Act, or DSCA, which regulate the distribution and tracing of prescription drugs andprescription drug samples at the federal level, and set minimum standards for the regulation of drug distributors by the states. The PDMA, its implementingregulations and state laws limit the distribution of prescription pharmaceutical product samples, and the DSCA imposes requirements to ensureaccountability in distribution and to identify and remove counterfeit and other illegitimate products from the market.Generic DrugsIn 1984, with passage of the Hatch-Waxman Amendments to the FDCA, Congress established an abbreviated regulatory scheme authorizing the FDAto approve generic drugs that are shown to contain the same active ingredients as, and to be bioequivalent to, drugs previously approved by the FDApursuant to NDAs. To obtain approval of a generic drug, an applicant must submit an abbreviated new drug application, or ANDA, to the agency. An ANDAis a comprehensive submission that contains, among other things, data and information pertaining to the active pharmaceutical ingredient, bioequivalence,drug product formulation, specifications and stability of the generic drug, as well as analytical methods, manufacturing process validation data and qualitycontrol procedures. ANDAs are “abbreviated” because they generally do not include preclinical and clinical data to demonstrate safety and effectiveness.Instead, in support of such applications, a generic manufacturer may rely on the preclinical and clinical testing previously conducted for a drug productpreviously approved under an NDA, known as the reference-listed drug, or RLD.Specifically, in order for an ANDA to be approved, the FDA must find that the generic version is identical to the RLD with respect to the activeingredients, the route of administration, the dosage form, the strength of the drug and the conditions of use of the drug. At the same time, the FDA must alsodetermine that the generic drug is “bioequivalent” to the innovator drug. Under the statute, a generic drug is bioequivalent to a RLD if “the rate and extentof absorption of the drug do not show a significant difference from the rate and extent of absorption of the listed drug...” Upon approval of an ANDA, theFDA indicates whether the generic product is “therapeutically equivalent” to the RLD in its publication “Approved Drug Products with TherapeuticEquivalence Evaluations,” also referred to as the “Orange Book.” Physicians and pharmacists consider a therapeutic equivalent generic drug to be fullysubstitutable for the RLD. In addition, by operation of certain state laws and numerous health insurance programs, the FDA’s designation of therapeuticequivalence often results in substitution of the generic drug without the knowledge or consent of either the prescribing physician or patient.Under the Hatch-Waxman Amendments, the FDA may not approve an ANDA until any applicable period of non-patent exclusivity for the RLD hasexpired. The FDCA provides a period of five years of non-patent data exclusivity for a new drug containing a new chemical entity. For the purposes of thisprovision, a new chemical entity, or NCE, is a drug that contains no active23moiety that has previously been approved by the FDA in any other NDA. An active moiety is the molecule or ion responsible for the physiological orpharmacological action of the drug substance. In cases where such NCE exclusivity has been granted, an ANDA may not be filed with the FDA until theexpiration of five years unless the submission is accompanied by a Paragraph IV certification, in which case the applicant may submit its application fouryears following the original product approval. The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or morenew clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the approvalof the application. BiosimilarsThe 2010 Patient Protection and Affordable Care Act, which was signed into law on March 23, 2010, included a subtitle called the Biologics PriceCompetition and Innovation Act of 2009 or BPCIA. That Act established a regulatory scheme authorizing the FDA to approve biosimilars andinterchangeable biosimilars. To date, one biosimilar product has been approved by FDA for use in the United States. No interchangeable biosimilars,however, have been approved. The FDA has issued several guidance documents outlining an approach to review and approval of biosimilars. Additionalguidance is expected to be finalized by FDA in the near term.Under the Act, a manufacturer may submit an application for licensure of a biologic product that is “biosimilar to” or “interchangeable with” apreviously approved biological product or “reference product.” In order for the FDA to approve a biosimilar product, it must find that there are no clinicallymeaningful differences between the reference product and proposed biosimilar product in terms of safety, purity, and potency. For the FDA to approve abiosimilar product as interchangeable with a reference product, the agency must find that the biosimilar product can be expected to produce the same clinicalresults as the reference product, and (for products administered multiple times) that the biologic and the reference biologic may be switched after one hasbeen previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date of approval of thereference product. The FDA may not approve a biosimilar product until 12 years from the date on which the reference product was approved. Even if aproduct is considered to be a reference product eligible for exclusivity, another company could market a competing version of that product if the FDAapproves a full BLA for such product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of their product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. Atthis juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed bystate pharmacy law.Orphan Drug Designation and ExclusivityUnder the Orphan Drug Act, the FDA may designate a drug product as an “orphan drug” if it is intended to treat a rare disease or condition, generallymeaning that it affects fewer than 200,000 individuals in the United States, or more in cases in which there is no reasonable expectation that the cost ofdeveloping and making a drug product available in the United States for treatment of the disease or condition will be recovered from sales of the product. Acompany must request orphan drug designation before submitting an NDA or BLA for the candidate product. If the request is granted, the FDA will disclosethe identity of the therapeutic agent and its potential use. Orphan drug designation does not shorten the PDUFA goal dates for the regulatory review andapproval process, although it does convey certain advantages such as tax benefits and exemption from the PDUFA application fee.If a product with orphan designation receives the first FDA approval for the disease or condition for which it has such designation or for a selectindication or use within the rare disease or condition for which it was designated, the product generally will receive orphan drug exclusivity. Orphan drugexclusivity means that the FDA may not approve another sponsor’s marketing application for the same drug for the same indication for seven years, except incertain limited circumstances. Orphan exclusivity does not block the approval of a different product for the same rare disease or condition, nor does it blockthe approval of the same product for different indications. If a drug or biologic designated as an orphan drug ultimately receives marketing approval for anindication broader than what was designated in its orphan drug application, it may not be entitled to exclusivity. Orphan exclusivity will not bar approval ofanother product under certain circumstances, including if a subsequent product with the same drug or biologic for the same indication is shown to beclinically superior to the approved product on the basis of greater efficacy or safety, or providing a major contribution to patient care, or if the company withorphan drug exclusivity is not able to meet market demand.Pediatric ExclusivityPediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment of anadditional six months of marketing protection to the term of any existing regulatory exclusivity, including the non-patent and orphan exclusivity. This six-month exclusivity may be granted if an NDA or BLA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. Thedata do not need to show the product to be effective in the24pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’s request, the additional protection is granted. If reports ofrequested pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivityor patent protection cover the product are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period duringwhich the FDA cannot approve another application.Review and Approval of Drug Products in the European UnionIn order to market any product outside of the United States, a company must also comply with numerous and varying regulatory requirements of othercountries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercialsales and distribution of drug products. Whether or not it obtains FDA approval for a product, the company would need to obtain the necessary approvals bythe comparable foreign regulatory authorities before it can commence clinical trials or marketing of the product in those countries or jurisdictions. Theapproval process ultimately varies between countries and jurisdictions and can involve additional product testing and additional administrative reviewperiods. The time required to obtain approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval.Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval inone country or jurisdiction may negatively impact the regulatory process in others.Clinical Trial Approval in the EUPursuant to the currently applicable Clinical Trials Directive 2001/20/EC and the Directive 2005/28/EC on Good Clinical Practice, or GCP, anapplicant must obtain approval from the competent national authority of the EU Member State in which the clinical trial is to be conducted. If the clinicaltrial is conducted in different EU Member States, the competent authorities in each of these EU Member States must provide their approval for the conduct ofthe clinical trial. Furthermore, the applicant may only start a clinical trial at a specific study site after the competent ethics committee has issued a favorableopinion. In April 2014, the EU adopted a new Clinical Trials Regulation (EU) No 536/2014, which is set to replace the current Clinical Trials Directive2001/20/EC. The new Clinical Trials Regulation will be directly applicable to and binding in all 28 EU Member States without the need for any nationalimplementing legislation. The new Clinical Trials Regulation (EU) No 536/2014 will become applicable no earlier than 28 May 2016. It will overhaul thecurrent system of approvals for clinical trials in the EU. Specifically, the new legislation aims at simplifying and streamlining the approval of clinical trials inthe EU. Under the new coordinated procedure for the approval of clinical trials, the sponsor of a clinical trial will be required to submit a single applicationfor approval of a clinical trial to a reporting EU Member State (RMS) through an EU Portal. The submission procedure will be the same irrespective ofwhether the clinical trial is to be conducted in a single EU Member State or in more than one EU Member State. The Clinical Trials Regulation also aims tostreamline and simplify the rules on safety reporting for clinical trials.Marketing AuthorizationIn the EU, marketing authorizations for medicinal products may be obtained through several different procedures founded on the same basicregulatory process.The centralized procedure provides for the grant of a single marketing authorization that is valid for all EU Member States. The centralized procedureis compulsory for medicinal products produced by certain biotechnological processes, products designated as orphan medicinal products, and products witha new active substance indicated for the treatment of certain diseases,. It is optional for those products that are highly innovative or for which a centralizedprocess is in the interest of patients. Under the centralized procedure in the EU, the maximum timeframe for the evaluation of a MAA is 210 days, excludingclock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by the Committee for MedicinalProducts for Human use, or CHMP. Accelerated evaluation may be granted by the CHMP in exceptional cases. These are defined as circumstances in which amedicinal product is expected to be of a “major public health interest.” Three cumulative criteria must be fulfilled in such circumstances: the seriousness ofthe disease, such as severely disabling or life-threatening diseases, to be treated; the absence or insufficiency of an appropriate alternative therapeuticapproach; and anticipation of high therapeutic benefit. In these circumstances, the EMA ensures that the opinion of the CHMP is given within 150 days.Under the centralized procedure in the European Union, the maximum timeframe for the evaluation of a marketing authorization application is 210days (excluding clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by the CHMP).Accelerated evaluation might be granted by the CHMP in exceptional cases, when a medicinal product is expected to be of a major public health interest,defined by three cumulative criteria: the seriousness of the disease (e.g. heavy disabling or life-threatening diseases) to be treated; the absence orinsufficiency of an appropriate alternative therapeutic approach; and anticipation of high therapeutic benefit. In this circumstance, EMA ensures that theopinion of the CHMP is given within 150 days.25The decentralized procedure provides for approval by one or more other concerned EU Member States of an assessment of an application formarketing authorization conducted by one EU Member State, known as the reference EU Member State. In accordance with this procedure, an applicantsubmits an application for marketing authorization to the reference EU Member State and the concerned EU Member States. This application is identical tothe application that would be submitted to the EMA for authorization through the centralized procedure. The reference EU Member State prepares a draftassessment and drafts of the related materials within 120 days after receipt of a valid application. The resulting assessment report is submitted to theconcerned EU Member States which, within 90 days of receipt, must decide whether to approve the assessment report and related materials. If a concerned EUMember State cannot approve the assessment report and related materials due to concerns relating to a potential serious risk to public health, disputedelements may be referred to the European Commission, whose decision is binding on all EU Member States. In accordance with the mutual recognitionprocedure, the sponsor applies for national marketing authorization in one EU Member State. Upon receipt of this authorization the sponsor can then seekthe recognition of this authorization by other EU Member States. Authorization in accordance with either of these procedures will result in authorization ofthe medicinal product only in the reference EU Member State and in the other concerned EU Member States..A marketing authorization may be granted only to an applicant established in the EU. Regulation No. 1901/2006 provides that, prior to obtaining amarketing authorization in the EU, an applicant must demonstrate compliance with all measures included in a Pediatric Investigation Plan, or PIP, approvedby the Pediatric Committee of the EMA, covering all subsets of the pediatric population, unless the EMA has granted a product-specific waiver, class waiver,or a deferral for one or more of the measures included in the PIP.Orphan Drug Designation and Exclusivity in the EURegulation (EC) No 141/2000 and Regulation (EC) No. 847/2000 provide that a product can be designated as an orphan medicinal product by theEuropean Commission if its sponsor can establish that the product is intended for the diagnosis, prevention or treatment of: (1) a life-threatening orchronically debilitating condition affecting not more than five in ten thousand persons in the EU when the application is made, or (2) a life-threatening,seriously debilitating or serious and chronic condition in the EU and that without incentives the medicinal product is unlikely to be developed. For either ofthese conditions, the applicant must demonstrate that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in questionthat has been authorized in the EU or, if such method exists, the medicinal product will be of significant benefit to those affected by that condition.Once authorized, orphan medicinal products are entitled to ten years of market exclusivity in all EU Member States and, in addition, a range of otherbenefits during the development and regulatory review process, including scientific assistance for study protocols, authorization through the centralizedmarketing authorization procedure covering all member countries and a reduction or elimination of registration and marketing authorization fees. However,marketing authorization may be granted to a similar medicinal product with the same orphan indication during the ten year period with the consent of themarketing authorization holder for the original orphan medicinal product or if the manufacturer of the original orphan medicinal product is unable to supplysufficient quantities. Marketing authorization may also be granted to a similar medicinal product with the same orphan indication if the product is safer, moreeffective or otherwise clinically superior to the original orphan medicinal product. The period of market exclusivity may, in addition, be reduced to six yearsif it can be demonstrated on the basis of available evidence that the original orphan medicinal product is sufficiently profitable not to justify maintenance ofmarket exclusivity.Pharmaceutical Coverage, Pricing and ReimbursementIn the United States and markets in other countries, patients who are prescribed treatments for their conditions and providers performing the prescribedservices generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Significant uncertainty exists as to the coverage andreimbursement status of products approved by the FDA and other government authorities. Thus, even if a product candidate is approved, sales of the productwill depend, in part, on the extent to which third-party payors, including government health programs in the United States such as Medicare and Medicaid,commercial health insurers and managed care organizations, provide coverage, and establish adequate reimbursement levels for, the product. The process fordetermining whether a payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the payorwill pay for the product once coverage is approved. Third-party payors are increasingly challenging the prices charged, examining the medical necessity, andreviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. Third-party payors may limit coverage to specificproducts on an approved list, also known as a formulary, which might not include all of the approved products for a particular indication.In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensivepharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the costs required to obtainFDA or other comparable marketing approvals. Nonetheless, product candidates may not be considered medically necessary or cost effective. A decision by athird-party payor not to cover a product candidate could reduce physician utilization once the product is approved and have a material adverse effect onsales, results of operations and financial condition.26Additionally, a payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’sdetermination to provide coverage for a drug product does not assure that other payors will also provide coverage and reimbursement for the product, and thelevel of coverage and reimbursement can differ significantly from payor to payor.The containment of healthcare costs also has become a priority of federal, state and foreign governments and the prices of drugs have been a focus inthis effort. Governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursementand requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies injurisdictions with existing controls and measures, could further limit a company’s revenue generated from the sale of any approved products. Coveragepolicies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or moreproducts for which a company or its collaborators receive marketing approval, less favorable coverage policies and reimbursement rates may be implementedin the future.Outside the United States, ensuring adequate coverage and payment for a product also involves challenges. Pricing of prescription pharmaceuticals issubject to governmental control in many countries. Pricing negotiations with governmental authorities can extend well beyond the receipt of regulatorymarketing approval for a product and may require a clinical trial that compares the cost effectiveness of a product to other available therapies. The conduct ofsuch a clinical trial could be expensive and result in delays in commercialization.In the European Union, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may bemarketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost-effectiveness of a particular drug candidate to currently available therapies or so called health technology assessments, in order to obtain reimbursement orpricing approval. For example, the European Union provides options for its member states to restrict the range of products for which their national healthinsurance systems provide reimbursement and to control the prices of medicinal products for human use. European Union member states may approve aspecific price for a product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the product on themarket. Other member states allow companies to fix their own prices for products, but monitor and control prescription volumes and issue guidance tophysicians to limit prescriptions. Recently, many countries in the European Union have increased the amount of discounts required on pharmaceuticals andthese efforts could continue as countries attempt to manage healthcare expenditures, especially in light of the severe fiscal and debt crises experienced bymany countries in the European Union. The downward pressure on health care costs in general, particularly prescription drugs, has become intense. As aresult, increasingly high barriers are being erected to the entry of new products. Political, economic and regulatory developments may further complicatepricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various European Unionmember states, and parallel trade, i.e., arbitrage between low-priced and high-priced member states, can further reduce prices. There can be no assurance thatany country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangementsfor any products, if approved in those countries.Healthcare Law and RegulationHealthcare providers and third-party payors play a primary role in the recommendation and prescription of drug products that are granted marketingapproval. Arrangements with providers, consultants, third-party payors and customers are subject to broadly applicable fraud and abuse, anti-kickback, falseclaims laws, reporting of payments to physicians and teaching physicians and patient privacy laws and regulations and other healthcare laws and regulationsthat may constrain business and/or financial arrangements. Restrictions under applicable federal and state healthcare laws and regulations, include thefollowing: ·the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering,paying, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individualfor, or the purchase, order or recommendation of, any good or service, for which payment may be made, in whole or in part, under a federalhealthcare program such as Medicare and Medicaid; ·the federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalties laws, which prohibitindividuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims forpayment that are false, fictitious or fraudulent or knowingly making, using or causing to made or used a false record or statement to avoid,decrease or conceal an obligation to pay money to the federal government. ·the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal laws that prohibit,among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program ormaking false statements relating to healthcare matters;27 ·HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their respective implementingregulations, including the Final Omnibus Rule published in January 2013, which impose obligations, including mandatory contractual terms,with respect to safeguarding the privacy, security and transmission of individually identifiable health information; ·the federal false statements statute, which prohibits knowingly and willfully falsifying, concealing ·or covering up a material fact or makingany materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; ·the federal transparency requirements known as the federal Physician Payments Sunshine Act, under the Patient Protection and Affordable CareAct, as amended by the Health Care Education Reconciliation Act, or the Affordable Care Act, which requires certain manufacturers of drugs,devices, biologics and medical supplies to report annually to the Centers for Medicare & Medicaid Services, or CMS, within the United StatesDepartment of Health and Human Services, information related to payments and other transfers of value made by that entity to physicians andteaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and ·analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to healthcare items orservices that are reimbursed by non-governmental third-party payors, including private insurers.Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevantcompliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments tophysicians and other health care providers or marketing expenditures. State and foreign laws also govern the privacy and security of health information insome circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.Healthcare ReformA primary trend in the United States healthcare industry and elsewhere is cost containment. There have been a number of federal and state proposalsduring the last few years regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for drugs and othermedical products, government control and other changes to the healthcare system in the United States.By way of example, the United States and state governments continue to propose and pass legislation designed to reduce the cost of healthcare. InMarch 2010, the United States Congress enacted the Affordable Care Act, which, among other things, includes changes to the coverage and payment forproducts under government health care programs. Among the provisions of the Affordable Care Act of importance to potential drug candidates are: ·an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportionedamong these entities according to their market share in certain government healthcare programs, although this fee would not apply to sales ofcertain products approved exclusively for orphan indications; ·expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certainindividuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebateliability; ·expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for both branded andgeneric drugs and revising the definition of “average manufacturer price,” or AMP, for calculating and reporting Medicaid drug rebates onoutpatient prescription drug prices and extending rebate liability to prescriptions for individuals enrolled in Medicare Advantage plans; ·addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs thatare inhaled, infused, instilled, implanted or injected; ·expanded the types of entities eligible for the 340B drug discount program; ·established the Medicare Part D coverage gap discount program by requiring manufacturers to provide a 50% point-of-sale-discount off thenegotiated price of applicable brand drugs to eligible beneficiaries during their coverage gap period as a condition for the manufacturers’outpatient drugs to be covered under Medicare Part D; ·a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research,along with funding for such research; ·the Independent Payment Advisory Board, or IPAB, which has authority to recommend certain changes to the Medicare program to reduceexpenditures by the program that could result in reduced payments for prescription drugs. However, the28 IPAB implementation has been not been clearly defined. PPACA provided that under certain circumstances, IPAB recommendations willbecome law unless Congress enacts legislation that will achieve the same or greater Medicare cost savings; and ·established the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery models to lowerMedicare and Medicaid spending, potentially including prescription drug spending. Funding has been allocated to support the mission of theCenter for Medicare and Medicaid Innovation from 2011 to 2019.Other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. For example, in August2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on DeficitReduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2012 through 2021, was unable to reach requiredgoals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments toproviders of up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2024 unless additional Congressional action istaken. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicarepayments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for thegovernment to recover overpayments to providers from three to five years. EmployeesAs of December 31, 2015, we had 19 employees worldwide. None of our employees is represented by a labor union or is covered by a collectivebargaining agreement. We consider our relationship with our employees to be good.Research and Development CostsOur research and development costs were $12.9 million, $38.3 million, and $68.5 million for the years ended December 31, 2015, 2014 and 2013,respectively. These costs consist of the cost of our own independent research and development efforts and the costs associated with collaborative researchand development and in-licensing arrangements. Research and development costs, including upfront fees and milestones paid to collaboration partners, areexpensed as incurred if the underlying products have not received regulatory approval and have no alternative future use.Segment and Geographic InformationWe view our operations and manage our business in one operating segment. As of December 31, 2015, we operate only in the United States.Executive OfficersThe following table lists the positions, names and ages of our executive officers as of February 29, 2016:Executive Officers Michael P. Bailey 50 Chief Executive Officer, President and DirectorKeith S. Ehrlich 65 Chief Financial OfficerMichael N. Needle 56 Chief Medical Officer Michael P. Bailey was appointed President and Chief Executive Officer and a member of our Board of Directors effective January 6, 2015. Mr. Baileyjoined our company in September 2010 as our Chief Commercial Officer and was named our Chief Business Officer in June 2013. Prior to joining ourcompany, Mr. Bailey served as Senior Vice President, Business Development and Chief Commercial Officer at Synta Pharmaceuticals, Inc., abiopharmaceutical company focused on research, development and commercialization of oncology medicines, from 2008 to September 2010. From 1999 to2008, Mr. Bailey worked at ImClone Systems Incorporated, a biopharmaceutical company focused on the development and commercialization of treatmentsfor cancer patients. During his nine-year tenure at ImClone, he was responsible for commercial aspects of the planning and launch of ERBITUX® (cetuximab)across multiple oncology indications, as well as new product planning for the ImClone development portfolio, which included CYRAMZA® (ramucirumab)and necitumumab. In addition, Mr. Bailey was a key member of the strategic leadership committees for ImClone and its North American and worldwidepartnerships and led their commercial organization, most recently as Senior Vice President of Commercial Operations. Prior to his role at ImClone. Mr. Baileymanaged the cardiovascular development portfolio at Genentech, Inc., a biotechnology company, from 1997 to 1999. Mr. Bailey started his career in thepharmaceutical industry as part of Smith-Kline Beecham’s Executive Marketing Development Program, where he held a variety of commercial roles from1992 to 1997, including sales, strategic planning, and product management. Mr. Bailey received a B.S. in psychology from St. Lawrence University and anM.B.A. in international marketing from the Mendoza College of Business at University of Notre Dame.29Keith S. Ehrlich, C.P.A. was appointed Chief Financial Officer in April 2015. Mr. Ehrlich has acted as a financial consultant to the Company fromFebruary 2015 to April 2015. Prior to joining our company, he worked with Synta. Mr. Ehrlich served as Synta’s vice president of finance and administrationfrom March 2004 until February 2015, and as its Chief Financial Officer from October 2006 to December 2014. Prior to Synta, Mr. Ehrlich served in varioussenior finance roles, including Chief Financial Officer of Argentys Corporation, Dyax Corp. and OraVax, Inc. Mr. Ehrlich also previously served as a directorof finance at Vertex Pharmaceuticals, Inc. and as a senior audit manager with PricewaterhouseCoopers, LLP. Mr. Ehrlich received his B.A. in Biology fromDrew University and his M.B.A. in Finance and Accounting from Rutgers University.Michael N. Needle, MD was appointed Chief Medical Officer in January 2015. Dr. Needle has more than 15 years of pharmaceutical industryexperience in drug development and regulatory affairs. This includes central roles in the development of oncology and hematology drugs, includingErbitux® (cetuximab), Revlimid® (lenalidomide) and Pomalyst® (pomolidimide). He most recently served as Chief Medical Officer for Array BioPharma Inc.,a biopharmaceutical company, from April 2013 to September 2014. Prior to Array, Dr. Needle was Chief Medical Officer of the Multiple Myeloma ResearchFoundation and Consortium (MMRF), a research organization, from April 2012 to April 2013. Prior to MMRF, he held multiple Vice President levelpositions at Celgene Corporation, a biotechnology company, in Clinical Research and Development in Oncology, Strategic Medical Business Development,and Pediatric Strategy from March 2004 to April 2010. Dr. Needle also served as the Vice President of Clinical Affairs at ImClone from April 2000 toFebruary 2004. Dr. Needle received his fellowship in Pediatric Hematology/Oncology at the Children’s Hospital Medical Center, the Fred Hutchinson CancerResearch Center of the University of Washington in Seattle and the University of Texas M.D. Anderson Cancer Center in Houston. Dr. Needle has heldfaculty positions at the University of Pennsylvania and Columbia University. Dr. Needle graduated from Binghamton University with a Bachelor of Arts inPhysics and received his medical degree from SUNY Downstate Medical Center, in Brooklyn, New York.Available InformationWe file reports and other information with the SEC as required by the Securities Exchange Act of 1934, as amended, which we refer to as the ExchangeAct. You can find, copy, and inspect information we file at the SEC’s public reference room, which is located at 100 F Street, N.E., Room 1580, Washington,DC 20549. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the SEC’s public reference room. You can review ourelectronically filed reports and other information that we file with the SEC on the SEC’s web site at http://www.sec.gov.We were incorporated under the laws of the State of Delaware on October 19, 2001 as GenPath Pharmaceuticals, Inc. and changed our name to AVEOPharmaceuticals, Inc. on March 1, 2005. Our principal executive offices are located at 1 Broadway, 14th Floor, Cambridge, Massachusetts, 02142, and ourtelephone number is (617) 588-1960. Our Internet website is http://www.aveooncology.com. We make available free of charge through our website ourannual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant toSections 13(a) and 15(d) of the Exchange Act. We also make available, free of charge on our website, the reports filed with the SEC by our executive officers,directors and 10% stockholders pursuant to Section 16 under the Exchange Act. We make these reports available through our website as soon as reasonablypracticable after we electronically file such reports with, or furnish such reports to, the SEC, or, in the case of Section 16 reports, as soon as reasonablypracticable after copies of those filings are provided to us by the filing persons. In addition, we regularly use our website to post information regarding ourbusiness, product development programs and governance, and we encourage investors to use our website, particularly the information in the section entitled“For Investors” and “For Media,” as a source of information about us.We have adopted a code of business conduct and ethics, which applies to all of our officers, directors and employees, as well as charters for our auditcommittee, our compensation committee and our nominating and governance committee, and corporate governance guidelines. We have posted copies of ourcode of business conduct and ethics and corporate governance guidelines, as well as each of our committee charters, on the Corporate Governance page of theInvestors section of our website, which you can access free of charge.The foregoing references to our website are not intended to, nor shall they be deemed to, incorporate information on our website into this report byreference. Item 1A.Risk FactorsOur business is subject to numerous risks. We caution you that the following important factors, among others, could cause our actual results to differmaterially from those expressed in forward-looking statements made by us or on our behalf in this Annual Report on Form 10-K and other filings with theSEC, press releases, communications with investors and oral statements. Any or all of our forward-looking statements in this Annual Report on Form 10-Kand in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known orunknown risks and uncertainties. Many factors30mentioned in the discussion below will be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actualfuture results may differ materially from those anticipated in our forward-looking statements. We undertake no obligation to update any forward-lookingstatements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosure we make in ourreports filed with the SEC.Risks Related to Our Financial Position and Need for Additional CapitalWe anticipate that we will continue to incur significant operating losses for the foreseeable future. It is uncertain if we will ever attain profitability, whichwould depress the market price of our common stock.We have incurred net losses of $15.0 million, $52.7 million and $107.0 million for the fiscal years ended December 31, 2015, 2014 and 2013,respectively. As of December 31, 2015, we had an accumulated deficit of $495.0 million. To date, we have not commercialized any products or generated anyrevenues from the sale of products, and absent the realization of sufficient revenues from product sales, we may never attain profitability. Our losses haveresulted principally from costs incurred in our discovery and development activities. We anticipate that we will continue to incur significant operating costsover the next several years as we seek to develop our product candidates.If we do not successfully develop and obtain regulatory approval for our existing and future pipeline of product candidates and effectivelymanufacture, market and sell any product candidates that are approved, we may never generate product sales. Even if we do generate product sales, we maynever achieve or sustain profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the market price of ourcommon stock and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations.Our business is in early stage of development, which may make it difficult for you to evaluate the success of our business to date and to assess our futureviability.All of our product candidates are in early stages of development. We have not yet demonstrated our ability to obtain marketing approvals,manufacture a commercial scale medicine, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary forsuccessful commercialization. Typically, it takes about 10 to 15 years to develop one new medicine from the time it is discovered to when it is available fortreating patients. Preclinical studies and clinical trials may involve highly uncertain results and a high risk of failure. Moreover, positive data frompreclinical studies and clinical trials of our product candidates may not be predictive of results in ongoing or subsequent preclinical studies and clinicaltrials. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operatinghistory.In addition, as an early stage business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknownfactors. To be profitable, we will need to transition from a company with a research and development focus to a company capable of supporting commercialactivities. We may not be successful in such a transition.We will require substantial additional financing, and a failure to obtain this necessary capital when needed would force us to delay, limit, reduce orterminate our research, product development or commercialization efforts.We will require substantial funds to continue our development programs and to fulfill our planned operating goals. In particular, our currently plannedoperating and capital requirements include the need for substantial working capital to support our development activities for tivozanib. For example, weestimate that the remaining uncommitted costs for a Phase 3 trial for RCC such as the one contemplated by us could be in the range of $34-36 million in theaggregate through 2018. We are also designing a phase 1 study of tivozanib combined with a PD-1 inhibitor for the treatment of patients with RCC.Moreover, we have future payment obligations and cost-sharing arrangements under certain of our collaboration and license agreements. For example, underour agreements with KHK and St. Vincent’s, we are required to make certain clinical and regulatory milestone payments, have royalty obligations withrespect to product sales and are required to pay a specified percentage of sublicense revenue in certain instances. Moreover, under our agreement withBiodesix, we are obligated to share any costs for the phase 2 FOCAL study that exceed $15 million. Accordingly, we will need substantial additional fundingin connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, or if we are unable to procure partnershiparrangements to advance our programs, we would be forced to delay, reduce or eliminate our research and development programs and any futurecommercialization efforts.We believe that our cash resources would allow us to fund our current operations into the fourth quarter of 2017. This estimate does not include ourpayment of potential licensing milestones or the uncommitted costs of conducting any contemplated clinical trials and assumes no milestone payments fromour partners, no additional funding from new partnership agreements, no equity financings, no debt financings, no accelerated repayment thereof and nofurther sales of equity under our ATM. This estimate also does not include any amount we may agree to pay in excess of the estimated settlement liabilitythat we have established for accounting purposes with respect to a potential settlement of claims with the SEC, as described below under the heading “LegalProceedings” in Part I—Item 3 of this Form 10-K.31However, because of the numerous risks and uncertainties associated with the development and commercialization of pharmaceutical products, we areunable to estimate the exact amounts of our working capital requirements and the period in which we will have working capital to fund our operations.Accordingly, the timing and nature of activities contemplated for 2016 and thereafter will be conducted subject to the availability of sufficient financialresources.Our future capital requirements depend on many factors, including: ·our ability to establish and maintain strategic partnerships, licensing or other arrangements and the financial terms of such agreements; ·the number and characteristics of the product candidates we pursue; ·the scope, progress, results and costs of developing our product candidates, and conducting preclinical and clinical trials; ·the timing of, and the costs involved in, obtaining regulatory approvals for our product candidates; ·the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and theoutcome of such litigation; ·the absence of any breach, acceleration event or event of default under our loan agreement with Hercules or under any other agreements withthird parties; ·the outcome of legal actions against us, including the current lawsuits and SEC proceedings described under “Part I, Item 3—LegalProceedings,” including whether we enter into a settlement with the SEC within the estimated settlement liability we have established foraccounting purposes; ·the cost of commercialization activities if any of our product candidates are approved for sale, including marketing, sales and distributioncosts; ·the cost of manufacturing our product candidates and any products we successfully commercialize; and ·the timing, receipt and amount of sales of, or royalties on, our future products, if any.Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or drugcandidates.We may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity or convertible debtsecurities may result in additional dilution to our stockholders. If we raise additional funds through the issuance of debt securities or preferred stock orthrough additional credit facilities, these securities and/or the loans under credit facilities could provide for rights senior to those of our common stock andcould contain covenants that would restrict our operations. We may require additional capital beyond our currently forecasted amounts. Additional fundsmay not be available when we need them, on terms that are acceptable to us, or at all.We also expect to seek additional funds through arrangements with collaborators, licensees or other third parties. These arrangements would generallyrequire us to relinquish or encumber rights to some of our technologies or drug candidates, and we may not be able to enter into such arrangements onacceptable terms, if at all.We anticipate that we will require additional funding. If we are unable to obtain such additional funding on a timely basis, whether through paymentsunder existing or future collaborations or license agreement or sales of debt or equity, we may be required to delay, limit, reduce or terminate our clinicaltrials or development activities for one or more of our product candidates.We may not be successful in establishing and maintaining strategic partnerships to further the development of each of our therapeutic programs. A failureto obtain such partnerships in the near future will have a material adverse effect on our operations and business.We currently are exploring partnership opportunities to fund the further development of a majority of our development programs, including our leadprogram for tivozanib as well as AV-203. Accordingly, our success will depend in significant part on our ability to attract and maintain strategic partners andstrategic relationships with major biotechnology or pharmaceutical companies to support the development and commercialization of these productcandidates. In these partnerships, we would expect our strategic partner to provide substantial funding, as well as significant capabilities in research,development, marketing and salesWe face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Moreover, wemay not be successful in our efforts to establish a strategic partnership or other alternative arrangements for any product candidates and programs because ourdevelopment pipeline may be deemed insufficient, our product candidates and32programs may be deemed to be at too early of a stage of development for collaborative effort or third parties may not view our product candidates andprograms as having the requisite potential to demonstrate safety and efficacy.Even if we are successful in our efforts to establish new strategic partnerships, the terms that we agree upon may not be favorable to us and we may notbe able to maintain such strategic partnerships if, for example, development or approval of a product candidate is delayed or sales of an approved product aredisappointing. Any delay in entering into new strategic partnership agreements related to our product candidates could have an adverse effect on ourbusiness or our operating plan, including delaying the development and commercialization of our product candidates.Moreover, if we fail to establish and maintain additional strategic partnerships related to our product candidates: ·we will have limited resources with which to continue to operate our business and we may not be able to successfully complete any otherstrategic transactions; ·the development of certain of our product candidates may be terminated or delayed; and ·our cash expenditures related to development of our product candidates would increase significantly and we do not have the cash resources todevelop our product candidates on our own.Risks Related to our Litigation and SEC InvestigationWe and certain of our former officers and present and former directors have been named as defendants in multiple lawsuits that could result in substantialcosts and divert management’s attention.We, and certain of our former officers and directors, were named as defendants in a consolidated class action lawsuit initiated in 2013 that generallyalleges that we and those individuals violated federal securities laws by making allegedly false and/or misleading statements concerning the development ofour drug tivozanib and its prospects for FDA approval. The lawsuit seeks unspecified damages, interest, attorneys’ fees, and other costs. The consolidatedamended complaint was dismissed without prejudice on March 20, 2015, and the lead plaintiffs then filed a second amended complaint bringing similarallegations. This second amended complaint was dismissed with prejudice on November 18, 2015. The lead plaintiffs have appealed the court’s decision tothe United States Court of Appeals for the First Circuit. Another plaintiff has also filed a derivative complaint, allegedly on our behalf, naming us as anominal defendant and also naming as defendants present and former members of our board of directors, alleging breach of fiduciary duty and abuse ofcontrol on the part of those directors with respect to the same statements at issue in the securities litigation. The derivative complaint seeks, among otherrelief, unspecified damages, costs and expenses, including attorneys’ fees, an order requiring us to implement certain corporate governance reforms,restitution from the defendants and such other relief as the court might find just and proper. The derivative complaint was dismissed with prejudice onMarch 18, 2015. The plaintiff has appealed the court’s decision to the United States Court of Appeals for the First Circuit.We intend to continue to deny these allegations and to engage in a vigorous defense of these lawsuits. However, we are unable to predict the outcomeof these matters at this time. Moreover, any conclusion of these matters in a manner adverse to us could have a material adverse effect on our financialcondition and business. For example, we could incur substantial costs not covered by our liability insurance, suffer a significant adverse impact on ourreputation and divert management’s attention and resources from other priorities, including the execution of business plans and strategies that are importantto our ability to grow our business, any of which could have a material adverse effect on our business. In addition, any of these matters could requirepayments that are not covered by, or exceed the limits of, our available liability insurance, which could have a material adverse effect on our operating resultsor financial condition.We are in settlement discussions with the SEC. If such discussions do not result in a settlement, the SEC may pursue claims against us.The SEC Staff has invited us, and three of our former officers, to discuss the settlement of potential claims that the SEC Staff may recommend that theCommission bring, asserting that we violated federal securities laws by omitting to disclose the recommendation of the staff of the U.S. Food and DrugAdministration, on May 11, 2012, that we conduct an additional clinical trial with respect to Tivozanib. See “Part I, Item 3 – Legal Proceedings” for a furtherdiscussion of these claims. We have continued such discussions with the SEC Staff. If settlement discussions conclude without a settlement that is mutuallyacceptable to the SEC and us, the SEC may pursue claims against us. There can be no assurance that we will be able to resolve any potential claim of theCommission. The terms of any settlement with the Commission, the filing of any claims by the Commission, or the outcome of any claims that theCommission may bring against us, could have a material adverse impact on our business, cash position and prospects, and could significantly harm ourreputation. Moreover, these ongoing matters with the Commission may adversely affect our ability to raise additional needed capital to fund our business,could divert our management’s attention and resources from other priorities, including the execution of business plans and strategies that are important to ourability to grow our business, and may adversely33affect the trading price of our common stock. If the Commission makes claims against our former officers, they may seek advancement of legal expenses orindemnification for any losses, either of which could be material to the extent not covered by our director and officer liability insurance. Risks Related to Development and Commercialization of Our Drug Candidates In the near term, we are dependent on the success of tivozanib. If we are unable to initiate or complete the clinical development of, obtain marketingapproval for or successfully commercialize tivozanib, either alone or with our collaborators, or if we experience significant delays in doing so, ourbusiness could be substantially harmed.We currently have no products approved for sale and are investing a significant portion of our efforts and financial resources in the development oftivozanib. Our prospects are substantially dependent on our ability, or that of our collaborators, to develop, obtain marketing approval for and successfullycommercialize tivozanib in one or more disease indications.The success of tivozanib will depend on several factors, including the following: ·initiation and successful enrollment and completion of clinical trials; ·a safety, tolerability and efficacy profile that is satisfactory to the U.S. Food and Drug Administration, or FDA, or any comparable foreignregulatory authority for marketing approval; ·timely receipt of marketing approvals from applicable regulatory authorities; ·the performance of our collaborators; ·the extent of any required post‑marketing approval commitments to applicable regulatory authorities; ·establishment of supply arrangements with third‑party raw materials suppliers and manufacturers including with respect to the supply of activepharmaceutical ingredient for tivozanib; ·establishment of arrangements with third‑party manufacturers to obtain finished drug product that is appropriately packaged for sale; ·adequate ongoing availability of raw materials and drug product for clinical development and any commercial sales; ·obtaining and maintaining patent, trade secret protection and regulatory exclusivity, both in the United States and internationally, includingour ability to maintain our license agreement with Kyowa Hakko Kirin Co., Ltd.; ·protection of our rights in our intellectual property portfolio; ·successful launch of commercial sales following any marketing approval; ·a continued acceptable safety profile following any marketing approval; ·commercial acceptance by patients, the medical community and third‑party payors; ·successful identification of biomarkers for patient selection; and ·our ability to compete with other therapies.Many of these factors are beyond our control, including clinical development, the regulatory submission process, potential threats to our intellectualproperty rights and the manufacturing, marketing and sales efforts of our collaborators. If we are unable to develop, receive marketing approval for andsuccessfully commercialize tivozanib on our own or with our collaborators, or experience delays as a result of any of these factors or otherwise, our businesscould be substantially harmed.If clinical trials of any product candidates that we, or any collaborators, may develop fail to satisfactorily demonstrate safety and efficacy to the FDA andother regulators, we, or any collaborators, may incur additional costs or experience delays in completing, or ultimately be unable to complete, thedevelopment and commercialization of these product candidates.We, and any collaborators, are not permitted to commercialize, market, promote or sell any product candidate in the United States without obtainingmarketing approval from the FDA. Foreign regulatory authorities, such as the European Medicines Agency, or the EMA, impose similar requirements. We,and any collaborators, must complete extensive preclinical development and clinical trials to demonstrate the safety and efficacy of our product candidatesin humans before we will be able to obtain these approvals.Clinical testing is expensive, is difficult to design and implement, can take many years to complete and is inherently uncertain as to outcome. Wecannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. The clinical34development of our product candidates is susceptible to the risk of failure inherent at any stage of product development, including failure to demonstrateefficacy in a clinical trial or across a broad population of patients, the occurrence of adverse events that are severe or medically or commerciallyunacceptable, failure to comply with protocols or applicable regulatory requirements and determination by the FDA or any comparable foreign regulatoryauthority that a product candidate may not continue development or is not approvable. It is possible that even if one or more of our product candidates has abeneficial effect, that effect will not be detected during clinical evaluation as a result of one or more of a variety of factors, including the size, duration,design, measurements, conduct or analysis of our clinical trials. Conversely, as a result of the same factors, our clinical trials may indicate an apparentpositive effect of a product candidate that is greater than the actual positive effect, if any. Similarly, in our clinical trials we may fail to detect toxicity of orintolerability caused by our product candidates, or mistakenly believe that our product candidates are toxic or not well tolerated when that is not in fact thecase.Any inability to successfully complete preclinical and clinical development could result in additional costs to us, or any collaborators, and impair ourability to generate revenues from product sales, regulatory and commercialization milestones and royalties. Moreover, if we, or any collaborators, are requiredto conduct additional clinical trials or other testing of our product candidates beyond the trials and testing that we or they contemplate, if we, or they, areunable to successfully complete clinical trials of our product candidates or other testing, or the results of these trials or tests are unfavorable, uncertain or areonly modestly favorable, or there are unacceptable safety concerns associated with our product candidates, we, or any collaborators, may: ·incur additional unplanned costs; ·be delayed in obtaining marketing approval for our product candidates; ·not obtain marketing approval at all; ·obtain approval for indications or patient populations that are not as broad as intended or desired; ·obtain approval with labeling that includes significant use or distribution restrictions or significant safety warnings, including boxed warnings; ·be subject to additional post‑marketing testing or other requirements; or ·be required to remove the product from the market after obtaining marketing approval.Our failure to successfully initiate and complete clinical trials of our product candidates and to demonstrate the efficacy and safety necessary to obtainregulatory approval to market any of our product candidates would significantly harm our business.Adverse events or undesirable side effects caused by, or other unexpected properties of, tivozanib or any future product candidates that we develop may beidentified during development and could delay or prevent their marketing approval or limit their use.Adverse events or undesirable side effects caused by, or other unexpected properties of, tivozanib or any future product candidates that we maydevelop could cause us, any collaborators, an institutional review board or regulatory authorities to interrupt, delay or halt clinical trials of one or more of ourproduct candidates and could result in a more restrictive label or the delay or denial of marketing approval by the FDA or comparable foreign regulatoryauthorities. If any of our product candidates is associated with adverse events or undesirable side effects or has properties that are unexpected, we, or anycollaborators, may need to abandon development or limit development of that product candidate to certain uses or subpopulations in which the undesirableside effects or other characteristics are less prevalent, less severe or more acceptable from a risk‑benefit perspective. Many compounds that initially showedpromise in clinical or earlier stage testing have later been found to cause undesirable or unexpected side effects that prevented further development of thecompound.If we, or any collaborators, experience any of a number of possible unforeseen events in connection with clinical trials of our current or any future productcandidates that we, or any collaborators, may develop, potential clinical development, marketing approval or commercialization of our productcandidates could be delayed or prevented.We, or any collaborators, may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent clinicaldevelopment, marketing approval or commercialization of our current product candidates or any future product candidates that we, or any collaborators, maydevelop, including: ·regulators or institutional review boards may not authorize us, any collaborators or our or their investigators to commence a clinical trial orconduct a clinical trial at a prospective trial site; ·we, or any collaborators, may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocolswith prospective trial sites; ·clinical trials of our product candidates may produce unfavorable or inconclusive results;35 ·we, or any collaborators, may decide, or regulators may require us or them, to conduct additional clinical trials or abandon productdevelopment programs; ·the number of patients required for clinical trials of our product candidates may be larger than we, or any collaborators, anticipate, patientenrollment in these clinical trials may be slower than we, or any collaborators, anticipate or participants may drop out of these clinical trials at ahigher rate than we, or any collaborators, anticipate; ·the cost of planned clinical trials of our product candidates may be greater than we anticipate; ·our third‑party contractors or those of any collaborators, including those manufacturing our product candidates or components or ingredientsthereof or conducting clinical trials on our behalf or on behalf of any collaborators, may fail to comply with regulatory requirements or meettheir contractual obligations to us or any collaborators in a timely manner or at all; ·patients that enroll in a clinical trial may misrepresent their eligibility to do so or may otherwise not comply with the clinical trial protocol,resulting in the need to drop the patients from the clinical trial, increase the needed enrollment size for the clinical trial or extend the clinicaltrial’s duration; ·we, or any collaborators, may have to delay, suspend or terminate clinical trials of our product candidates for various reasons, including afinding that the participants are being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of theproduct candidate; ·regulators or institutional review boards may require that we, or any collaborators, or our or their investigators suspend or terminate clinicalresearch for various reasons, including noncompliance with regulatory requirements or their standards of conduct, a finding that theparticipants are being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of the productcandidate or findings of undesirable effects caused by a chemically or mechanistically similar product or product candidate; ·the FDA or comparable foreign regulatory authorities may disagree with our, or any collaborators’, clinical trial designs or our or theirinterpretation of data from preclinical studies and clinical trials; ·the FDA or comparable foreign regulatory authorities may fail to approve or subsequently find fault with the manufacturing processes orfacilities of third‑party manufacturers with which we, or any collaborators, enter into agreements for clinical and commercial supplies; ·the supply or quality of raw materials or manufactured product candidates or other materials necessary to conduct clinical trials of our productcandidates may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; and ·the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner renderingour clinical data insufficient to obtain marketing approval.Product development costs for us, or any collaborators, will increase if we, or they, experience delays in testing or pursuing marketing approvals andwe, or they, may be required to obtain additional funds to complete clinical trials and prepare for possible commercialization. We do not know whether anytrials will begin as planned, will need to be restructured, or will be completed on schedule or at all. Significant clinical trial delays also could shorten anyperiods during which we, or any collaborators, may have the exclusive right to commercialize our product candidates or allow our competitors, or thecompetitors of any collaborators, to bring products to market before we, or any collaborators, do and impair our ability, or the ability of any collaborators, tosuccessfully commercialize our product candidates and may harm our business and results of operations. In addition, many of the factors that lead to clinicaltrial delays may ultimately lead to the denial of marketing approval of any of our product candidates.If we, or any collaborators, experience delays or difficulties in the enrollment of patients in clinical trials, our or their receipt of necessary regulatoryapprovals could be delayed or prevented.We, or any collaborators, may not be able to initiate or continue clinical trials for our current product candidates or any future product candidates thatwe, or any collaborators, may develop if we, or they, are unable to locate and enroll a sufficient number of eligible patients to participate in clinical trials.Patient enrollment is a significant factor in the timing of clinical trials, and is affected by many factors, including: ·the size and nature of the patient population; ·the severity of the disease under investigation; ·the availability of approved therapeutics for the relevant disease; ·the proximity of patients to clinical sites;36 ·the eligibility criteria for the trial; ·the design of the clinical trial; ·efforts to facilitate timely enrollment; ·competing clinical trials; and ·clinicians’ and patients’ perceptions as to the potential advantages and risks of the drug being studied in relation to other available therapies,including any new drugs that may be approved for the indications we are investigating.Our inability, or the inability of any collaborators, to enroll a sufficient number of patients for our, or their, clinical trials could result in significantdelays or may require us or them to abandon one or more clinical trials altogether. Enrollment delays in our, or their, clinical trials may result in increaseddevelopment costs for our product candidates, delay or halt the development of and approval processes for our product candidates and jeopardize our, or anycollaborators’, ability to commence sales of and generate revenues from our product candidates, which could cause the value of our company to decline andlimit our ability to obtain additional financing, if needed.Results of early clinical trials may not be predictive of results of future late‑stage clinical trials.The outcome of early clinical trials may not be predictive of the success of later clinical trials, and interim results of clinical trials do not necessarilypredict success in future clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late‑stageclinical trials after achieving positive results in earlier development, and we have and could, in the future, face similar setbacks. For example, in June 2013,the FDA issued a response letter informing us that it would not approve tivozanib for the treatment of first line advanced renal cell carcinoma based on thestudy data from our initial Phase 3 trial, and recommended that we perform an additional study that is adequately sized to assure the FDA that there is noadverse effect on overall survival. The design of a clinical trial can determine whether its results will support approval of a product and flaws in the design ofa clinical trial may not become apparent until the clinical trial is well advanced. We have limited experience in designing clinical trials and may be unable todesign and execute a clinical trial to support marketing approval. In addition, preclinical and clinical data are often susceptible to varying interpretations andanalyses. Many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed toobtain marketing approval for the product candidates. Even if we, or any collaborators, believe that the results of clinical trials for our product candidateswarrant marketing approval, the FDA or comparable foreign regulatory authorities may disagree and may not grant marketing approval of our productcandidates.In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due tonumerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in andadherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants. If we fail to receive positive resultsin clinical trials of our product candidates, the development timeline and regulatory approval and commercialization prospects for our most advancedproduct candidates, and, correspondingly, our business and financial prospects would be negatively impacted.We have never obtained marketing approval for a product candidate and we may be unable to obtain, or may be delayed in obtaining, marketing approvalfor our current product candidates or any future product candidates that we, or any collaborators, may develop.We have never obtained marketing approval for a product candidate. It is possible that the FDA may refuse to accept for substantive review any newdrug applications, or NDAs, that we submit for our product candidates or may conclude after review of our data that our application is insufficient to obtainmarketing approval of our product candidate. If the FDA does not accept or approve NDAs for any of our product candidates, it may require that we conductadditional clinical trials, preclinical studies or manufacturing validation studies and submit that data before it will reconsider our applications. Depending onthe extent of these or any other FDA‑required trials or studies, approval of any NDA or application that we submit may be delayed by several years, or mayrequire us to expend more resources than we have available. It is also possible that additional trials or studies, if performed and completed, may not beconsidered sufficient by the FDA to approve our NDAs. Any delay in obtaining, or an inability to obtain, marketing approvals would prevent us fromcommercializing our product candidates or any companion diagnostics, generating revenues and achieving and sustaining profitability. If any of theseoutcomes occurs, we may be forced to abandon our development efforts for our product candidates, which could significantly harm our business.37Even if any product candidates that we, or any collaborators, may develop receive marketing approval, we or others may later discover that the product isless effective than previously believed or causes undesirable side effects that were not previously identified, which could compromise our ability, or that ofany collaborators, to market the product.Clinical trials of any product candidates that we, or any collaborators, may develop will be conducted in carefully defined subsets of patients whohave agreed to enter into clinical trials. Consequently, it is possible that our clinical trials, or those of any collaborator, may indicate an apparent positiveeffect of a product candidate that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable side effects. If, followingapproval of a product candidate, we, or others, discover that the product is less effective than previously believed or causes undesirable side effects that werenot previously identified, any of the following adverse events could occur: ·regulatory authorities may withdraw their approval of the product or seize the product; ·we, or any collaborators, may be required to recall the product, change the way the product is administered or conduct additional clinical trials; ·additional restrictions may be imposed on the marketing of, or the manufacturing processes for, the particular product; ·we may be subject to fines, injunctions or the imposition of civil or criminal penalties; ·regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication; ·we, or any collaborators, may be required to create a Medication Guide outlining the risks of the previously unidentified side effects fordistribution to patients; ·we, or any collaborators, could be sued and held liable for harm caused to patients; ·the product may become less competitive; and ·our reputation may suffer.Any of these events could harm our business and operations, and could negatively impact our stock price.Even if our current product candidates, or any future product candidates that we, or any collaborators, may develop receives marketing approval, it mayfail to achieve the degree of market acceptance by physicians, patients, third‑party payors and others in the medical community necessary for commercialsuccess, in which case we may not generate significant revenues or become profitable.We have never commercialized a product, and even if one of our product candidates is approved by the appropriate regulatory authorities formarketing and sale, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third‑party payors and others in the medicalcommunity. Physicians are often reluctant to switch their patients from existing therapies even when new and potentially more effective or convenienttreatments enter the market. Further, patients often acclimate to the therapy that they are currently taking and do not want to switch unless their physiciansrecommend switching products or they are required to switch therapies due to lack of reimbursement for existing therapies.Efforts to educate the medical community and third‑party payors on the benefits of our product candidates may require significant resources and maynot be successful. If any of our product candidates is approved but does not achieve an adequate level of market acceptance, we may not generate significantrevenues and we may not become profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on anumber of factors, including: ·the efficacy and safety of the product; ·the potential advantages of the product compared to competitive therapies; ·the prevalence and severity of any side effects; ·whether the product is designated under physician treatment guidelines as a first‑, second‑ or third‑line therapy; ·our ability, or the ability of any collaborators, to offer the product for sale at competitive prices; ·the product’s convenience and ease of administration compared to alternative treatments; ·the willingness of the target patient population to try, and of physicians to prescribe, the product; ·limitations or warnings, including distribution or use restrictions, contained in the product’s approved labeling; ·the strength of sales, marketing and distribution support;38 ·changes in the standard of care for the targeted indications for the product; and ·availability and amount of coverage and reimbursement from government payors, managed care plans and other third‑party payors.If we are unable to establish sales, marketing and distribution capabilities or enter into sales, marketing and distribution arrangements with third parties,we may not be successful in commercializing any product candidates if approved.We do not have a sales, marketing or distribution infrastructure and have no experience in the sale, marketing or distribution of pharmaceuticalproducts. To achieve commercial success for any approved product, we must either develop a sales and marketing organization or outsource these functionsto third parties. We plan to build focused capabilities to commercialize development programs for certain indications where we believe that the medicalspecialists for the indications are sufficiently concentrated to allow us to effectively promote the product with a targeted sales team. The development ofsales, marketing and distribution capabilities will require substantial resources, will be time consuming and could delay any product launch. If thecommercial launch of a product candidate for which we recruit a sales force and establish marketing and distribution capabilities is delayed or does not occurfor any reason, we could have prematurely or unnecessarily incurred these commercialization costs. This may be costly, and our investment could be lost ifwe cannot retain or reposition our sales and marketing personnel. In addition, we may not be able to hire or retain a sales force in the United States that issufficient in size or has adequate expertise in the medical markets that we plan to target. If we are unable to establish or retain a sales force and marketing anddistribution capabilities, our operating results may be adversely affected. If a potential partner has development or commercialization expertise that webelieve is particularly relevant to one of our products, then we may seek to collaborate with that potential partner even if we believe we could otherwisedevelop and commercialize the product independently.In certain indications, we seek to enter into collaborations that we believe may contribute to our ability to advance development and ultimatelycommercialize our product candidates. We also seek to enter into collaborations where we believe that realizing the full commercial value of ourdevelopment programs will require access to broader geographic markets or the pursuit of broader patient populations or indications. As a result of enteringinto arrangements with third parties to perform sales, marketing and distribution services, our product revenues or the profitability of these product revenuesmay be lower, perhaps substantially lower, than if we were to directly market and sell products in those markets. Furthermore, we may be unsuccessful inentering into the necessary arrangements with third parties or may be unable to do so on terms that are favorable to us. In addition, we may have little or nocontrol over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively.If we do not establish sales, marketing and distribution capabilities, either on our own or in collaboration with third parties, we will not be successfulin commercializing any of our product candidates that receive marketing approval.If we are unable to successfully develop companion diagnostics for certain of our therapeutic product candidates, or experience significant delays in doingso, we may not realize the full commercial potential of these therapeutics. A component of our business strategy may be to develop, in collaboration with a third party, companion diagnostics for some of our therapeuticproduct candidates. There has been limited success to date industry-wide in developing companion diagnostics. To be successful, our collaborator will needto address a number of scientific, technical, regulatory and logistical challenges. We have limited experience in the development of diagnostics and may notbe successful in developing appropriate diagnostics to pair with anyof our therapeutic product candidates that receive marketing approval. The FDA and similar regulatory authorities outside the United States are generallyexpected to regulate companion diagnostics as medical devices. In each case, companion diagnostics require separate regulatory approval prior tocommercialization. For example, BDX004, our companion diagnostic test for ficlatuzumab in our FOCAL study, requires separate approval by the FDA, forwhich we must rely on Biodesix to obtain. In addition, we require a commercializable companion diagnostic assay to identify patients with low NRP-1 inorder to proceed with the development of tivozanib in CRC. We have presented the results from the phase 2 BATON-CRC study and the Company’songoing assay development efforts to the FDA in connection with our evaluation of a proposed pivotal Phase 3 trial of tivozanib in CRC. In responseto questions we posed to the FDA regarding this proposed trial, the FDA suggested that we continue work on the development of our biomarker assay toaddress variability between assays presented, and that, at present, “insufficient data exists to determine the appropriateness of this [NRP-1 low] subgroup” forthe proposed Phase 3 study. As such, we hope to identify a commercially viable assay, which will enable a prospectively defined, randomized Phase 2study. Given our limited experience in developing diagnostics, we expect to rely in part on third parties for their design, development and manufacture. If we,or any third parties that we engage to assist us, are unable to successfully develop companion diagnostics for our therapeutic product candidates, orexperience delays in doing so, the development of our therapeutic product candidates may be adversely affected, our therapeutic product candidates may notreceive marketing approval and we may not realize the full commercial potential of any therapeutics that receive marketing approval. As a result, ourbusiness would be harmed, possibly materially.39We face substantial competition, which may result in others discovering, developing or commercializing products before, or more successfully, than we do.Our future success depends on our ability to demonstrate and maintain a competitive advantage with respect to the design, development andcommercialization of product candidates. Our objective is to design, develop and commercialize new products with superior efficacy, convenience,tolerability and safety. We expect any product candidate that we commercialize with our strategic partners will compete with existing, market-leadingproducts.Many of our potential competitors have substantially greater financial, technical and personnel resources than we have and several are alreadymarketing products to treat the same indications, and having the same biological targets, as the product candidates we are developing, including with respectto cachexia. In addition, many of these competitors have significantly greater commercial infrastructures than we have. We will not be able to competesuccessfully unless we effectively: ·design and develop products that are superior to other products in the market in terms of, among other things, both safety and efficacy; ·obtain patent and/or other proprietary protection for our processes and product candidates; ·obtain required regulatory approvals; ·obtain favorable reimbursement, formulary and guideline status; and ·collaborate with others in the design, development and commercialization of new products.Established competitors may invest heavily to quickly discover and develop novel compounds that could make our product candidates obsolete. Inaddition, any new product that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safetyin order to obtain approval, to overcome price competition and to be commercially successful. If we are not able to compete effectively against our currentand future competitors, our business will not grow and our financial condition and operations will suffer.Even if we, or any collaborators, are able to commercialize any product candidate that we, or they, develop, the product may become subject tounfavorable pricing regulations, third‑party payor reimbursement practices or healthcare reform initiatives, any of which could harm our business.The commercial success of our product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of ourproduct candidates will be paid by third‑party payors, including government health care programs and private health insurers. If coverage is not available, orreimbursement is limited, we, or any collaborators, may not be able to successfully commercialize our product candidates. Even if coverage is provided, theapproved reimbursement amount may not be high enough to allow us, or any collaborators, to establish or maintain pricing sufficient to realize a sufficientreturn on our or their investments. In the United States, no uniform policy of coverage and reimbursement for products exists among third‑party payors andcoverage and reimbursement levels for products can differ significantly from payor to payor. As a result, the coverage determination process is often a timeconsuming and costly process that may require us to provide scientific and clinical support for the use of our products to each payor separately, with noassurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.There is significant uncertainty related to third‑party payor coverage and reimbursement of newly approved drugs. Marketing approvals, pricing andreimbursement for new drug products vary widely from country to country. Some countries require approval of the sale price of a drug before it can bemarketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescriptionpharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we, or any collaborators, mightobtain marketing approval for a product in a particular country, but then be subject to price regulations that delay commercial launch of the product, possiblyfor lengthy time periods, which may negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricinglimitations may hinder our ability or the ability of any collaborators to recoup our or their investment in one or more product candidates, even if our productcandidates obtain marketing approval.Patients who are provided medical treatment for their conditions generally rely on third‑party payors to reimburse all or part of the costs associatedwith their treatment. Therefore, our ability, and the ability of any collaborators, to commercialize successfully any of our product candidates will depend inpart on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from third‑party payors.Third‑party payors decide which medications they will cover and establish reimbursement levels. The healthcare industry is acutely focused on costcontainment, both in the United States and elsewhere. Government authorities and other third‑party payors have attempted to control costs by limitingcoverage and the amount of reimbursement for particular medications, which could affect our ability or that of any collaborators to sell our productcandidates40profitably. These payors may not view our products, if any, as cost‑effective, and coverage and reimbursement may not be available to our customers, or thoseof any collaborators, or may not be sufficient to allow our products, if any, to be marketed on a competitive basis. Cost‑control initiatives could cause us, orany collaborators, to decrease the price we, or they, might establish for products, which could result in lower than anticipated product revenues. If the pricesfor our products, if any, decrease or if governmental and other third‑party payors do not provide coverage or adequate reimbursement, our prospects forrevenue and profitability will suffer.There may also be delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the indicationsfor which the drug is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for reimbursement does not imply that anydrug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Reimbursement ratesmay vary, by way of example, according to the use of the product and the clinical setting in which it is used. Reimbursement rates may also be based onreimbursement levels already set for lower cost drugs or may be incorporated into existing payments for other services.In addition, increasingly, third‑party payors are requiring higher levels of evidence of the benefits and clinical outcomes of new technologies and arechallenging the prices charged. Further, the net reimbursement for drug products may be subject to additional reductions if there are changes to laws thatpresently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. An inability to promptly obtain coverageand adequate payment rates from both government‑funded and private payors for any of our product candidates for which we, or any collaborator, obtainmarketing approval could significantly harm our operating results, our ability to raise capital needed to commercialize products and our overall financialcondition.If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our productcandidates.We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk if wecommercialize any products. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable duringproduct testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, afailure to warn of dangers inherent in the product, negligence, strict liability, and a breach of warranties. Claims could also be asserted under state consumerprotection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limitcommercialization of our product candidates. Even successful defense could require significant financial and management resources. Regardless of the meritsor eventual outcome, product liability claims may result in: ·decreased demand for our product candidates or products that we may develop; ·injury to our reputation; ·withdrawal of clinical trial participants; ·costs to defend the related litigation; ·diversion of management’s time and our resources; ·substantial monetary awards to trial participants or patients; ·product recalls, withdrawals or labeling, marketing or promotional restrictions; ·loss of revenue; ·the inability to commercialize our product candidates; and ·a decline in our stock price.Our inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims couldprevent or inhibit the commercialization of products we develop. We currently carry product liability insurance covering our clinical studies in the amount of$20 million in the aggregate. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlementin an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies alsohave various exclusions, and we may be subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by acourt or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain,sufficient capital to pay such amounts.41Risks Related to Our Dependence on Third PartiesWe rely on third parties, such as clinical research organizations, or CROs, to conduct clinical trials for our product candidates, and if they do not properlyand successfully perform their obligations to us, we may not be able to obtain regulatory approvals for our product candidates.We, in consultation with our collaborators, where applicable, design the clinical trials for our product candidates, but we have relied, and will rely, oncontract research organizations and other third parties to assist us in managing, monitoring and otherwise carrying out many of these trials. We compete withlarger companies for the resources of these third parties.Although we plan to continue to rely on these third parties to conduct our ongoing any future clinical trials, we are responsible for ensuring that eachof our clinical trials is conducted in accordance with its general investigational plan and protocol. Moreover, the FDA and foreign regulatory agenciesrequire us to comply with regulations and standards, commonly referred to as good clinical practices, for designing, conducting, monitoring, recording,analyzing, and reporting the results of clinical trials to assure that the data and results are credible and accurate and that the rights, integrity andconfidentiality of trial participants are protected. Our reliance on third parties that we do not control does not relieve us of these responsibilities andrequirements.The third parties on whom we rely generally may terminate their engagements with us at any time. If we are required to enter into alternativearrangements because of any such termination, the introduction of our product candidates to market could be delayed.If these third parties do not successfully carry out their duties under their agreements with us, if the quality or accuracy of the data they obtain iscompromised due to their failure to adhere to our clinical trial protocols or regulatory requirements, or if they otherwise fail to comply with clinical trialprotocols or meet expected deadlines, our clinical trials may not meet regulatory requirements. If our clinical trials do not meet regulatory requirements or ifthese third parties need to be replaced, our preclinical development activities or clinical trials may be extended, delayed, suspended or terminated. If any ofthese events occur, we may not be able to obtain regulatory approval of our product candidates and our reputation could be harmed.We rely on third-party manufacturers to produce our preclinical and clinical product candidate supplies and we intend to rely on third parties to producecommercial supplies of any approved product candidates. Any failure by a third-party manufacturer to produce supplies for us may delay or impair ourability to complete our clinical trials or commercialize our product candidates.We do not possess all of the capabilities to fully commercialize any of our product candidates on our own. We have relied upon third-partymanufacturers for the manufacture of our product candidates for preclinical and clinical testing purposes and intend to continue to do so in the future. If weare unable to arrange for third-party manufacturing sources, or to do so on commercially reasonable terms, we may not be able to complete development ofsuch other product candidates or market them.Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured product candidates ourselves, includingreliance on the third party for regulatory compliance and quality assurance, the possibility of breach of the manufacturing agreement by the third partybecause of factors beyond our control (including a failure to synthesize and manufacture our product candidates in accordance with our productspecifications), failure of the third party to accept orders for supply of drug substance or drug product and the possibility of termination or nonrenewal of theagreement by the third-party, based on its own business priorities, at a time that is costly or damaging to us. In addition, the FDA and other regulatoryauthorities require that our product candidates be manufactured according to cGMP and similar foreign standards. Any failure by our third-partymanufacturers to comply with cGMP or failure to scale-up manufacturing processes as needed, including any failure to deliver sufficient quantities of productcandidates in a timely manner, could lead to a delay in, or failure to obtain, regulatory approval of any of our product candidates. In addition, such failurecould be the basis for action by the FDA to withdraw approvals for product candidates previously granted to us and for other regulatory action, includingrecall or seizure, fines, imposition of operating restrictions, total or partial suspension of production or injunctions.We rely on our manufacturers to purchase from third-party suppliers the materials necessary to produce our product candidates for our clinical studies.There are a small number of suppliers for certain capital equipment and raw materials that we use to manufacture our product candidates. Such suppliers maynot sell this capital equipment or these raw materials to our manufacturers at the times we need them or on commercially reasonable terms. We do not haveany control over the process or timing of the acquisition of this capital equipment or these raw materials by our manufacturers. Moreover, we currently do nothave any agreements for the commercial production of these raw materials. Any significant delay in the supply of a product candidate or the raw materialcomponents thereof for an ongoing clinical trial due to the need to replace a third-party manufacturer could considerably delay completion of our clinicalstudies, product testing and potential regulatory approval of our product candidates. If our manufacturers or we are unable to purchase these raw materialsafter regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would be delayed or there would bea shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.42Because of the complex nature of many of our early stage compounds and product candidates, our manufacturers may not be able to manufacture suchcompounds and product candidates at a cost or in quantities or in a timely manner necessary to develop and commercialize related products. If wesuccessfully commercialize any of our drugs, we may be required to establish or access large-scale commercial manufacturing capabilities. In addition, as ourdrug development pipeline increases and matures, we will have a greater need for clinical trial and commercial manufacturing capacity. We do not own oroperate manufacturing facilities for the production of clinical or commercial quantities of our product candidates and we currently have no plans to build ourown clinical or commercial scale manufacturing capabilities. To meet our projected needs for commercial manufacturing in the event that one or more of ourproduct candidates gains marketing approval, third parties with whom we currently work will need to increase their scale of production or we will need tosecure alternate suppliers.If any of our current or future strategic partners fails to perform its obligations or terminates its agreement with us, the development andcommercialization of the product candidates under such agreement could be delayed or terminated and our business could be substantially harmed.As part of our business strategy, we plan to enter into additional strategic partnerships in the future. If any current or future strategic partners do notdevote sufficient time and resources to its arrangements with us, we may not realize the potential commercial benefits of the arrangement, and our results ofoperations may be adversely affected. In addition, if any strategic partner were to breach or terminate its arrangements with us, the development andcommercialization of the affected product candidate could be delayed, curtailed or terminated because we may not have sufficient financial resources orcapabilities to continue development and commercialization of the product candidate on its own, and we may find it difficult to attract a new alliance partnerfor such product candidate. For example, Biodesix can opt-out of its agreement with us after the completion of the proof of concept trial prior to the firstcommercial sale of ficlatuzumab, at which point Biodesix would not be responsible for any future costs associated with developing and commercializingficlatuzumab other than any ongoing clinical studies.Much of the potential revenue from any strategic partnership we may enter into in the future will likely consist of contingent payments, such asroyalties payable on sales of any successfully developed drugs. Any such contingent revenue will depend upon our, and our strategic partners’, ability tosuccessfully develop, introduce, market and sell new drugs. In some cases, we will not be involved in these processes, and we will depend entirely on ourstrategic partners. Any of our future strategic partners may fail to develop or effectively commercialize these drugs because it: ·decides not to devote the necessary resources because of internal constraints, such as limited personnel with the requisite scientific expertise,limited cash resources or specialized equipment limitations, or the belief that other product candidates may have a higher likelihood ofobtaining regulatory approval or may potentially generate a greater return on investment; ·does not have sufficient resources necessary to carry the product candidate through clinical development, regulatory approval andcommercialization; or ·cannot obtain the necessary regulatory approvals.If one or more of our strategic partners fails to develop or effectively commercialize product candidates for any of the foregoing reasons, we may notbe able to replace the strategic partner with another partner to develop and commercialize a product candidate under the terms of the strategic partnership. Wemay also be unable to obtain, on terms acceptable to us, a license from such strategic partner to any of its intellectual property that may be necessary or usefulfor us to continue to develop and commercialize a product candidate. Any of these events could have a material adverse effect on our business, results ofoperations and our ability to achieve future profitability, and could cause our stock price to decline.Risks Related to Our Intellectual Property RightsWe could be unsuccessful in obtaining adequate patent protection for one or more of our product candidates, which could result in competition and adecrease in the potential market share for our product candidates.We cannot be certain that patents will be issued or granted with respect to applications that are currently pending, or that issued or granted patents willnot later be found to be invalid and/or unenforceable. The patent position of biotechnology and pharmaceutical companies is generally uncertain because itinvolves complex legal and factual considerations. The standards applied by the United States Patent and Trademark Office and foreign patent offices ingranting patents are not always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter orthe scope of claims allowable in biotechnology and pharmaceutical patents. Consequently, patents may not issue from our pending patent applications. Assuch, we do not know the degree of future protection that we will have on our proprietary products and technology. The scope of patent protection that theU.S. Patent and Trademark Office will grant with respect to the antibodies in our antibody product pipeline is uncertain. It is possible that the U.S. Patent andTrademark Office will not allow broad antibody claims that cover closely related antibodies as well as the specific antibody. Upon receipt of FDA approval,competitors would be free to market antibodies almost identical to ours, including biosimilar antibodies, thereby decreasing our market share.43Issued patents covering one or more of our products could be found invalid or unenforceable if challenged in patent office proceedings, or in court.If we or one of our corporate partners were to initiate legal proceedings against a third-party to enforce a patent covering one of our products, thedefendant could counterclaim that our patent is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleginginvalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet one or more statutory requirementsfor patentability, including, for example, lack of novelty, obviousness, lack of written description or non-enablement. In addition, patent validity challengesmay, under certain circumstances, be based upon non-statutory obviousness-type double patenting, which, if successful, could result in a finding that theclaims are invalid for obviousness-type double patenting or the loss of patent term, including a patent term adjustment granted by the United States Patentand Trademark Officer, if a terminal disclaimer is filed to obviate a finding of obviousness-type double patenting. Grounds for an unenforceability assertioncould be an allegation that someone connected with prosecution of the patent withheld relevant information from the U.S. Patent and Trademark Office, ormade a misleading statement, during prosecution. Additionally, third parties are able to challenge the validity of issued patents through administrativeproceedings in the patent offices of certain countries, including the United States Patent and Trademark Office and the European Patent Office. Although wehave conducted due diligence on patents we have exclusively in-licensed, and we believe that we have conducted our patent prosecution in accordance withthe duty of candor and in good faith, the outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. Withrespect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unawareduring prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of thepatent protection on one of our products or certain aspects of our Human Response Platform. Such a loss of patent protection could have a material adverseimpact on our business.Claims that our platform technologies, our products or the sale or use of our products infringe the patent rights of third parties could result in costlylitigation or could require substantial time and money to resolve, even if litigation is avoided.We cannot guarantee that our platform technologies, our products, or the use of our products, do not infringe third-party patents. Third parties mightallege that we are infringing their patent rights or that we have misappropriated their trade secrets. Such third parties might resort to litigation against us. Thebasis of such litigation could be existing patents or patents that issue in the future.It is also possible that we failed to identify relevant third-party patents or applications. For example, applications filed before November 29, 2000 andcertain applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Patent applications in theUnited States and elsewhere are published approximately 18 months after the earliest filing, which is referred to as the priority date. Therefore, patentapplications covering our products or platform technology could have been filed by others without our knowledge. Additionally, pending patentapplications which have been published can, subject to certain limitations, be later amended in a manner that could cover our platform technologies, ourproducts or the use of our products.With regard to tivozanib, we are aware of a third-party United States patent, and corresponding foreign counterparts, that contain broad claims relatedto use of an organic compound, that, among other things, inhibits the tyrosine phosphorylation of a VEGF receptor caused by VEGF binding to such VEGFreceptor. We are also aware of third-party United States patents that contain broad claims related to the use of a tyrosine kinase inhibitor in combination witha DNA damaging agent such as chemotherapy or radiation and we have received written notice from the owners of such patents indicating that they believewe may need a license from them in order to avoid infringing their patents. With regard to ficlatuzumab, we are aware of two separate families of United Statespatents, United States patent applications and foreign counterparts, with each of the two families being owned by a different third-party, that contain broadclaims related to anti-HGF antibodies having certain binding properties and their use. With regard to AV-203, we are aware of a third-party United Statespatent that contains broad claims relating to anti-ErbB3 antibodies. Additionally, we are aware of a United States patent application and foreign counterpartsthat contains claims to the use of a companion diagnostic in conjunction with AV-203. Based on our analyses, if any of the above third-party patents wereasserted against us, we do not believe our proposed products or activities would be found to infringe any valid claim of these patents. If we were to challengethe validity of any issued United States patent in court, we would need to overcome a statutory presumption of validity that attaches to every United Statespatent. This means that in order to prevail, we would have to present clear and convincing evidence as to the invalidity of the patent’s claims. There is noassurance that a court would find in our favor on questions of infringement or validity.In order to avoid or settle potential claims with respect to any of the patent rights described above or any other patent rights of third parties, we maychoose or be required to seek a license from a third-party and be required to pay license fees or royalties or both. These licenses may not be available onacceptable terms, or at all. Even if we or our strategic partners were able to obtain a license, the rights may be non-exclusive, which could result in ourcompetitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease someaspect of our business operations, if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms.This could harm our business significantly.44Defending against claims of patent infringement or misappropriation of trade secrets could be costly and time-consuming, regardless of the outcome.Thus, even if we were to ultimately prevail, or to settle at an early stage, such litigation could burden us with substantial unanticipated costs. In addition,litigation or threatened litigation could result in significant demands on the time and attention of our management team, distracting them from the pursuit ofother company business.Unfavorable outcomes in an intellectual property litigation could limit our research and development activities and/or our ability to commercializecertain products.If third parties successfully assert intellectual property rights against us, we might be barred from using aspects of our technology platform, or barredfrom developing and commercializing related products. Prohibitions against using specified technologies, or prohibitions against commercializing specifiedproducts, could be imposed by a court or by a settlement agreement between us and a plaintiff. In addition, if we are unsuccessful in defending againstallegations of patent infringement or misappropriation of trade secrets, we may be forced to pay substantial damage awards to the plaintiff. There is inevitableuncertainty in any litigation, including intellectual property litigation. There can be no assurance that we would prevail in any intellectual propertylitigation, even if the case against us is weak or flawed. If litigation leads to an outcome unfavorable to us, we may be required to obtain a license from thepatent owner in order to continue our research and development programs or our partnerships or to market our product(s). It is possible that the necessarylicense will not be available to us on commercially acceptable terms, or at all. This could limit our research and development activities, our ability tocommercialize specified products, or both.Most of our competitors are larger than we are and have substantially greater resources. They are, therefore, likely to be able to sustain the costs ofcomplex patent litigation longer than we could. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability toraise the funds necessary to continue our clinical trials, continue our internal research programs, in-license needed technology, or enter into strategicpartnerships that would help us bring our product candidates to market.In addition, any future patent litigation, interference or other administrative proceedings will result in additional expense and distraction of ourpersonnel. An adverse outcome in such litigation or proceedings may expose us or our strategic partners to loss of our proprietary position, expose us tosignificant liabilities, or require us to seek licenses that may not be available on commercially acceptable terms, if at all.An intellectual property litigation could lead to unfavorable publicity that could harm our reputation and cause the market price of our common stock todecline.During the course of any patent litigation, there could be public announcements of the results of hearings, rulings on motions, and other interimproceedings in the litigation. If securities analysts or investors regard these announcements as negative, the perceived value of our products, programs, orintellectual property could be diminished. In such event, the market price of our common stock may decline.AV-380 and tivozanib are protected by patents exclusively licensed from other companies or institutions. If the licensors terminate the licenses or fail tomaintain or enforce the underlying patents, our competitive position would be harmed and our partnerships could be terminated.Certain of our product candidates and out-licensing arrangements depend on patents and/or patent applications owned by other companies orinstitutions with which we have entered into intellectual property licenses. In particular, we hold exclusive licenses from St. Vincent’s for therapeuticapplications that benefit from inhibition or decreased expression or activity of MIC-1, which we refer to as GDF15 and which we used in our AV-380program, and from KHK for tivozanib. We may enter into additional license agreements as part of the development of our business in the future. Our licensorsmay not successfully prosecute certain patent applications under which we are licensed and on which our business depends. Even if patents issue from theseapplications, our licensors may fail to maintain these patents, may decide not to pursue litigation against third-party infringers, may fail to proveinfringement, or may fail to defend against counterclaims of patent invalidity or unenforceability. In addition, in spite of our best efforts, a licensor couldclaim that we have materially breached a license agreement and terminate the license, thereby removing our or our licensees’ ability to obtain regulatoryapproval for and to market any product covered by such license. If these in-licenses are terminated, or if the underlying patents fail to provide the intendedmarket exclusivity, competitors would have the freedom to seek regulatory approval of, and to market, identical products. In addition, the partners to whichwe have sublicensed certain rights under these licenses, including Novartis and Pharmstandard, would likely have grounds for terminating our partnerships ifthese licenses are terminated or the underlying patents are not maintained or enforced. This could have a material adverse effect on our results of operations,our competitive business position and our business prospects.45Confidentiality agreements with employees and third parties may not prevent unauthorized disclosure of trade secrets and other proprietary information.In addition to patents, we rely on trade secrets, technical know-how, and proprietary information concerning our business strategy in order to protectour competitive position in the field of oncology. In the course of our research, development and business activities, we often rely on confidentialityagreements to protect our proprietary information. Such confidentiality agreements are used, for example, when we talk to vendors of laboratory or clinicaldevelopment services or potential strategic partners. In addition, each of our employees is required to sign a confidentiality agreement upon joining ourcompany. We take steps to protect our proprietary information, and we seek to carefully draft our confidentiality agreements to protect our proprietaryinterests. Nevertheless, there can be no guarantee that an employee or an outside party will not make an unauthorized disclosure of our proprietaryconfidential information. This might happen intentionally or inadvertently. It is possible that a competitor will make use of such information, and that ourcompetitive position will be compromised, in spite of any legal action we might take against persons making such unauthorized disclosures.Trade secrets are difficult to protect. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, or outsidescientific collaborators might intentionally or inadvertently disclose our trade secret information to competitors. Enforcing a claim that a third-party illegallyobtained and is using any of our trade secrets is expensive and time-consuming, and the outcome is unpredictable. In addition, courts outside the UnitedStates sometimes are less willing than U.S. courts to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge,methods and know-how.Our research and development strategic partners may have rights to publish data and other information to which we have rights. In addition, wesometimes engage individuals or entities to conduct research relevant to our business. The ability of these individuals or entities to publish or otherwisepublicly disclose data and other information generated during the course of their research is subject to certain contractual limitations. These contractualprovisions may be insufficient or inadequate to protect our confidential information. If we do not apply for patent protection prior to such publication, or ifwe cannot otherwise maintain the confidentiality of our proprietary technology and other confidential information, then our ability to obtain patentprotection or to protect our trade secret information may be jeopardized.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and maynot adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative: ·Others may be able to make compounds that are similar to our product candidates but that are not covered by the claims of the patents that weown or have exclusively licensed. ·We or our licensors or strategic partners might not have been the first to make the inventions covered by the issued patent or pending patentapplication that we own or have exclusively licensed. ·We or our licensors or strategic partners might not have been the first to file patent applications covering certain of our inventions. ·Others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectualproperty rights. ·It is possible that our pending patent applications will not lead to issued patents. ·Issued patents that we own or have exclusively licensed may not provide us with a competitive advantage; for example, our issued patents maynot be broad enough to prevent the commercialization of competitive antibodies that are biosimilar to one or more of our antibody products, ormay be held invalid or unenforceable, as a result of legal challenges by our competitors. ·Our competitors might conduct research and development activities in countries where we do not have patent rights and then use theinformation learned from such activities to develop competitive products for sale in our major commercial markets. ·We may not develop additional proprietary technologies that are patentable. ·The patents of others may have an adverse effect on our business.46Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining andenforcing patents in the biopharma industry involve both technological complexity and legal complexity. Therefore, obtaining and enforcing biopharmapatents is costly, time-consuming and inherently uncertain. In addition, several recent events have increased uncertainty with regard to our ability to obtainpatents in the future and the value of patents once obtained. Among these, in September 2011, patent reform legislation passed by Congress was signed intolaw. The new patent law introduces changes including a first-to-file system for determining which inventors may be entitled to receive patents, and a newpost-grant review process that allows third parties to challenge newly issued patents. It remains to be seen how the biopharma industry will be affected bysuch changes in the patent system. In addition, the Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patentprotection available in specified circumstances or weakening the rights of patent owners in specified situations. Depending on decisions by the U.S.Congress, the federal courts, and the U.S. Patent and Trademark Office, the laws and regulations governing patents could change in unpredictable ways thatcould weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. Risks Related to Regulatory Approval and Marketing of Our Product Candidates and Other Legal Compliance MattersEven if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time-consuming and uncertain andmay prevent us from obtaining approvals for the commercialization of some or all of our product candidates. If we or our collaborators are not able toobtain, or if there are delays in obtaining, required regulatory approvals, we or they will not be able to commercialize our product candidates, and ourability to generate revenue will be materially impaired. Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture,safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, export and import, are subject to comprehensiveregulation by the FDA and other regulatory agencies in the United States and by the European Medicines Agency and comparable regulatory authorities inother countries. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate. We and ourcollaborators have not received approval to market any of our product candidates from regulatory authorities in any jurisdiction. We have only limitedexperience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party contract research organizationsto assist us in this process. Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to the various regulatoryauthorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing regulatory approval also requires the submissionof information about the product manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatory authority. Our productcandidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or othercharacteristics that may preclude our obtaining marketing approval or prevent or limit commercial use. The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years if additional clinical trials arerequired, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the productcandidates involved. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes orregulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. TheFDA and comparable authorities in other countries have substantial discretion in the approval process and may refuse to accept any application or maydecide that our data is insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the dataobtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval we or ourcollaborators ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commerciallyviable. Accordingly, if we or our collaborators experience delays in obtaining approval or if we or they fail to obtain approval of our product candidates, thecommercial prospects for our product candidates may be harmed and our ability to generate revenues will be materially impaired. Failure to obtain marketing approval in foreign jurisdictions would prevent our product candidates from being marketed in such jurisdictions. In order to market and sell our medicines in the European Union and many other jurisdictions, we or our third party collaborators must obtain separatemarketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involveadditional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval processoutside the United States generally includes47all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, a product be approved for reimbursementbefore the product can be approved for sale in that country. We or our third party collaborators may not obtain approvals from regulatory authorities outsidethe United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, andapproval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by theFDA. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market. We, or any future collaborators, may not be able to obtain orphan drug designation or orphan drug exclusivity for our product candidates and, even if wedo, that exclusivity may not prevent the FDA or the EMA from approving other competing products.Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs and biologics for relatively small patientpopulations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is intended to treat a rare disease orcondition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States. We, or any futurecollaborators, may seek orphan drug designations for other product candidates and may be unable to obtain such designations.Even if we, or any future collaborators, obtain orphan drug designation for a product candidate, we, or they, may not be able to obtain orphan drugexclusivity for that candidate. Generally, a product with orphan drug designation only becomes entitled to orphan drug exclusivity if it receives the firstmarketing approval for the indication for which it has such designation, in which case the FDA or the EMA will be precluded from approving anothermarketing application for the same product for that indication for the applicable exclusivity period. The applicable exclusivity period is seven years in theUnited States and ten years in Europe. The European exclusivity period can be reduced to six years if a product no longer meets the criteria for orphan drugdesignation or if the product is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or theEMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meetthe needs of patients with the rare disease or condition.Even if we, or any future collaborators, obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product fromcompetition because different products can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approvethe same drug or biologic for the same condition if the FDA concludes that the later product is clinically superior in that it is shown to be safer, more effectiveor makes a major contribution to patient care.Even if we, or any current or future collaborators, obtain marketing approvals for our product candidates, the terms of approvals and ongoing regulationof our products may limit how we, or they, manufacture and market our products, which could materially impair our ability to generate revenue.Once marketing approval has been granted, an approved product and its manufacturer and marketer are subject to ongoing review and extensiveregulation. We, and any current or future collaborators, must therefore comply with requirements concerning advertising and promotion for any of ourproduct candidates for which we or they obtain marketing approval. Promotional communications with respect to prescription products are subject to avariety of legal and regulatory restrictions and must be consistent with the information in the product’s approved labeling. Thus, we and any current or futurecollaborators will not be able to promote any products we develop for indications or uses for which they are not approved.In addition, manufacturers of approved products and those manufacturers’ facilities are required to comply with extensive FDA requirements,including ensuring that quality control and manufacturing procedures conform to cGMPs, which include requirements relating to quality control and qualityassurance as well as the corresponding maintenance of records and documentation and reporting requirements. We, our contract manufacturers, any current orfuture collaborators and their contract manufacturers could be subject to periodic unannounced inspections by the FDA to monitor and ensure compliancewith cGMPs.Accordingly, assuming we, or any current or future collaborators, receive marketing approval for one or more of our product candidates, we, and anycurrent or future collaborators, and our and their contract manufacturers will continue to expend time, money and effort in all areas of regulatory compliance,including manufacturing, production, product surveillance and quality control.If we, and any current or future collaborators, are not able to comply with post-approval regulatory requirements, we, and any current or futurecollaborators, could have the marketing approvals for our products withdrawn by regulatory authorities and our, or any current or future collaborators’,ability to market any products could be limited, which could adversely affect our ability to achieve or sustain profitability. Further, the cost of compliancewith post-approval regulations may have a negative effect on our operating results and financial condition.48Any product candidate for which we or our collaborators obtain marketing approval could be subject to restrictions or withdrawal from the market andwe may be subject to substantial penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our productcandidates, when and if any of them are approved. Any product candidate for which we or our collaborators obtain marketing approval, along with the manufacturing processes, post-approval clinicaldata, labeling, advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and otherregulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listingrequirements, cGMP requirements relating to quality control and manufacturing, quality assurance and corresponding maintenance of records anddocuments, and requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a product candidate isgranted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval, or containrequirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the medicine, including the requirement to implement arisk evaluation and mitigation strategy. The FDA and other agencies, including the Department of Justice, or the DOJ, closely regulate and monitor the post-approval marketing andpromotion of products to ensure that they are marketed and distributed only for the approved indications and in accordance with the provisions of theapproved labeling. The FDA and DOJ impose stringent restrictions on manufacturers’ communications regarding off-label use and if we do not market ourproducts for their approved indications, we may be subject to enforcement action for off-label marketing. Violations of the Federal Food, Drug, and CosmeticAct and other statutes, including the False Claims Act, relating to the promotion and advertising of prescription products may lead to investigations andenforcement actions alleging violations of federal and state health care fraud and abuse laws, as well as state consumer protection laws.In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, orfailure to comply with regulatory requirements, may yield various results, including: ·restrictions on such products, manufacturers or manufacturing processes; ·restrictions on the labeling or marketing of a product; ·restrictions on distribution or use of a product; ·requirements to conduct post-marketing studies or clinical trials; ·warning letters or untitled letters; ·withdrawal of the products from the market; ·refusal to approve pending applications or supplements to approved applications that we submit; ·recall of products; ·damage to relationships with any potential collaborators; ·unfavorable press coverage and damage to our reputation; ·fines, restitution or disgorgement of profits or revenues; ·suspension or withdrawal of marketing approvals; ·refusal to permit the import or export of our products; ·product seizure; ·injunctions or the imposition of civil or criminal penalties; and ·litigation involving patients using our products.Non-compliance with European Union requirements regarding safety monitoring or pharmacovigilance, and with requirements related to thedevelopment of products for the pediatric population, can also result in significant financial penalties. Similarly, failure to comply with the EuropeanUnion’s requirements regarding the protection of personal information can also lead to significant penalties and sanctions.49Our relationships with healthcare providers, physicians and third party payors will be subject to applicable anti-kickback, fraud and abuse and otherhealthcare laws and regulations, which, in the event of a violation, could expose us to criminal sanctions, civil penalties, contractual damages,reputational harm and diminished profits and future earnings. Healthcare providers, physicians and third party payors will play a primary role in the recommendation and prescription of any product candidates forwhich we obtain marketing approval. Our future arrangements with healthcare providers, physicians and third party payors may expose us to broadlyapplicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships throughwhich we market, sell and distribute any products for which we obtain marketing approval. Restrictions under applicable federal and state healthcare lawsand regulations include the following: ·the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving orproviding remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or thepurchase, order or recommendation or arranging of, any good or service, for which payment may be made under a federal healthcare program suchas Medicare and Medicaid; ·the federal False Claims Act imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individualsor entities for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment by a federalhealthcare program or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligationto pay money to the federal government, with potential liability including mandatory treble damages and significant per-claim penalties,currently set at $5,500 to $11,000 per false claim; ·the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme todefraud any healthcare benefit program or making false statements relating to healthcare matters; ·HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposesobligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individuallyidentifiable health information; ·the federal Physician Payments Sunshine Act requires applicable manufacturers of covered products to report payments and other transfers ofvalue to physicians and teaching hospitals, with data collection beginning in August 2013; and ·analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and transparency statutes, may apply to salesor marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third party payors, includingprivate insurers. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevantcompliance guidance promulgated by the federal government and may require product manufacturers to report information related to payments and othertransfers of value to physicians and other healthcare providers or marketing expenditures. State and foreign laws also govern the privacy and security ofhealth information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thuscomplicating compliance efforts. If our operations are found to be in violation of any of the laws described above or any governmental regulations that apply to us, we may be subjectto penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations. Any penalties, damages, fines,curtailment or restructuring of our operations could adversely affect our financial results. We are developing and implementing a corporate complianceprogram designed to ensure that we will market and sell any future products that we successfully develop from our product candidates in compliance with allapplicable laws and regulations, but we cannot guarantee that this program will protect us from governmental investigations or other actions or lawsuitsstemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us and we are not successful in defendingourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or othersanctions.Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantialcosts. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or caselaw involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or anyother governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines,imprisonment, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring ofour operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance withapplicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.50Current and future legislation may increase the difficulty and cost for us and any collaborators to obtain marketing approval of our other productcandidates and affect the prices we, or they, may obtain. In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approval of our other product candidates, restrict or regulate post-approvalactivities and affect our ability, or the ability of any collaborators, to profitably sell any products for which we, or they, obtain marketing approval. Weexpect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and inadditional downward pressure on the price that we, or any collaborators, may receive for any approved products. For example, in March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care andEducation Affordability Reconciliation Act, or collectively the PPACA. Among the provisions of the PPACA of potential importance to our business and ourproduct candidates are the following: ·an annual, non-deductible fee on any entity that manufactures or imports specified branded prescription products and biologic agents; ·an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program; ·a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for products that areinhaled, infused, instilled, implanted or injected; ·expansion of healthcare fraud and abuse laws, including the civil False Claims Act and the federal Anti-Kickback Statute, new governmentinvestigative powers and enhanced penalties for noncompliance; ·a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiatedprices of applicable brand products to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatientproducts to be covered under Medicare Part D; ·extension of manufacturers’ Medicaid rebate liability to individuals enrolled in Medicaid managed care organizations; ·expansion of eligibility criteria for Medicaid programs; ·expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; ·new requirements to report certain financial arrangements with physicians and teaching hospitals; ·a new requirement to annually report product samples that manufacturers and distributors provide to physicians; ·a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research,along with funding for such research; ·a new Independent Payment Advisory Board, or IPAB, which has authority to recommend certain changes to the Medicare program to reduceexpenditures by the program that could result in reduced payments for prescription products; and ·established the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery models.Other legislative changes have been proposed and adopted since the PPACA was enacted. These changes include the Budget Control Act of 2011,which, among other things, led to aggregate reductions to Medicare payments to providers of up to 2% per fiscal year that started in 2013 and, due tosubsequent legislation, will continue until 2025. In addition, the American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments toseveral providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These newlaws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any of our productcandidates for which regulatory approval is obtained. We expect that the PPACA, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions inMedicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and in additional downward pressure on the price thatwe receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction inpayments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generaterevenue, attain profitability, or commercialize our products. Moreover, legislative and regulatory proposals have been made to expand post-approvalrequirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will beenacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of ourproduct candidates, if any, may be. In addition, increased scrutiny by the United States Congress of51the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us and any collaborators to more stringent productlabeling and post-marketing testing and other requirements.Laws and regulations governing any international operations we may have in the future may preclude us from developing, manufacturing and sellingcertain products outside of the United States and require us to develop and implement costly compliance programs.If we expand our operations outside of the United States, we must dedicate additional resources to comply with numerous laws and regulations in eachjurisdiction in which we plan to operate. The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering,authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencingany act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companieswhose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records thataccurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system ofinternal accounting controls for international operations.Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPApresents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and otherhospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to beimproper payments to government officials and have led to FCPA enforcement actions.Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-U.S.nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If we expand ourpresence outside of the United States, it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us fromdeveloping, manufacturing, or selling certain products and product candidates outside of the United States, which could limit our growth potential andincrease our development costs.The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension ordebarment from government contracting. The Securities and Exchange Commission, or SEC, also may suspend or bar issuers from trading securities on U.S.exchanges for violations of the FCPA’s accounting provisions.If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on our business.We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling,use, storage, treatment and disposal of hazardous materials and wastes. From time to time and in the future, our operations may involve the use of hazardousand flammable materials, including chemicals and biological materials, and may also produce hazardous waste products. Even if we contract with thirdparties for the disposal of these materials and waste products, we cannot completely eliminate the risk of contamination or injury resulting from thesematerials. In the event of contamination or injury resulting from the use or disposal of our hazardous materials, we could be held liable for any resultingdamages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure tocomply with such laws and regulations.We maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the useof hazardous materials, but this insurance may not provide adequate coverage against potential liabilities. However, we do not maintain insurance forenvironmental liability or toxic tort claims that may be asserted against us.In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. Current orfuture environmental laws and regulations may impair our research, development or production efforts, which could adversely affect our business, financialcondition, results of operations or prospects. In addition, failure to comply with these laws and regulations may result in substantial fines, penalties or othersanctions.Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.In some countries, such as the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control andaccess. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product.To obtain reimbursement or pricing approval in some countries, we, or any current or future collaborators, may be required to conduct a clinical trial thatcompares the cost-effectiveness of our product to other52available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our businesscould be materially harmed.We rely significantly upon information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cybersecurity incidents, could harm our ability to operate our business effectively.Despite the implementation of security measures, our internal computer systems and those of third parties with which we contract are vulnerable todamage from cyber-attacks, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Systemfailures, accidents or security breaches could cause interruptions in our operations, and could result in a material disruption of our clinical andcommercialization activities and business operations, in addition to possibly requiring substantial expenditures of resources to remedy. The loss of clinicaltrial data could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that anydisruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate public disclosure of confidential or proprietaryinformation, we could incur liability and our product development and commercialization efforts could be delayed.Risks Related to Employee Matters and Managing GrowthIf we fail to attract and keep senior management, we may be unable to successfully develop our product candidates, conduct our clinical trials andcommercialize our product candidates.Our success depends in part on our continued ability to attract, retain and motivate highly qualified management personnel. We are highly dependentupon our senior management, as well as others on our management team. The reduction in force related to the restructuring we completed this year couldmake it more difficult to retain or attract employees in the future. The loss of services of employees, and in particular, of a member of management coulddelay or prevent our ability to successfully maintain or enter into new licensing arrangements or collaborations, the successful development of our productcandidates, the completion of our planned clinical trials or the commercialization of our product candidates. We do not carry “key person” insurancecovering any members of our senior management. Our employment arrangements with all of these individuals are “at will,” meaning they or we can terminatetheir service at any time.We face intense competition for qualified individuals from numerous pharmaceutical and biotechnology companies, universities, governmentalentities and other research institutions, many of which have substantially greater resources with which to reward qualified individuals than we do. We mayface challenges in retaining our existing senior management and key employees and recruiting new employees to join our company as our business needschange. We may be unable to attract and retain suitably qualified individuals, and our failure to do so could have an adverse effect on our ability toimplement our future business plans.Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insidertrading.We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDAregulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and statehealth-care fraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular,sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, salescommission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of informationobtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a code of businessconduct and ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activitymay not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuitsstemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defendingourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or othersanctions.In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic informationregarding our business, our results of operations or potential transactions we are considering. Despite the adoption of an insider trading policy, we may not beable to prevent a director, executive or employee from trading in our common stock on the basis of, or while having access to, material, nonpublicinformation. If a director, executive or employee was to be investigated, or an action was to be brought against a director, executive or employee for insidertrading, it could have a negative impact on our reputation and our stock price. Such a claim, with or without merit, could also result in substantialexpenditures of time and money, and divert attention of our management team from other tasks important to the success of our business.53Risks Related to Ownership of Our Common StockIf we fail to meet the requirements for continued listing on the NASDAQ Global Select Market, our common stock could be delisted from trading, whichwould decrease the liquidity of our common stock and our ability to raise additional capital.Our common stock is currently listed for quotation on the NASDAQ Global Select Market. We are required to meet specified financial requirements inorder to maintain our listing on the NASDAQ Global Select Market. One such requirement is that we maintain a minimum bid price of at least $1.00 per sharefor our common stock. If our bid price falls below $1.00 per share for 30 consecutive business days, we will receive a deficiency notice from NASDAQadvising us that we have 180 days to regain compliance by maintaining a minimum bid price of at least $1.00 for a minimum of ten consecutive businessdays. Under certain circumstances, NASDAQ could require that the minimum bid price exceed $1.00 for more than ten consecutive days before determiningthat a company complies. If in the future we fail to satisfy the NASDAQ Global Select Market’s continued listing requirements, we may transfer to theNASDAQ Capital Market, which generally has lower financial requirements for initial listing, to avoid delisting, or, if we fail to meet its listing requirements,the OTC Bulletin Board. Any potential delisting of our common stock from the NASDAQ Global Select Market would make it more difficult for ourstockholders to sell our stock in the public market and would likely result in decreased liquidity and increased volatility for our common stock.The market price of our common stock has been, and is likely to continue to be, highly volatile, and could fall below the price you paid. A significantdecline in the value of our stock price could also result in securities class-action litigation against us.The market price of our common stock has been, and is likely to continue to be, highly volatile and subject to wide fluctuations in price in response tovarious factors, many of which are beyond our control, including: ·new products, product candidates or new uses for existing products introduced or announced by our strategic partners, or our competitors, andthe timing of these introductions or announcements; ·actual or anticipated results from and any delays in our clinical trials; ·results of regulatory reviews relating to the approval of our product candidates; ·the results of our efforts to discover, develop, acquire or in-license additional product candidates or products; ·disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection forour technologies; ·announcements by us of material developments in our business, financial condition and/or operations; ·announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures and capital commitments; ·additions or departures of key scientific or management personnel; ·conditions or trends in the biotechnology and biopharmaceutical industries; ·actual or anticipated changes in earnings estimates, development timelines or recommendations by securities analysts; ·general economic and market conditions and other factors that may be unrelated to our operating performance or the operating performance ofour competitors, including changes in market valuations of similar companies; and ·sales of common stock by us or our stockholders in the future, as well as the overall trading volume of our common stock.In addition, the stock market in general and the market for biotechnology and biopharmaceutical companies in particular have experienced extremeprice and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. These broad market andindustry factors may seriously harm the market price of our common stock, regardless of our operating performance.Periods of volatility in the market for a company’s stock are often followed by litigation against the company. For example, since our May 2, 2013announcement regarding the vote of the Oncologic Drugs Advisory Committee of the FDA, we and certain of our former officers and directors have beeninvolved in a number of legal proceedings, including those described below under the heading “Legal Proceedings” in Part I—Item 3 of this Form 10-K.These proceedings and other similar litigation, if instituted against us, could result in substantial costs and diversion of management’s attention andresources, which could materially and adversely affect our business and financial condition.54We may not achieve development and commercialization goals in the time frames that we publicly estimate, which could have an adverse impact on ourbusiness and could cause our stock price to decline.We set goals, and make public statements regarding our expected timing for certain accomplishments, such as the initiation and completion of clinicaltrials, filing and approval of regulatory applications for our product candidates and other developments and milestones under our research and developmentprograms. The actual timing of these events can vary significantly due to a number of factors, including, without limitation, delays or failures in our and ourcurrent and potential collaborators’ preclinical studies or clinical trials, the amount of time, effort and resources committed to our programs by us and ourcurrent and potential collaborators and the uncertainties inherent in the regulatory approval process. As a result, there can be no assurance that our or ourcurrent and potential collaborators’ preclinical studies and clinical trials will advance or be completed in the time frames we expect or announce, that we orour current and potential collaborators will make regulatory submissions or receive regulatory approvals as planned or that we or our current and potential collaborators will be able to adhere to our current schedule for the achievement of key milestones under any of our programs. If we or any collaborators fail toachieve one or more of the milestones described above as planned, our business could be materially adversely affected and the price of our common stockcould decline.Our management has broad discretion over our use of available cash and cash equivalents and might not spend our available cash and cash equivalents inways that increase the value of your investment.Our management has broad discretion on where and how to use our cash and cash equivalents and you will be relying on the judgment of ourmanagement regarding the application of our available cash and cash equivalents to fund our operations. Our management might not apply our cash or cashequivalents in ways that increase the value of your investment. We expect to use a substantial portion of our cash to fund existing and future research anddevelopment of our preclinical and clinical product candidates, with the balance, if any, to be used for working capital and other general corporate purposes,which may in the future include investments in, or acquisitions of, complementary businesses, joint ventures, partnerships, services or technologies. Ourmanagement might not be able to yield a significant return, if any, on any investment of this cash. You will not have the opportunity to influence ourdecisions on how to use our cash reserves.Fluctuations in our quarterly operating results could adversely affect the price of our common stock.Our quarterly operating results may fluctuate significantly. Some of the factors that may cause our operating results to fluctuate on a period-to-periodbasis include: ·the status of our preclinical and clinical development programs; ·the level of expenses incurred in connection with our preclinical and clinical development programs, including development andmanufacturing costs relating to our preclinical and clinical development candidates; ·any intellectual property infringement lawsuit or other litigation in which we may become involved; ·the implementation of our current restructuring and cost-savings strategies; ·the implementation or termination of collaboration, licensing, manufacturing or other material agreements with third parties, and non-recurringrevenue or expenses under any such agreement; ·costs associated with lawsuits against us, including the current purported class action and derivative lawsuits described elsewhere in this reportunder “Part I, Item 3—Legal Proceedings;” ·changes in our loan agreement with Hercules, including the existence of any event of default that may accelerate payments due thereunder; and ·compliance with regulatory requirements.Period-to-period comparisons of our historical and future financial results may not be meaningful, and investors should not rely on them as anindication of future performance. Our fluctuating results may fail to meet the expectations of securities analysts or investors. Our failure to meet theseexpectations may cause the price of our common stock to decline.Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.As widely reported, global credit and financial markets have been experiencing extreme volatility, and in some cases, disruptions, over the pastseveral years, in many cases, over extended periods. Although certain of these trends have recently showed signs of reversing, there can be no assurance thatrapid or extended periods of deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general businessstrategy may be adversely affected by external economic conditions and a volatile business environment or unpredictable and unstable market conditions. Ifthe equity and credit markets are55not favorable at any time we seek to raise capital, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. Failureto secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financialperformance and stock price and could require us to delay or abandon clinical development plans. In addition, there is a risk that one or more of our currentservice providers, manufacturers or other partners may not survive economically turbulent times, which could directly affect our ability to attain ouroperating goals on schedule and on budget.At December 31, 2015, we had $34.1 million of cash, cash equivalents and marketable securities consisting of cash on deposit with banks, moneymarket funds, U.S. government agency securities, and corporate debt securities, including commercial paper. As of the date of this report, we are not aware ofany downgrades, material losses, or other significant deterioration in the fair value of our cash equivalents. However, no assurance can be given thatdeterioration in conditions of the global credit and financial markets would not negatively impact our current portfolio of cash equivalents or our ability tomeet our financing objectives. Dislocations in the credit market may adversely impact the value and/or liquidity of cash equivalents owned by us.There is a possibility that our stock price may decline because of volatility of the stock market and general economic conditions.Future sales of shares of our common stock, including shares issued upon the exercise of currently outstanding options, could negatively affect our stockprice.A substantial portion of our outstanding common stock can be traded without restriction at any time. Some of these shares are currently restricted as aresult of securities laws, but will be able to be sold, subject to any applicable volume limitations under federal securities laws with respect to affiliate sales, inthe near future. As such, sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or theperception in the market that the holders of a large number of shares intend to sell such shares, could reduce the market price of our common stock. Inaddition, we have a significant number of shares that are subject to outstanding options. The exercise of these options and the subsequent sale of theunderlying common stock could cause a further decline in our stock price. These sales also might make it difficult for us to sell equity securities in the futureat a time and at a price that we deem appropriate.If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and tradingvolume could decline.The trading market for our common stock may depend in part on the research and reports that securities or industry analysts publish about us or ourbusiness. We do not have any control over these analysts. There can be no assurance that analysts will cover us, or provide favorable coverage. A lack ofresearch coverage may negatively impact the market price of our common stock. To the event we do have analyst coverage, if one or more analystsdowngrade our stock or change their opinion of our stock, our share price would likely decline. In addition, if one or more analysts cease coverage of ourcompany or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume todecline.A decline in our stock price may affect future fundraising efforts.We currently have no product revenues, and depend entirely on funds raised through other sources. One source of such funding is future debt and/orequity offerings. Our ability to raise funds in this manner depends upon, among other things, our stock price, which may be affected by capital market forces,evaluation of our stock by securities analysts, product development success (or failure), and internal management operations and controls.Provisions in our certificate of incorporation, our by-laws or Delaware law might discourage, delay or prevent a change in control of our company orchanges in our management and, therefore, depress the market price of our common stock.Provisions of our certificate of incorporation, our by-laws or Delaware law may have the effect of deterring unsolicited takeovers or delaying orpreventing a change in control of our company or changes in our management, including transactions in which our stockholders might otherwise receive apremium for their shares over then current market prices. In addition, these provisions may limit the ability of stockholders to approve transactions that theymay deem to be in their best interest. These provisions include: ·advance notice requirements for stockholder proposals and nominations; ·the inability of stockholders to act by written consent or to call special meetings;56 ·the ability of our board of directors to make, alter or repeal our by-laws; and ·the ability of our board of directors to designate the terms of and issue new series of preferred stock without stockholder approval, which couldbe used to institute a rights plan, or a poison pill, that would work to dilute the stock ownership of a potential hostile acquirer, likelypreventing acquisitions that have not been approved by our board of directors.In addition, Section 203 of the Delaware General Corporation Law prohibits a publicly-held Delaware corporation from engaging in a businesscombination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of ourvoting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the businesscombination is approved in a prescribed manner.The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future forshares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that a stockholder could receive apremium for shares of our common stock held by a stockholder in an acquisition.Our business could be negatively affected as a result of the actions of activist shareholders.Proxy contests have been waged against companies in the biopharmaceutical industry over the last few years. If faced with a proxy contest, we maynot be able to successfully respond to the contest, which would be disruptive to our business. Even if we are successful, our business could be adverselyaffected by a proxy contest because: ·responding to proxy contests and other actions by activist shareholders may be costly and time-consuming, and may disrupt our operations anddivert the attention of management and our employees; ·perceived uncertainties as to the potential outcome of any proxy contest may result in our inability to consummate potential acquisitions,collaborations or in-licensing opportunities and may make it more difficult to attract and retain qualified personnel and business partners; and ·if individuals that have a specific agenda different from that of our management or other members of our board of directors are elected to ourboard as a result of any proxy contest, such an election may adversely affect our ability to effectively and timely implement our strategic planand create additional value for our stockholders.Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on ourability to produce accurate financial statements and on our stock price.Section 404 of the Sarbanes-Oxley Act of 2002 requires us, on an annual basis, to review and evaluate our internal controls, and requires ourindependent registered public accounting firm to attest to the effectiveness of our internal controls. Despite our efforts, we can provide no assurance as to our,or our independent registered public accounting firm’s, conclusions with respect to the effectiveness of our internal control over financial reporting underSection 404. There is a risk that neither we nor our independent registered public accounting firm will be able to continue to conclude within the prescribedtimeframe that our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in the financialmarkets due to a loss of confidence in the reliability of our financial statements.We do not expect to pay any cash dividends for the foreseeable future.You should not rely on an investment in our common stock to provide dividend income. We do not anticipate that we will pay any cash dividends toholders of our common stock in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our existing operations. In addition,our ability to pay cash dividends is currently prohibited by the terms of our debt financing arrangements and any future debt financing arrangement maycontain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. Accordingly, investors must rely on salesof their common stock after price appreciation, which may never occur, as the only way to realize any return on their investment. As a result, investorsseeking cash dividends should not purchase our common stock. 57We might not be able to utilize a significant portion of our net operating loss carryforwards and research and development tax credit carryforwards.As of December 31, 2015, we had federal and state net operating loss carryforwards of $444.5 million and $338.7 million, respectively, and federal andstate research and development tax credit carryforwards of $10.1 million and $4.0 million, respectively, each of which if not utilized will expire at variousdates through 2035. These net operating loss and tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities. Inaddition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an“ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three‑year period, the corporation’sability to use its pre‑change net operating loss carryforwards and other pre‑change tax attributes to offset its post‑change income may be limited. We mayexperience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. We have notconducted a detailed study to document whether our historical activities qualify to support the research and development credit carryforwards. A detailedstudy could result in adjustment to our research and development credit carryforwards. If we determine that an ownership change has occurred and our abilityto use our historical net operating loss and tax credit carryforwards is materially limited, or if our research and development carryforwards are adjusted, itwould harm our future operating results by effectively increasing our future tax obligations. ITEM 1B.Unresolved Staff CommentsNone. ITEM 2.PropertiesWe sublease our principal facilities, which consist of approximately 5,000 square feet of office space located at 1 Broadway, Cambridge,Massachusetts. Our lease arrangement is cancellable with 30 days’ notice to our landlord. We believe that our existing facilities are sufficient for our currentneeds for the foreseeable future. ITEM 3.Legal ProceedingsTwo class action lawsuits have been filed against us and certain of our former officers and members of our board of directors, (Tuan Ha-Ngoc, David N.Johnston, William Slichenmyer and Ronald DePinho), in the United States District Court for the District of Massachusetts, one captioned Paul Sanders v.Aveo Pharmaceuticals, Inc., et al., No. 1:13-cv-11157-JLT, filed on May 9, 2013, and the other captioned Christine Krause v. AVEO Pharmaceuticals, Inc., etal., No. 1:13-cv-11320-JLT, filed on May 31, 2013. On December 4, 2013, the District Court consolidated the complaints as In re AVEO Pharmaceuticals, Inc.Securities Litigation et al., No. 1:13-cv-11157-DJC, and an amended complaint was filed on February 3, 2014. The amended complaint purported to bebrought on behalf of shareholders who purchased our common stock between January 3, 2012 and May 1, 2013. The amended complaint generally alleged that we and certain of our present and former officers and directors violated Sections 10(b) and/or 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and/or misleading statements concerning the phase 3 trial design and results for our TIVO-1 study in aneffort to lead investors to believe that the drug would receive approval from the FDA. The lawsuit seeks unspecified damages, interest, attorneys’ fees, andother costs. The consolidated amended complaint was dismissed without prejudice on March 20, 2015, and the lead plaintiffs then filed a second amendedcomplaint bringing similar allegations. We moved to dismiss again, and after a second round of briefing and oral argument, the court ruled in our favor anddismissed the second amended complaint with prejudice on November 18, 2015. The lead plaintiffs have appealed the court’s decision to the United StatesCourt of Appeals for the First Circuit. We deny any allegations of wrongdoing and intend to continue to vigorously defend against this lawsuit. However,there is no assurance that we will be successful in our defense or that insurance will be available or adequate to fund any settlement or judgment or thelitigation costs of the action. Moreover, we are unable to predict the outcome or reasonably estimate a range of possible loss at this time.On April 4, 2014, Karen J. van Ingen, a purported purchaser of AVEO stock, filed a derivative complaint allegedly on behalf of AVEO in the UnitedStates District Court for the District of Massachusetts, Civil Action No. 1:14-cv-11672-DJC, naming AVEO, as a nominal defendant and also naming asdefendants present and former members of our board of directors, including Tuan Ha-Ngoc, Henri A. Termeer, Kenneth M. Bate, Anthony B. Evnin, RobertEpstein, Raju Kucherlapati, Robert C. Young, and Kenneth E. Weg. The complaint alleged breach of fiduciary duty and abuse of control between January2012 and May 2013 with respect to allegedly misleading statements and omissions regarding tivozanib. The lawsuit seeks, among other relief, unspecifieddamages, costs and expenses, including attorneys’ fees, an order requiring us to implement certain corporate governance reforms, restitution from thedefendants and such other relief as the court might find just and proper. We filed a motion to dismiss the derivative complaint, and after briefing and oralargument, on March 18, 2015 the Court ruled in our favor and dismissed the case with prejudice. The plaintiff then filed a motion seeking to vacate theCourt’s order of dismissal and permit filing of an amended complaint, which we opposed, and which the Court denied on June 30, 2015. The plaintiff hasappealed the Court’s decision to the United States Court of Appeals for the First Circuit. We deny any allegations of wrongdoing and intend to continue tovigorously defend this lawsuit. However, there58is no assurance that we will be successful in our defense or that insurance will be available or adequate to fund any settlement or judgment or the litigationcosts of this action. Moreover, we are unable to predict the outcome or reasonably estimate a range of possible loss at this time.On July 3, 2013, the staff (the “SEC Staff”) of the United States Securities and Exchange Commission (the “Commission”) served a subpoena on us for documents and information concerning tivozanib, including related communications with the FDA, investors and others. We have fully cooperated with theinquiry. In September 2015, the SEC Staff invited us to discuss the settlement of potential claims that the SEC Staff may recommend that the Commissionbring against us asserting that we violated federal securities laws by omitting to disclose to investors the recommendation made to us by the staff of the U.S.Food and Drug Administration, on May 11, 2012, that we conduct an additional clinical trial with respect to tivozanib. Based on the progress in thesettlement process thus far, we believe that we could potentially settle with the SEC for a total amount of $4,000,000. There can be no assurance, however,that a settlement will be approved by the Commission, or that any settlement on terms agreeable to us will be achieved. If settlement discussions concludewithout a settlement proposal that is acceptable to the Commission and us, the Commission may authorize the SEC Staff to pursue claims against us. Therecan be no assurance that we will be able to resolve the potential claims of the Commission or that any settlement will not have a material adverse impact onour ability to execute on our proposed plans or on our financial position or results of operations. The SEC Staff also invited three of our former officers to discuss the settlement of potential claims that the SEC Staff may recommend that theCommission bring against them. We are not a party to any discussions between the SEC Staff and the former officers, and we can make no assurance regardingsuch potential claims. Refer to Footnote 16 in the Notes to Consolidated Financial Statements below for further discussion. ITEM 4.Mine Safety DisclosuresNot applicable. 59PART II ITEM 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket Price InformationOur common stock is traded on the NASDAQ Global Select Market under the symbol “AVEO”. The following table sets forth the high and low saleprices per share for our common stock for the periods indicated: High Low 2014 First Quarter $2.07 $1.49 Second Quarter $1.85 $1.00 Third Quarter $1.92 $1.06 Fourth Quarter $1.19 $0.61 High Low 2015 First Quarter $2.02 $0.78 Second Quarter $3.50 $1.16 Third Quarter $2.59 $1.14 Fourth Quarter $1.47 $0.92 HoldersAt March 9, 2016, there were approximately 48 holders of record of our common stock. We believe that the number of beneficial owners of ourcommon stock at that date was substantially greater.DividendsWe have never declared or paid any cash dividends on our common stock and our ability to pay cash dividends is currently prohibited by the terms ofour debt financing arrangements. We currently intend to retain earnings, if any, for use in our business and do not anticipate paying cash dividends on ourcommon stock in the foreseeable future. Payment of future dividends, if any, on our common stock will be at the discretion of our board of directors aftertaking into account various factors, including our financial condition, operating results, anticipated cash needs, and plans for expansion.Securities Authorized for Issuance under Equity Compensation PlansThe information required by this item will be set forth in the definitive proxy statement we will file in connection with our 2016 Annual Meeting ofStockholders and is incorporated by reference herein.Purchase of Equity SecuritiesWe did not purchase any of our equity securities during the period covered by this Annual Report on Form 10-K.Recent Sales of Unregistered SecuritiesWe did not issue any unregistered securities during the period covered by this Annual Report on Form 10-K.Comparative Stock Performance GraphThe information included under the heading “Comparative Stock Performance Graph” in this Item 5 of Part II of this Annual Report on Form 10-Kshall not be deemed to be “soliciting material” or subject to Regulation 14A or 14C, shall not be deemed “filed” for purposes of Section 18 of the ExchangeAct, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, asamended, or the Exchange Act.60The graph below matches AVEO Pharmaceuticals, Inc.’s cumulative 5-Year total shareholder return on common stock with the cumulative total returns of theNASDAQ Composite index and the NASDAQ Biotechnology index. The graph tracks the performance of a $100 investment in our common stock and in eachindex (with the reinvestment of all dividends) from 12/31/2010 to 12/31/2015. The stock price performance included in this graph is not necessarily indicative of future stock price performance. Company/Market/Peer Group 12/2010 12/2011 12/2012 12/2013 12/2014 12/2015 AVEO Pharmaceuticals $100.00 $117.65 $55.06 $12.52 $5.75 $8.62 NASDAQ Composite Index $100.00 $100.53 $116.92 $166.19 $188.78 $199.95 NASDAQ Biotechnology Index $100.00 $113.92 $153.97 $263.29 $348.49 $369.06 ITEM 6.Selected Financial DataThe following selected consolidated financial data should be read in conjunction with our Consolidated Financial Statements and the AccompanyingNotes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Annual Report onForm 10-K. The Balance Sheet Data at December 31, 2015 and 2014 and the Statement of Operations Data for each of the three years in the period endedDecember 31, 2015 have been derived from our audited Consolidated Financial Statements for such years, included elsewhere in this Annual Report onForm 10-K. The Balance Sheet Data at December 31, 2013, 2012 and 2011, and the Statement of Operations Data for each of the two years in the periodended December 31, 2012 have been derived from the audited Consolidated Financial Statements for such years not included in this Annual Report onForm 10-K.61Our historical results for any prior period are not necessarily indicative of results to be expected in any future period. Years EndedDecember 31, 2015 2014 2013 2012 2011 (in thousands, except per share data) Statement of operations data: Revenue $19,024 $18,123 $1,293 $19,286 $164,849 Operating expenses: Research and development 12,875 38,254 68,468 91,358 101,735 General and administrative 14,217 18,589 28,712 36,932 29,167 Restructuring and lease exit 4,358 11,729 8,017 2,633 — Total operating expenses 31,450 68,572 105,197 130,923 130,902 (Loss) income from operations (12,426) (50,449) (103,904) (111,637) 33,947 Other income and expense: Other (expense) income, net (289) 66 (123) 247 10 Interest expense (2,307) (2,388) (3,127) (3,501) (3,836)Interest income 21 32 125 497 527 Other expense, net (2,575) (2,290) (3,125) (2,757) (3,299)Net (loss) income before benefit for income taxes (15,001) (52,739) (107,029) (114,394) 30,648 Net (loss) income $(15,001) $(52,739) $(107,029) $(114,394) $30,648 Net (loss) income per share—basic $(0.27) $(1.01) $(2.10) $(2.64) $0.77 Weighted average number of common shares used in net (loss) income per share calculation—basic 55,701 52,289 50,928 43,374 39,715 Net (loss) income per share—diluted $(0.27) $(1.01) $(2.10) $(2.64) $0.74 Weighted average number of common shares and dilutive common share equivalents used in net (loss) income per share calculation—diluted 55,701 52,289 50,928 43,374 41,473 As of December 31, 2015 2014 2013 2012 2011 (in thousands) Balance sheet data: Cash, cash equivalents, and marketable securities $34,135 $52,306 $118,506 $160,602 $275,440 Working capital 27,978 18,773 97,511 151,551 199,786 Total assets 40,542 70,662 146,346 207,469 295,050 Loans payable, including current portion, net of discount 9,471 20,652 19,205 26,037 24,170 Accumulated deficit (495,029) (480,028) (427,289) (320,260) (205,866)Total stockholders’ equity 17,227 20,606 69,938 118,938 223,541 62ITEM 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsYou should read the following discussion and analysis of our financial condition and results of operations together with our financial statementsand the related notes appearing elsewhere in this report. Some of the information contained in this discussion and analysis or set forth elsewhere in thisreport, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements thatinvolve risks and uncertainties. You should read the “Risk Factors” section in Part 1—Item 1A. of this report for a discussion of important factors that couldcause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussionand analysis.OverviewWe are a biopharmaceutical company dedicated to advancing a broad portfolio of targeted therapeutics for oncology and other areas of unmet medicalneed. Our proprietary platform has delivered unique insights into cancer and related diseases. Our strategy is to leverage these biomarker insights and partnerresources to advance the development of our clinical pipeline. We are focused on developing our lead candidate tivozanib in North America as a treatmentfor Renal Cell Carcinoma and other cancers. We have entered into partnerships to fund the further development of three of our four clinical stage assets,including AV-380, ficlatuzumab, and tivozanib in non-oncologic indications worldwide and oncology indications outside North America. We are alsoseeking a partnership for AV-203, our fourth development program. These programs and partnerships are described as follows: ·Tivozanib: Tivozanib is a potent, selective, long half-life vascular endothelial growth factor (“VEGF”) tyrosine kinase inhibitor (“TKI”) ofVEGF receptors 1, 2 and 3. In 2006, we acquired the exclusive rights to develop and commercialize tivozanib in all countries outside of Asiaunder a license from Kyowa Hakko Kirin Co., Ltd. (formerly Kirin Brewery Co. Ltd.), or KHK. We have programs to evaluate tivozanib inseveral tumor types, including renal cell, colorectal and breast cancer. RCC First Line Phase 3 Trial (TIVO-1): We conducted a global phase 3 clinical trial comparing the efficacy and safety of tivozanib withNexavar® (sorafenib), an approved therapy, for first-line treatment of renal cell carcinoma, or RCC. The trial met its primary endpoint forprogression-free survival, or PFS, but showed a non-statistically significant trend favoring the sorafenib arm in overall survival, or OS. In June2013, the U.S. Food and Drug Administration, or FDA, issued a complete response letter informing us that it would not approve tivozanib forthe treatment of first line advanced RCC based on the study data from this trial, and recommended that we perform an additional studyadequately sized to assure the FDA that there is no adverse effect on OS. In January 2015, we announced our receipt of confirmation from the European Medicines Agency, or EMA, that tivozanib is eligible forsubmission of an application for a European Union Marketing Authorization under the Agency’s centralized procedure for the treatment ofRCC. Confirmation of eligibility for submission is not predictive of the EMA’s approval of a Marketing Authorization Application, or MAA.Tivozanib has previously been granted orphan drug designation in Europe for the treatment of RCC. Our partner, EUSA Pharma (UK) Limited,or EUSA, submitted a MAA for tivozanib for the treatment of RCC with the EMA in February 2016 based on our existing dataset, whichincludes the results from the TIVO-1 study of tivozanib in the first-line treatment of RCC.TIVO-1 Extension Study (One-way crossover from sorafenib to tivozanib): We have completed a TIVO-1 extension study, known as Study 902,in which patients with advanced RCC received tivozanib as second-line treatment subsequent to disease progression on the sorafenib arm inthe TIVO-1 first-line RCC trial. We presented the final results at the 2015 American Society of Clinical Oncology (ASCO) Annual Meeting onJune 1, 2015. The final results show a median PFS of 11.0 months and median OS of 21.6 months, demonstrating the clinically meaningfulefficacy of tivozanib in a VEGF treatment refractory population. We believe that the long OS derived from tivozanib following sorafenib inStudy 902 contributed to the discordance in the results between the PFS benefit which significantly favored tivozanib and the OS whichtrended in favor of sorafenib in the TIVO-1 trial. RCC Third Line Phase 3 Trial (TIVO-3): We are planning to conduct a phase 3 trial of tivozanib in the third-line treatment of patients withrefractory RCC. The study will use PFS as the primary endpoint and OS as a secondary endpoint to support a request for regulatory approval oftivozanib as a third-line treatment and to address the overall survival concerns from TIVO-1 as a first-line treatment presented in the June 2013complete response letter from the FDA. Our study design, which we have shared with the FDA, contemplates a randomized, controlled, multi-center, open-label phase 3 study of approximately 322 subjects randomized 1:1 to receive either tivozanib or sorafenib. Subjects enrolled inthe study may include those who have received prior immunotherapy, including immune checkpoint (PD-1) inhibitors, reflecting a potentiallyevolving treatment landscape. The primary objective of the study would be to show improved PFS. Secondary endpoints would include OS andobjective response rate, or ORR, as well as safety and pharmacokinetic endpoints. We are evaluating all options for funding, includingpartnerships, for the clinical and regulatory advancement of tivozanib in RCC as well as colorectal cancer, or CRC. 63RCC PD-1 Combination Trial: We are designing a phase 1 study of tivozanib combined with a PD-1 inhibitor for the treatment of patients withRCC. We are evaluating all options for funding, including partnerships, for the clinical and regulatory advancement of tivozanib incombination with PD-1 inhibitors in RCC.CRC Phase 2 Results: In March 2015, we announced results from a predefined biomarker analysis of our BATON-CRC study, a randomizedphase 2 clinical trial of modified FOLFOX6, a commonly used chemotherapy, combined with tivozanib or Avastin® (bevacizumab), whichboth target angiogenesis signaling pathways, in first line treatment of metastatic CRC. In this study, among prospectively defined biomarkers,patients with low (below the median, representing 50% of the population) serum neuropilin-1, or NRP-1, a cell surface protein that modulatesblood vessel development, showed an improved PFS versus patients with high serum NRP-1 in both treatment arms, supporting the value ofserum NRP-1 as a potential prognostic marker for angiogenesis inhibitors. Further, in the subgroup with samples available at the interimanalysis, patients identified using a research-use assay to have low serum NRP-1 demonstrated longer PFS when treated with tivozanibcompared to bevacizumab, which suggests that first line colorectal cancer patients with low NRP-1 levels may benefit from treatment withtivozanib over bevacizumab, a standard of care in this disease. In April 2015, we presented the results from the phase 2 BATON-CRC study andthe Company’s ongoing assay development efforts to the FDA in connection with our evaluation of a proposed pivotal phase 3 trial oftivozanib in CRC. In response to questions we posed to the FDA regarding this proposed trial, the FDA suggested that we continue work onthe development of our biomarker assay to address variability between assays presented. As such, we hope to identify a commercially viableassay, which may enable a prospectively defined, randomized Phase 2 or Phase 3 study.Tivozanib Partnerships: EUSA License Agreement: In December 2015, we entered into a license agreement with EUSA under which we granted EUSA the rightto develop and commercialize tivozanib for all diseases and conditions in humans, excluding non-oncologic diseases or conditions of the eye,in Europe (excluding Russia, Ukraine and the Commonwealth of Independent States), Latin America (excluding Mexico), Africa, Australasiaand New Zealand. EUSA submitted a MAA for tivozanib for the treatment of RCC with the EMA in February 2016.Pharmstandard License Agreement: In August 2015, we entered into a license agreement under which we granted to a subsidiary ofPharmstandard OJSC, or Pharmstandard, the exclusive right to develop, manufacture and commercialize tivozanib in the territories of Russia,Ukraine and the Commonwealth of Independent States, or CIS, for all conditions excluding non-oncologic ocular conditions. Under thisagreement, Pharmstandard is responsible for all activities and costs associated with the further development, regulatory filings, health servicesand commercialization of tivozanib in the specified territories. In December 2015, Pharmstandard submitted an application for marketingauthorization for tivozanib based on TIVO-1 results in Russia that was accepted by the Ministry of Health in February 2016.Ophthotech Option for Ocular Conditions (Non-Oncologic): In November 2014, we entered into a research and exclusive optionagreement with Ophthotech Corporation, or Ophthotech, under which we granted Ophthotech an option to develop and commercializetivozanib outside of Asia for the potential diagnosis, prevention and treatment of non-oncologic diseases or conditions of the eye in humans. ·Ficlatuzumab: Ficlatuzumab is a potent Hepatocyte Growth Factor, or HGF, inhibitory antibody. HGF is the sole known ligand of the c-Metreceptor which is believed to trigger many activities that are involved in cancer development and metastasis. We have completed two phase 1clinical studies of ficlatuzumab administered as a single agent and in combination with erlotinib, a TKI, of the epidermal growth factorreceptor, or EGFR, and a phase 2 clinical study evaluating ficlatuzumab in combination with gefitinib, an EGFR TKI, in first line non-smallcell lung cancer, or NSCLC. The phase 2 trial failed to demonstrate a statistically significant benefit in the intent-to-treat population. However,an exploratory analysis using a serum-based proteomic diagnostic test, known as VeriStrat®, identified a sub-population of patients whoexperienced a progression free survival and overall survival benefit from the addition of ficlatuzumab to gefitinib. VeriStrat is commerciallyavailable to help physicians guide treatment decisions for patients with second line advanced NSCLC. Data from the exploratory analyses withVeriStrat prompted the development of a separate investigational companion diagnostic test called BDX004. Based upon the exploratoryanalyses, BDX004 may be indicative of a predictive biomarker for the combination of ficlatuzumab and EGFR TKI over EGFR TKI alone in thefirst line EGFR mutation patients who have been previously identified to not respond well to the current standard of care.In April 2014, we entered into a worldwide agreement with Biodesix, Inc., or Biodesix, to develop and commercialize ficlatuzumab withBDX004, a serum based diagnostic test which has been derived from the VeriStrat test, employing the same methodology and data processingalgorithms as VeriStrat, for use in a confirmatory clinical trial. Pursuant to the Biodesix agreement, in December 2014 we initiated a phase 2confirmatory study of ficlatuzumab, which we refer to as the FOCAL study, in combination with erlotinib in first line advanced NSCLCpatients who have an EGFR mutation and who are identified by the BDX004 test as being most likely to benefit from the addition officlatuzumab to the EGFR TKI. We began enrolling patients during the second half of 2015. Biodesix will fund up to $15 million of the cost ofthis study,64as well as all of the costs associated with development and registration of BDX004, and any additional development, regulatory andcommercial costs for ficlatuzumab will be shared equally. Under the Biodesix agreement, subject to regulatory approval, AVEO would leadworldwide commercialization of ficlatuzumab. ·AV-203: AV-203 is a potent anti-ErbB3 (also known as HER3) specific monoclonal antibody with high ErbB3 affinity. We have observedpotent anti-tumor activity in mouse models. AV-203 selectively inhibits the activity of the ErbB3 receptor, and our preclinical studies suggestthat neuregulin-1, or NRG1 (also known as heregulin), levels predict AV-203 anti-tumor activity in preclinical models. We have completed aphase 1 dose escalation study of AV-203, which established a recommended phase 2 dose of AV-203 at 20mg/kg intravenously every 2 weeks,demonstrated good tolerability and promising early signs of activity, and reached the maximum planned dose of AV-203 monotherapy. Noanti-drug antibodies were detected, and pharmacokinetic results indicated a dose-proportional increase in levels of AV-203.The expansion cohort of this study among patients with a specific biomarker has been discontinued. We are seeking to pursue further clinicaldevelopment of AV-203 with a strategic partner. ·AV-380: AV-380 is a potent humanized IgG1 inhibitory monoclonal antibody targeting growth differentiating factor-15, or GDF15, adivergent member of the TGF-ß family, for the potential treatment or prevention of cachexia. Cachexia is defined as a multi-factorial syndromeof involuntary weight loss characterized by an ongoing loss of skeletal muscle mass (with or without loss of fat mass) that cannot be fullyreversed by conventional nutritional support and leads to progressive functional impairment. Cachexia is associated with various cancers aswell as diseases outside of cancer including chronic kidney disease, congestive heart failure, and chronic obstructive pulmonary disease, orCOPD. We believe that AV-380 represents a unique approach to treating cachexia because it addresses key underlying mechanisms of thesyndrome and focuses on a significant area of patient need. It is estimated that approximately 30% of all cancer patients die due to cachexiaand over half of cancer patients who die do so with cachexia present. (J Cachexia Sarcopenia Muscle 2010). In the United States alone, theestimated prevalence of cancer cachexia is over 400,000 patients, and the prevalence of cachexia due to cancer, COPD, congestive heart failure,frailty and end stage renal disease combined is estimated to total more than 5 million patients (Am J Clin Nutr 2006). In September 2014, we presented the results from four preclinical studies of AV-380 in various in vivo cachexia models and in vitro assays atthe 2nd Cancer Cachexia Conference held in Montreal Canada. Our research was also selected for presentation in an oral session at theconference. In April 2015, we also presented the results from a preclinical study of AV-380 in a cachectic human tumor xenograft model at theAnnual Meeting of the American Association of Cancer Research. We have established preclinical proof of concept for GDF15 as a key driverof cachexia by demonstrating, in animal models, that the administration of GDF15 induces cachexia, and that inhibition of GDF15 reversescachexia and provides a potential indication of an overall survival benefit.In August 2015, we entered into a license agreement under which we granted Novartis International Pharmaceutical Ltd., or Novartis, theexclusive right to develop and commercialize AV-380 and related AVEO antibodies. Under this agreement, Novartis is responsible for allactivities and costs associated with the further development, regulatory filing and commercialization of AV-380 worldwide.In connection with the AV-380 program, we have in-licensed certain patents and patent applications from St. Vincent’s Hospital in Sydney,Australia. We have demonstrated preclinical proof-of-concept for AV-380 in multiple cancer cachexia models and have completed cell linedevelopment.We have devoted substantially all of our resources to our drug discovery efforts, comprising research and development, conducting clinical trials forour product candidates, protecting our intellectual property and the general and administrative functions relating to these operations. We have generated norevenue from product sales through December 31, 2015, and through such date have principally funded our operations through the proceeds from ourstrategic partnerships, sales of stock to investors and loan agreements with Hercules Technology II, L.P. and Hercules Technology III, L.P.We do not have a history of being profitable and, as of December 31, 2015, we had an accumulated deficit of $495.0 million. We anticipate that wewill continue to incur significant operating costs over the next several years as we continue our planned development activities for our preclinical andclinical products. We will need additional financing to support our operating activities, and the timing and nature of activities contemplated for 2016 andthereafter will be conducted subject to the availability of sufficient financial resources.65Strategic PartnershipsEUSAIn December 2015, we entered into a license agreement with EUSA under which we granted to EUSA the exclusive, sublicensable right to develop,manufacture and commercialize tivozanib in the territories of Europe (excluding Russia, Ukraine and the Commonwealth of Independent States), LatinAmerica (excluding Mexico), Africa, Australasia and New Zealand for all diseases and conditions in humans, excluding non-oncologic diseases or conditionsof the eye. For additional information regarding the terms of this agreement, see “Part I, Business – Strategic Partnerships.”Under the license agreement, EUSA made a research and development funding payment to us of $2.5 million and is required to make a paymentof $4.0 million upon the grant by the European Medicines Agency, or the EMA, of marketing approval for tivozanib for treatment of renal cell carcinoma. Weare eligible to receive additional research funding from EUSA, including up to $20.0 million if EUSA elects to utilize data generated by our planned phase 3study in third line renal cell carcinoma, and up to $2.0 million for a potential phase 1 combination study with a checkpoint inhibitor. We will be entitled toreceive milestone payments of $2.0 million per country upon reimbursement approval for renal cell carcinoma in each of France, Germany, Italy, Spain andthe United Kingdom, and an additional $2.0 million for the grant of marketing approval in three of the following five countries: Argentina, Australia, Brazil,South Africa and Venezuela. We will also be eligible to receive a payment of $2.0 million in connection with EUSA’s filing with the EMA for marketingapproval for tivozanib for the treatment of each of up to three additional indications and $5.0 million per indication in connection with the EMA’s grant ofmarketing approval for each of up to three additional indications, as well as potentially up to $335.0 million upon EUSA’s achievement of certain salesthresholds. We will also be eligible to receive tiered double digit royalties on net sales, if any, of licensed products in the licensed territories ranging from alow double digit up to mid-twenty percent depending on the level of annual net sales. A percentage of any milestone and royalty payments we receive aredue to Kyowa Hakko Kirin Co., Ltd. (formerly Kirin Brewery Co., Ltd.), or KHK, as a sublicensing fee under the license agreement between us and KHK datedas of December 21, 2006.EUSA is obligated to use commercially reasonable efforts to develop and commercialize tivozanib throughout the licensed territories. With theexception of certain support to be provided by us prior to the grant of marketing approval by the EMA, EUSA has responsibility for all activities and costsassociated with the further development, manufacture, regulatory filings and commercialization of tivozanib in the licensed territories. EUSA submitted anapplication with the EMA for approval of marketing authorization for tivozanib for the treatment of renal cell carcinoma in February 2016.Activities under the agreement were evaluated under ASC 605-25 Revenue Recognition—Multiple Element Arrangements, or ASC 605-25, todetermine whether such activities represented a multiple element revenue arrangement. The agreement with EUSA includes the following non-contingentdeliverables: (i) our grant of an exclusive license to develop and commercialize tivozanib in the licensed territories; (ii) our obligation to transfer alltechnical knowledge and data useful in the development and manufacture of tivozanib; (iii) our obligation to cooperate with EUSA and support its efforts tofile for marketing approval in the licensed territories, (iv) our obligation to provide access to certain regulatory information resulting from our ongoingdevelopment activities outside of the licensed territories and (v) our participation in a joint steering committee. We determined that the delivered license didnot have stand-alone value from the undelivered elements and have accounted for these items as a single bundled deliverable. We allocated up-frontconsideration of $2.5 million to the bundled unit of accounting and are recognizing it over our performance period through April 2022, the remaining patentlife of tivozanib. We recognized approximately $14,000 as revenue during the year ended December 31, 2015.We believe the regulatory milestones that may be achieved under the EUSA agreement are consistent with the definition of a milestone included inASU 2010-17, Revenue Recognition—Milestone Method, and, accordingly, we will recognize payments related to the achievement of such milestones, if any,when such milestone is achieved. Factors considered in this determination included scientific and regulatory risks that must be overcome to achieve eachmilestone, the level of effort and investment required to achieve each milestone, and the monetary value attributed to each milestone.NovartisIn August 2015, we entered into a license agreement with Novartis International Pharmaceutical Ltd., which we refer to as Novartis, under which wegranted Novartis the exclusive right to develop and commercialize AV-380 and our related antibodies that bind to GDF15 worldwide. Under this agreement,Novartis is responsible for all activities and costs associated with the further development, regulatory filing and commercialization of AV-380 worldwide. Foradditional information regarding the terms of this agreement, see “Part I, Item 1, Business – Strategic Partnerships.”Novartis made an upfront payment to us of $15.0 million during September 2015. We will also be eligible to receive (a) up to $53 million in potentialclinical milestone payments and up to $105 million in potential regulatory milestone payments tied to the commencement of clinical trials and to regulatoryapprovals of products developed under the license agreement in the United States, the European Union and Japan; and (b) up to $150 million in potentialsales based milestone payments based on annual net sales of66such products. Upon commercialization, we are eligible to receive tiered royalties on net sales of approved products ranging from the high single digits to thelow double digits. Novartis has responsibility under the license agreement for the development, manufacture and commercialization of the licensedantibodies and any resulting approved therapeutic products.Novartis also exercised its right under the license agreement to acquire our inventory of clinical quality drug substance in December 2015,reimbursing us approximately $3.5 million for such existing inventory.Activities under the agreement with Novartis were evaluated under ASC 605-25 to determine whether such activities represented a multiple elementrevenue arrangement. The agreement with Novartis includes the following non-contingent deliverables: (i) our grant of an exclusive, worldwide license todevelop and commercialize the licensed antibodies; (ii) our obligation to transfer all technical knowledge and data useful in the development andmanufacture of the licensed antibodies; and (iii) our obligation to cooperate with Novartis’ requests for transition assistance during a 90 day period. Novartis’option to acquire our inventory of clinical quality drug substance was determined to be a contingent deliverable at the inception of the agreement.We determined the delivered license and obligation to transfer technical knowledge and data have standalone value from the undeliveredcooperation. We allocated up-front consideration of $15.0 million to the delivered license and technical knowledge. The relative selling price of theundelivered cooperation had de minimis value.We received cash payments of $15.0 million during the year ended December 31, 2015. We recognized the $15.0 million upfront payment allocatedto the delivered license and technical knowledge during 2015 upon delivery. We recognized revenue of $3.5 million during 2015 related to the delivery ofour inventory of clinical quality drug substance to Novartis pursuant to the terms of the agreement. The amount due to us from Novartis was $3.5 million asof December 31, 2015.Pharmstandard GroupIn August 2015, we entered into an exclusive license agreement with JSC “Pharmstandard-Ufimskiy Vitamin Plant”, or Pharmstandard, a subsidiary ofPharmstandard OJSC, under which we granted Pharmstandard the exclusive right to develop, manufacture and commercialize tivozanib in the territories ofRussia, Ukraine and the Commonwealth of Independent States for all conditions excluding non-oncologic ocular conditions. For additional informationregarding the terms of this agreement, see “Part I, Item 1, Business – Strategic Partnerships.”Pharmstandard is obligated to use commercially reasonable efforts to develop and commercialize tivozanib throughout the licensed territories, andPharmstandard has responsibility for all activities and costs associated with the further development, manufacture, regulatory filings and commercializationof tivozanib in the licensed territories. Pharmstandard has filed an application for marketing authorization in Russia for tivozanib for the treatment of renalcell carcinoma that was accepted by the Ministry of Health of the Russian Federation in February 2016.Pharmstandard made an upfront payment to us of $1.0 million and will be obligated to pay an additional $0.5 million upon registration of the licenseagreement with a Russian regulatory agency. We are also eligible to receive $7.5 million in connection with the first marketing authorization of tivozanib inRussia. If Russian regulatory authorities require additional studies to be conducted prior to approval, this amount would be reduced to $3.0 million. Inaddition, we are eligible to receive $3.0 million for each additional approved indication of tivozanib, if Pharmstandard elects to seek any such approvals, aswell as a high single-digit royalty on net sales in the sublicensed territories. A percentage of all upfront, milestone and royalty payments received by us aredue to KHK as a sublicensing fee under the license agreement with KHK.Activities under the agreement with Pharmstandard were evaluated under ASC 605-25 to determine whether such activities represented a multipleelement revenue arrangement. The agreement with Pharmstandard includes the following non-contingent deliverables: (i) our grant of an exclusive license todevelop and commercialize tivozanib in the licensed territories, (ii) our obligation to provide access, upon request, to all clinical data, regulatory filings,safety data and manufacturing data to Pharmstandard for use in the development and commercialization of tivozanib in the licensed territories, (iii) ourobligation to participate in certain development and commercialization planning meetings and (iv) our obligation to provide support for certaindevelopment, regulatory or manufacturing activities if requested by Pharmstandard.We determined the delivered license does not have standalone value from the undelivered items and that the arrangement should be treated as a singleunit of accounting. We allocated the upfront payment of $1.0 million to the bundled unit of accounting and are recognizing it over our performance periodthrough April 2022, the remaining patent life of tivozanib. We recognized approximately $61,000 as revenue during the year ended December 31, 2015.We believe the regulatory milestones that may be achieved under the Pharmstandard agreement are consistent with the definition of a milestoneincluded in ASU 2010-17, Revenue Recognition—Milestone Method, and, accordingly, we will recognize67payments related to the achievement of such milestones, if any, when such milestone is achieved. Factors considered in this determination included scientificand regulatory risks that must be overcome to achieve each milestone, the level of effort and investment required to achieve each milestone, and themonetary value attributed to each milestone.We incurred $0.3 million of R&D expense associated with sublicensing fees payable to KHK as a result of such payments from Pharmstandard duringthe year ended December 31, 2015.Ophthotech CorporationIn November 2014 we entered into a Research and Exclusive Option Agreement, or Option Agreement, with Ophthotech Corporation pursuant towhich we provided Ophthotech an exclusive option to enter into a definitive license agreement whereby we would grant Ophthotech the right to develop andcommercialize our VEGF factor tyrosine kinase inhibitor, tivozanib, outside of Asia for the potential diagnosis, prevention and treatment of non-oncologicdiseases or conditions of the eye in humans.Pursuant to this Option Agreement, we granted to Ophthotech an exclusive, royalty free license or sublicense, as applicable, under intellectualproperty rights controlled by us solely to perform the research and development activities related to the use of tivozanib for the specific purposes outlined inthe agreement during the option period. These activities include formulation work for ocular administration, preclinical research and the conduct of a Phase1/2a, proof of concept clinical trial of a product containing tivozanib in patients with wet age-related macular degeneration, or the POC Study.Ophthotech paid us $500,000 in consideration for the grant of the option. Such amount is non-refundable and not creditable against any otheramounts due under the agreement. We are obligated to make available to Ophthotech, at no cost to Ophthotech, certain quantities of tivozanib hydrochloridesolely for conducting its option period research including manufacturing additional quantities of tivozanib in the event stability data indicates that thecurrent supply will expire prior to the end of February 2017. For additional information regarding the terms of the Option Agreement, see “Item 1, Business –Strategic Partnerships.”Activities under the Option Agreement were evaluated under ASC 605-25 to determine whether such activities represented a multiple element revenuearrangement. The Option Agreement includes the following non-contingent deliverables: (i) our obligation to grant an exclusive option to Ophthotech toenter into a License Agreement to develop and commercialize products incorporating tivozanib for treatment of AMD and other diseases of the eye outside ofAsia during the Option Period; (ii) our obligation to enter into an amendment with KHK to modify the terms of the existing KHK agreement to negotiate amutually acceptable form of license agreement; and (iii) our obligation to transfer research-grade tivozanib API for Ophthotech to conduct the Option Periodresearch.We determined that the delivered Option Grant Deliverable, or our obligation to grant an exclusive option to Ophthotech to enter into a LicenseAgreement to develop and commercialize products incorporating tivozanib for treatment of AMD and other diseases of the eye outside of Asia during theOption Period, did not have standalone value from the remaining deliverables since Ophthotech could not obtain the intended benefit of the option withoutthe remaining deliverables. Similarly, the remaining deliverables have no standalone value without the Option Grant Deliverable. We are accounting for thedeliverables as one unit of accounting.During the year ended December 31, 2014, we received an up-front cash payment of $0.5 million. We deferred the upfront payment and are recordingthe deferred revenue over our period of performance which is estimated to be through December 2016, or the life of the agreement. We recordedapproximately $0.2 million and $38,000 of revenue associated with the Option Grant Deliverable during the years ended December 31, 2015 and 2014,respectively.BiodesixIn April 2014, we entered into a worldwide agreement with Biodesix to develop and commercialize our HGF inhibitory antibody ficlatuzumab, withBDX004, a proprietary companion diagnostic test developed by Biodesix and based upon an exploratory analyses with VeriStrat®, a serum protein test that iscommercially available to help physicians guide treatment decisions for patients with advanced NSCLC. For additional information regarding the terms ofthis agreement, see “Part I, Item 1, Business – Strategic Partnerships.”Pursuant to a joint development plan, we retain primary responsibility for clinical development of ficlatuzumab in a proof of concept, or POC, clinicalstudy of ficlatuzumab for NSCLC, in which VeriStrat will be used to select clinical trial subjects, referred to as the NSCLC POC Trial. The NSCLC POC Trialwill be fully funded by Biodesix up to a maximum of $15.0 million, referred to as the “Cap”. After the Cap is reached, Biodesix will share equally in the costsof the NSCLC trial with us, and we will each be responsible for 50% of development and regulatory costs associated with all future clinical trials agreed-uponby both parties, including all milestone payments and royalties payable to third parties, if any.68Activities under the agreement with Biodesix were evaluated under ASC 605-25 to determine such activities represented a multiple element revenuearrangement. The agreement with Biodesix includes the following non-contingent deliverables: (i) perpetual, non-exclusive rights to certain intellectualproperty including clinical and biomarker data related to ficlatuzumab for use in developing and commercializing BDX004; (ii) our obligation to delivertechnology improvements and data developed during the FOCAL study to Biodesix; (iii) our obligation to participate in the joint steering committee duringthe FOCAL study; (iv) our obligation to perform certain development activities associated with the FOCAL study; (v) our obligation to supply clinicalmaterial for use in conducting the FOCAL study; and (vi) our obligation to deliver clinical specimens and data during the FOCAL study. We concluded thatany deliverables that would be delivered after the FOCAL study is complete are contingent deliverables because these services are contingent upon theresults of the FOCAL study. As these deliverables are contingent, and are not at an incremental discount, they are not evaluated as deliverables at theinception of the arrangement. These contingent deliverables will be evaluated and accounted for separately as each related contingency is resolved. As ofDecember 31, 2015, no contingent deliverables had been provided by us.We have determined that the delivered item, or the perpetual, non-exclusive rights to certain intellectual property for use in developing andcommercializing BDX004 did not have standalone value from the remaining deliverables since Biodesix could not obtain the intended benefit of the licensewithout the remaining deliverables. Since the remaining deliverables will be performed over the same period of performance there is no difference inaccounting for the deliverables as one unit or multiple units of accounting, and therefore, we are accounting for the deliverables as one unit of accounting.We record the consideration earned while conducting the FOCAL Study, which consists of reimbursement by Biodesix for expenses related to the trialunder the Cap, as a reduction to research and development expense using the proportional performance method over the respective period of performance. Asa result of the cost sharing provisions in the agreement, we reduced research and development expenses by approximately $3.5 million and $2.7 millionduring the years ended December 31, 2015 and 2014, respectively. The amount due to us from Biodesix pursuant to the cost-sharing provision was $1.1million and $1.8 million at December 31, 2015 and 2014, respectively.St. Vincent’s HospitalIn July 2012, we entered into a license agreement with St. Vincent’s Hospital Sydney Limited, which we refer to as St. Vincent’s, under which weobtained an exclusive, worldwide license to research, develop, manufacture and commercialize products for therapeutic applications that benefit frominhibition or decreased expression or activity of MIC-1, which is also known as GDF15. We believe GDF15 is a novel target for cachexia and we areexploiting this license in our AV-380 program for cachexia. Under the agreement, we have the right to grant sublicenses subject to certain restrictions. Wehave a right of first negotiation to obtain an exclusive license to certain improvements that St. Vincent’s or third parties may make to licensed therapeuticproducts. Under the license agreement, St. Vincent’s also granted us non-exclusive rights for certain related diagnostic products and research tools. Foradditional information regarding the terms of the agreement with St. Vincent’s, see “Part I, Item 1, Business – Strategic Partnerships.”In August 2015, in connection with the execution of our license agreement with Novartis, we entered into an amended and restated agreement with St.Vincent’s, pursuant to which we made an upfront payment to St. Vincent’s of $1.5 million. St. Vincent’s is also eligible to receive up to approximately $18.9million in connection with development and regulatory milestones. Royalties for approved products resulting from the license agreement will also bepayable to St. Vincent’s, and we and Novartis will share that obligation equally.Biogen IdecIn March 2009, we entered into an exclusive option and license agreement with Biogen Idec International GmbH, or Biogen Idec, regarding thedevelopment and commercialization of our discovery-stage ErbB3-targeted antibodies for the potential treatment and diagnosis of cancer and other diseasesin humans outside of North America. Under the agreement, we were responsible for developing ErbB3 antibodies through completion of the first phase 2clinical trial designed in a manner that, if successful, will generate data sufficient to support advancement to a phase 3 clinical trial. In March 2014, weamended our agreement with Biogen Idec, whereby Biogen Idec agreed to the termination of its rights and obligations under the agreement, includingBiogen Idec’s option to (i) obtain a co-exclusive (with us) license to develop and manufacture ErbB3 targeted antibodies and (ii) obtain exclusivecommercialization rights to ErbB3 products in countries in the world other than North America. As a result, we retain worldwide rights to AV-203, a clinicalstage ErbB3-targeted antibody. Pursuant to the amendment, we are obligated to in good faith use reasonable efforts to seek a collaboration partner for thepurpose of funding further development and commercialization of ErbB3-targeted antibodies. Pursuant to the amendment, we are obligated to pay BiogenIdec a percentage of milestone payments received by us from future partnerships after March 28, 2016 and single digit royalty payments on net sales relatedto the sale of ErbB3 products, up to cumulative maximum amount of $50.0 million. For additional information regarding the terms of Biogen Idec agreement,see “Part I, Item 1, Business – Strategic Partnerships.”69The deliverables under the original Biogen Idec agreement included an option for a co-exclusive, worldwide license to develop and manufactureErbB3 antibody products and an option for an exclusive license to commercialize ErbB3 antibody products in all countries in the world other than NorthAmerica. We determined that these deliverables did not have standalone value due to the fact that the program was still in preclinical development andrequired our experience to advance development of the product candidates. As such, we determined that the agreement should be accounted for as one unit ofaccounting.Under the terms of the original agreement, Biogen Idec made up-front and milestone-based cash payments totaling $20.0 million. Of the $20.0 millionreceived, $10.0 million was associated with milestones that were considered substantive and these amounts were included in revenue when earned. Theremaining $10.0 million was amortized as additional license revenue over our period of substantial involvement.We concluded that the amendment entered into in March 2014 materially modified the terms of the agreement and, as a result, required application ofthe guidance included in ASC 605-25. Based upon the terms of the amended arrangement, the remaining deliverables included our obligation to seek acollaboration partner to fund further development of the program and our obligation to continue development and commercialization of the licensedproducts if a collaboration partner is secured. We concluded that our obligation to use best efforts to seek a collaboration partner does not have standalonevalue from our efforts to continue development and commercialization of the licensed products and thus the deliverables should be treated as a single unit ofaccounting.Upon modifying the arrangement, we had $14.7 million of deferred revenue remaining to be recognized. We are not entitled to receive any furtherconsideration from Biogen Idec under the amended arrangement. We allocated a portion of the remaining deferred revenue to the undelivered unit ofaccounting based upon our best estimate of the selling price. We determined the best estimate of the selling price to be approximately $0.6 million andrecognized the remaining $14.1 million as collaboration revenue in the three months ended March 31, 2014. The deferred revenue associated with theundelivered unit of accounting is being recognized on a straight-line basis over the expected period of performance, or through March 2016, based upon ourhistorical experience with marketing our product candidates to potential partners.The best estimate of the selling price was based upon a cost approach pursuant to which we estimated the costs expected to be incurred in executing apartnership agreement and then applied a reasonable markup. We estimated future cash outflows for several possible outcomes, including the execution of apartnership at different times within a reasonable range and partnerships of differing complexity. We estimated our cash outflows for each scenario basedupon the expected costs associated with the relevant employees and the expected level of effort to be expended to seek and execute a partnership. Ouranalysis also considered the legal charges we anticipate we will incur. Changes to the assumptions within the reasonable range of possible values would nothave a material impact on the amounts recorded in current or future periods.Under the agreement, we recorded revenue of $0.3 million, $14.5 million and $0.9 million during the years ended December 31, 2015, 2014 and 2013,respectively.Astellas PharmaIn February 2011, we entered into a collaboration and license agreement with Astellas and certain of its indirect wholly-owned subsidiaries pursuantto which we and Astellas made plans to develop and seek to commercialize tivozanib for the treatment of a broad range of cancers. On February 12, 2014,Astellas exercised its right to terminate the agreement. The termination of the agreement became effective August 11, 2014, at which time tivozanib rightsreturned to us. In accordance with the collaboration and license agreement, we and Astellas agreed to equally share committed development costs, includingthe costs of completing certain tivozanib clinical development activities that were initiated as part of our partnership with Astellas.In connection with the agreement, we received an initial cash payment of $125.0 million, comprised of a $75.0 million license fee and $50.0 millionin research and development funding, both of which are non-creditable and non-refundable against any amounts due under the collaboration agreement. Weretained net proceeds of approximately $97.6 million of the initial cash payment from Astellas, after payments to KHK and strategic, legal and financialadvisors. In December 2012, we received a $15.0 million milestone payment from Astellas in connection with the acceptance by the FDA of our NDA filingfor tivozanib for the treatment of patients with advanced RCC. We have accounted for the joint development and commercialization activities in NorthAmerica and Europe as a joint risk-sharing collaboration in accordance with Accounting Standards Codification, or ASC, 808 Collaborative Arrangements.In addition, these joint development and commercialization activities were not deemed to be separate deliverables under the agreement with Astellas.Payments from Astellas with respect to Astellas’ share of tivozanib development and commercialization costs incurred by us pursuant to the jointdevelopment plan are recorded as a reduction to research and development expense and general and administrative expense in the accompanyingconsolidated financial statements due to the joint risk-sharing nature of the activities in North America and Europe. As a result of the cost-sharing provisionsin the Astellas Agreement, we reduced research and70development expense by $0.7 million, $3.5 million and $15.8 million during the years ended December 31, 2015, 2014, and 2013, respectively. We alsoreduced general and administrative expense by $0.1 million, $0.1 million and $2.8 million as a result of the cost-sharing provisions in the AstellasAgreement during the years ended December 31, 2015, 2014 and 2013, respectively. The net amount due to us from Astellas pursuant to the cost-sharingprovisions was $0.1 million and $0.6 million at December 31, 2015 and 2014, respectively.Activities under the agreement with Astellas outside of the joint development and commercialization activities in North America and Europe wereevaluated under ASC 605-25 to determine if they represented a multiple element revenue arrangement. The agreement with Astellas included the followingdeliverables outside of the joint development and commercialization activities in North America and Europe: (i) a co-exclusive license to develop andcommercialize tivozanib in North America and Europe; (ii) a royalty-bearing license to develop and commercialize tivozanib in the royalty territory, whichincludes our obligation to provide access to clinical and regulatory information resulting from the activities in North America and Europe to Astellas for itsdevelopment and commercialization of tivozanib in the royalty territory; and (iii) our obligation to supply clinical material to Astellas for development oftivozanib in the royalty territory. All of these deliverables were deemed to have stand-alone value and to meet the criteria to be accounted for as separateunits of accounting under ASC 605-25.We allocated the up-front consideration of $125.0 million to the deliverables based on our best estimate of selling price of each deliverable using therelative selling price method as we did not have vendor specific objective evidence or third-party evidence for such deliverables. We allocated $120.2million of the up-front consideration from Astellas to the co-exclusive license in North America and Europe and $4.8 million of the up-front considerationfrom Astellas to the combined deliverable representing a royalty-bearing license to develop and commercialize tivozanib in the royalty territory along withour obligation to provide access to clinical and regulatory information resulting from the activities in North America and Europe to Astellas for its use in theroyalty territory. The relative selling price for our obligation to supply clinical material to Astellas for development in the royalty territory had de minimisvalue.We recorded the $120.2 million relative selling price of the co-exclusive license granted in North America and Europe as collaboration revenue upondelivery of the license, and deferred approximately $4.8 million of revenue representing the relative selling price of the royalty-bearing license to developand commercialize tivozanib in the royalty territory along with our obligation to provide access to clinical and regulatory information resulting from theactivities in North America and Europe to Astellas for its use in the royalty territory. We were recording the $4.8 million ratably over the period of ourperformance through April 2022, the remaining patent life of tivozanib. Upon being notified that the collaboration would be terminated effective August2014, we reassessed the period of performance associated with the royalty territory deliverable and accelerated the recognition of the remaining deferredrevenue such that the balance would be recognized through August 2014. This change in estimate resulted in the recognition of an additional $3.2 millionduring the year ended December 31, 2014. We recorded approximately $3.6 million and $0.4 million of revenue associated with the Royalty TerritoryDeliverable during the years ended December 31, 2014 and 2013.Kyowa Hakko KirinIn December 2006, we entered into a license agreement with Kirin Brewery Co. Ltd. (now Kyowa Hakko Kirin), which we sometimes refer to as KHK,under which we obtained an exclusive license, with the right to grant sublicenses subject to certain restrictions, to research, develop, manufacture andcommercialize tivozanib, pharmaceutical compositions thereof and associated biomarkers. Our exclusive license covers all territories in the world, except forAsia. KHK has retained rights to tivozanib in Asia. Under the license agreement, we obtained exclusive rights in our territory under certain KHK patents,patent applications and know-how related to tivozanib, to research, develop, make, have made, use, import, offer for sale, and sell tivozanib for the diagnosis,prevention and treatment of any and all human diseases and conditions. We and KHK each have access to and can benefit from the other party’s clinical dataand regulatory filings with respect to tivozanib and biomarkers identified in the conduct of activities under the license agreement.Under the license agreement, we are obligated to use commercially reasonable efforts to develop and commercialize tivozanib in our territory,including meeting certain specified diligence goals. Prior to the first anniversary of the first post-marketing approval sale of tivozanib in our territory, neitherwe nor any of our subsidiaries has the right to conduct certain clinical trials of, seek marketing approval for or commercialize any other cancer product thatalso works by inhibiting the activity of the VEGF receptor. For additional information regarding the terms of the license agreement with KHK, see “Item 1,Business – Strategic Partnerships.”Upon entering into the license agreement with KHK, we made a one-time cash payment in the amount of $5.0 million. In March 2010, we made a$10.0 million milestone payment to KHK in connection with the dosing of the first patient in our phase 3 clinical trial of tivozanib. In December 2012, wemade a $12.0 million milestone payment to KHK in connection with the acceptance by the FDA of our NDA filing for tivozanib. The total remainingpayments for clinical and regulatory milestones under our license agreement with KHK are $38.0 million, in the aggregate, provided that the associatedclinical and regulatory milestones specific to71licensed territories would be replaced by a specified percentage of any non-research and development amounts we receive from any third party sublicensees.We also made a $22.5 million payment to KHK during the year ended December 31, 2011 related to the up-front license payment received under thecollaboration and license agreement with Astellas that we entered into in February 2011. We are required to pay to KHK 30% of certain amounts we receivefrom sublicensees, including up-front license fees, milestone payments and royalties, other than amounts we receive in respect of research and developmentfunding or equity investments, subject to certain limitations.We are also required to pay tiered royalty payments on net sales we make of tivozanib in our territory, which range from the low to mid-teens as apercentage of net sales. The royalty rate escalates within this range based on increasing tivozanib sales. Our royalty payment obligations in a particularcountry in our territory begin on the date of the first commercial sale of tivozanib in that country, and end on the later of 12 years after the date of firstcommercial sale of tivozanib in that country or the date of the last to expire of the patents covering tivozanib that have been issued in that country. In theevent we sublicense the rights licensed to us under the license agreement with KHK, we are required to pay KHK a specified percentage of any amounts wereceive from any third party sublicensees, other than amounts we receive in respect of research and development funding or equity investments, subject tocertain limitations.Financial OverviewIn January 2015, our Board of Directors approved a strategic restructuring that eliminated our internal research function to better align our resourceswith our future clinically focused strategic plans given that our material programs were at preclinical and clinical stages of development. As part of thisrestructuring, we eliminated approximately two thirds of our workforce, or 40 positions, across the organization. The restructuring was fully completed during2015.RevenueTo date, we have not generated any revenue from product sales. All of our revenue to date has been derived from license fees, milestone payments,premium over the fair value of convertible preferred shares sold to our strategic partners, and research and development payments received from our strategicpartners.In the future, we may generate revenue from a combination of product sales, license fees, milestone payments and research and development paymentsin connection with strategic partnerships, and royalties resulting from the sales of products developed under licenses of our intellectual property. We expectthat any revenue we generate will fluctuate from year to year as a result of the timing and amount of license fees, research and development reimbursements,milestone and other payments received under our strategic partnerships, and the amount and timing of payments that we receive upon the sale of ourproducts, to the extent any are successfully commercialized. We do not expect to generate revenue from product sales in the near term. If we or our strategicpartners fail to complete the development of our drug candidates in a timely manner or obtain regulatory approval for them, our ability to generate futurerevenue, and our results of operations and financial position, would be materially adversely affected.Research and Development ExpensesResearch and development expenses have historically consisted of expenses incurred in connection with the discovery and development of ourproduct candidates. These expenses consist primarily of: ·employee-related expenses, which include salaries, benefits and stock-based compensation expense; ·expenses incurred under agreements with contract research organizations, investigative sites and consultants that conduct our clinical trials anda substantial portion of our preclinical studies; ·the cost of acquiring and manufacturing clinical trial materials, as well as commercial materials prior to our anticipated launch of tivozanib; ·the cost of completing certain tivozanib clinical development activities that were initiated as part of our prior partnership with Astellas; ·facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities andequipment, and depreciation of fixed assets; ·license fees for, and milestone payments related to, in-licensed products and technology; and ·costs associated with outsourced development activities, regulatory approvals and medical affairs.72We expense research and development costs as incurred. Nonrefundable advance payments for goods and services that will be used in future researchand development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.Research and development expenses are net of amounts reimbursed under our agreements with Astellas and Biodesix for Astellas’ and Biodesix’respective shares of development costs incurred by us under our joint development plans with each respective partner.We track external development expenses and personnel expense on a program-by-program basis and allocate common expenses, such as scientificconsultants and laboratory supplies, to each program based on the personnel resources allocated to such program. Facilities, depreciation, stock-basedcompensation, research and development management and research and development support services are not allocated among programs and are consideredoverhead. We expect our overhead expenses to decrease in future periods as a result of our January 2015 restructuring which reduced our facilitiesrequirement by more than 80% of our prior space, including the elimination of lab and vivarium needs. Below is a summary of our research and developmentexpenses for the years ended December 31, 2015, 2014 and 2013: Years Ended December 31, 2015 2014 2013 (in thousands) Tivozanib $8,513 $9,530 $25,060 AV-380 Program in Cachexia 2,408 12,968 4,308 AV-203 532 1,843 5,698 Ficlatuzumab 80 1,579 12,573 Other pipeline programs 11 72 1,299 Other research and development 10 67 376 Platform collaborations — — — Overhead 1,321 12,195 19,154 Total research and development expenses $12,875 $38,254 $68,468 TivozanibOn November 27, 2012, the FDA accepted for filing our NDA for tivozanib, our lead product candidate, with the proposed indication for the treatmentof patients with advanced renal cell carcinoma, or RCC. On May 2, 2013, we were informed by the FDA that its Oncologic Drugs Advisory Committeebelieved that our NDA for investigational agent tivozanib did not demonstrate a favorable benefit-to-risk evaluation for the treatment of advanced RCC, andin June 2013, we received a complete response letter from the FDA informing us that the FDA will not approve in its present form our NDA for ourinvestigational agent tivozanib for the treatment of patients with advanced RCC.Our strategy for development of tivozanib included a focus on the exploration of various biomarkers which could provide insights into tivozanib’spotential clinical benefit. Accordingly, we conducted biomarker studies referred to as the BATON (Biomarker Assessment of Tivozanib in Oncology) trials.The first, which was a single-arm phase 2 trial of tivozanib (BATON-RCC) to evaluate various biomarkers for tivozanib activity in treatment naïve advancedRCC patients, was completed in 2014. In another, we evaluated tivozanib in colorectal cancer (BATON-CRC) through a randomized phase 2 clinical trial, toevaluate tivozanib in combination with mFOLFOX6 compared to Avastin in combination with mFOLFOX6 as first-line therapy in patients with advancedmetastatic colorectal cancer, or CRC. On December 13, 2013, we announced that, based on data from a September 2013 interim analysis, the BATON-CRCtrial was unlikely to meet the primary endpoint of demonstrating superiority over bevacizumab in the intent-to-treat population; and on February 14, 2014,we announced that the study would be discontinued.We entered into a collaboration and license agreement with Astellas in February 2011, pursuant to which we and Astellas shared responsibility fortivozanib, including expenses for continued development and commercialization of tivozanib, in North America and Europe. We have included $0.8 million,$3.5 million and $15.8 million in research and development cost reimbursements as a reduction in tivozanib-related expenses for the years endedDecember 31, 2015, 2014 and 2013, respectively. We also made a $22.5 million payment to KHK during the year ended December 31, 2011 related to the up-front license payment received under the collaboration and license agreement with Astellas which we entered into in February 2011. In December 2012, wemade a $12.0 million milestone payment to KHK in connection with the acceptance of our NDA filing for tivozanib. On August 11, 2014, our collaborationand license agreement with Astellas terminated pursuant to Astellas’ election to terminate and tivozanib rights were returned to us.73We and Astellas will share the costs of completing certain tivozanib clinical development activities. We do not expect the amount that we will incurin 2016 to be significant. The actual amount that we will incur may differ from this estimate depending upon our ability to expedite the termination of ourexisting obligations while continuing to satisfy our patient and regulatory requirements.In November 2014, we entered into a research and exclusive option agreement with Ophthotech Corporation, or Ophthotech, under which we grantedOphthotech an option to develop and commercialize tivozanib for the potential diagnosis, prevention and treatment of non-oncologic diseases or conditionsof the eye in humans.In August 2015, we entered into a license agreement under which we granted to a subsidiary of Pharmstandard OJSC, or Pharmstandard, the exclusiveright to develop, manufacture and commercialize tivozanib in the territories of Russia, Ukraine and the Commonwealth of Independent States for allconditions excluding non-oncologic ocular conditions. Under this agreement, Pharmstandard is responsible for all activities and costs associated with thefurther development, regulatory filings, health services and commercialization of tivozanib in the specified territories. In December 2015, Pharmstandardsubmitted an application for marketing authorization in Russia.In December 2015, we entered into a license agreement with EUSA under which we granted EUSA the right to develop and commercialize tivozanibfor all diseases and conditions in humans, excluding non-oncologic diseases or conditions of the eye, in Europe (excluding Russia, Ukraine and theCommonwealth of Independent States), Latin America (excluding Mexico), Africa, Australasia and New Zealand. We expect EUSA to file a MarketingAuthorization Application, or MAA, for tivozanib for the treatment of RCC with the European Medicines Agency, or EMA, in the first quarter of 2016. Underthe license agreement, EUSA has responsibility for all activities and costs associated with the further development, manufacture, regulatory approval andcommercialization of tivozanib in the licensed territories.We are also evaluating the opportunity to conduct an additional phase 3 trial of tivozanib vs. sorafenib in approximately 322 patients in the refractoryRCC setting using PFS as the primary endpoint and OS as a secondary endpoint, in order to support the approval of tivozanib as a third-line treatment and toaddress the overall survival concerns presented in the June 2013 complete response letter from the FDA. We expect the remaining uncommitted costs of thistrial to be between $34.0 and $36.0 million through completion. The timing and nature of activities contemplated for 2016 and thereafter will be conductedsubject to the availability of sufficient financial resources.AV-380 Program in CachexiaIn 2012, we initiated a program focusing on cachexia, which we now refer to as our AV-380 program. Our primary research focus is in the area ofcancer cachexia which we believe represents a significant are of patient need. In addition, cachexia is also associated with diseases outside of cancerincluding CKD, CHF, and COPD. In connection with our cachexia program, we have in-licensed certain patents and patent applications from St. Vincent’s.Appropriate IND-enabling efforts, including cell line development and manufacturing of our first cGMP batch, have been completed in preparation forpotential future clinical development.In August 2015, we entered into a license agreement with Novartis, under which we granted Novartis the exclusive right to develop and commercializeAV-380 and related AVEO antibodies that bind to Growth Differentiation Factor 15 worldwide. Under this agreement, Novartis is responsible for all activitiesand costs associated with the further development, regulatory filing and commercialization of AV-380 worldwide. We do not expect to incur any significantcosts related to AV-380 in future periods beyond any milestone fees and royalties payable to St. Vincent’s pursuant to our in-licensing agreement.AV-203In March 2014, we regained our worldwide rights from Biogen Idec to develop, manufacture and commercialize AV-203, and we are actively pursuingpartnerships or collaborations to further advance the development of AV-203. Because obtaining a partnership or collaboration may be complex andunpredictable in timing and nature of terms, we are unable to estimate with any certainty the costs we will incur in the future development of AV-203.FiclatuzumabIn April 2014, we entered into a worldwide agreement with Biodesix to develop and commercialize AVEO’s potent HGF inhibitory antibodyficlatuzumab, with BDX004, a proprietary companion diagnostic test, developed by Biodesix and based upon an exploratory analyses with VeriStrat®, aserum protein test that is commercially available to help physicians guide treatment decisions for patients with advanced NSCLC. Pursuant to the agreementwith Biodesix, Biodesix will provide up to $15 million for a phase 2 trial of ficlatuzumab in combination with erlotinib in first line advanced NSCLC patientsselected using BDX004, a diagnostic test derived from VeriStrat, and fund the further development and registration of BDX004 as a companion diagnostic.After the74completion of the phase 2 trial, any additional development, regulatory or commercial expenses for ficlatuzumab will be equally shared, as well as profits, ifany.Due to the unpredictable nature of clinical development, we are unable to estimate with any certainty the costs we will incur in the future developmentof ficlatuzumab.Uncertainties of Estimates Related to Research and Development ExpensesThe process of conducting preclinical studies and clinical trials necessary to obtain FDA approval for each of our product candidates is costly andtime-consuming. The probability of success for each product candidate and clinical trial may be affected by a variety of factors, including, among others, thequality of the product candidate’s early clinical data, investment in the program, competition, manufacturing capabilities and commercial viability.At this time, we cannot reasonably estimate or know the nature, specific timing and estimated costs of the efforts that will be necessary to complete thedevelopment of our product candidates, or the period, if any, in which material net cash inflows may commence from sales of any approved products. Thisuncertainty is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of: ·our ability to establish and maintain strategic partnerships, the terms of those strategic partnerships and the success of those strategicpartnerships, if any, including the timing and amount of payments that we might receive from strategic partners; ·the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for any product candidate; ·the progress and results of our clinical trials; ·the costs, timing and outcome of regulatory review of our product candidates; ·the emergence of competing technologies and products and other adverse market developments; and ·the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-relatedclaims.As a result of the uncertainties associated with developing drugs, including those discussed above, we are unable to determine the duration andcompletion costs of current or future clinical stages of our product candidates, or when, or to what extent, we will generate revenues from thecommercialization and sale of any of our product candidates. Development timelines, probability of success and development costs vary widely. Weanticipate that we will make determinations as to which additional programs to pursue and how much funding to direct to each program on an ongoing basisin response to the scientific and clinical success, if any, of each product candidate, as well as ongoing assessment of each product candidate’s commercialpotential. We will need to raise substantial additional capital in the future in order to fund the development of our preclinical and clinical productcandidates.General and Administrative ExpensesGeneral and administrative expenses consist principally of salaries and related costs for personnel in executive, finance, corporate development,marketing, information technology, legal and human resource functions. Also included in general and administrative expenses are facility costs not otherwiseincluded in research and development expenses, patent filing, prosecution and defense costs and professional fees for legal, consulting, pre-commercialization activities, auditing and tax services.We anticipate that our general and administrative expenses will continue to decrease due to the January 2015 restructuring. This decrease may bepartially offset by an increase in legal costs associated with the ongoing shareholder litigation and SEC investigation described above in this report under theheading “Legal Proceedings” in Part I—Item 3.Interest Income and Interest ExpenseInterest income consists of interest earned on our cash, cash equivalents and marketable securities. The primary objective of our investment policy iscapital preservation.Interest expense consists of interest, amortization of debt discount, and amortization of deferred financing costs associated with our loans payable.75Income TaxesWe calculate our provision for income taxes on ordinary income based on our projected annual tax rate for the year. We recorded a loss for the yearsended December 31, 2015, 2014, and 2013, and since we maintain a full valuation allowance on all of our deferred tax assets, we have recorded no incometax provision or benefit during the years ended December 31, 2015, 2014, and 2013.Critical Accounting Policies and Significant Judgments and EstimatesOur discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have beenprepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to makeestimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities inour financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, accrued clinicalexpenses, and stock-based compensation. We base our estimates on historical experience, known trends and events and various other factors that we and ourmanagement believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assetsand liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.Our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in thisreport. We believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our consolidated financialstatements.Revenue RecognitionOur revenues have historically been generated primarily through collaborative research, development and commercialization agreements. The terms ofthese agreements generally contain multiple elements, or deliverables, which may include (i) licenses, or options to obtain licenses, to our technology,(ii) research and development activities to be performed on behalf of the collaborative partner, and (iii) in certain cases, services in connection with themanufacturing of pre-clinical and clinical material. Payments to us under these arrangements typically include one or more of the following: non-refundable,up-front license fees; option exercise fees; funding of research and/or development efforts; milestone payments; and royalties on future product sales.When evaluating multiple element arrangements, we consider whether the deliverables under the arrangement represent separate units of accounting.This evaluation requires subjective determinations and requires management to make judgments about the individual deliverables and whether suchdeliverables are separable from the other aspects of the contractual relationship. In determining the units of accounting, management evaluates certaincriteria, including whether the deliverables have standalone value, based on the consideration of the relevant facts and circumstances for each arrangement.The consideration received is allocated among the separate units of accounting using the relative selling price method, and the applicable revenuerecognition criteria are applied to each of the separate units.We determine the estimated selling price for deliverables within each agreement using vendor-specific objective evidence, or VSOE, of selling price, ifavailable, third-party evidence, or TPE, of selling price if VSOE is not available, or best estimate of selling price if neither VSOE nor TPE is available.Determining the best estimate of selling price for a deliverable requires significant judgment. We typically use best estimate of selling price to estimate theselling price for licenses to our proprietary technology, since we often do not have VSOE or TPE of selling price for these deliverables. In those circumstanceswhere we utilize best estimate of selling price to determine the estimated selling price of a license to our proprietary technology, we consider marketconditions as well as entity-specific factors, including those factors contemplated in negotiating the agreements as well as internally developed models thatinclude assumptions related to the market opportunity, estimated development costs, probability of success and the time needed to commercialize a productcandidate pursuant to the applicable license. In validating our best estimate of selling price, we evaluate whether changes in the key assumptions used todetermine the best estimate of selling price will have a significant effect on the allocation of arrangement consideration between multiple deliverables.We typically receive up-front, non-refundable payments when licensing our intellectual property in conjunction with a research and developmentagreement. When management believes the license to our intellectual property does not have stand-alone value from the other deliverables to be provided inthe arrangement, we generally recognize revenue attributed to the license on a straight-line basis over our contractual or estimated performance period, whichis typically the term of our research and development obligations. If management cannot reasonably estimate when our performance obligation ends, thenrevenue is deferred until management can reasonably estimate when the performance obligation ends. When management believes the license to ourintellectual property has stand-alone value, we generally recognize revenue attributed to the license upon delivery. The periods over which revenue shouldbe recognized are subject to estimates by management and may change over the course of the research and development agreement. Such a change couldhave a material impact on the amount of revenue we record in future periods.76Payments or reimbursements resulting from our research and development efforts for those arrangements where such efforts are considered asdeliverables are recognized as the services are performed and are presented on a gross basis so long as there is persuasive evidence of an arrangement, the feeis fixed or determinable, and collection of the related receivable is reasonably assured. Amounts received prior to satisfying the above revenue recognitioncriteria are recorded as deferred revenue in the accompanying balance sheets.At the inception of each agreement that includes milestone payments, we evaluate whether each milestone is substantive and at risk to both parties onthe basis of the contingent nature of the milestone. This evaluation includes an assessment of whether (a) the consideration is commensurate with either(1) the entity’s performance to achieve the milestone, or (2) the enhancement of the value of the delivered item(s) as a result of a specific outcome resultingfrom the entity’s performance to achieve the milestone, (b) the consideration relates solely to past performance, and (c) the consideration is reasonablerelative to all of the deliverables and payment terms within the arrangement. We evaluate factors such as the scientific, regulatory, commercial and other risksthat must be overcome to achieve the respective milestone, the level of effort and investment required to achieve the respective milestone and whether themilestone consideration is reasonable relative to all deliverables and payment terms in the arrangement in making this assessment. The conclusion as towhether milestone payments are substantive involves management judgment regarding the factors noted above.We classify each of our milestones into one of four categories: (i) clinical and development milestones, (ii) regulatory milestones, (iii) commercialmilestones, and (iv) patent-related milestones. Clinical and development milestones are typically achieved when a product candidate advances into a definedphase of clinical research or completes such phase. For example, a milestone payment may be due to us upon the initiation of a phase 3 clinical trial for a newindication, which is the last phase of clinical development and could eventually contribute to marketing approval by the FDA or other regulatory authorities.Regulatory milestones are typically achieved upon acceptance of the submission for marketing approval of a product candidate or upon approval to marketthe product candidate by the FDA or other regulatory authorities. For example, a milestone payment may be due to us upon the FDA’s acceptance of an NDA.Commercial milestones are typically achieved when an approved pharmaceutical product reaches certain defined levels of net sales by the licensee, such aswhen a product first achieves global sales or annual sales of a specified amount. Patent-related milestones are typically achieved when a patent application isfiled or a patent is issued with respect to certain intellectual property related to the applicable collaboration.Revenues from clinical and development, regulatory and patent-related milestone payments, if the milestones are deemed substantive and themilestone payments are nonrefundable, are recognized upon successful accomplishment of the milestones. We have concluded that the clinical anddevelopment, regulatory and patent-related milestones pursuant to our current research and development arrangements are substantive. Milestones that arenot considered substantive are accounted for as license payments and recognized on a straight-line basis over the remaining period of performance. Revenuesfrom commercial milestone payments are accounted for as royalties and are recorded as revenue upon achievement of the milestone, assuming all otherrevenue recognition criteria are met.Accrued Clinical ExpensesAs part of the process of preparing our financial statements, we are required to record an estimate of our accrued expenses. This process involvesreviewing open contracts and purchase orders, and communicating with our applicable personnel to identify services that have been performed on our behalfand estimating the level of service performed and the associated cost incurred for such services when we have not yet been invoiced or otherwise notified ofthe actual costs. The majority of our service providers invoice us monthly in arrears for services performed. We make estimates of our accrued expenses as ofeach balance sheet date in our financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of ourestimates with the service providers and make adjustments if necessary. Examples of estimated accrued clinical expenses include: ·fees paid to contract research organizations in connection with clinical studies; ·fees paid to investigative sites in connection with clinical studies; ·fees paid to contract manufacturers in connection with the production of clinical trial materials; and ·fees paid to vendors in connection with preclinical development activities.We determine our expenses related to clinical studies based on our estimates of the services received and efforts expended pursuant to contracts withmultiple research institutions and contract research organizations that conduct and manage clinical studies on our behalf. The financial terms of theseagreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. Payments under some of these contractsdepend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the timeperiod over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or thelevel of effort varies77from our estimate, we adjust the accrual accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, andour estimates have not historically been materially different, our estimates of the status and timing of services performed relative to the actual status andtiming of services performed may vary and may result in us reporting amounts that are too high or too low in any particular period. Based on our accruedclinical trial expenses as of December 31, 2015, if our previous estimates are 5% too high or too low, this may result in an adjustment to our accrued clinicaltrial expenses in future periods of approximately $0.1 million.Estimated SEC SettlementThe Company is involved in various legal proceedings and accrues anticipated costs of settlement, damages, and/or losses to the extent such amountsare probable and estimable. If the estimate of a probable loss is a range and no amount within the range is more likely, the Company accrues the minimumamount of the range.On July 3, 2013, the staff (the “SEC Staff”) of the United States Securities and Exchange Commission (the “Commission”) served a subpoena on us fordocuments and information concerning tivozanib, including related communications with the FDA, investors and others. We have fully cooperated with theinquiry. In September 2015, the SEC Staff invited us to discuss the settlement of potential claims that the SEC Staff may recommend that the Commissionbring against us asserting that we violated federal securities laws by omitting to disclose to investors the recommendation made to us by the staff of the U.S.Food and Drug Administration, on May 11, 2012, that we conduct an additional clinical trial with respect to tivozanib. Based on the progress in thesettlement process thus far, we believe that we could potentially settle with the SEC for a total amount of $4,000,000 and, accordingly, we have accrued anestimated settlement liability, for accounting purposes, in that amount in our financial statements as of December 31, 2015. There can be no assurance,however, that a settlement will be approved by the Commission, or that any settlement on terms agreeable to us will be achieved. If settlement discussionsconclude without a settlement proposal that is acceptable to the Commission and us, the Commission may authorize the SEC Staff to pursue claims againstus. There can be no assurance that we will be able to resolve the potential claims of the Commission or that any settlement will not have a material adverseimpact on our ability to execute on our proposed plans or on our financial position or results of operations. The SEC Staff also invited three of our former officers to discuss the settlement of potential claims that the SEC Staff may recommend that theCommission bring against them. We are not a party to any discussions between the SEC Staff and the former officers, and we can make no assurance regardingsuch potential claims.Stock-Based CompensationUnder our stock-based compensation programs, we periodically grant stock options and restricted stock to employees, directors and nonemployeeconsultants. We also issue shares under an employee stock purchase plan. The fair value of all awards is recognized in our statements of operations over therequisite service period for each award. Awards that vest as the recipient provides service are expensed on a straight-line basis over the requisite serviceperiod. Other awards, such as performance-based awards that vest upon the achievement of specified goals, are expensed using the accelerated attributionmethod if achievement of the specified goals is considered probable. We have also granted awards that vest upon the achievement of market conditions. PerASC 718 Share-Based Payments, market conditions must be considered in determining the estimated grant-date fair value of share-based payments and themarket conditions must be considered in determining the requisite service period over which compensation cost is recognized. We estimate the fair value ofthe awards with market conditions using a Monte Carlo simulation, which utilizes several assumptions including the risk-free interest rate, the volatility ofour stock and the exercise behavior of award recipients. The grant-date fair value of the awards is then recognized over the requisite service period, whichrepresents the derived service period for the awards as determined by the Monte Carlo simulation. Determining the amount of stock-based compensation tobe recorded requires us to develop estimates of fair values of stock options as of the grant date using highly subjective assumptions.We use the Black-Scholes option pricing model to value our stock option awards without market conditions, which requires us to make certainassumptions regarding the expected volatility of our common stock price, the expected term of the option grants, the risk-free interest rate and the dividendyield with respect to our common stock. Our expected stock price volatility is based on an average of our own historical volatility and that of several peercompanies. We utilized a weighted average method using our own volatility data for the time that we have been public, along with similar data for peercompanies that are publicly traded. For purposes of identifying peer companies, we considered characteristics such as industry, length of trading history,similar vesting terms and in-the-money option status. Due to the lack of available quarterly data for these peer companies and a lack of our own historicaldata, we elected to use the “simplified” method for “plain vanilla” options to estimate the expected term of our stock option grants. Under this approach, theweighted-average expected life is presumed to be the average of the vesting term and the contractual term of the option. The risk-free interest rate used foreach grant is based on the U.S. Treasury yield curve in effect at the time of grant for instruments with a similar expected life. We utilize a dividend yield ofzero based on the fact that we have never paid cash dividends and have no present intention to pay cash dividends.78During the years ended December 31, 2015, 2014 and 2013, respectively, the assumptions used in the Black-Scholes pricing model for new grantswere as follows: Years Ended December 31, 2015 2014 2013 Volatility 73.04%-78.70% 69.38%-77.92% 64.22%-72.65% Expected Term (in years) 5.50-6.25 5.50-6.25 5.50-6.25 Risk-Free Interest Rates 1.54%-1.93% 1.81%-2.02% 1.01%-2.10% Dividend Yield — — — We recognized stock-based compensation expense of approximately $1.1 million, $2.8 million and $3.9 million for the years ended December 31,2015, 2014, and 2013, respectively. During the years ending December 31, 2015, 2014 and 2013, we estimated our expected forfeiture rates to be 71%, 62%and 49%, respectively. As of December 31, 2015, we had approximately $0.7 million of total unrecognized stock-based compensation expense for stockoptions, which we expect to recognize over a weighted-average period of approximately 2.9 years.As of December 31, 2015, we had $6,000 of total unrecognized stock-based compensation expense related to restricted stock awards granted under our2010 Stock Incentive Plan. We expect to recognize the expense over a weighted-average period of 0.1 years.We record compensation expense only for those awards that we ultimately expect will vest. We have performed an historical analysis of option awardsthat were forfeited prior to vesting and recorded total stock option expense that reflected this estimated forfeiture rate. We cannot currently predict the totalamount of stock-based compensation expense to be recognized in any future period because such amounts will depend on levels of stock-based paymentsgranted in the future as well as the portion of the awards that actually vest. Forfeitures are estimated each period and adjusted if actual forfeitures differ fromthose estimates. Actual forfeitures may differ from our estimates as a result of significant changes in our operations, such as those stemming from our October2012, June 2013 and January 2015 restructurings.We have historically granted stock options at exercise prices that are not less than the fair market value of our common stock.Results of OperationsComparison of Years Ended December 31, 2015 and 2014The following tables summarize the results of our operations for each of the years ended December 31, 2015 and 2014, together with the changes inthose items in dollars and as a percentage: Years EndedDecember 31, Increase/(decrease) % 2015 2014 (in thousands) Revenue $19,024 $18,123 $901 5%Operating expenses: Research and development 12,875 38,254 (25,379) (66)%General and administrative 14,217 18,589 (4,372) (24)%Restructuring and lease exit 4,358 11,729 (7,371) (63)%Total operating expenses 31,450 68,572 (37,122) (54)%Loss from operations (12,426) (50,449) 38,023 (75)%Other (expense) income, net (289) 66 (355) (538)%Interest expense (2,307) (2,388) 81 (3)%Interest income 21 32 (11) (34)%Net loss $(15,001) $(52,739) $37,738 (72)% 79 Years EndedDecember 31, Increase/(decrease) % Revenue 2015 2014 (in thousands) Strategic Partner: Novartis $18,450 $— $18,450 100%Biogen Idec 268 14,520 (14,252) (98)%Ophthotech 231 39 192 492%Pharmstandard 61 — 61 100%EUSA 14 — 14 100%Astellas — 3,564 (3,564) (100)% $19,024 $18,123 $901 5% Revenue. Revenue for the year ended December 31, 2015 was $19.0 million compared to $18.1 million for the year ended December 31, 2014, anincrease of approximately $0.9 million, or 5%. The increase was primarily due to the recognition of $18.5 million of revenue associated with the receipt of a$15.0 million upfront payment for our license of AV-380 to Novartis and Novartis’ subsequent purchase of clinical material for $3.5 million. These amountswere partially offset by a decrease of $3.6 million of revenue from Astellas following the termination of our collaboration agreement in 2014 and a decreaseof $14.3 million of revenue recognized from our arrangement with Biogen due to the one-time recognition of previously deferred revenue following anamendment to our agreement in 2014.Research and development. Research and development expenses for the year ended December 31, 2015 were $12.9 million compared to $38.3 millionfor the year ended December 31, 2014, a decrease of $25.4 million, or 66%. The decrease is primarily attributable to a $7.8 million decrease in employeecompensation, benefits, contract labor and consulting and a decrease of $9.2 million in facilities, IT, and other costs following our January 2015restructuring; a decrease of $7.6 million in outsourced services costs primarily related to the completion of the manufacture of AV-380 material in 2014; anda decrease of $0.8 million in medical affairs and external clinical trial costs associated with the decreased number of active patients enrolled in our clinicaltrials.Included in research and development expenses were stock-based compensation expenses of approximately $0.3 million and $0.9 million for the yearsended December 31, 2015 and 2014, respectively.General and administrative. General and administrative expenses for the year ended December 31, 2015 were $14.2 million compared to $18.6million for the year ended December 31, 2014, a decrease of $4.4 million, or 24%. The decrease is primarily the result of a $4.1 million decrease in salaries,benefits, contract labor and consulting and a decrease of $4.5 million in facilities, IT, insurance and other infrastructure costs following our January 2015restructuring as well as a $2.0 million decrease in external legal costs associated with various ongoing legal matters. These amounts were partially offset by$4.0 million in expense incurred in 2015 related to the accrual of an estimated settlement liability, for accounting purposes, related to the potential SECclaims and an increase in depreciation expense of $2.2 million due to the acceleration of depreciation in connection with the termination of our leaseagreement of 650 East Kendall Street in September 2014.Included in general and administrative expenses were stock-based compensation expenses of approximately $0.8 million and $1.9 million for theyears ended December 31, 2015 and 2014, respectively.Restructuring and lease exit. Restructuring and lease exit expense for the year ended December 31, 2015 was $4.4 million, compared to $11.7 millionfor the year ended December 31, 2014. The expenses incurred during 2015 relate to costs associated with elimination of our research function and theassociated reductions in headcount as part of our January 2015 restructuring. The expenses incurred during 2014 relate to costs associated with partiallyvacating and subsequently terminating the agreement for our leased space at 650 East Kendall Street, which occurred in September 2014.Other (expense) income, net. Other (expense) income, net for the year ended December 31, 2015 was ($0.3) million compared to $0.1 million for theyear ended December 31, 2014, a decrease of $0.4 million or 538%. Other (expense) for 2015 is primarily due to losses incurred upon disposing of certainassets following our January 2015 restructuring. Other income for 2014 is primarily due to proceeds from the sale of lab equipment.Interest expense. Interest expense for the year ended December 31, 2015 was $2.3 million compared to $2.4 million for the year ended December 31,2014, a decrease of $0.1 million, or 3%. The decrease is primarily attributable to the declining average outstanding balance on our loan with HerculesTechnology Growth.80Interest income. Interest income for the year ended December 31, 2015 was $21,000 compared to $32,000 for the year ended December 31, 2014, adecrease of $11,000, or 34%. The decrease in interest income is primarily due to overall lower average cash, cash equivalent and marketable securitiesbalances during the year ended December 31, 2015 compared to the year ended December 31, 2014.Comparison of Years Ended December 31, 2014 and 2013The following tables summarize the results of our operations for each of the years ended December 31, 2014 and 2013, together with the changes inthose items in dollars and as a percentage: Years EndedDecember 31, Increase/(decrease) % 2014 2013 (in thousands) Revenue $18,123 $1,293 $16,830 1,302%Operating expenses: Research and development 38,254 68,468 (30,214) (44)%General and administrative 18,589 28,712 (10,123) (35)%Restructuring and lease exit 11,729 8,017 3,712 46%Total operating expenses 68,572 105,197 (36,625) (35)%Loss from operations (50,449) (103,904) 53,455 (51)%Other income (expense), net 66 (123) 189 (154)%Interest expense (2,388) (3,127) 739 (24)%Interest income 32 125 (93) (74)%Net loss $(52,739) $(107,029) $54,290 (51)% Years EndedDecember 31, Increase/(decrease) % Revenue 2014 2013 (in thousands) Strategic Partner: Astellas $3,564 $430 $3,134 729%Ophthotech 39 — 39 100%Biogen Idec 14,520 863 13,657 1,583% $18,123 $1,293 $16,830 1,302% Revenue. Revenue for the year ended December 31, 2014 was $18.1 million compared to $1.3 million for the year ended December 31, 2013, anincrease of approximately $16.8 million, or 1,302%. The increase was primarily due to the recognition of an additional $13.7 million of previously deferredrevenue as a result of the amendment to our arrangement with Biogen. Pursuant to the amendment, Biogen agreed to the termination of its rights andobligations under the previous arrangement. As a result, we recognized as revenue all previously deferred amounts in excess of the estimated selling price ofthe remaining deliverables under the modified arrangement. In addition, we recognized an additional $3.1 million in connection with the change in theestimated period of performance associated with our collaboration with Astellas as a result of the termination of the agreement in August 2014.Research and development. Research and development expenses for the year ended December 31, 2014 were $38.3 million compared to $68.5 millionfor the year ended December 31, 2013, a decrease of $30.2 million, or 44%. The decrease is primarily attributable to a $14.0 million decrease in employeecompensation, benefits, and contract labor as well as a decrease of $6.2 million in facilities, IT, and other costs following our June 2013 restructuring; adecrease of $11.9 million in outsourced services costs primarily related to the completion of the manufacture of ficlatuzumab material in 2013; and adecrease of $11.7 million in external clinical trial, research, and medical affairs costs associated with decreased tivozanib clinical development activity. Thedecrease for 2014 was partially offset by a decrease of $9.5 million in reimbursements to us by Astellas for tivozanib development costs due to thecorresponding decrease in tivozanib expenses, which we recorded as a reduction in R&D expense in the prior year period, and an increase of $4.1 million inmanufacturing costs related primarily to the completion of the manufacture of AV-380 material in 2014.Included in research and development expenses were stock-based compensation expenses of approximately $0.9 million and $2.0 million for the yearsended December 31, 2014 and 2013, respectively.General and administrative. General and administrative expenses for the year ended December 31, 2014 were $18.6 million compared to $28.7million for the year ended December 31, 2013, a decrease of $10.1 million, or 35%. The decrease is primarily the81result of a $6.0 million decrease in salaries and benefits as well as a decrease of $2.5 million in facilities and IT costs following our June 2013 restructuring,and a $6.7 million decrease in marketing and consulting costs due to termination of tivozanib pre-commercialization activities. These amounts were partiallyoffset by a $1.6 million increase in external legal costs associated with various ongoing legal matters, an increase in depreciation expense of $0.9 million dueto the acceleration of depreciation following the termination of our lease agreement of 650 East Kendall Street in September 2014, and by a $2.6 milliondecrease in reimbursements to us from Astellas for shared tivozanib general and administrative costs, which we recorded as a reduction in general andadministrative expense in the prior year period.Included in general and administrative expenses were stock-based compensation expenses of approximately $1.9 million and $1.8 million for theyears ended December 31, 2014 and 2013, respectively.Restructuring and lease exit. Restructuring and lease exit expense for the year ended December 31, 2014 was $11.7 million, compared to $8.0 millionfor the year ended December 31, 2013. The expenses incurred during 2014 relate to costs associated with partially vacating and subsequently terminating theagreement for our leased space at 650 East Kendall Street, which occurred in September 2014. The expenses incurred during 2013 relate to severance andemployee benefits incurred as part of the June 2013 strategic restructuring.Other income (expense), net. Other income (expense), net for the year ended December 31, 2014 was $0.1 million compared to $(0.1) million for theyear ended December 31, 2013, an increase of $0.2 million or 154%. Other income for 2014 is primarily due to proceeds from the sale of lab equipment, whileexpense for 2013 is primarily due to losses on foreign exchange rates and fixed asset disposals.Interest expense. Interest expense for the year ended December 31, 2014 was $2.4 million compared to $3.1 million for the year ended December 31,2013, a decrease of $0.7 million, or 24%. The decrease is primarily attributable to the declining outstanding balance on our loan with Hercules TechnologyGrowth during the first three quarters of 2014.Interest income. Interest income for the year ended December 31, 2014 was $32,000 compared to $125,000 for the year ended December 31, 2013, adecrease of $93,000, or 74%. The decrease in interest income is primarily due to overall lower average cash, cash equivalent and marketable securitiesbalances during the year ended December 31, 2014 compared to the year ended December 31, 2013.Contractual Obligations and CommitmentsThe following table summarizes our non-cancellable contractual obligations at December 31, 2015: Payment due by period Contractual Obligations Total Less than1 Year 1 to 3Years 3 to 5Years More than 5Years (in thousands) Long-term debt (including interest) $12,413 $3,499 $8,914 — — Operating lease obligations(1) 46 46 — — — License agreements(2)(3) 25 25 — — — Total contractual cash obligations $12,484 $3,570 $8,914 — — (1)As discussed in Note 14 to our consolidated financial statements, we provided notice in February 2015 of our election to surrender our space at 650 E.Kendall Street in Cambridge on May 29, 2015. In conjunction with our departure from our prior space, we began subleasing our principal facilities atOne Broadway in Cambridge in April, 2015. Our lease arrangement is cancellable within 30 days’ notice to our landlord. As a result, our operatinglease obligation as of December 31, 2015 is the January rent payable to our landlord.(2)Under our license agreement with Kyowa Hakko Kirin, we are required to make certain milestone payments upon the achievement of specifiedregulatory milestones. We are also required to pay 30% of certain amounts we receive from sublicensees, including up-front license fees, milestonepayments and royalties, other than amounts we receive in respect of research and development funding or equity investments, subject to certainlimitations. Additionally, under our license agreement with St. Vincent’s Hospital, we are required to make certain milestone payments upon theachievement of specified regulatory or clinical milestones. At this time, we cannot reasonably estimate when or if we may be required to make otheradditional payments to Kyowa Hakko Kirin or St. Vincent’s Hospital and have not included any additional amounts in the table above.(3)As discussed in Note 7 to our consolidated financial statements, we have executed license agreements for patented technology and other technologyrelated to research projects, including technology to humanize ficlatuzumab and other antibody product candidates. The license agreements requiredus to pay non-refundable license fees upon execution, and in certain cases, require82milestone payments upon the achievement of defined development goals. We have not included any additional milestone payments in the tableabove as we are not able to make a reasonable estimate of the probability and timing of such payments, if any. In addition to the amounts in the tableabove, these four agreements include sales and development milestones of up to $22.5 million, $5.5 million and $4.2 million per product,respectively, and single digit royalties as a percentage of sales.Liquidity and Capital ResourcesWe have funded our operations principally through the sale of equity securities sold in private placements and underwritten public offerings of equitysecurities, revenue and expense reimbursements from strategic partnerships, debt financing and interest income. Through December 31, 2015, we havereceived gross proceeds of $89.7 million from the sale of common stock in our initial public offering, $68.3 million from private placements of shares of ourcommon stock to institutional and accredited investors, $168.7 million from a follow-on public offering of shares of our common stock, and $169.6 millionfrom the sale of convertible preferred stock prior to becoming a public company. As of December 31, 2015, we have received an aggregate of $420.5 millionin cash from our agreements with strategic partners, and $36.5 million in funding from our debt financing with Hercules Technology Growth and certain of itsaffiliates. As of December 31, 2015, we had cash, cash equivalents and marketable securities of approximately $34.1 million. Currently, our funds areinvested in money market funds, U.S. government agency securities, and corporate debt securities, including commercial paper. The following table sets forththe primary sources and uses of cash for each of the periods set forth below: Years EndedDecember 31, 2015 2014 2013 (in thousands) Net cash used in operating activities $(18,230) $(54,248) $(84,402)Net cash (used in) provided by investing activities (6,316) 54,710 12,070 Net cash (used in) provided by financing activities (1,126) 1,018 46,998 Net (decrease) increase in cash and cash equivalents $(25,672) $1,480 $(25,334) During the years ended December 31, 2015, 2014 and 2013, our operating activities used cash of $18.2 million, $54.2 million and $84.4 million,respectively. Cash used by operations for the year ended December 31, 2015 was due primarily to our net loss adjusted for non-cash items. Cash used byoperations for the year ended December 31, 2014 was due primarily to our net loss adjusted for non-cash items, including a $7.6 million impairment ofproperty due to the lease exit costs incurred upon us meeting the cease use criteria for certain of our facilities during 2014, an $18.0 million recognition ofdeferred revenue related to the termination of our collaboration with Astellas and Biogen during the same period, and working capital changes. Cash used byoperations for the year ended December 31, 2013 was due primarily to our net losses adjusted for non-cash items.During the years ended December 31, 2015, 2014 and 2013, our investing activities (used) provided cash of ($6.3) million, $54.7 million and $12.1million, respectively. The cash used in investing activities for the year ended December 31, 2015 was the result of the purchase of $19.1 million ofmarketable securities, partially offset by the sale of $11.6 million of marketable securities and the receipt of $1.2 million in proceeds from the sale of propertyand equipment. The cash provided by investing activities for the years ended December 31, 2014 and 2013 was the result of fewer purchases of marketablesecurities than the proceeds from maturities and sales of marketable securities in order to fund our ongoing operations, partially offset by purchases ofproperty and equipment of $12.9 million and $3.7 million during the years ended December 31, 2013 and 2012, respectively.During the years ended December 31, 2015, 2014 and 2013, our financing activities (used) provided ($1.1) million, $1.0 million and $47.0 million,respectively. The cash used in financing activities in 2015 was due to $11.6 million in principal payments on our loan agreement, partially offset by proceedsfrom the issuance of common stock totaling $10.2 million. The cash provided by financing activities in 2014 was due to net proceeds of $8.6 million fromthe amendment of our loan agreement entered into with affiliates of Hercules Technology Growth, offset partially by principal payments on loans payable inthe amount of $7.8 million. The cash provided by financing activities in 2013 was primarily due to the net proceeds of $53.6 million from our public offeringof stock, offset by $7.1 million in principal payments on our loan from Hercules Technology Growth.At-The-Market Issuance Sales Agreements with FBRIn February 2015, we entered into an at-the-market issuance sales agreement, which we refer to as the Sales Agreement, with FBR & Co., or FBR,(formerly MLV & Co. LLC), pursuant to which we could issue and sell shares of our common stock from time to time up to an aggregate amount of $17.9million, at our option, through FBR as our sales agent.On May 7, 2015, we filed a shelf registration statement on Form S-3 with the SEC, which we refer to as the 2015 Shelf. The 2015 Shelf covers theoffering, issuance and sale of up to $100 million of our common stock, preferred stock, debt securities, warrants83and/or units. The 2015 Shelf was filed to replace our existing $250 million shelf registration statement, which expired at the end of May 2015, and which werefer to as the 2012 Shelf. On May 7, 2015, we also amended the Sales Agreement to provide for the offering, issuance and sale of up to $15 million of ourcommon stock under the 2015 Shelf. The prior at-the-market offering initiated under the Sales Agreement expired along with the 2012 Shelf. As of December31, 2015, we have sold approximately 5.9 million shares pursuant to the Sales Agreement, as amended, resulting in proceeds of approximately $10.2 million,net of commissions and issuance costs. Approximately $9.0 million remains available for sale under the Sales Agreement.Sales of common stock through FBR may be made by any method that is deemed an “at-the-market” offering as defined in Rule 415 promulgatedunder the Securities Act of 1933, as amended, including by means of ordinary brokers’ transactions at market prices, in block transactions or as otherwiseagreed by the Company and FBR. Subject to the terms and conditions of the Sales Agreement, FBR will use commercially reasonable efforts to sell ourcommon stock based upon our instructions (including any price, time or size limits or other customary parameters or conditions we may impose). We are notobligated to make any sales of common stock under the amended Sales Agreement. Any shares sold will be sold pursuant to an effective shelf registrationstatement on Form S-3. We are required to pay FBR a commission of up to 3% of the gross proceeds. The Sales Agreement may be terminated by us at anytime.Credit Facilities. On September 24, 2014, we amended our loan and security agreement, which we refer to as the Amended Loan Agreement, withHercules Technology II, L.P. and Hercules Technology III, L.P., affiliates of Hercules Technology Growth, which we originally entered into on May 28, 2010and amended on December 21, 2011 and March 31, 2012. Pursuant to the Amended Loan Agreement, we received a new loan in an aggregate principalamount of $10.0 million and amended the terms of our original loan with Hercules, which had an outstanding principal balance of $11.6 million at the dateof the amendment. We are not required to make any principal payments on the new loan of $10.0 million until May 1, 2016. The date on which we will berequired to begin making principal payments was extended in August 2015 and may be further extended if we continue to achieve performance milestones,after which time we will be required to make monthly principal and interest payments with the entire loan due and payable on January 1, 2018.The Amended Loan Agreement has an end-of-term payment of approximately $0.5 million due on January 1, 2018 or on such earlier date as the newloan is prepaid. The Amended Loan Agreement also has a financial covenant with respect to the new loan, whereby we have agreed to maintain a liquidityratio equal to or greater than 1.25 to 1.00, or the equivalent of $12.5 million based on the outstanding principal balance as of December 31, 2015, inunrestricted and unencumbered cash and cash equivalents. This financial covenant will not apply after such time as we receive favorable data both withrespect to our phase 2 clinical study of ficlatuzumab and a phase 1 clinical study of AV-380. We continued to be in compliance with all financial covenantsunder the Amended Loan Agreement at December 31, 2015. We must make interest payments on both loans each month the loans remains outstanding. Perannum interest is payable on each loan at the greater of 11.9% and an amount equal to 11.9% plus the prime rate minus 4.75%, provided, however, that theper annum interest shall not exceed 15.0%. Our annual interest rate as of December 31, 2015 was 11.9%.We have determined that the risk of subjective acceleration under the material adverse events clause included in this loan and security agreement isremote and, therefore, have classified the outstanding principal amount in current and long-term liabilities based on the timing of scheduled principalpayments. As of December 31, 2015 and through the date of this filing, the lenders have not asserted any events of default under the loan.The loans are secured by a lien on all of our personal property (other than intellectual property), whether owned as of, or acquired after, the date of theamended loan agreement. As of December 31, 2015, the principal balance outstanding was $10.0 million.Operating Capital Requirements. We anticipate that we will continue to incur significant operating losses for the next several years as we incurexpenses to continue to execute on our clinical development strategy to advance our clinical stage assets. In particular, we estimate that the remaininguncommitted costs of a Phase 3 trial for RCC such as the one contemplated by us could cost in the range of $34-36 million through 2018.We believe that our cash resources would allow us to fund our current operations into the fourth quarter of 2017. This estimate does not include ourpayment of potential licensing milestones or the uncommitted costs of conducting any contemplated clinical trials and assumes no milestone payments fromour partners, no additional funding from new partnership agreements, no equity financings, no debt financings, no accelerated repayment thereof and nofurther sales of equity under our ATM. This estimate also does not include any amount we may agree to pay in excess of the estimated settlement liability, foraccounting purposes, that we have established with respect to a settlement of claims with the SEC, as described above under the heading “LegalProceedings” in Part I—Item 3 of this Form 10-K.84Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we areunable to estimate the exact amounts of our working capital requirements and the period in which we will have working capital to fund our operations.Accordingly, the timing and nature of activities contemplated for 2016 and thereafter will be conducted subject to the availability of sufficient financialresources.Our future funding requirements will depend on many factors, including, but not limited to: ·our ability to establish and maintain strategic partnerships, licensing or other arrangements and the financial terms of such agreements; ·the number and characteristics of the product candidates we pursue; ·the scope, progress, results and costs of researching and developing our product candidates, and conducting preclinical and clinical trials; ·the timing of, and the costs involved in, obtaining regulatory approvals for our product candidates; ·the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and theoutcome of such litigation; ·the absence of any breach, acceleration event or event of default under our loan agreement with Hercules or under any other agreements withthird parties; ·the outcome of legal actions against us, including the current lawsuits and SEC proceedings described above under “Part I, Item 3—LegalProceedings,” including whether we enter into a settlement with the SEC within the estimated settlement liability we have established foraccounting purposes; ·the cost of commercialization activities if any of our product candidates are approved for sale, including marketing, sales and distributioncosts; ·the cost of manufacturing our product candidates and any products we successfully commercialize; and ·the timing, receipt and amount of sales of, or royalties on, our future products, if any.If our available cash and cash equivalents are insufficient to satisfy our liquidity requirements, or if we identify additional opportunities to do so, wemay seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity or convertible debt securities mayresult in additional dilution to our stockholders. If we raise additional funds through the issuance of debt securities or preferred stock or through additionalcredit facilities, these securities and/or the loans under credit facilities could provide for rights senior to those of our common stock and could containcovenants that would restrict our operations. We may require additional capital beyond our currently forecasted amounts. Additional funds may not beavailable when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to: ·delay, limit, reduce or terminate our clinical trials or other development activities for one or more of our product candidates; and/or ·delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary tocommercialize our product candidates, if approved.Off-Balance Sheet ArrangementsWe did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable SECrules. 85ITEM 7A.Quantitative and Qualitative Disclosures About Market RiskWe are exposed to market risk related to changes in interest rates. As of December 31, 2015, we had cash, cash equivalents and marketable securities of$34.1 million, consisting of cash on deposit with banks, money market funds, U.S. government agency securities, and corporate debt, including commercialpaper. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularlybecause our investments are in short-term cash equivalents. Our cash equivalents are subject to interest rate risk and could fall in value if market interest ratesincrease. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 10% change in interest rateswould not have a material effect on the fair market value of our portfolio. We have the ability to hold our cash equivalents until maturity, and therefore wewould not expect our operating results or cash flows to be affected to any significant degree by the effect of a change in market interest rates on ourinvestments. We do not currently have any auction rate securities.Our long-term debt bears interest at variable rates. In May 2010, we entered into a loan agreement with affiliates of Hercules Technology GrowthCapital pursuant to which we received a loan in the aggregate principal amount of $25.0 million. In March 2012, we entered into an amendment to the loanagreement, pursuant to which we increased the principal amount to $26.5 million. In September 2014, we entered into a further amendment to the loanagreement, pursuant to which we borrowed a new loan of $10.0 million, which is in addition to the existing loan which had an outstanding principal balanceof $11.6 million. As of December 31, 2015, our aggregate principal balance outstanding on our loans was $10.0 million. Per annum interest is payable at thegreater of 11.9% and 11.9% plus the prime rate of interest minus 4.75%, not to exceed 15%. As a result of the 15% maximum per annum interest rate underthe amended loan agreement, we have limited exposure to changes in interest rates on borrowings under this loan agreement. For every 1% increase in theprime rate over 4.75%, given the amount of debt outstanding under the loan agreement as of December 31, 2015, and expected loan payments during 2015,we would have a decrease in future annual cash flows of approximately $0.1 million over the next twelve month period as a result of such 1% increase.We are also exposed to market risk related to change in foreign currency exchange rates. We contract with contract research organizations andinvestigational sites that are located around the world. We are subject to fluctuations in foreign currency rates in connection with these agreements. We donot currently hedge our foreign currency exchange rate risk. 86ITEM 8.Financial Statements and Supplementary Data AVEO PHARMACEUTICALS, INC.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm88 Consolidated Balance Sheets as of December 31, 2015 and 201489 Consolidated Statements of Operations for the Years Ended December 31, 2015, 2014 and 201390 Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2015, 2014 and 201391 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2015, 2014 and 201392 Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014 and 201393 Notes to Consolidated Financial Statements94 87REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofAVEO Pharmaceuticals, Inc.We have audited the accompanying consolidated balance sheets of AVEO Pharmaceuticals, Inc. as of December 31, 2015 and 2014, and the relatedconsolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended December 31,2015. These financial statements are the responsibility of AVEO Pharmaceuticals, Inc.’s management. Our responsibility is to express an opinion on thesefinancial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe thatour audits provide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AVEOPharmaceuticals, Inc. at December 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the three years in the periodended December 31, 2015, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), AVEO Pharmaceuticals,Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 15, 2016 expressed an unqualifiedopinion thereon./s/ Ernst & Young LLPBoston, MassachusettsMarch 15, 2016 88AVEO Pharmaceuticals, Inc.Consolidated Balance Sheets(In thousands, except par value amounts) 2015 2014 Assets Current assets: Cash and cash equivalents $26,634 $52,306 Marketable securities 7,501 — Accounts receivable 4,641 2,341 Restricted cash — 2,997 Prepaid expenses and other current assets 1,600 1,484 Total current assets 40,376 59,128 Property and equipment, net 23 11,295 Other assets 143 239 Total assets $40,542 $70,662 Liabilities and stockholders’ equity Current liabilities: Accounts payable $1,425 $3,245 Accrued expenses 4,106 9,301 Lease exit obligation — 4,981 Loans payable, net of discount 2,053 11,722 Deferred revenue 814 537 Estimated settlement liability (Note 16) 4,000 — Deferred rent — 10,569 Total current liabilities 12,398 40,355 Loans payable, net of current portion and discount 7,418 8,930 Deferred revenue, net of current portion 2,881 231 Other liabilities 618 540 Commitments and contingencies (Note 8) Stockholders’ equity: Preferred stock, $.001 par value: 5,000 shares authorized; no shares issued and outstanding — — Common stock, $.001 par value: 200,000 and 100,000 shares authorized at December 31, 2015 and 2014, respectively; 58,182 and 52,289 shares issued and outstanding at December 31, 2015 and 2014, respectively 58 52 Additional paid-in capital 512,201 500,582 Accumulated other comprehensive loss (3) — Accumulated deficit (495,029) (480,028)Total stockholders’ equity 17,227 20,606 Total liabilities and stockholders’ equity $40,542 $70,662 See accompanying notes 89AVEO Pharmaceuticals, Inc.Consolidated Statements of Operations(In thousands, except per share amounts) Year Ended December 31, 2015 2014 2013 Collaboration revenue $19,024 $18,123 $1,293 Operating expenses: Research and development 12,875 38,254 68,468 General and administrative 14,217 18,589 28,712 Restructuring and lease exit 4,358 11,729 8,017 31,450 68,572 105,197 Loss from operations (12,426) (50,449) (103,904)Other income and expense: Other (expense) income, net (289) 66 (123)Interest expense (2,307) (2,388) (3,127)Interest income 21 32 125 Other expense, net (2,575) (2,290) (3,125)Net loss $(15,001) $(52,739) $(107,029)Basic and diluted net loss per share: Net loss per share $(0.27) $(1.01) $(2.10)Weighted average number of common shares outstanding 55,701 52,289 50,928 See accompanying notes 90AVEO PHARMACEUTICALS, INC.Consolidated Statements of Comprehensive Loss(In thousands) Year Ended December 31, 2015 2014 2013 Net loss $(15,001) $(52,739) $(107,029)Other comprehensive (loss) income: Unrealized (losses) gains on available-for-sale securities (3) 2 (9)Foreign currency translation adjustment — — 26 Comprehensive loss $(15,004) $(52,737) $(107,012) See accompanying notes 91AVEO Pharmaceuticals, Inc.Consolidated Statements of Stockholders’ Equity(In thousands) CommonShares AdditionalPaid-inCapital AccumulatedOtherComprehensiveLoss AccumulatedDeficit TotalStockholders’Equity Transaction Shares Par Value Balance at December 31, 2012 43,780 $44 $439,173 $(19) $(320,260) $118,938 Exercise of stock options 185 1 271 — — 272 Stock-based compensation expense related to equity-classified awards — — 3,791 — — 3,791 Issuance of common stock to settle liability- classified share awards granted to directors 39 — 119 — — 119 Issuance of common stock under employee stock purchase plan 110 — 193 — — 193 Issuance of common stock from follow-on stock offering (net of issuance cost of $3,865) 7,667 7 53,630 — — 53,637 Issuance of restricted stock awards, net of forfeitures 28 — — — — — Change in unrealized gain/loss on investments — — — (9) — (9)Cumulative translation adjustment — — — 26 — 26 Net loss — — — — (107,029) (107,029)Balance at December 31, 2013 51,809 $52 $497,177 $(2) $(427,289) $69,938 Stock-based compensation expense related to equity-classified awards — — 2,750 — — 2,750 Issuance of common stock to settle liability- classified share awards granted to directors 31 — 51 — — 51 Issuance of common stock under employee stock purchase plan 139 — 191 — — 191 Issuance of warrants in connection with loans payable — — 413 — — 413 Issuance of restricted stock awards, net of forfeitures 310 — — — — — Change in unrealized gain/loss on investments — — — 2 — 2 Net loss — — — — (52,739) (52,739)Balance at December 31, 2014 52,289 $52 $500,582 $— $(480,028) $20,606 Stock-based compensation expense related to equity-classified awards — — 1,132 — — 1,132 Exercise of stock options 166 — 241 — — 241 Issuance of common stock to settle liability- classified share awards granted to directors 8 7 7 Issuance of common stock under employee stock purchase plan 7 — 27 — — 27 Issuance of common stock from at-the-market sales agreement (net of issuance cost of $157) 5,913 6 10,212 — — 10,218 Forfeiture of restricted stock awards (201) — — — — — Change in unrealized gain/loss on investments — — — (3) — (3)Net loss — — — — (15,001) (15,001)Balance at December 31, 2015 58,182 $58 $512,201 $(3) $(495,029) $17,227 See accompanying notes 92AVEO Pharmaceuticals, Inc.Consolidated Statements of Cash Flows(in thousands) Year Ended December 31, 2015 2014 2013 Operating activities Net loss $(15,001) $(52,739) $(107,029)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 9,567 6,219 3,775 Net loss (gain) on disposal of property and equipment 253 (127) 83 Impairment of property and equipment 232 7,600 65 Stock-based compensation 1,132 2,808 3,940 Non-cash interest expense 655 347 285 Amortization of premiums and discounts on investments 34 221 1,041 Changes in operating assets and liabilities: Accounts receivable (2,300) (1,357) 19,665 Tenant improvement allowance receivable — 5,833 (2,593)Prepaid expenses and other current assets (116) 1,503 3,179 Other noncurrent assets 96 50 31 Restricted cash 2,997 598 5 Accounts payable (1,820) (993) (6,390)Accrued expenses (5,189) (2,064) (7,838)Lease exit obligation (5,206) 4,981 — Deferred revenue 2,927 (17,623) (1,293)Other liabilities 78 — — Estimated settlement liability 4,000 — — Deferred rent (10,569) (9,505) 8,672 Net cash used in operating activities (18,230) (54,248) (84,402)Investing activities Purchases of property and equipment (22) (12,942) (3,668)Purchases of marketable securities (19,085) (42,306) (175,391)Proceeds from maturities and sales of marketable securities 11,550 109,767 191,129 Proceeds from sale of property and equipment 1,241 191 — Net cash (used in) provided by investing activities (6,316) 54,710 12,070 Financing activities Proceeds from issuance of common stock, net of issuance costs 10,218 — 53,637 Proceeds from issuance of stock for stock-based compensation arrangements 268 191 465 Proceeds from issuance of loans payable — 10,000 — Payments of debt issuance cost — (1,388) — Principal payments on loans payable (11,612) (7,785) (7,104)Net cash (used in) provided by financing activities (1,126) 1,018 46,998 Net (decrease) increase in cash and cash equivalents (25,672) 1,480 (25,334)Effect of exchange rate changes on cash and cash equivalents — — 26 Cash and cash equivalents at beginning of period 52,306 50,826 76,134 Cash and cash equivalents at end of period $26,634 $52,306 $50,826 Supplemental cash flow and noncash investing and financing activities Cash paid for interest $1,983 $2,018 $2,916 Non-cash financing activity Fair value of warrants issued in connection with long-term debt $— $413 — See accompanying notes 93AVEO Pharmaceuticals, Inc.Notes to Consolidated Financial StatementsDecember 31, 2015 1.Nature of Business and OrganizationAVEO Pharmaceuticals, Inc. (the “Company”) is a biopharmaceutical company committed to developing targeted therapies through biomarkerinsights to provide substantial improvements in patient outcomes where significant unmet medical needs exist. AVEO’s proprietary platform has deliveredunique insights into cancer and related disease. AVEO’s strategy for building value is to leverage these biomarker insights and partner resources to advancethe development of its clinical pipeline.The Company’s pipeline of product candidates includes tivozanib, a potent, selective long half-life vascular endothelial growth factor tyrosine kinaseinhibitor of all three vascular endothelial growth factors, or VEGF TKI, for which the Company previously demonstrated tivozanib’s safety and efficacy infirst and second line RCC. However, the U.S. Food and Drug Administration issued a complete response letter denying AVEO’s application for approval ofthe use of tivozanib in first line advanced RCC. The Company is planning to conduct a phase 3 trial of tivozanib in the third-line treatment of patients withrefractory RCC to support a request for regulatory approval of tivozanib as a third-line treatment and to address the overall survival concerns presented in theJune 2013 complete response letter from the FDA. A strategic partner has submitted a Marketing Authorization Application for tivozanib with the EuropeanMedicines Agency for the treatment of RCC in February 2016. Another strategic partner has submitted a registration dossier for tivozanib with the Ministryof Health of the Russian Federation for the treatment of RCC in December 2015 that was accepted in February 2016.The Company also has a pipeline of monoclonal antibodies, including: (i)Ficlatuzumab, a potent anti-HFG antibody that inhibits the activity of the HGF/c-Met pathway for which the Company has completed a phase 2clinical trial, and has entered into a partnership with Biodesix, Inc. (“Biodesix”) to advance clinical development, (ii)AV-203, a potent, high affinity inhibitor of ErbB3 function that has demonstrated anti-tumor activity in multiple preclinical models for whichthe Company has completed a phase 1 dose escalation trial, (iii)AV-380, a potent humanized IgG1 inhibitory monoclonal antibody targeting growth differentiating factor-15, or GDF15, a divergent memberof the TGF-ß family, for the potential treatment or prevention of cachexia, which the Company has licensed to Novartis.As used throughout these consolidated financial statements, the terms “AVEO,” and the “Company”, refer to the business of AVEO Pharmaceuticals,Inc. and its subsidiaries, AVEO Pharma Limited and AVEO Securities Corporation, both of which are wholly-owned.The Company has an accumulated deficit as of December 31, 2015 of approximately $495.0 million, and will require substantial additional capital forresearch and product development. The Company believes that its existing cash and cash equivalents are sufficient to fund its operations through at leasttwelve months from the balance sheet date. 2.Significant Accounting PoliciesRevenue RecognitionThe Company’s revenues have been generated primarily through collaborative research, development and commercialization agreements. The termsof these agreements generally contain multiple elements, or deliverables, which may include (i) licenses, or options to obtain licenses, to the Company’stechnology, (ii) research and development activities to be performed on behalf of the collaborative partner, and (iii) in certain cases, services in connectionwith the manufacturing of pre-clinical and clinical material. Payments to the Company under these arrangements typically include one or more of thefollowing: non-refundable, up-front license fees; option exercise fees; funding of research and/or development efforts; milestone payments; and royalties onfuture product sales.When evaluating multiple element arrangements, the Company considers whether the deliverables under the arrangement represent separate units ofaccounting. This evaluation requires subjective determinations and requires management to make judgments about the individual deliverables and whethersuch deliverables are separable from the other aspects of the contractual relationship. In determining the units of accounting, management evaluates certaincriteria, including whether the deliverables have standalone value, based on the relevant facts and circumstances for each arrangement. The considerationreceived is allocated among the separate units of accounting using the relative selling price method, and the applicable revenue recognition criteria areapplied to each of the separate units.94The Company determines the estimated selling price for deliverables within each agreement using vendor-specific objective evidence (“VSOE”) ofselling price, if available, third-party evidence (“TPE”) of selling price if VSOE is not available, or best estimate of selling price if neither VSOE nor TPE isavailable. Determining the best estimate of selling price for a deliverable requires significant judgment. The Company typically uses best estimate of sellingprice to estimate the selling price for licenses to the Company’s proprietary technology, since the Company often does not have VSOE or TPE of selling pricefor these deliverables. In those circumstances where the Company utilizes best estimate of selling price to determine the estimated selling price of a license tothe Company’s proprietary technology, the Company considers market conditions as well as entity-specific factors, including those factors contemplated innegotiating the agreements and internally developed models that include assumptions related to the market opportunity, estimated development costs,probability of success and the time needed to commercialize a product candidate pursuant to the license. In validating the Company’s best estimate of sellingprice, the Company evaluates whether changes in the key assumptions used to determine the best estimate of selling price will have a significant effect on theallocation of arrangement consideration among multiple deliverables.The Company typically receives non-refundable, up-front payments when licensing its intellectual property in conjunction with a research anddevelopment agreement. When management believes the license to its intellectual property does not have stand-alone value from the other deliverables to beprovided in the arrangement, the Company generally recognizes revenue attributed to the license on a straight-line basis over the Company’s contractual orestimated performance period, which is typically the term of the Company’s research and development obligations. If management cannot reasonablyestimate when the Company’s performance obligation ends, then revenue is deferred until management can reasonably estimate when the performanceobligation ends. When management believes the license to its intellectual property has stand-alone value, the Company generally recognizes revenueattributed to the license upon delivery. The periods over which revenue should be recognized are subject to estimates by management and may change overthe course of the research and development agreement. Such a change could have a material impact on the amount of revenue the Company records in futureperiods.Payments or reimbursements resulting from the Company’s research and development efforts for those arrangements where such efforts are consideredas deliverables are recognized as the services are performed and are presented on a gross basis so long as there is persuasive evidence of an arrangement, thefee is fixed or determinable, and collection of the related receivable is reasonably assured. Amounts received prior to satisfying the above revenuerecognition criteria are recorded as deferred revenue in the accompanying balance sheets.At the inception of each agreement that includes milestone payments, the Company evaluates whether each milestone is substantive and at risk toboth parties on the basis of the contingent nature of the milestone. This evaluation includes an assessment of whether (a) the consideration is commensuratewith either (1) the entity’s performance to achieve the milestone, or (2) the enhancement of the value of the delivered item(s) as a result of a specific outcomeresulting from the entity’s performance to achieve the milestone, (b) the consideration relates solely to past performance, and (c) the consideration isreasonable relative to all of the deliverables and payment terms within the arrangement. The Company evaluates factors such as the scientific, regulatory,commercial and other risks that must be overcome to achieve the respective milestone, the level of effort and investment required to achieve the respectivemilestone and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement in making this assessment.The Company aggregates its milestones into four categories: (i) clinical and development milestones, (ii) regulatory milestones, (iii) commercialmilestones, and (iv) patent-related milestones. Clinical and development milestones are typically achieved when a product candidate advances into a definedphase of clinical research or completes such phase. For example, a milestone payment may be due to the Company upon the initiation of a phase 3 clinicaltrial for a new indication, which is the last phase of clinical development and could eventually contribute to marketing approval by the U.S. Food and DrugAdministration (“FDA”) or other global regulatory authorities. Regulatory milestones are typically achieved upon acceptance of the submission formarketing approval of a product candidate or upon approval to market the product candidate by the FDA or other global regulatory authorities. For example,a milestone payment may be due to the Company upon the FDA’s acceptance of a New Drug Application (“NDA”). Commercial milestones are typicallyachieved when an approved pharmaceutical product reaches certain defined levels of net sales by the licensee, such as when a product first achieves globalsales or annual sales of a specified amount. Patent-related milestones are typically achieved when a patent application is filed or a patent is issued withrespect to certain intellectual property related to the applicable collaboration.Revenues from clinical and development, regulatory, and patent-related milestone payments, if the milestones are deemed substantive and themilestone payments are nonrefundable, are recognized upon successful accomplishment of the milestones. The Company has concluded that the clinical anddevelopment, regulatory and patent-related milestones pursuant to its current research and development arrangements are substantive. Milestones that are notconsidered substantive are accounted for as license payments and recognized on a straight-line basis over the remaining period of performance. Revenuesfrom commercial milestone payments are accounted for as royalties and are recorded as revenue upon achievement of the milestone, assuming all otherrevenue recognition criteria are met.95Principles of ConsolidationThe Company’s consolidated financial statements include the Company’s accounts and the accounts of the Company’s wholly-owned subsidiaries,AVEO Pharma Limited and AVEO Securities Corporation. All intercompany transactions have been eliminated.Research and Development ExpensesResearch and development expenses are charged to expense as incurred. Research and development expenses consist of costs incurred in performingresearch and development activities, including personnel-related costs such as salaries and stock-based compensation, facilities, research-related overhead,clinical trial costs, manufacturing costs and costs of other contracted services, license fees, and other external costs. Nonrefundable advance payments forgoods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods havebeen received.Cash and Cash EquivalentsThe Company considers highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents atDecember 31, 2015 consisted of money market funds, U.S. government agency securities, and corporate debt securities, including commercial paper,maintained by an investment manager totaling $16.3 million. Cash equivalents at December 31, 2014 consisted of money market funds, U.S. governmentagency securities, and corporate debt securities, including commercial paper, maintained by an investment manager totaling $36.6 million. The carryingvalues of our cash equivalent securities approximate fair value due to their short term maturities.Marketable SecuritiesMarketable securities at December 31, 2015 consisted of municipal bonds, asset-backed securities, and corporate debt securities, includingcommercial paper, maintained by an investment manager. There were no marketable securities held by the Company at December 31, 2014. Credit risk isreduced as a result of the Company’s policy to limit the amount invested in any one issue. Marketable securities consist primarily of investments which haveexpected average maturity dates in excess of three months, but not longer than 24 months. The Company classifies these investments as available-for-sale.Unrealized gains and losses are included in other comprehensive (loss) income until realized. The cost of securities sold is based on the specific identificationmethod. There were no realized gains or losses recognized on the sale or maturity of securities during the years ended December 31, 2015 and 2014.Available-for-sale securities at December 31, 2015 consisted of the following: AmortizedCost UnrealizedGains UnrealizedLosses FairValue (in thousands) Corporate debt securities (Due within 1 year) $6,504 $— $(3) $6,501 Government agency securities (Due within 1 year) 1,000 — — 1,000 $7,504 $— $(3) $7,501 The aggregate fair value of securities in an unrealized loss position for less than 12 months at December 31, 2015 was $5.1 million, representing 6securities. There were no securities in an unrealized loss position for greater than 12 months at December 31, 2015. The unrealized loss was caused by atemporary change in the market for these securities primarily caused by changes in markets interest rates. There was no change in the credit risk of thesecurities. To determine whether an other-than-temporary impairment exists, the Company performs an analysis to assess whether it intends to sell, or whetherit would more likely than not be required to sell, the security before the expected recovery of the amortized cost basis. Where the Company intends to sell asecurity, or may be required to do so, the security’s decline in fair value is deemed to be other-than-temporary and the full amount of the unrealized loss isrecorded in the statement of operations as an other-than-temporary impairment charge. When this is not the case, the Company performs additional analyseson all securities with unrealized losses to evaluate losses associated with the creditworthiness of the security. Credit losses are identified where the Companydoes not expect to receive cash flows, based on using a single best estimate, sufficient to recover the amortized cost basis of a security and these arerecognized in other income (expense), net.96Marketable securities in an unrealized loss position at December 31, 2015 consisted of the following: AggregateFair Value UnrealizedLosses (in thousands) Corporate debt securities (Due within 1 year) $4,100 $(3)Government agency securities (Due within 1 year) 1,000 — $5,100 $(3) Concentrations of Credit RiskFinancial instruments that potentially subject the Company to credit risk primarily consist of cash, cash equivalents and available-for-sale marketablesecurities. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits.The Company’s credit risk related to marketable securities is reduced as a result of the Company’s policy to limit the amount invested in any oneissue.The Company’s accounts receivable primarily consist of amounts due to the Company from licensees and collaborators. As of December 31, 2015, theCompany had $4.6 million of receivables outstanding, including $3.5 million due from Novartis for the purchase of clinical material pursuant to ourlicensing arrangement for AV-380 (refer to Note 7) and $1.1 million due from Biodesix pursuant to our collaboration arrangement for AV-299 (refer to Note7). The Company has not experienced any material losses related to receivables from individual licensees or collaborators.Fair Value MeasurementsThe Company records cash equivalents and marketable securities at fair value. The accounting standards for fair value measurements establish ahierarchy that distinguishes between fair value measurements based on market data (observable inputs) and those based on the Company’s own assumptions(unobservable inputs). The hierarchy consists of three levels: ·Level 1—Quoted market prices in active markets for identical assets or liabilities. Assets that are valued utilizing only Level 1 inputs includemoney market funds. ·Level 2—Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted market prices, interest rates and yieldcurves. Assets that are valued utilizing Level 2 inputs include U.S. government agency securities, asset-backed securities, and corporate bonds,including commercial paper. These investments have been initially valued at the transaction price and are subsequently valued, at the end ofeach reporting period, utilizing third party pricing services or other observable market data. The pricing services utilize industry standardvaluation models, including both income and market based approaches and observable market inputs to determine value. These observablemarket inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates, and otherindustry and economic events. The Company validates the prices provided by third party pricing services by reviewing their pricing methodsand matrices, obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming that the relevantmarkets are active. After completing its validation procedures, the Company did not adjust or override any fair value measurements providedby pricing services as of December 31, 2015 or December 31, 2014. ·Level 3—Unobservable inputs developed using estimates and assumptions developed by the Company, which reflect those that a marketparticipant would use. The Company currently has no assets or liabilities measured at fair value on a recurring basis that utilize Level 3 inputs.The following tables summarize the cash equivalents and marketable securities measured at fair value on a recurring basis in the accompanyingconsolidated balance sheets as of December 31, 2015 and 2014. Fair Value Measurements of Cash Equivalents andMarketable Securities as of December 31, 2015 Level 1 Level 2 Level 3 Total (in thousands) Cash equivalents $11,462 $4,812 $— $16,274 Marketable securities — 7,501 — 7,501 $11,462 $12,313 $— $23,775 97 Fair Value Measurements of Cash Equivalentsas of December 31, 2014 Level 1 Level 2 Level 3 Total (in thousands) Cash equivalents $28,777 $7,834 $— $36,611 The Company recorded a liability totaling $7.3 million associated with the exit of a portion of its leased facilities during the year ended December 31,2014. The Company measured the fair value of the liability based on the present value of the remaining termination payments. The net cash outflows werediscounted using a credit-risk adjusted rate. The Company has classified this lease liability as a Level 3 fair value measurement.The fair value of the Company’s loans payable at December 31, 2015 and 2014, computed pursuant to a discounted cash flow technique using theeffective interest rate under the loan, was $10.0 million and $21.3 million, respectively. These fair values are considered a level 3 fair value measurement.The effective interest rate considers the fair value of the warrant issued in connection with the loan, loan issuance costs and a deferred charge, whichapproximates a market interest rate.Property and EquipmentProperty and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the respective assets.Maintenance and repair costs are charged to expense as incurred.Long-lived AssetsThe Company reviews long-lived assets, including property and equipment, for impairment whenever changes in business circumstances indicate thatthe carrying amount of the asset may not be fully recoverable. The Company recognized $0.2 million, $7.6 million and $0.1 million of impairment losses forthe years ended December 31, 2015, 2014 and 2013. The impairment charges incurred during these years primarily related to leasehold improvements.Stock-Based CompensationUnder the Company’s stock-based compensation programs, the Company periodically grants stock options and restricted stock to employees,directors and nonemployee consultants. The Company also issues shares under an employee stock purchase plan. The fair value of all awards is recognized inthe Company’s statements of operations over the requisite service period for each award. Awards that vest as the recipient provides service are expensed on astraight-line basis over the requisite service period. Other awards, such as performance-based awards that vest upon the achievement of specified goals, areexpensed using the accelerated attribution method if achievement of the specified goals is considered probable. The Company has also granted awards thatvest upon the achievement of market conditions. Per ASC 718 Share-Based Payments, market conditions must be considered in determining the estimatedgrant-date fair value of share-based payments and the market conditions must be considered in determining the requisite service period over whichcompensation cost is recognized. The Company estimates the fair value of the awards with market conditions using a Monte Carlo simulation, which utilizesseveral assumptions including the risk-free interest rate, the volatility of the Company’s stock and the exercise behavior of award recipients. The grant-datefair value of the awards is then recognized over the requisite service period, which represents the derived service period for the awards as determined by theMonte Carlo simulation.The fair value of equity-classified awards to employees and directors are measured at fair value on the date the awards are granted. Awards tononemployee consultants are recorded at their fair values and are re-measured as of each balance sheet date until the recipient’s services are complete. Duringthe years ended December 31, 2015, 2014 and 2013, the Company recorded the following stock-based compensation expense: Years Ended December 31, 2015 2014 2013 (in thousands) Research and development $298 $899 $1,991 General and administrative 765 1,909 1,949 Restructuring 69 — — Total stock-based compensation expense $1,132 $2,808 $3,940 Stock-based compensation expense is allocated to research and development and general and administrative expense based upon the department ofthe employee to whom each award was granted. No related tax benefits of the stock-based compensation expense have been recognized.98Legal ContingenciesThe Company is involved in various legal proceedings and accrues anticipated costs of settlement, damages, and/or losses to the extent such amountsare probable and estimable. If the estimate of a probable loss is a range and no amount within the range is more likely, the Company accrues the minimumamount of the range. See Footnote 16 for discussion of our individual material legal proceedings.Income TaxesThe Company provides for income taxes using the asset-liability method. Under this method, deferred tax assets and liabilities are recognized basedon differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effectwhen the differences are expected to reverse. Uncertain tax positions are recognized if the position is more-likely-than-not to be sustained upon examinationby a tax authority. Unrecognized tax benefits represent tax positions for which reserves have been established. The Company maintains a full valuationallowance on all deferred tax assets.Segment and Geographic InformationOperating segments are defined as components of an enterprise engaging in business activities for which discrete financial information is availableand regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company views itsoperations and manages its business in one operating segment principally in the United States. As of December 31, 2015 and 2014, the Company has $1.0million of net assets located in the United Kingdom.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires theCompany’s management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actualresults could differ from those estimates.Recent Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board (“FASB”) issued a comprehensive new revenue recognition standard that will supersedenearly all existing revenue recognition guidance under US GAAP. The standard was originally scheduled to be effective for public entities for annual andinterim periods beginning after December 15, 2016. In July 2015, the standard was deferred and will now be effective for annual and interim periodsbeginning after December 15, 2017. Early adoption is permitted for annual and interim periods beginning after December 15, 2016. The Company iscurrently evaluating the effect this standard will have on its revenue recognition policies and its financial statements, including how the standard will beadopted.In August 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-15, Presentation of Financial Statements—Going Concern(Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This ASU is intended to define management’sresponsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern within one year of the date ofissuance of the entity’s financial statements and to provide related footnote disclosures. This guidance is effective for fiscal years beginning afterDecember 15, 2016, with early application permitted. The adoption of this standard may have an effect on the Company’s disclosures in future periods.In April 2015, the FASB issued a standard that will require that debt issuance costs be presented in the balance sheet as a reduction of the carryingamount of the associated liability, consistent with debt discounts. The standard is effective for public entities for annual and interim periods beginning afterDecember 15, 2015. The Company does not believe the adoption of this standard will have a material effect on its financial statements. 3.Loss Per Common ShareBasic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted lossper share is computed by dividing net loss by the weighted-average number of common shares and dilutive common share equivalents then outstanding.Potential common share equivalents consist of restricted stock awards and the incremental common shares issuable upon the exercise of stock options andwarrants. Since the Company had a net loss for all periods presented, the effect of all potentially dilutive securities is anti-dilutive. Accordingly, basic anddiluted net loss per common share is the same.99The following table sets forth for the periods presented the potential common shares (prior to consideration of the treasury stock method) excludedfrom the calculation of net loss per common share because their inclusion would have been anti-dilutive: Outstanding atYears Ended December 31, 2015 2014 2013 (in thousands) Options outstanding 4,796 5,817 4,297 Warrants outstanding 609 609 — 5,405 6,426 4,297 4.Property and EquipmentProperty and equipment consists of the following: EstimatedUseful Life December 31,2015 December 31,2014 (in thousands) Laboratory equipment 5 years $— $7,671 Computer equipment and software 3 years 187 3,913 Office furniture 5 years — 893 Leasehold improvements Shorter of asset’s useful lifeor remaining term of lease — 14,433 187 26,910 Less accumulated depreciation and amortization (164) (15,615)Property and equipment, net $23 $11,295 Depreciation expense for the years ended December 31, 2015, 2014 and 2013 was $9.6 million, $6.2 million and $3.8 million, respectively. InSeptember 2014, the Company entered into a Lease Termination Agreement, pursuant to which the Company agreed to surrender the remaining 49,185square feet of leased space no later than September 24, 2015. As a result, the Company revised the estimated useful life of its leasehold improvements relatedto this space, resulting in an increase in depreciation expense of approximately $2.4 million during the year ended December 31, 2014. In February 2015, theCompany provided notice that it would surrender the remaining space on May 29, 2015. Accordingly, the Company again revised the estimated useful life ofits leasehold improvements related to this office space and amortized such assets through May 2015, resulting in an additional $2.9 million of depreciationexpense during the year ended December 31, 2015. 5.Accrued ExpensesAccrued expenses consisted of the following: December 31,2015 December 31,2014 (in thousands) Clinical expenses $1,793 $2,312 Salaries and benefits 938 1,744 Professional fees 573 685 Restructuring 357 — Manufacturing and distribution 173 3,216 Other 272 1,344 $4,106 $9,301 6.Loans PayableOn May 28, 2010, the Company entered into a loan and security agreement (the “Loan Agreement”) with Hercules Technology II, L.P. and HerculesTechnology III, L.P., affiliates of Hercules Technology Growth (collectively, “Hercules”), pursuant to which the Company received a loan in the aggregateprincipal amount of $25.0 million. The Company was required to repay the aggregate principal balance under the Loan Agreement in 30 equal monthlyinstallments of principal starting on January 1, 2012. On March 31, 2012, the Company entered into an amendment to the Loan Agreement, pursuant towhich the Company increased the principal100amount under the Loan Agreement to $26.5 million. Under the amendment to the Loan Agreement, the date on which the Company was required to beginrepaying the aggregate principal balance was extended to April 1, 2013, at which point the Company began repaying such balance in 30 equal monthlyinstallments.On September 24, 2014, the Company further amended the Loan Agreement with Hercules (the “Amended Loan Agreement”). Pursuant to theAmended Loan Agreement, the Company received a new loan in the aggregate principal amount of $10.0 million and amended the terms of the original LoanAgreement with an outstanding principal balance of $11.6 million. The Company was not required to pay principal on the original loan until January 1,2015, at which time the Company was required to commence making 12 principal and interest payments ending December 1, 2015. The original loan wasfully paid as of December 31, 2015.Pursuant to the Amended Loan Agreement, the Company is not required to make principal payments on the new $10.0 million loan until May 1, 2016.The period during which the Company is not required to pay principal was extended six months from November 1, 2015 to May 1, 2016 upon executing theCompany’s license agreement with Novartis and may be further extended if the Company continues to achieve certain performance milestones, after whichtime, the Company is required to make monthly principal and interest payments with the last principal and interest payment due on January 1, 2018. TheAmended Loan Agreement has an end-of-term payment of approximately $0.5 million due on January 1, 2018 or on such earlier date as the new loan isprepaid. This end-of-term payment has been recorded as a loan discount and is being amortized to interest expense over the term of the loan agreement usingthe effective interest rate method. The Company accounted for the Amended Loan Agreement as a loan modification in accordance with ASC 470-50, Debt—Modifications and Extinguishments.Per annum interest is payable on principal balance of both loans at the greater of 11.9% and an amount equal to 11.9% plus the prime rate of interestminus 4.75%, provided however, that the per annum interest shall not exceed 15.0%.The Amended Loan Agreement contains a financial covenant whereby the Company has agreed to maintain, with respect to the new loan of $10.0million, a liquidity ratio equal to or greater than 1.25 to 1.00 of the then outstanding loan balance or the equivalent of $12.5 million in unrestricted andunencumbered cash and cash equivalents as of December 31, 2015 based upon a principal balance of $10.0 million. The financial covenant shall not applyafter such time that the Company receives favorable data both with respect to its phase 2 clinical trial of ficlatuzumab and a phase 1 clinical trial of AV-380.The Loan Agreement required a deferred financing charge of $1.3 million which was paid in May 2012 related to the amendment of the LoanAgreement. The Loan Agreement also included an additional deferred financing charge of $1.2 million which was paid in June 2014. These amounts wererecorded as a loan discount and are being amortized to interest expense over the term of the loan borrowed under the Loan Agreement using the effectiveinterest rate method. The Company recorded a liability for the full amount of the charge since the payment of such amount was not contingent on any futureevent. The Company paid approximately $0.2 million in loan issuance costs directly to Hercules under the Loan Agreement, which were offset against theloan proceeds and are accounted for as a loan discount.As part of the Loan Agreement, on June 2, 2010, the Company issued warrants to the lenders to purchase up to 156,641 shares of the Company’scommon stock at an exercise price equal to $7.98 per share to Hercules. The Company recorded the relative fair value of the warrants of approximately $0.8million as stockholders’ equity and as a discount to the related loan outstanding and is amortizing the value of the discount to interest expense over the termof the original loan using the effective interest method. On July 21, 2011, Hercules exercised these warrants and they are no longer outstanding.As part of the Amended Loan Agreement, on September 24, 2014, the Company issued warrants to the lenders to purchase up to 608,696 shares of theCompany’s common stock at an exercise price equal to $1.15 per share to Hercules. The Company recorded the relative fair value of the warrants ofapproximately $0.4 million as stockholders’ equity and as a discount to the related loan outstanding and is amortizing the value of the discount to interestexpense over the term of the loan using the effective interest method. The relative fair value of the warrants was calculated using the Black-Scholes option-pricing model with the following assumptions: volatility of 71.81%, an expected term equal to the contractual life of the warrants (five years), a risk-freeinterest rate of 1.82% and no dividend yield. The resulting effective interest rate for the loans outstanding under the Amended Loan Agreement isapproximately 16.14%.As part of the Loan Agreement, Hercules also received an option, subject to the Company’s written consent, not to be unreasonably withheld, topurchase, either with cash or through conversion of outstanding principal under the loan, up to $2.0 million of equity of the Company sold in any sale by theCompany to third parties of equity securities resulting in at least $10.0 million in net cash proceeds to the Company, subject to certain exceptions. TheCompany has evaluated the embedded conversion option, and has concluded that it does not need to be bifurcated and separately accounted for. No amountwill be recognized for the conversion feature until such time as the conversion feature is exercised and it can be determined whether a beneficial conversionfeature exists. As of December 31, 2015, the outstanding aggregate principal balance under the remaining loan was $10.0 million.101The loans are secured by a lien on all of our personal property (other than intellectual property), whether owned as of, or acquired after, the date of theamended loan agreement. The Amended Loan Agreement defines events of default, including the occurrence of an event that results in a material adverseeffect upon the Company’s business operations, properties, assets or condition (financial or otherwise), its ability to perform its obligations under and inaccordance with the terms of the Amended Loan Agreement, or upon the ability of the lenders to enforce any of their rights or remedies with respect to suchobligations, or upon the collateral under the Loan Agreement, the related liens or the priority thereof. As of December 31, 2015, Hercules has not asserted anyevents of default and the Company does not believe that there has been a material adverse change as defined in the loan agreement. The Company hasdetermined that the risk of subjective acceleration under the material adverse events clause is remote and therefore has classified the outstanding principal incurrent and long-term liabilities based on the timing of scheduled principal payments.Future minimum payments under the loans payable outstanding as of December 31, 2015 are as follows (amounts in thousands): Years Ending December 31: 2016 $3,499 2017 4,645 2018 4,269 12,413 Less amount representing interest (1,872)Less discount (530)Less deferred charges (540)Less current portion (2,053)Loans payable, net of current portion and discount $7,418 7.Collaboration and License Agreements(a) Out-License AgreementsEUSAIn December 2015, the Company entered into a license agreement with EUSA under which the Company granted to EUSA the exclusive,sublicensable right to develop, manufacture and commercialize tivozanib in the territories of Europe (excluding Russia, Ukraine and the Commonwealth ofIndependent States), Latin America (excluding Mexico), Africa, Australasia and New Zealand (the “Licensed Territories”) for all diseases and conditions inhumans, excluding non-oncologic diseases or conditions of the eye.Under the license agreement, EUSA made a research and development funding payment to the Company of $2.5 million during the year endedDecember 31, 2015 and is required to make a payment of $4.0 million upon the grant by the European Medicines Agency (“EMA”) of marketing approval fortivozanib for treatment of renal cell carcinoma. The Company is eligible to receive additional research funding from EUSA, including up to $20.0 million ifEUSA elects to utilize data generated by the Company’s planned phase 3 study in third line renal cell carcinoma, and up to $2.0 million for a potential phase1 combination study with a checkpoint inhibitor. The Company will be entitled to receive milestone payments of $2.0 million per country uponreimbursement approval for renal cell carcinoma in each of France, Germany, Italy, Spain and the United Kingdom, and an additional $2.0 million for thegrant of marketing approval in three of the following five countries: Argentina, Australia, Brazil, South Africa and Venezuela. The Company will also beeligible to receive a payment of $2.0 million in connection with EUSA’s filing with the EMA for marketing approval for tivozanib for the treatment of eachof up to three additional indications and $5.0 million per indication in connection with the EMA’s grant of marketing approval for each of up to threeadditional indications, as well as potentially up to $335.0 million upon EUSA’s achievement of certain sales thresholds. The Company will also be eligibleto receive tiered double digit royalties on net sales, if any, of licensed products in the Licensed Territories ranging from a low double digit up to mid-twentypercent depending on the level of annual net sales. A percentage of any milestone and royalty payments received by AVEO are due to Kyowa Hakko KirinCo., Ltd. (formerly Kirin Brewery Co., Ltd.) (“KHK”) as a sublicensing fee under the license agreement between AVEO and KHK dated as of December 21,2006.EUSA is obligated to use commercially reasonable efforts to develop and commercialize tivozanib throughout the Licensed Territories. With theexception of certain support to be provided by the Company prior to the grant of marketing approval by the EMA, EUSA has responsibility for all activitiesand costs associated with the further development, manufacture, regulatory filings and commercialization of tivozanib in the Licensed Territories. EUSA isobligated to use commercially reasonable efforts to file an application with the EMA for approval of marketing authorization for tivozanib for the treatmentof renal cell carcinoma, which EUSA filed in February 2016.The term of the license agreement commenced in December 2015 and will continue on a product-by-product and country-by-country basis until thelater to occur of (a) the expiration of the last valid patent claim for such product in such country, (b) the102expiration of market or regulatory data exclusivity for such product in such country or (c) the 10th anniversary of the Effective Date. Either party mayterminate the license agreement in the event of the bankruptcy of the other party or a material breach by the other party that remains uncured, followingreceipt of written notice of such breach, for a period of (a) thirty (30) days in the case of breach for nonpayment of any amount due under the licenseagreement, and (b) ninety (90) days in the case of any other material breach. EUSA may terminate the license agreement at any time upon one hundred eighty(180) days’ prior written notice. In addition, the Company may terminate the license agreement upon thirty (30) days’ prior written notice if EUSA challengesany of the patent rights licensed under the license agreement.Activities under the agreement were evaluated under ASC 605-25 Revenue Recognition—Multiple Element Arrangements, or ASC 605-25, todetermine whether such activities represented a multiple element revenue arrangement. The agreement with EUSA includes the following non-contingentdeliverables: (i) the Company’s grant of an exclusive license to develop and commercialize the tivozanib in the licensed territories; (ii) the Company’sobligation to transfer all technical knowledge and data useful in the development and manufacture of tivozanib; (iii) the Company’s obligation to cooperatewith EUSA and support its efforts to file for marketing approval in the licensed territories, (iv) the Company’s obligation to provide access to certainregulatory information resulting from the Company’s ongoing development activities outside of the licensed territories and (v) the Company’s participationin a joint steering committee. The Company determined that the delivered license did not have stand-alone value from the undelivered elements and haveaccounted for these items as a single bundled deliverable. The Company allocated up-front consideration of $2.5 million to the bundled unit of accountingand is recognizing it over our performance period through April 2022, the remaining patent life of tivozanib. The Company recognized approximately$14,000 as revenue during the year ended December 31, 2015.The Company believes the regulatory milestones that may be achieved under the EUSA agreement are consistent with the definition of a milestoneincluded in ASU 2010-17, Revenue Recognition—Milestone Method, and, accordingly, the Company will recognize payments related to the achievement ofsuch milestones, if any, when each such milestone is achieved. Factors considered in this determination included scientific and regulatory risks that must beovercome to achieve each milestone, the level of effort and investment required to achieve each milestone, and the monetary value attributed to eachmilestone.NovartisIn August 2015, the Company entered into a license agreement with Novartis. Under the license agreement, the Company has granted to Novartis theexclusive right to develop and commercialize worldwide the Company’s proprietary antibody AV-380 and related AVEO antibodies that bind to GrowthDifferentiation Factor 15 (“GDF15”) for the treatment and prevention of diseases and other conditions in all indications in humans (the “Product”).Pursuant to the license agreement, Novartis made an upfront payment to the Company of $15.0 million within fifteen days of the effective date.Novartis also has acquired the Company’s inventory of clinical quality, AV-380 biological drug substance and reimbursed the Company for approximately$3.5 million for such existing inventory. The Company will also be eligible to receive (a) up to $53.0 million in potential clinical and developmentmilestone payments and up to $105.0 million in potential regulatory milestone payments tied to the commencement of clinical trials and to regulatoryapprovals of products developed under the license agreement in the United States, the European Union and Japan; and (b) up to $150.0 million in potentialcommercial milestone payments based on annual net sales of such products. Upon commercialization, the Company is eligible to receive tiered royalties onnet sales of approved products ranging from the high single digits to the low double digits. Novartis has responsibility under the license agreement for thedevelopment, manufacture and commercialization of the Company’s antibodies and any resulting approved therapeutic products.The term of the license agreement commenced in August 2015 and will continue on a country-by-country basis until the later to occur of the10th anniversary of the first commercial sale of a product in such country or the expiration of the last valid patent claim for a product in that country. Eitherparty may terminate the license agreement in the event of a material breach of the license agreement by the other party that remains uncured for a period ofsixty days, which period may be extended an additional thirty days under certain circumstances. Novartis may terminate the license agreement, either in itsentirety or with respect to any individual products or countries, at any time upon sixty days’ prior written notice. In addition, the Company may terminate thelicense agreement upon thirty days’ prior written notice if Novartis challenges certain patents controlled by the Company related to theCompany’s antibodies.The Company has agreed that it will not directly or indirectly develop, manufacture or commercialize any GDF15 modulator as a human therapeuticduring the term of the license agreement.Activities under the agreement with Novartis were evaluated under ASC 605-25 Revenue Recognition—Multiple Element Arrangements, or ASC 605-25, to determine whether such activities represented a multiple element revenue arrangement. The agreement with Novartis includes the following non-contingent deliverables: (i) the Company’s grant of an exclusive, worldwide103license to develop and commercialize the Product; (ii) the Company’s obligation to transfer all technical knowledge and data useful in the development andmanufacture of the Product; and (iii) the Company’s obligation to cooperate with Novartis’ requests for transition assistance during a 90 day period. TheCompany determined that the option to purchase the Company’s existing inventory was a contingent deliverable.The Company determined the delivered license and obligation to transfer technical knowledge and data have standalone value from the undeliveredcooperation. The Company allocated up-front consideration of $15.0 million to the delivered license and technical knowledge. The relative selling price ofthe undelivered cooperation had de minimis value.The Company received cash payments of $15.0 million during the year ended December 31, 2015. The Company recognized the $15.0 millionupfront payment allocated to the delivered license and technical knowledge upon delivery. The Company recognized revenue of $3.5 million during 2015related to the delivery of its inventory of clinical quality drug substance to Novartis pursuant to the terms of the agreement. The amount due to the Companyfrom Novartis was $3.5 million as of December 31, 2015.Pharmstandard GroupIn August 2015, the Company entered into a license agreement with JSC “Pharmstandard- Ufimskiy Vitamin Plant,” a company registered under thelaws of the Russian Federation (“Pharmstandard”). Pharmstandard is a subsidiary of Pharmstandard OJSC. Under the license agreement, the Company hasgranted to Pharmstandard the exclusive, sublicensable right to develop, manufacture and commercialize tivozanib in the territories of Russia, Ukraine and theCommonwealth of Independent States (the “Licensed Territories”) for all diseases and conditions in humans, excluding non-oncologic ocular conditions.Under the license agreement, Pharmstandard is required to make an upfront payment to AVEO of $1.5 million, of which $1.0 million was paid duringthe three months ended September 30, 2015 and $0.5 million is payable within fifteen business days of the date the license agreement is registered with theFederal Service for Intellectual Property of the Russian Federation. The Company is also eligible to receive $7.5 million in connection with the firstmarketing authorization of tivozanib in Russia. If Russian regulatory authorities require additional studies to be conducted by Pharmstandard prior toapproval, this amount would be reduced to $3.0 million. In addition, the Company is eligible to receive $3.0 million for each additional approved indicationof tivozanib, if Pharmstandard elects to seek any such approvals, as well as a high single-digit royalty on net sales in the Licensed Territories.Pharmstandard is obligated to use commercially reasonable efforts to develop and commercialize tivozanib throughout the Licensed Territories, andPharmstandard has responsibility for all activities and costs associated with the further development, manufacture, regulatory filings and commercializationof tivozanib in the Licensed Territories. Pharmstandard filed an application for marketing authorization in Russia for tivozanib for the treatment of renal cellcarcinoma in December 2015.The term of the license agreement commenced in August 2015 and will continue on a product-by-product and country-by-country basis until the laterto occur of (a) the expiration of the last valid patent claim for such product in such country, (b) the expiration of the last marketing authorization for suchproduct in such country or (c) the 10th anniversary of the first commercial sale of such product in such country. Either party may terminate the licenseagreement in the event of a material breach by the other party that remains uncured, following receipt of written notice of such breach, for a period of(a) thirty days, in the case of breach for nonpayment of any amount due under the license agreement, and (b) ninety days, in the case of any other materialbreach. After the first anniversary of the effective date, Pharmstandard may terminate the license agreement at any time upon ninety days’ prior written notice.In addition, the Company may terminate the license agreement upon thirty days’ prior written notice if Pharmstandard challenges certain patents controlledby the Company or the Company’s licensor, Kyowa Hakko Kirin Co., Ltd. (formerly Kirin Brewery Co. Ltd.) (“KHK”), related to tivozanib.Activities under the agreement with Pharmstandard were evaluated under ASC 605-25 to determine whether such activities represented a multipleelement revenue arrangement. The agreement with Pharmstandard includes the following non-contingent deliverables: (i) the Company’s grant of anexclusive license to develop and commercialize tivozanib in the Licensed Territories, (ii) the Company’s obligation to provide access, upon request, to allclinical data, regulatory filings, safety data and manufacturing data to Pharmstandard for use in the development and commercialization of tivozanib in theLicensed Territories, (iii) the Company’s obligation to participate in certain development and commercialization planning meetings and (iv) the Company’sobligation to provide support for certain development, regulatory or manufacturing activities if requested by Pharmstandard.The Company determined the delivered license does not have standalone value from the undelivered items and that the arrangement should be treatedas a single unit of accounting. The Company allocated the upfront payment of $1.0 million to the104bundled unit of accounting and is recognizing it over the Company’s performance period through April 2022, the remaining patent life of tivozanib. TheCompany recognized approximately $61,000 as revenue during the year ended December 31, 2015.The Company believes the regulatory milestones that may be achieved under the Pharmstandard agreement are consistent with the definition of amilestone included in ASU 2010-17, Revenue Recognition—Milestone Method, and, accordingly, the Company will recognize payments related to theachievement of such milestones, if any, when such milestone is achieved. Factors considered in this determination included scientific and regulatory risksthat must be overcome to achieve each milestone, the level of effort and investment required to achieve each milestone, and the monetary value attributed toeach milestone.A percentage of all upfront, milestone and royalty payments received by AVEO are due to KHK as a sublicensing fee under the License Agreementbetween AVEO and KHK dated as of December 21, 2006. The Company incurred $0.3 million of R&D expense associated with sublicensing fees payable toKHK during the year ended December 31, 2015.Ophthotech CorporationIn November 2014 the Company entered into a Research and Exclusive Option Agreement, or Option Agreement, with Ophthotech Corporationpursuant to which the Company provided Ophthotech an exclusive option to enter into a definitive license agreement whereby the Company would grantOphthotech the right to develop and commercialize the Company’s VEGF factor tyrosine kinase inhibitor, tivozanib, outside of Asia for the potentialdiagnosis, prevention and treatment of non-oncologic diseases or conditions of the eye in humans.Pursuant to this Option Agreement, the Company granted to Ophthotech an exclusive, royalty free license or sublicense, as applicable, underintellectual property rights controlled by the Company solely to perform the research and development activities related to the use of tivozanib for thespecific purposes outlined in the agreement during the option period (as defined below). These activities include formulation work for ocular administration,preclinical research and the conduct of a phase 1/2a, proof of concept clinical trial of a product containing tivozanib in patients with wet age-related maculardegeneration, (the “POC Study”).Ophthotech paid the Company $500,000 in consideration for the grant of the option. Such amount is non-refundable and not creditable against anyother amounts due under the agreement. The Company is obligated to make available to Ophthotech, at no cost to Ophthotech, certain quantities oftivozanib hydrochloride solely for conducting its option period research including manufacturing additional quantities of tivozanib in the event stabilitydata indicates that the current supply will expire prior to the end of February 2017.During the option period, if Ophthotech elects to continue the development of tivozanib for non-oncologic diseases of the eye, the Company isentitled to receive a one-time milestone payment of $2.0 million upon acceptance of the first Investigational New Drug application for the purpose ofconducting a human clinical study of tivozanib in ocular diseases (the “IND Submission Milestone Payment”). The Company is also entitled to receive aone-time milestone payment of $6.0 million (the “Clinical Efficacy Milestone Payment”), on the earlier of (a) December 31, 2016 and (b) the later to occur of:(i) the achievement of a clinical milestone in the POC Study (the “Clinical Efficacy Milestone”) and (ii) the earlier of (A) the date twelve (12) months afterour and Ophthotech’s agreement as to the form and substance of the KHK Amendment (as defined below) or (B) the date ninety (90) days after the entry intothe KHK Amendment, subject to the Company’s right to terminate the Option Agreement on 90 days’ written notice (the date on which such payment is due,referred to as the “Clinical Efficacy Milestone Payment Trigger Date”).Ophthotech may exercise the option at any time until the latest to occur of: (i) twelve (12) months after the achievement of the Clinical EfficacyMilestone, (ii) ninety (90) days after the Clinical Efficacy Milestone Payment Trigger Date, and (iii) thirty (30) days after the Company and Ophthotech agreeas to the definitive form of license agreement, which the Company refers to as the option period.During the Option Period, the Company will not grant a license to any third party that would preclude the Company from being able to grant toOphthotech the rights and licenses that are contemplated by the definitive license agreement, and the Company will not engage in any research, developmentor commercialization of tivozanib in the field covered by the contemplated definitive license agreement, except as specified in the Option Agreement.The terms of the Option Agreement are subject to the Company’s obligations to Kyowa Hakko Kirin Co., Ltd. (“KHK”), under a license agreemententered into by the Company with KHK in 2006, pursuant to which the Company acquired exclusive rights to develop and commercialize tivozanib for allhuman diseases outside of Asia (the “KHK License Agreement”). A percentage of all payments received by the Company under the Option Agreement andany definitive license agreement must be paid to KHK. The Company is required to maintain the KHK Agreement in effect, and not enter into any amendmentor termination thereof that would adversely affect the Company’s rights, during the option period.105During the option period, the Company and Ophthotech are obligated to negotiate in good faith the form and substance of a definitive licenseagreement, as well as the form and substance of an amendment to the Company’s license agreement with KHK (the “KHK Amendment”) to modify certainrights and obligations of the parties and sublicensees thereunder, particularly with respect to rights to improvements that are not specifically related totivozanib, and regulatory affairs matters.Upon exercise of the option, Ophthotech is required to pay the Company a one-time option exercise fee of $2.0 million in addition to the INDSubmission Milestone Payment if such payment has not then been previously paid. If upon exercise of the option, the Clinical Efficacy Milestone PaymentTrigger Date has not yet occurred, the Company shall be entitled to the Clinical Efficacy Milestone Payment at such time that the Clinical EfficacyMilestone Payment Date does occur if the license agreement remains in effect as of such date. The license agreement, if entered into upon Ophthotech’sexercise of the Option, will provide for the Company to be entitled to receive (i) $10.0 million upon meeting certain efficacy and safety endpoints in phase 2clinical trials that would enable the commencement of a phase 3 clinical trial, (ii) $20.0 million upon marketing approval in the United States, (iii) $20.0million upon marketing approval in the UK, Germany, Spain, Italy and France and (iv) up to $45.0 million in sales-based milestone payments. Ophthotechwould also be required to pay tiered, double digit royalties, up to the mid-teens, on net sales of tivozanib or products containing tivozanib.Either party may terminate the Option Agreement in the event of an uncured material breach of the Option Agreement by the other party whichremains uncured for a period of ninety (90) days (or thirty (30) days for a breach relating to non-payment), or upon bankruptcy or like proceedings relating tothe other party. Ophthotech may terminate the Option Agreement at any time upon ninety (90) days’ prior written notice to us. In addition, the Company mayterminate the Option Agreement upon thirty (30) days’ prior written notice to Ophthotech if Ophthotech challenges certain patents controlled by theCompany related to tivozanib. Unless terminated as provided above, the Option Agreement will expire upon the expiration of the option or the entry into thedefinitive license agreement.Activities under the agreement with Ophthotech were evaluated under ASC 605-25 to determine whether such activities represented a multipleelement revenue arrangement. The agreement with Ophthotech includes the following non-contingent deliverables: the Company’s obligation to grant anexclusive option to Ophthotech to enter into a License Agreement to develop and commercialize products incorporating tivozanib for treatment of AMD andother diseases of the eye outside of Asia during the Option Period; the Company’s obligation to enter into an amendment with KHK to modify the terms ofthe existing KHK agreement to negotiate a mutually acceptable form of license agreement; and the Company’s obligation to transfer research-grade tivozanibAPI for Ophthotech to conduct the Option Period research.The Company determined that the delivered Option Grant Deliverable, or the Company’s obligation to grant an exclusive option to Ophthotech toenter into a License Agreement to develop and commercialize products incorporating tivozanib for treatment of AMD and other diseases of the eye outside ofAsia during the Option Period, did not have standalone value from the remaining deliverables since Ophthotech could not obtain the intended benefit of theoption without the remaining deliverables. Similarly, the remaining deliverables have no standalone value without the Option Grant Deliverable. TheCompany is accounting for the deliverables as one unit of accounting.Under the agreement, the Company received a cash payment of $0.5 million during the year ended December 31, 2014. The Company deferred thepayment and is recording the deferred revenue over the Company’s period of performance, which is estimated to be through December 2016. The Companyrecorded approximately $0.2 million and $38,000 of revenue during the years ended December 31, 2015 and 2014, respectively.BiodesixIn April 2014, the Company entered into a worldwide agreement with Biodesix to develop and commercialize its hepatocyte growth factor (“HGF”)inhibitory antibody ficlatuzumab, with BDX004, a proprietary companion diagnostic test developed by Biodesix and derived from VeriStrat®, a serumprotein test that is commercially available to help physicians guide treatment decisions for patients with advanced non-small cell lung cancer (“NSCLC”).Under the agreement, the Company granted Biodesix perpetual, non-exclusive rights to certain intellectual property, including all clinical and biomarkerdata related to ficlatuzumab, to develop and commercialize BDX004. Biodesix granted the Company perpetual, non-exclusive rights to certain intellectualproperty, including diagnostic data related to BDX004, with respect to the development and commercialization of ficlatuzumab; each license includes theright to sublicense, subject to certain exceptions. Pursuant to a joint development plan, the Company retains primary responsibility for clinical developmentof ficlatuzumab in a proof of concept (“POC”) clinical study of ficlatuzumab for NSCLC, in which VeriStrat will be used to select clinical trial subjects,referred to as the NSCLC POC Trial. The NSCLC POC Trial will be fully funded by Biodesix up to a maximum of $15.0 million, referred to as the “Cap”.After the Cap is reached, the Company and Biodesix will share equally in the costs of the NSCLC trial, and the Company and Biodesix will each beresponsible for 50% of development and regulatory costs associated with all future clinical trials agreed-upon by Biodesix and the Company, including allmilestone payments and royalties payable to third parties, if any.106Pending marketing approval of ficlatuzumab and subject to a commercialization agreement to be entered into after receipt of results from the NSCLCPOC Trial, each party would share equally in commercialization profits and losses, subject to the Company’s right to be the lead commercialization party.Biodesix is solely responsible for the BDX004 development costs, as well as BDX004 sales and marketing costs. Subject to and following theapproval of the BDX004 test as a companion diagnostic for ficlatuzumab, Biodesix has agreed to make the BDX004 test available and use commerciallyreasonable efforts to seek reimbursement in all geographies where ficlatuzumab is approved. The Company has agreed to reimburse Biodesix a pre-specifiedamount, under certain circumstances for BDX004 tests performed.Prior to the first commercial sale of ficlatuzumab and after the earlier of (i) the Cap being reached or (ii) the completion of the NSCLC POC Trial, eachparty has the right to elect to discontinue participating in further development or commercialization efforts with respect to ficlatuzumab, which is referred toas an “Opt-Out”. If either AVEO or Biodesix elects to Opt-Out, with such party referred to as the “Opting -Out Party”, then the Opting-Out Party shall not beresponsible for any future costs associated with developing and commercializing ficlatuzumab other than any ongoing clinical trials. After election of anOpt-Out, the non-opting out party shall have sole decision-making authority with respect to further development and commercialization of ficlatuzumab.Additionally, the Opting-Out Party shall be entitled to receive, if ficlatuzumab is successfully developed and commercialized, a royalty equal to 10% of netsales of ficlatuzumab throughout the world, if any, subject to offsets under certain circumstances.If Biodesix elects to Opt-Out, it will continue to be responsible for its development and commercialization obligations with respect to BDX004. IfAVEO elects to Opt-Out, it will continue to make the existing supply of ficlatuzumab available to Biodesix for the purposes of enabling Biodesix tocomplete the development of ficlatuzumab, and Biodesix will have the right to commercialize ficlatuzumab.Prior to any Opt-Out, the parties shall share equally in any payments received from a third party licensee; provided, however, after any Opt-Out, theOpting-Out Party shall be entitled to receive only a reduced portion of such third party payments. The agreement will remain in effect until the expiration ofall payment obligations between the parties related to development and commercialization of ficlatuzumab, unless earlier terminated.Activities under the agreement with Biodesix were evaluated under ASC 605-25 to determine whether such activities represented a multiple elementrevenue arrangement. The agreement with Biodesix includes the following non-contingent deliverables: perpetual, non-exclusive rights to certainintellectual property including clinical and biomarker data related to ficlatuzumab for use in developing and commercializing BDX004; the Company’sobligation to deliver technology improvements and data developed during the NSCLC POC Trial to Biodesix; the Company’s obligation to participate inthe joint steering committee during the NSCLC POC Trial; the Company’s obligation to perform certain development activities associated with the NSCLCPOC Trial; and the Company’s obligation to supply clinical material for use in conducting the NSCLC POC Trial; and the Company’s obligation to deliverclinical specimens and data during the NSCLC POC Trial. The Company concluded that any deliverables that would be delivered after the NSCLC POC Trialis complete are contingent deliverables because these services are contingent upon the results of the NSCLC POC Trial. As these deliverables are contingent,and are not at an incremental discount, they are not evaluated as deliverables at the inception of the arrangement. These contingent deliverables will beevaluated and accounted for separately as each related contingency is resolved. As of December 31, 2015, no contingent deliverables had been provided bythe Company.The Company determined that the delivered item, or the perpetual, non-exclusive rights to certain intellectual property for use in developing andcommercializing BDX004 did not have standalone value from the remaining deliverables since Biodesix could not obtain the intended benefit of the licensewithout the remaining deliverables. Since the remaining deliverables will be performed over the same period of performance there is no difference inaccounting for the deliverables as one unit or multiple units of accounting, and therefore, the Company is accounting for the deliverables as one unit ofaccounting.The Company records the consideration earned while conducting the NSCLC POC Trial, which consists of reimbursements from Biodesix for expensesrelated to the trial under the Cap, as a reduction to research and development expense using the proportional performance method over the respective periodof performance. As a result of the cost sharing provisions in the agreement, the Company reduced research and development expenses by approximately $3.5million and $2.7 million during the years ended December 31, 2015 and 2014. The amount due to the Company from Biodesix pursuant to the cost-sharingprovision was $1.1 million and $1.8 million at December 31, 2015 and 2014, respectively.Biogen Idec International GmbHIn March 2009, the Company entered into an exclusive option and license agreement with Biogen Idec International GmbH, a subsidiary of BiogenIdec Inc., (collectively “Biogen Idec”) regarding the development and commercialization of the Company’s discovery-stage ErbB3-targeted antibodies forthe potential treatment and diagnosis of cancer and other diseases outside of North107America. Under the agreement, the Company is responsible for developing ErbB3 antibodies through completion of the first phase 2 clinical trial designed ina manner that, if successful, will generate data sufficient to support advancement to a phase 3 clinical trial.In March 2014, the Company and Biogen Idec amended the exclusive option and license agreement (the “Amendment”). Pursuant to the Amendment,Biogen agreed to the termination of its rights and obligations under the agreement, including Biogen’s option to (i) obtain a co-exclusive (with AVEO)worldwide license to develop and manufacture ErbB3 targeted antibodies and (ii) obtain exclusive commercialization rights to ErbB3 products in countriesin the world other than North America. As a result, AVEO has worldwide rights to AV-203. Pursuant to the Amendment, AVEO is obligated to use reasonableefforts to seek a collaboration partner for the purpose of funding further development and commercialization of ErbB3 targeted antibodies. AVEO is alsoobligated to pay Biogen a percentage of milestone payments received by AVEO from future partnerships after March 28, 2016 and single digit royaltypayments on net sales related to the sale of ErbB3 products, if any, up to cumulative maximum amount of $50 million.The deliverables under the original arrangement included an option for a co-exclusive, worldwide license to develop and manufacture ErbB3antibody products and an option for an exclusive license to commercialize ErbB3 antibody products in all countries in the world other than North America.The Company determined that these deliverables did not have standalone value due to the fact that the program was still in preclinical development andrequired the Company’s experience to advance development of the product candidates. As such, the Company determined that the original agreement shouldbe accounted for as one unit of accounting.Under the terms of the original agreement, Biogen Idec made up-front and milestone-based cash payments totaling $20.0 million. Of the $20.0 millionreceived, $10.0 million was associated with milestones that were considered substantive and these amounts were included in revenue when they were earned.The remaining $10.0 million was amortized as additional license revenue over the Company’s period of substantial involvement.The Company concluded that the Amendment materially modified the terms of the agreement and, as a result, required the application of ASC 605-25.Based upon the terms of the Amendment, the remaining deliverables included the Company’s obligation to seek a collaboration partner to fund furtherdevelopment of the program and the Company’s obligation to continue development and commercialization of the licensed products if a collaborationpartner is secured (“Development Deliverable”). The Company concluded that its obligation to use best efforts to seek a collaboration partner does not havestandalone value from the Development Deliverable upon delivery and thus the deliverables should be treated as a single unit of accounting.Upon modifying the arrangement, the Company had $14.7 million of deferred revenue remaining to be amortized. The Company is not entitled toreceive any further consideration from Biogen Idec under the amended arrangement. The Company allocated a portion of the remaining deferred revenue tothe undelivered unit of accounting based upon the Company’s best estimate of the selling price, as the Company determined that neither VSOE or TPE wereavailable. The Company determined the best estimate of selling price to be approximately $0.6 million and recognized the remaining $14.1 million ascollaboration revenue in March 2014. The deferred revenue associated with the undelivered unit of accounting is being recognized on a straight-line basisover the expected period of performance, or through March 2016, based upon the Company’s historical experience with marketing its product candidates topotential partners.The best estimate of selling price was based upon a cost approach pursuant to which the Company estimated the costs expected to be incurred inexecuting a partnership agreement and then applied a reasonable markup. The Company estimated future cash outflows for several possible outcomes,including the execution of a partnership at different times within a reasonable range and partnerships of differing complexity. The Company estimated itscash outflows for each scenario based upon the expected costs associated with the relevant employees and the expected level of effort to be expended to seekand execute a partnership. The Company’s analysis also considered the legal charges that it anticipates it will incur. Changes to the Company’s assumptionswithin the reasonable range of possible values would not have a material impact on the amounts recorded in current or future periods.Under the agreement, the Company recorded revenue of $0.3 million, $14.5 million and $0.9 million during the years ended December 31, 2015, 2014and 2013, respectively.Astellas Pharma Inc.In February 2011, the Company, together with its wholly-owned subsidiary AVEO Pharma Limited, entered into a Collaboration and LicenseAgreement with Astellas (the “Astellas Agreement”), pursuant to which the Company and Astellas intended to develop and commercialize tivozanib for thetreatment of a broad range of cancers. Under the terms of the Astellas Agreement, the Company and Astellas shared responsibility for continued developmentand commercialization of tivozanib in North America and in Europe under a joint development plan and a joint commercialization plan, respectively.Throughout the rest of the world (the “Royalty Territory”), excluding Asia, where KHK has retained all development and commercialization rights, Astellashad108an exclusive, royalty-bearing license to develop and commercialize tivozanib. The terms of the Astellas Agreement were subject to the Company’sobligations to KHK under a license agreement entered into with KHK in 2006 pursuant to which the Company acquired exclusive rights to develop andcommercialize tivozanib worldwide outside of Asia.In January 2014, AVEO and Astellas jointly decided to discontinue a phase 2 breast cancer clinical trial due to insufficient enrollment. Further,Astellas elected in February 2014 to terminate the Astellas Agreement as a result of the limited scope of development for tivozanib moving forward. Thistermination became effective on August 11, 2014, at which time the tivozanib rights returned to the Company. In accordance with the Astellas Agreement,committed development costs, including the costs of completing certain tivozanib clinical development activities, will be shared equally. There are norefund provisions in the Astellas Agreement.Under the Astellas Agreement, the Company received an initial cash payment of $125.0 million, comprised of a $75.0 million license fee and $50.0million in research and development funding. The Company retained net proceeds of approximately $97.6 million of the initial cash payment from Astellas,after payments to KHK and strategic, legal and financial advisors. In December 2012, the Company received a $15.0 million milestone payment from Astellasin connection with the acceptance by the FDA of the NDA filing for tivozanib. The milestone was considered substantive and revenue was recognized uponachievement of the milestone.The Company accounted for the joint development and commercialization activities in North America and Europe as a joint risk-sharingcollaboration in accordance with ASC 808, Collaborative Arrangements. In addition, these activities were not deemed to be separate deliverables under theAstellas Agreement.Payments from Astellas with respect to Astellas’ share of tivozanib development and commercialization costs incurred by the Company pursuant tothe joint development plan were recorded as a reduction to research and development expense and general and administrative expense in the accompanyingconsolidated financial statements due to the joint risk-sharing nature of the activities in North America and Europe. As a result of the cost-sharing provisionsin the Astellas Agreement, the Company reduced research and development expense by $0.7 million, $3.5 million and $15.8 million during the years endedDecember 31, 2015, 2014, and 2013, respectively. The Company also reduced general and administrative expense by $0.1 million, $0.1 million and $2.8million during the years ended December 31, 2015, 2014 and 2013, respectively, as a result of the cost-sharing provisions in the Astellas Agreement. The netamount due to the Company from Astellas pursuant to the cost-sharing provisions was $0.1 million and $0.6 million at December 31, 2015 and 2014,respectively.Activities under the Astellas Agreement outside of the joint development and commercialization activities in North America and Europe, includingthe co-exclusive license to develop and commercialize tivozanib in North America and Europe that was delivered prior to the initiation of the collaborativeactivities in North America and Europe, were evaluated under ASC 605-25 to determine if they represented a multiple element revenue arrangement. TheAstellas Agreement included the following deliverables: (1) a co-exclusive license to develop and commercialize tivozanib in North America and Europe(the “License Deliverable”); (2) a combined deliverable comprised of an exclusive royalty-bearing license to develop and commercialize tivozanib in theRoyalty Territory and the Company’s obligation to provide access to clinical and regulatory information resulting from the activities in North America andEurope to Astellas for its development and commercialization of tivozanib in the Royalty Territory (the “Royalty Territory Deliverable”); and (3) theCompany’s obligation to supply clinical material to Astellas for development of tivozanib in the Royalty Territory (the “Clinical Material Deliverable”). Allof these deliverables were deemed to have stand-alone value and to meet the criteria to be accounted for as separate units of accounting under ASC 605-25.Factors considered in this determination included, among other things, the subject of the licenses and the research and development and commercialcapabilities of Astellas.The Company allocated the up-front consideration of $125.0 million to the deliverables based on management’s best estimate of selling price of eachdeliverable using the relative selling price method as the Company did not have VSOE or TPE of selling price for such deliverables. The Company’s bestestimate of selling price considered discounted cash flow models, the key assumptions of which included the market opportunity for commercialization oftivozanib in North America and Europe and the Royalty Territory, the probability of successfully developing and commercializing tivozanib, the remainingdevelopment costs for tivozanib, and the estimated time to commercialization of tivozanib. The Company’s analysis included the following marketconditions and entity-specific factors: (a) the specific rights provided under the license to develop and commercialize tivozanib in North America and Europeand the Royalty Territory, (b) the potential indications for tivozanib pursuant to the licenses, (c) the relevant territories for the respective licenses, (d) thestage of development of tivozanib by potential indication and estimated remaining development timelines and costs for each indication, (e) the developmentrisk by indication, (f) the market size by indication, (g) the expected product life of tivozanib assuming commercialization and (h) the competitiveenvironment. The Company utilized a discount rate of 15% in its analysis, representing the weighted average cost of capital derived from returns on equityfor comparable companies.The Company concluded that a change in the key assumptions used to determine best estimate of selling price for each license deliverable would nothave a significant effect on the allocation of arrangement consideration.109The Company allocated up-front consideration of $120.2 million to the License Deliverable and up-front consideration of $4.8 million to the RoyaltyTerritory Deliverable. The relative selling price of the Company’s obligation under the Clinical Material Deliverable had de minimis value.The Company recorded the $120.2 million relative selling price of the License Deliverable as collaboration revenue during the three months endedMarch 31, 2011 upon delivery of the license, and deferred approximately $4.8 million of revenue representing the relative selling price of the RoyaltyTerritory Deliverable. The Company was recording the $4.8 million of revenue attributed to the Royalty Territory Deliverable ratably over the Company’speriod of performance through April 2022, the remaining patent life of tivozanib. Upon being notified that the collaboration would be terminated effectiveAugust 2014, the Company reassessed the period of performance associated with the Royalty Territory Deliverable and accelerated the recognition of theremaining deferred revenue such that the balance would be recognized through August 2014. This change in estimate resulted in the recognition of anadditional $3.1 million during the year ended December 31, 2014. The Company recorded approximately $3.6 million and $0.4 million of revenueassociated with the Royalty Territory Deliverable during the years ended December 31, 2014 and 2013, respectively. The Company recorded no revenueassociated with the Royalty Territory Delivery during the year ended December 31, 2015.Under the agreement, the Company received cash payments related to reimbursable payments and milestone payments of $1.5 million, $4.1 millionand $40.1 million during the years ended December 31, 2015, 2014 and 2013, respectively, and recorded revenue of $3.6 million and $0.4 million during theyears ended December 31, 2014 and 2013, respectively. The Company did not record revenue related to reimbursable payments and milestone paymentsduring the year ended December 31, 2015.(b) In-license AgreementsKirin Brewery Co. Ltd. (KHK)In December 2006, the Company entered into an exclusive license agreement, with the right to grant sublicenses, subject to certain restrictions, withKirin Brewery Co. Ltd. (now Kyowa Hakko Kirin) (“KHK”) to research, develop, manufacture and commercialize tivozanib, pharmaceutical compositionsthereof and associated biomarkers in all territories in the world except for Asia (the “KHK Agreement”). Upon entering into the KHK Agreement, theCompany made a cash payment in the amount of $5.0 million.In March 2010, the Company made a $10.0 million milestone payment to KHK in connection with the dosing of the first patient in the Company’sphase 3 clinical trial of tivozanib. The Company recorded $22.5 million of research and development expense during the year ended December 31, 2011associated with a payment made to KHK related to the up-front license payment received under the Astellas Agreement. In December 2012, the Companymade a $12.0 million milestone payment to KHK in connection with the acceptance by the FDA of the Company’s NDA filing for tivozanib. In connectionwith this payment, $6.0 million was reimbursed from Astellas and recorded as a reduction of research and development expense.Under the KHK Agreement, the Company may be required to (i) make future milestone payments upon the achievement of specified regulatorymilestones in the United States, including a possible milestone payment of $18.0 million to KHK in connection with the FDA granting marketing approval inthe United States, (ii) pay tiered royalty payments on net sales it makes of tivozanib in its territory ranging from the low to mid-teens as a percentage of theCompany’s net sales of tivozanib, and (iii) pay 30% of certain amounts the Company receives under sublicense agreements, including up-front license fees,milestone payments and royalties, other than amounts the Company receives in respect of research and development funding or equity investments, subjectto certain limitations.The license agreement will remain in effect until the expiration of all of the Company’s royalty and sublicense revenue obligations to KHK unlesseither party elects to terminate the license agreement earlier. If the Company fails to meet its obligations under the agreements and is unable to cure suchfailure within specified time periods, KHK can terminate the agreement, resulting in a loss of the Company’s rights to tivozanib and an obligation to assign orlicense to KHK any intellectual property rights the Company may have in tivozanib.St. Vincent’s HospitalIn July 2012, the Company entered into a license agreement with St Vincent’s Hospital Sydney Limited, which the Company refers to as St. Vincent’s,under which the Company obtained an exclusive, worldwide license, with the right to grant sublicenses subject to certain restrictions, under specified patentrights and related know-how, to research, develop, manufacture and commercialize products for human therapeutic, preventative and palliative applicationsthat benefit from inhibition or decreased expression or activity of MIC-1, which the Company refers to as GDF15. The Company is exploiting this license inits AV-380 program for cachexia. The Company has a right of first negotiation to obtain an exclusive license to certain improvements that St. Vincent’s orthird parties may make to licensed therapeutic products. Under the license agreement, St. Vincent’s also granted us non-exclusive rights for certain relateddiagnostic products and research tools.110Under the license agreement, the Company is obligated to use diligent efforts to conduct research and clinical development and commercially launchat least one licensed therapeutic product, and to maximize profits from licensed therapeutic products for the benefit of us and St. Vincent’s. Subject to certainconditions, the Company has also agreed to achieve specified research, development and regulatory milestones by specified dates. If the Company does notachieve a given milestone by the agreed date, the Company has the option of paying the amount the Company would have been obligated to pay had theCompany timely achieved the milestone, and, if the Company does so, St. Vincent’s will not have the right to terminate the license agreement based on itsfailure to timely achieve such milestone.In order to sublicense certain necessary intellectual property rights to Novartis in August 2015, the Company entered into an amendment (the“Amended St. Vincent’s Agreement”) to the license agreement with St. Vincent’s. Under the license agreement with Novartis, the Company is required tomaintain the Amended St. Vincent’s Agreement in effect, and not enter into any amendment that would adversely affect Novartis’ rights during the term ofthe license agreement with Novartis.The Company has also agreed that, for as long as there is a valid claim in the licensed patents, the Company will not, and the Company will ensurethat its affiliates and its sublicensees do not, develop or commercialize any product, other than a licensed therapeutic product, for the treatment, prevention orprophylaxis of cachexia, decreased appetite or body weight, that binds to GDF15 or the GDF15 receptor and that is a GDF15 antagonist, and will not licenseor induce any other person to do the same.In connection with entering into the license agreement with St. Vincent’s, the Company paid St. Vincent’s an upfront license fee of $0.7 million and alow five-figure amount to reimburse St. Vincent’s for patent-related expenses it incurred with respect to a specified licensed patent. In connection withentering into the Amended St. Vincent’s Agreement, the Company was required to make an upfront payment to St. Vincent’s of $1.5 million in 2015, whichhas been recorded as R&D expense.Under the Company’s license agreement with St. Vincent’s, the Company may be required to: ·make milestone payments, up to an aggregate total of $18.9 million, upon achievement of specified research, development and regulatorymilestones for the first three indications for licensed therapeutic products, some of which payments may be increased by a mid to high double-digit percentage rate for milestones payments made after the Company grants any sublicense under the license agreement, depending on thesublicensed territory or territories; ·pay tiered royalty payments equal to a low-single-digit percentage of any net sales the Company or its sublicensees make of licensedtherapeutic products. The royalty rate escalates within the low-single-digit range during each calendar year based on increasing licensedtherapeutic product sales during such calendar year. Royalties for approved products resulting from the Amended St. Vincent’s Agreement willalso be payable to St. Vincent’s, and the Company and Novartis will share that obligation equally. The Company’s royalty paymentobligations for a licensed therapeutic product in a particular country end on the later of 10 years after the date of first commercial sale of suchlicensed therapeutic product in such country or expiration of the last-to-expire valid claim of the licensed patents covering such licensedtherapeutic product in such country, and are subject to offsets under certain circumstances; and ·reimburse St. Vincent’s for some or all of the reasonable costs and expenses it incurs in patent management, filing, prosecuting and maintainingthe licensed patents.The license agreement will remain in effect until the later of 10 years after the date of first commercial sale of licensed therapeutic products in the lastcountry in which a commercial sale is made, or expiration of the last-to-expire valid claim of the licensed patents, unless the Company elects, or St. Vincent’selects, to terminate the license agreement earlier.Either party has the right to terminate the agreement in connection with a material breach of the agreement by the other party that remains uncured fora specified cure period, or in connection with events relating to the other party’s insolvency or bankruptcy, or if a force majeure event continues for morethan 4 months.St. Vincent’s has the right to terminate the agreement due to any patent-related challenge by the Company, its affiliates or any sublicensee, or if theCompany or its affiliates or any sublicensee cause or induce any other person to make a patent-related challenge, and such challenge continues after aspecified cure period.The Company has the right to terminate the agreement on 6 months’ notice if the Company terminates its GDF15 research and development programsas a result of the failure of a licensed therapeutic product in pre-clinical or clinical development, or if the Company forms the reasonable view that furtherGDF15 research and development is not commercially viable, and the Company is not then in breach of any of its obligations under the agreement. If theCompany forms the reasonable view that further GDF15 research and development is not commercially viable and terminate the agreement before theCompany starts a phase 1 clinical trial on a licensed therapeutic product, the Company will be required to pay St. Vincent’s a low-to-mid six-figuretermination payment.111Any termination of the agreement, in whole or in part, will result in a loss of the Company’s rights to the relevant licensed patents and know-how. If St.Vincent’s terminates the agreement in its entirety due to the Company’s breach, insolvency or a patent-related challenge, or the Company terminates theagreement due to a development failure or lack of commercial viability, as described above, St. Vincent’s will have a non-exclusive license from us to certainintellectual property rights and know-how relating to the licensed therapeutic products, and the Company must transfer to St. Vincent’s certain then-existingregulatory approvals and related documents for the licensed therapeutic products.Other License AgreementsThe Company has entered into various cancelable license agreements for patented technology and other technology related to research projects,including technology to humanize ficlatuzumab, AV-203 and other antibody product candidates. The Company is obligated to pay annual maintenancepayments of $25,000, which are recognized as research and development expense over the maintenance period. Under an additional agreement, if the partiesagree to the use of the licensed technology in development of a product, the Company will be required to make a $1.0 million license payment per product.Three of these agreements also include development and sales-based milestones of up to $22.5 million, $5.5 million and $4.2 million per product,respectively, and single digit royalties as a percentage of sales.Certain other research agreements require the Company to remit royalties in amounts ranging from 0.5% to 1.5% based on net sales of productsutilizing the licensed technology. No expenses were incurred during the years ended December 31, 2015, 2014 and 2013. The Company has not paid anyroyalties to date. 8.Commitments and ContingenciesOperating LeasesThe Company leases office and has leased lab space and equipment under various operating lease agreements. Rent expense under the operatingleases amounted to ($9.1) million, $4.1 million and $9.4 million for the years ended December 31, 2015, 2014 and 2013, respectively. For the year endedDecember 31, 2014, $3.1 million of rent expense is included within lease exit costs on the Company’s statement of operations. The net rent credit for the yearended December 31, 2015 and the net rent credit for the years ended December 31, 2014 and 2013 were recorded within operating expenses and allocated toresearch and development and general and administrative expense based upon the use of the underlying facility space.In May 2015, the Company began leasing office space under a cancellable arrangement. The Company recognized rent expense of approximately $0.2million related to this lease during the year ended December 31, 2015.On May 9, 2012, the Company entered into a lease agreement with BMR-650 E KENDALL B LLC (“BMR”), under which the Company agreed tolease 126,065 square feet of space located at 650 East Kendall Street, Cambridge, Massachusetts to be used for office, research and laboratory space. Theinitial term of the lease agreement was approximately twelve years and seven months (the “initial term”). The Company has determined that the lease shouldbe classified as an operating lease. In order to make the space usable for the Company’s operations, substantial improvements were made to the space. These improvements were planned,managed and carried out by the Company and the improvements were tailored to the Company’s needs. BMR agreed to reimburse the Company for up to$14.9 million of the improvements, and the Company bore all risks associated with any cost overruns that may be incurred. As such, the Companydetermined it was the owner of the improvements and, as such, the Company accounted for tenant improvement reimbursements from BMR as a leaseincentive. The Company recorded a deferred lease incentive (included as a component of the deferred rent balance in the accompanying consolidatedbalance sheets) and the incentive was amortized as an offset to rent expense over the term of the lease. Rent expense, inclusive of the escalating rentpayments, was recognized on a straight-line basis over the initial term of the lease agreement. Refer to Footnote 14 for further discussion regarding thetermination of this lease. The Company recognized rent expense of approximately ($9.5) million, $4.3 million and $6.7 million related to the lease during theyears ended December 31, 2015, 2014 and 2013, respectively. The expense recognized during the years ended December 31, 2015 and 2014 include therecognition of deferred rent credits totaling $10.6 million and $3.8 million, respectively, following the termination of the lease agreement.Employment AgreementsCertain key executives are covered by severance and change in control agreements. Under these agreements, if the executive’s employment isterminated without cause or if the executive terminates his employment for good reason, such executive will be entitled to receive severance equal to his basesalary, benefits and prorated bonuses for a period of time equal to either 12 months or 18 months, depending on the terms of such executive’s individualagreement. In addition, in December 2007, the Company approved a key employee change in control severance benefits plan, which was amended inNovember 2009, and which provides for severance112and other benefits under certain qualifying termination events upon a change in control for a period of time ranging from 6 months to 18 months, dependingupon the position of the key employee.Refer to Footnote 16 for further discussion of legal contingencies. 9.Income TaxesThe Company accounts for income taxes under the provisions of ASC 740. For the years ended December 31, 2015, 2014 and 2013, the Company didnot have any federal, state, or foreign income tax expense as it generated taxable losses in all filing jurisdictions.A reconciliation of the expected income tax benefit computed using the federal statutory income tax rate to the Company’s effective income tax rate isas follows for the years ended December 31, 2015, 2014 and 2013: December 31,2015 December 31,2014 December 31,2013 Income tax computed at federal statutory tax rate 34.0% 34.0% 34.0%State taxes, net of federal benefit 5.3% 5.3% 5.1%Research and development credits 2.0% 2.6% 2.0%Other permanent differences (2.0)% (0.8)% (0.9)%Foreign rate differential (0.1)% 0.0% (0.2)%Permanent difference – estimated settlement liability (9.1)% 0.0% 0.0%Other (3.8)% (5.7)% (0.5)%Change in valuation allowance (26.3)% (35.4)% (39.5)%Total 0.0% 0.0% 0.0% Prior to 2011, the Company had incurred net operating losses from inception. At December 31, 2015, the Company had domestic federal, state, andUK net operating loss carryforwards of approximately $444.5 million, $338.7 million, and $6.6 million respectively, available to reduce future taxableincome. The federal net operating loss carryforwards expire beginning in 2024 through 2035 and the state loss carryforwards begin to expire in 2030 andcontinue through 2035. The foreign net operating loss carryforwards in the UK do not expire. The Company also had federal and state research anddevelopment tax credit carryforwards of approximately $10.1 million and $4.0 million, respectively, available to reduce future tax liabilities and whichexpire at various dates. The federal credits expire beginning in 2022 through 2035 and the state credits begin to expire in 2019. The net operating loss andresearch and development carryforwards are subject to review and possible adjustment by the Internal Revenue Service and may be limited in the event ofcertain changes in the ownership interest of significant stockholders.The Company’s net deferred tax assets as of December 31, 2015, 2014 and 2013 are as follows: December 31,2015 December 31,2014 December 31,2013 NOL carryforwards $170,200 $162,248 $134,023 Research and development credits 12,721 12,721 11,357 Deferred revenue 1,451 302 7,224 Other temporary differences 5,935 11,135 15,158 Valuation allowance (190,307) (186,406) (167,762)Total — — — A full valuation allowance has been recorded in the accompanying consolidated financial statements to offset these deferred tax assets because thefuture realizability of such assets is uncertain. This determination is based primarily on the Company’s historical losses. Accordingly, future favorableadjustments to the valuation allowance may be required, if and when circumstances change. The valuation allowance increased by $3.9 million, $18.6million and $42.3 million during the years ended December 31, 2015, 2014, and 2013, respectively, primarily due to the generation of net operating losscarryforwards.As of December 31, 2015, the Company had federal and state net operating losses of approximately $4.1 million related to excess tax deductions thathave been excluded from the above table. The benefit of these net operating losses will be recognized as an increase in additional paid in capital when itresults in a reduction of taxes payable.113The Company applies FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FAS 109” (codified within ASC740, Income Taxes), for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to betaken in income tax returns. Unrecognized tax benefits represent tax positions for which reserves have been established. A full valuation allowance has beenprovided against the Company’s deferred tax assets, so that the effect of the unrecognized tax benefits is to reduce the gross amount of the deferred tax assetand the corresponding valuation allowance. Since the Company has incurred net operating losses since inception, it has never been subject to a revenueagent review. The Company is currently open to examination under the statute of limitations by the Internal Revenue Service and state jurisdictions for thetax years ended 2012 through 2015. Carryforward tax attributes generated in years past may still be adjusted upon future examination if they have or will beused in a future period. The Company is currently not under examination by the Internal Revenue Service or any other jurisdictions for any tax years.The Company may from time to time be assessed interest or penalties by major tax jurisdictions. The Company recognizes interest and penaltiesrelated to uncertain tax positions in income tax expense. No interest and penalties have been recognized by the Company to date.The Company anticipates that the amount of unrecognized tax benefits recorded will not change in the next twelve months.The following is a reconciliation of the Company’s gross uncertain tax positions at December 31, 2015, 2014 and 2013: Year endedDecember 31, Year endedDecember 31, Year endedDecember 31, 2015 2014 2013 (in thousands) Amount established upon adoption $1,200 $1,200 $1,200 Additions for current year tax positions — — — Additions for prior year tax positions — — — Reductions of prior year tax positions — — — Balance as of end of year $1,200 $1,200 $1,200 10.Common Stock and WarrantsAs of December 31, 2015, the Company had 200,000,000 authorized shares of common stock, $0.001 par value, of which 58,181,715 shares wereissued and outstanding. The number of authorized shares of common stock was increased from 100,000,000 at the Company’s 2015 annual shareholdersmeeting.As part of the Amended Loan Agreement with Hercules Technology II, L.P. and Hercules Technology III, L.P., affiliates of Hercules TechnologyGrowth (collectively, “Hercules”), on September 24, 2014, the Company issued warrants to the lenders to purchase up to 608,696 shares of the Company’scommon stock at an exercise price equal to $1.15 per share to Hercules. All warrants issued during the year remain outstanding as of December 31, 2015.ATM Sales AgreementIn February 2015, the Company entered into an at-the-market issuance sales agreement with FBR & Co. (formerly MLV & Co. LLC (“FBR”), pursuantto which the Company could issue and sell shares of its common stock from time to time up to an aggregate amount of $17.9 million, at the Company’soption, through FBR as its sales agent. Sales of common stock through FBR may be made by any method that is deemed an “at-the-market” offering asdefined in Rule 415 promulgated under the Securities Act of 1933, as amended, including by means of ordinary brokers’ transactions at market prices, inblock transactions or as otherwise agreed by the Company and FBR. Subject to the terms and conditions of the sales agreement between the Company andFBR (the “Sales Agreement”), FBR will use commercially reasonable efforts to sell the common stock based upon the Company’s instructions (including anyprice, time or size limits or other customary parameters or conditions the Company may impose). The Company is not obligated to make any sales of itscommon stock under the Sales Agreement. Any shares sold will be sold pursuant to an effective shelf registration statement on Form S-3. The Company willpay FBR a commission of up to 3% of the gross proceeds. The Sales Agreement may be terminated by the Company at any time.On May 7, 2015, the Company filed a shelf registration statement on Form S-3 with the SEC, which covers the offering, issuance and sale by theCompany of up to $100.0 million of its common stock, preferred stock, debt securities, warrants and/or units (the “2015 Shelf”). The 2015 Shelf was filed toreplace the Company’s existing $250.0 million shelf registration statement (the “2012 Shelf”). On May 7, 2015, the Company amended its Sales Agreementwith FBR to provide for the offering, issuance and sale by the Company of up to $15.0 million of its common stock under the 2015 Shelf, which replaced theCompany’s existing $17.9 million114offering that expired along with the expired 2012 Shelf. As of December 31, 2015, the Company has sold approximately 5.9 million shares pursuant to theSales Agreement, resulting in proceeds of approximately $10.2 million, net of commissions and issuance costs.Approximately $9.0 million remains available for sale under the Sales Agreement. 11.Stock-Based CompensationStock Incentive Plan—OverviewThe Company maintains the 2010 Stock Incentive Plan (the “Plan”) for employees, consultants, advisors, and directors. The Plan provides for thegrant of equity awards such as stock options and restricted stock. The Plan has been amended at various times since its approval. In March 2013, theCompany’s board of directors amended the Plan to increase the number of shares of common stock reserved for issuance to 7,875,000 shares, plus the numberof shares of common stock subject to awards granted under the Company’s 2002 Incentive Plan which expire, terminate or are otherwise surrendered,cancelled, forfeited or repurchased by us, up to a maximum of 625,000 shares. This amendment also adopted a fungible share pool whereby any award that isa full-value award (i.e. any restricted stock award, restricted stock unit award, or other stock-based award with a per share price or per unit purchase pricelower than 100% of fair market value on the date of the grant) is counted against the share limits under the Plan as 1.5 shares for each one share of commonstock subject to such full-value award. In June 2014, the Company’s stockholders approved an amendment to the Plan, which increased the annual perparticipant share limit under the Plan from 250,000 to 1,000,000 shares per fiscal year. No other amendments to the Plan were made.The Company has reserved 8,500,000 shares of common stock under the Plan, and at December 31, 2015, the Company has 3,413,353 shares availablefor future issuance under the Plan. Shares issued upon exercise of options are generally issued from new shares of the Company. The Plan provides that theexercise price of incentive stock options cannot be less than 100% of the fair market value of the common stock on the date of the award for participants whoown less than 10% of the total combined voting power of stock of the Company and not less than 110% for participants who own more than 10% of the totalcombined voting power of the stock of the Company. Options and restricted stock granted under the Plan vest over periods as determined by the Board,which generally are equal to four years. Options generally expire ten years from the date of grant.Stock Incentive Plan—Employee Stock OptionsThe fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option-pricing model using the assumptionsnoted in the following table: Years Ended December 31, 2015 2014 2013 Volatility 73.04%-78.7% 69.38%-77.92% 64.22%-72.65% Expected Term (in years) 5.50-6.25 5.50-6.25 5.50-6.25 Risk-Free Interest Rates 1.54%-1.93% 1.81%-2.02% 1.01%-2.10% Dividend Yield — — — The risk-free interest rate is determined based upon the United States Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar tothose of the expected term of the options being valued. The Company does not expect to pay dividends in the foreseeable future.The Company does not have sufficient history to support a calculation of volatility and expected term using only its historical data. As such, theCompany has used a weighted-average volatility considering the Company’s own volatility since March 2010, and the volatilities of several peer companies.For purposes of identifying similar entities, the Company considered characteristics such as industry, length of trading history, similar vesting terms and in-the-money option status. Due to lack of available option activity data, the Company elected to use the “simplified” method for “plain vanilla” options toestimate the expected term of the stock option grants. Under this approach, the weighted-average expected life is presumed to be the average of the vestingterm and the contractual term of the option. Additionally, the Company is required to include an estimate of the value of the awards that will be forfeited incalculating compensation costs, which the Company estimates based upon actual historical forfeitures. The forfeiture estimates are recognized over therequisite service period of the awards on a straight-line basis. During the years ending December 31, 2015, 2014 and 2013 the Company estimated itsforfeiture rates to be 71%, 62% and 49%, respectively. Based upon these assumptions, the weighted-average grant date fair value of stock options grantedduring the years ended December 31, 2015, 2014, and 2013 was $0.75, $1.15 and $4.32 per share, respectively.During the year ended December 31, 2014 the Company issued stock options to purchase 2,250,000 shares of common stock that contain market andperformance –based vesting conditions. As of December 31, 2015, there were 381,500 shares remaining115which were not deemed probable of vesting. As of December 31, 2015, there was $0.7 million of total unrecognized stock-based compensation expenserelated to stock options granted under the Company’s 2002 Stock Incentive Plan and 2010 Stock Incentive Plan (collectively, the “Plans”). The expense isexpected to be recognized over a weighted-average period of 2.9 years. The intrinsic value of options exercised was $58,000 for the years endedDecember 31, 2015. No options were exercised during the year ended December 31, 2014.The following table summarizes the activity of the Plans for the year ended December 31, 2015: Number ofOptions Weighted-AverageExercisePrice Weighted-AverageRemainingContractualLife(in years) AggregateIntrinsicValue Outstanding at December 31, 2014 5,817,313 $4.45 Granted 3,159,134 $1.11 Exercised (165,805) $1.45 Forfeited (2,964,938) $1.85 Expired (1,049,699) $5.27 Outstanding at December 31, 2015 4,796,005 $3.78 6.93 $596,660 Exercisable at December 31, 2015 3,153,440 $5.09 5.86 $325,107 Vested or expected to vest at December 31, 2015 2,276,447 $6.56 4.61 $115,704 Stock Incentive Plan—Nonemployee Stock OptionsThere were no stock options granted to nonemployee consultants during 2015 or 2013. During 2014, the Company granted nonqualified options topurchase 225,000 shares of common stock to nonemployee consultants, with an average exercise price of $1.47 per share. The Company valued these optionsusing the Black-Scholes option-pricing model and recognized expense related to these awards using the accelerated attribution method. The unvestedoptions held by consultants have been revalued using the Company’s estimate of fair value at each reporting period over the vesting period. Stock-basedcompensation expense of approximately $0.1 million was recorded during the year ended December 31, 2014 relating to nonemployee stock option awards.Stock Incentive Plan—Restricted StockThe Company periodically grants awards of restricted stock to employees. These awards typically vest upon completion of the requisite service periodor upon achievement of specified performance targets.The following table summarizes the restricted stock activity for the year ended December 31, 2015: Number ofShares Weighted-AveragePrice Unvested at December 31, 2014 477,600 $1.81 Granted — — Cancelled (201,180) 1.87 Expired — — Vested/Released (233,670) 1.80 Unvested at December 31, 2015 42,750 $1.61 The fair value of restricted stock awards that vested was $0.1 million, $0.2 million, and $0.5 million for the years ended December 31, 2015, 2014, and2013, respectively. As of December 31, 2015, there was $6,000 of total unrecognized stock-based compensation expense related to restricted stock awardsgranted under the Plan. The expense is expected to be recognized over a weighted-average period of 0.1 years if all performance targets are met.Employee Stock Purchase PlanIn February 2010, the Board of Directors adopted the 2010 Employee Stock Purchase Plan (the “ESPP”) pursuant to which the Company may sell upto an aggregate of 250,000 shares of Common Stock. The ESPP was approved by the Company’s stockholders in February 2010. The plan was amended inMarch 2013 to increase the total number of shares available under the ESPP for the Company to sell to 764,000. The ESPP allows eligible employees topurchase common stock at a price per share equal to 85% of the116lower of the fair market value of the common stock at the beginning or end of each six month period during the term of the ESPP. The first offering periodbegan on July 1, 2010.Pursuant to the ESPP, the Company sold a total of 7,138 shares of common stock during the year ended December 31, 2015 at purchase prices of $0.75and $1.07, respectively, which represent 85% of the closing price of the Company’s common stock on June 30, 2015 and December 31, 2015, respectively.For the year ended December 31, 2014, the Company sold a total of 139,032 shares of common stock at purchase prices of $1.53 and $0.71, respectively,which represent 85% of the closing price of the Company’s common stock on June 30, 2014 and December 31, 2014, respectively. For the year endedDecember 31, 2013, the Company sold a total of 109,610 shares of common stock at purchase prices of $2.13 and $1.56, respectively, which represent 85% ofthe closing price of the Company’s common stock on June 28, 2013 and December 31, 2013, respectively. The total stock-based compensation expenserecorded as a result of the ESPP was approximately $27,000, $0.2 million and $0.2 million during the years ended December 31, 2015, 2014 and 2013,respectively. 12.Employee Benefit PlanIn 2002, the Company established the AVEO Pharmaceuticals, Inc. 401(k) Plan (the “401(k) Plan”) for its employees, which is designed to be qualifiedunder Section 401(k) of the Internal Revenue Code. Eligible employees are permitted to contribute to the 401(k) Plan within statutory and 401(k) Plan limits.The Company makes matching contributions of 50% of the first 5% of employee contributions. The Company made matching contributions of $0.1 million,$0.1 million, and $0.4 million for the years ended December 31, 2015, 2014 and 2013, respectively. 13.Strategic RestructuringIn connection with the receipt of a complete response letter from the FDA informing the Company that the FDA would not approve the Company’sNDA for tivozanib for the treatment of patients with advanced RCC, the Company announced a strategic restructuring in June 2013 to refocus the Company’sefforts on the then on-going clinical development of tivozanib in colorectal and breast cancer and on the advancement of key pipeline and preclinical assets.This restructuring was completed as of December 31, 2013 and resulted in costs totaling $8.0 million, which included impairment charges of $0.3 million.On January 6, 2015, the Board of the Company approved a further strategic restructuring of the Company that eliminated the Company’s internalresearch function and aligned the Company’s resources with the Company’s future strategic plans. As part of this restructuring, the Company eliminatedapproximately two-thirds of the Company’s workforce, or 40 positions across the organization. The Company substantially completed the restructuringduring the quarter-ended March 31, 2015.The following table summarizes the components of the Company’s restructuring activity recorded in operating expenses and in accrued expenses inthe accompanying consolidated balance sheet: Restructuringamounts accrued atDecember 31,2013 Restructuringexpenseincurredduring the yearendedDecember 31,2014 Restructuringamountspaidduring the yearendedDecember 31,2014 Restructuringamountsaccrued atDecember 31,2014 (in thousands) Employee severance, benefits and related costs. $587 — $(587) — Restructuringamounts accrued atDecember 31,2014 Restructuringexpenseincurredduring the yearendedDecember 31,2015 Restructuringamountspaidduring the yearendedDecember 31,2015 Restructuringamountsaccrued atDecember 31,2015 (in thousands) Employee severance, benefits and related costs. $— $3,560 $(3,203) $357 The Company is obligated to continue to pay the remaining amounts accrued through the first quarter of 2016. The table above excludes non-cashstock-based compensation costs of approximately $0.1 million incurred as part of the restructuring during the year ended December 31, 2015. 11714.Facility Lease ExitIn September 2014, the Company entered into the Lease Termination Agreement pursuant to which the Company immediately surrendered leasedspace at 650 East Kendall Street in Cambridge, Massachusetts that it had previously ceased using earlier in 2014. In connection with the Lease TerminationAgreement, the Company agreed to pay the landlord a termination fee totaling $15.6 million. The Company also agreed to surrender its remaining leasedspace upon 90 days written notice prior to September 24, 2015.The Company previously recorded liabilities totaling $15.2 million for lease exit costs when it ceased using the leased spaces during the first andsecond quarters of 2014. The fair value of these liabilities was determined using the credit-adjusted risk-free rate to discount the estimated future net cashoutflows associated with the space that met the cease use criteria. The estimate of future net cash outflows included the Company’s expected minimum rentalpayments and incremental operating, utility and tax payments to the landlord less the amount of sublease income that the Company estimates it couldreasonably expect to obtain during the remainder of the lease period. Upon signing the Lease Termination Agreement during the quarter ended September 30,2014, the Company recorded an additional $1.9 million of Lease Exit charges based on the fair value of the revised net cash outflows, resulting in total LeaseExit charges of $17.1 million for the year ended December 31, 2014.In February 2015, the Company provided notice that it would surrender the remaining space on May 29, 2015. Accordingly, the Company revised theestimated useful life of its leasehold improvements related to this office space and amortized such assets through May 2015, resulting in an additional $2.9million of depreciation expense during the year ended December 31, 2015. Similarly, the Company accelerated the amortization of its deferred rent andleasehold improvement allowance associated with this office space through May 2015, resulting in an additional $3.5 million of amortization during the yearended December 31, 2015. Upon the surrender of the remaining space, the Company had no further rights or obligations with respect to the lease. TheCompany has secured office space appropriate for its current needs under a cancellable arrangement that began in May 2015.The following tables summarize the components of the Company’s lease exit activity recorded in current liabilities: Lease ExitExpenseincurredduring theyear endedDecember 31,2014 AccretionExpenseincurredduring the yearendedDecember 31,2014 Amountspaidduring theyear endedDecember 31,2014 Amounts offsetagainsttenantreceivableduring theyear endedDecember 31,2014 Amountsaccrued atDecember 31,2014 (in thousands) Lease exit costs $17,142 $974 $(5,313) $(7,822) $4,981 In addition to the $17.1 million of expense included in the table above, lease exit expenses also include the write-off $14.0 million of deferred rentassociated with the portions of the facility that met the cease use criteria under ASC 420-10 and leasehold improvements totaling $7.6 million during theyear ended December 31, 2014 as the Company’s estimates of sublease income would not recover the value of the leasehold improvements. Amountsaccrued atDecember 31,2014 AccretionExpenseincurredduring theyear endedDecember 31,2015 Amountspaidduring theyear endedDecember 31,2015 Additionalexpenseincurredduring the yearendedDecember 31,2015 Amountsaccrued atDecember 31,2015 (in thousands) Lease exit costs $4,981 $224 $(5,477) $272 $─ In addition to the $0.5 million of expense for the year ended December 31, 2015 included in the table above, lease exit expenses also include thewrite-off of $0.2 million of leasehold improvements. 11815.Quarterly Results (Unaudited) Three Months Ended March 31,2015 June 30,2015 September 30,2015 December 31,2015 (in thousands, except per share data) (unaudited) Collaboration revenue $134 $134 $15,158 $3,598 Restructuring 4,333 25 ─ ─ Operating expenses 5,950 4,730 6,691 9,721 Loss from operations (10,149) (4,621) 8,467 (6,123)Other expense, net (725) (835) (553) (462)Net loss $(10,874) $(5,456) $7,914 $(6,585)Net loss per share—basic and diluted $(0.21) $(0.10) $0.14 $(0.11) Three Months Ended March 31,2014 June 30,2014 September 30,2014 December 31,2014 (in thousands, except per share data) (unaudited) Collaboration revenue $15,289 $1,846 $873 $115 Restructuring 3,859 5,165 1,403 1,302 Operating expenses 17,322 14,146 13,569 11,806 Loss from operations (5,892) (17,465) (14,099) (12,993)Other expense, net (558) (494) (337) (901)Net loss $(6,450) $(17,959) $(14,436) $(13,894)Net loss per share—basic and diluted $(0.12) $(0.35) $(0.28) $(0.27) 16.Legal ActionsTwo class action lawsuits have been filed against the Company and certain of its former officers and members of its board of directors, (Tuan Ha-Ngoc,David N. Johnston, William Slichenmyer and Ronald DePinho), in the United States District Court for the District of Massachusetts, one captioned PaulSanders v. Aveo Pharmaceuticals, Inc., et al., No. 1:13-cv-11157-JLT, filed on May 9, 2013, and the other captioned Christine Krause v. AVEOPharmaceuticals, Inc., et al., No. 1:13-cv-11320-JLT, filed on May 31, 2013. On December 4, 2013, the District Court consolidated the complaints as In reAVEO Pharmaceuticals, Inc. Securities Litigation et al., No. 1:13-cv-11157-DJC, and an amended complaint was filed on February 3, 2014. The amendedcomplaint purported to be brought on behalf of shareholders who purchased the Company’s common stock between January 3, 2012 and May 1, 2013. Theamended complaint generally alleged that the Company and certain of its present and former officers and directors violated Sections 10(b) and/or 20(a) of theSecurities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and/or misleading statements concerning the phase 3trial design and results for the Company’s TIVO-1 study in an effort to lead investors to believe that the drug would receive approval from the FDA. Thelawsuit seeks unspecified damages, interest, attorneys’ fees, and other costs. The consolidated amended complaint was dismissed without prejudice on March20, 2015, and the lead plaintiffs then filed a second amended complaint bringing similar allegations. The Company moved to dismiss again, and after asecond round of briefing and oral argument, the court ruled in the Company’s favor and dismissed the second amended complaint with prejudice onNovember 18, 2015. The lead plaintiffs have appealed the court’s decision to the United States Court of Appeals for the First Circuit. The Company deniesany allegations of wrongdoing and intends to continue to vigorously defend against this lawsuit. However, there is no assurance that the Company will besuccessful in its defense or that insurance will be available or adequate to fund any settlement or judgment or the litigation costs of the action. Moreover, theCompany is unable to predict the outcome or reasonably estimate a range of possible loss at this time.On April 4, 2014, Karen J. van Ingen, a purported purchaser of AVEO stock, filed a derivative complaint allegedly on behalf of AVEO in the UnitedStates District Court for the District of Massachusetts, Civil Action No. 1:14-cv-11672-DJC, naming AVEO, as a nominal defendant and also naming asdefendants present and former members of the Company’s board of directors, including Tuan Ha-Ngoc, Henri A. Termeer, Kenneth M. Bate, Anthony B.Evnin, Robert Epstein, Raju Kucherlapati, Robert C. Young, and Kenneth E. Weg. The complaint alleged breach of fiduciary duty and abuse of controlbetween January 2012 and May 2013 with respect to allegedly misleading statements and omissions regarding tivozanib. The lawsuit seeks, among otherrelief, unspecified damages, costs and expenses, including attorneys’ fees, an order requiring us to implement certain corporate governance reforms,restitution from the defendants and such other relief as the court might find just and proper. The Company filed a motion to dismiss the derivative complaint,and after briefing and oral argument, on March 18, 2015 the Court ruled in the Company’s favor and dismissed the case with prejudice. The plaintiff thenfiled a motion seeking to vacate the Court’s order of dismissal and permit filing of an amended119complaint, which the Company opposed, and which the Court denied on June 30, 2015. The plaintiff has appealed the Court’s decision to the United StatesCourt of Appeals for the First Circuit. The Company denies any allegations of wrongdoing and intends to continue to vigorously defend this lawsuit.However, there is no assurance that the Company will be successful in its defense or that insurance will be available or adequate to fund any settlement orjudgment or the litigation costs of this action. Moreover, the Company is unable to predict the outcome or reasonably estimate a range of possible loss at thistime.On July 3, 2013, the staff (the “SEC Staff”) of the United States Securities and Exchange Commission (the “Commission”) served a subpoena on theCompany for documents and information concerning tivozanib, including related communications with the FDA, investors and others. The Company fullycooperated with the inquiry. In September 2015, the SEC Staff invited the Company to discuss the settlement of potential claims that the SEC Staff mayrecommend that the Commission bring against the Company asserting that it violated federal securities laws by omitting to disclose to investors therecommendation made to the Company by the staff of the U.S. Food and Drug Administration, on May 11, 2012, that the Company conduct an additionalclinical trial with respect to tivozanib. Based on the progress in the settlement process thus far, the Company believes that it could potentially settle with theSEC for a total amount of $4,000,000 and, accordingly, the Company has accrued an estimated settlement liability, for accounting purposes, in that amountin its financial statements as of December 31, 2015. There can be no assurance, however, that a settlement will be approved by the Commission, or that anysettlement on terms agreeable to the Company will be achieved, or that any settlement the Company enters into with the SEC will be within the estimatedsettlement liability accrued. If settlement discussions conclude without a settlement proposal that is acceptable to the Commission and the Company, theCommission may authorize the SEC Staff to pursue claims against the Company. There can be no assurance that the Company will be able to resolve anypotential claims of the Commission or that any settlement will not have a material adverse impact on the Company’s ability to execute on its proposed plansor on its financial position or results of operations. The SEC Staff also invited three of the Company’s former officers to discuss the settlement of potential claims that the SEC Staff may recommend thatthe Commission bring against them. The Company is not a party to any discussions between the SEC Staff and the former officers, and the Company canmake no assurance regarding such potential claims. 120ITEM 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone. ITEM 9A.Controls and ProceduresEvaluation of Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosurecontrols and procedures as of December 31, 2015. In designing and evaluating our disclosure controls and procedures, management recognized that anycontrols and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and ourmanagement necessarily applied its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, ourChief Executive Officer and Chief Financial Officer concluded that as of December 31, 2015, our disclosure controls and procedures were (1) designed toensure that material information relating to us is made known to our management including our principal executive officer and principal financial officer byothers, particularly during the period in which this report was prepared and (2) effective, in that they provide reasonable assurance that information requiredto be disclosed by us in the reports the Company files or submit under the Exchange Act is recorded, processed, summarized and reported within the timeperiods specified in the SEC’s rules and forms.Management’s report on the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)appears below.Internal Control Over Financial Reporting(a) Management’s Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financialreporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, thecompany’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles and includes those policies and procedures that: ·Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of thecompany; ·Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and ·Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assetsthat could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systemsdetermined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2015. In making this assessment,management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—IntegratedFramework (2013 framework). Based on its assessment, management believes that, as of December 31, 2015, our internal control over financial reporting iseffective based on those criteria.Our independent registered public accounting firm has issued an attestation report of our internal control over financial reporting. This report appearsbelow.(b) Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting121REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofAVEO Pharmaceuticals, Inc.We have audited AVEO Pharmaceuticals, Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSOcriteria). AVEO Pharmaceuticals, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment ofthe effectiveness of internal control over financial reporting included in the accompanying management’s report on internal control over financial reporting.Our responsibility is to express an opinion on AVEO Pharmaceuticals, Inc.’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained inall material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures aswe considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.In our opinion, AVEO Pharmaceuticals, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31,2015, based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balancesheets of AVEO Pharmaceuticals, Inc. as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive loss,stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015 and our report dated March 15, 2016 expressed anunqualified opinion thereon./s/ Ernst & Young LLPBoston, MassachusettsMarch 15, 2016122Changes in Internal Control Over Financial ReportingThere were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2015 that have materiallyaffected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B.Other InformationNone. 123PART III ITEM 10.Directors, Executive Officers and Corporate GovernanceThe information required by this Item 10 will be contained in the sections entitled “Election of Directors,” “Corporate Governance” and“Section 16(a) Beneficial Ownership Reporting Compliance” appearing in the definitive proxy statement we will file in connection with our 2016 AnnualMeeting of Stockholders and is incorporated by reference herein. The information required by this item relating to executive officers may be found in Part I,Item 1 of this report under the heading “Business—Executive Officers” and is incorporated herein by reference. ITEM 11.Executive CompensationThe information required by this Item 11 will be contained in the sections entitled “Executive and Director Compensation,” “Executive and DirectorCompensation—Compensation Committee Interlocks and Insider Participation” and “Executive and Director Compensation—Compensation CommitteeReport” appearing in the definitive proxy statement we will file in connection with our 2016 Annual Meeting of Stockholders and is incorporated byreference herein. ITEM 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this Item 12 will be contained in the sections entitled “Ownership of Our Common Stock” and “Executive and DirectorCompensation—Equity Compensation Plan Information” appearing in the definitive proxy statement we will file in connection with our 2016 AnnualMeeting of Stockholders and is incorporated by reference herein. ITEM 13.Certain Relationships and Related Person Transactions, and Director IndependenceThe information required by this Item 13 will be contained in the sections entitled “Certain Relationships and Related Person Transactions” appearingin the definitive proxy statement we will file in connection with our 2016 Annual Meeting of Stockholders and is incorporated by reference herein. ITEM 14.Principal Accounting Fees and ServicesThe information required by this Item 14 will be contained in the section entitled “Corporate Governance—Principal Accountant Fees and Services”appearing in the definitive proxy statement we will file in connection with our 2016 Annual Meeting of Stockholders and is incorporated by reference herein. 124PART IV ITEM 15.Exhibits and Financial Statement Schedules(a)Documents filed as part of Form 10-K. (1)Financial StatementsReport of Independent Registered Public Accounting FirmConsolidated Balance SheetsConsolidated Statements of OperationsConsolidated Statements of Comprehensive Loss) IncomeConsolidated Statements of Stockholders’ EquityConsolidated Statements of Cash FlowsNotes to Consolidated Financial Statements (2)SchedulesSchedules have been omitted as all required information has been disclosed in the financial statements and related footnotes. (3)ExhibitsThe Exhibits listed in the Exhibit Index are filed as a part of this Form 10-K. 125SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized. AVEO PHARMACEUTICALS, INC. Date: March 15, 2016By:/s/ MICHAEL BAILEY Michael Bailey President & Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Signature Title Date /s/ Michael Bailey President, Chief Executive Officer and Director March 15, 2016Michael Bailey Principal Executive Officer /s/ Keith S. Ehrlich Chief Financial Officer March 15, 2016Keith S. Ehrlich Principal Financial and Accounting Officer /s/ Kenneth M. Bate Director March 15, 2016Kenneth M. Bate /s/ Anthony B. Evnin Director March 15, 2016Anthony B. Evnin /s/ Raju Kucherlapati Director March 15, 2016Raju Kucherlapati /s/ Henri Termeer Director March 15, 2016Henri Termeer /s/ Robert C. Young Director March 15, 2016Robert C. Young 126Exhibit Index Incorporated by Reference FiledHerewithExhibitNumber Description of Exhibit Form File Number Date ofFiling ExhibitNumber Articles of Incorporation and Bylaws 3.1 Restated Certificate of Incorporation of the Registrant 8-K 001-34655 03/18/2010 3.1 3.2 Certificate of Amendment of Restated Certificate of Incorporation of theRegistrant 8-K 001-34655 06/03/2015 3.1 3.3 Second Amended and Restated Bylaws of the Registrant S-1/A 333-163778 02/08/2010 3.5 Instruments Defining the Rights of Security Holders, IncludingIndentures 4.1 Specimen Stock Certificate evidencing the shares of common stock S-1/A 333-163778 03/09/2010 4.1 Material Contracts—Management Contracts and Compensatory Plans 10.1 2002 Stock Incentive Plan, as amended S-1/A 333-163778 02/23/2010 10.1 10.2 Form of Incentive Stock Option Agreement under 2002 Stock IncentivePlan S-1 333-163778 12/16/2009 10.2 10.3 Form of Nonstatutory Stock Option Agreement under 2002 StockIncentive Plan S-1 333-163778 12/16/2009 10.3 10.4 Form of Restricted Stock Agreement under 2002 Stock Incentive Plan S-1 333-163778 12/16/2009 10.4 10.5 Amended and Restated 2010 Stock Incentive Plan, as amended 8-K 001-34655 06/23/2014 99.1 10.6 Form of Incentive Stock Option Agreement under 2010 Stock IncentivePlan S-1/A 333-163778 02/08/2010 10.6 10.7 Form of Nonqualified Stock Option Agreement under 2010 StockIncentive Plan S-1/A 333-163778 02/08/2010 10.7 10.8 Form of Restricted Stock Agreement under 2010 Stock Incentive Plan 10-K 001-34655 03/30/2012 10.8 10.9 Key Employee Change in Control Severance Benefits Plan S-1 333-163778 12/16/2009 10.8 10.10 2010 Employee Stock Purchase Plan, as amended S-1/A 333-163778 02/23/2010 10.17 10.11 Amendment No. 1 to 2010 Employee Stock Purchase Plan 8-K 001-34655 06/04/2013 99.2 10.12 Offer Letter by Registrant to Michael Bailey, dated as of January 6, 2015 10-Q 001-34655 05/07/2015 10.1 10.13 Severance and Change in Control Agreement, dated as of January 9, 2015, by and between the Registrant and Michael Needle 10-Q 001-34655 05/07/2015 10.2 10.14 Transition and Separation Agreement, dated as of January 6, 2015, by andbetween the Registrant and Tuan Ha-Ngoc 10-Q 001-34655 05/07/2015 10.3 10.15 Offer Letter by the Registrant to Michael Needle, dated January 8, 2015 10-Q 001-34655 05/07/2015 10.4 10.16 Severance and Change in Control Agreement, dated as of December 11,2009, by and between the Registrant and Tuan Ha-Ngoc S-1 333-163778 12/16/2009 10.10 10.17 Severance Agreement, dated September 13, 2010, by and between theRegistrant and Michael Bailey 10-Q 001-34655 11/05/2010 10.1  Incorporated by Reference FiledHerewithExhibitNumber Description of Exhibit Form File Number Date ofFiling ExhibitNumber 10.18 Letter Agreement regarding Retention Bonus Award and SeveranceAgreement, dated February 3, 2014, by and between the Company andMichael Bailey 10-K 001-34655 3/13/2014 10.22 10.19 Offer Letter by and between the Registrant and Keith Ehrlich, dated April21, 2015 X Material Contracts—Financing Agreements 10.20 Loan and Security Agreement, dated May 28, 2010, by and among theCompany, Hercules Technology II, L.P. and Hercules Technology III, L.P. 8-K 001-34655 06/04/2010 10.1 10.21 Amendment No. 1 to Loan and Security Agreement, dated December 21,2011, by and among the Company, Hercules Technology II, L.P. andHercules Technology III, L.P. 10-K 001-34655 03/30/2012 10.25 10.22 Amendment No. 2 to Loan and Security Agreement, dated March 31,2012, by and among the Company, Hercules Technology II, L.P. andHercules Technology III, L.P. 8-K 001-34655 04/04/2012 10.1 10.23 Amendment No. 3 to Loan and Security Agreement, dated September 24,2014, by and among the Company, Hercules Technology Growth Capital,Inc., Hercules Capital Funding Trust 2012-1 and Hercules Technology III,L.P. 10-Q 001-34655 11/05/2014 10.1 10.24 Warrant, dated as of September 24, 2014, issued by the Registrant toHercules Technology II, L.P. and Hercules Technology III, L.P. 10-Q 001-34655 11/05/2014 10.2 Material Contracts—Lease 10.25 Sublease, dated February 28, 2011, by and between the Company andAcceleron Pharma, Inc. 10-Q 001-34655 05/12/2011 10.4 10.26 First Amendment to Sublease, dated September 1, 2011, by and betweenthe Company and Acceleron Pharma, Inc. 10-K 001-34655 03/30/2012 10.29 10.27 Lease, dated May 9, 2012, by and between the Company and BMR-650E. Kendall B LLC 10-Q 001-34655 05/09/2012 10.3 10.28 First Amendment to Lease, dated as of April 30, 2013, by and between theRegistrant and BMR-650 E Kendall B LLC 10-K 001-34655 3/06/2015 10.27 10.29 Second Amendment to Lease, dated as of August 13, 2013, by andbetween the Registrant and BMR-650 E Kendall B LLC 10-K 001-34655 3/06/2015 10.28 10.30 Third Amendment to Lease and Lease Termination Agreement, datedSeptember 24, 2014, by and between the Registrant and BMR-650 EKendall B LLC 10-Q 001-34655 11/05/2014 10.3 10.31 Fourth Amendment to Lease, dated December 1, 2014, by and betweenthe Registrant and BMR-650 E Kendall B LLC 10-K 001-34655 3/06/2015 10.30 Material Contracts—License and Strategic Partnership Agreements 10.32† License Agreement, dated as of December 21, 2006, by and between theRegistrant and Kirin Brewery Co. Ltd. S-1 333-163778 12/16/2009 10.22 10.33† Option and License Agreement, dated as of March 18, 2009, by andbetween the Registrant and Biogen Idec International GmbH S-1 333-163778 12/16/2009 10.26 10.34† Amendment No. 1 to Option and License Agreement, dated as of March18, 2014 by and between the Registrant and Biogen Idec MA Inc. 10-Q 001-34655 05/07/2014 10.1  Incorporated by Reference FiledHerewithExhibitNumber Description of Exhibit Form File Number Date ofFiling ExhibitNumber 10.35† Co-Development and Collaboration Agreement, dated as of April 9, 2014by and between the Registrant and Biodesix Inc. 10-Q 001-34655 05/07/2014 10.2 10.36† Research and Exclusive License Agreement, dated as of November 10,2014, by and between the Registrant and Ophthotech Corporation 10-K 001-34655 3/06/2015 10.35 10.37 ATM Sales Agreement, dated February 27, 2015 by and between theCompany and MLV & Co. LLC 8-K 001-34655 2/27/2015 1.1 10.38 Amendment No. 1 to ATM Sales Agreement, dated May 7, 2015 by andbetween the Registration and MLV & Co. LLC 10-Q 001-34655 05/07/2015 10.6 10.39† License Agreement, dated August 4, 2015, by and between the Registrantand JSC “Pharmstandard- Ufimskiy Vitamin Plant” 10-Q 001-34655 11/09/2015 10.1 10.40† License Agreement, dated August 13, 2015, by and between theRegistrant and Novartis International Pharmaceutical Ltd. 10-Q 001-34655 11/09/2015 10.2 10.41† Amended and Restated License Agreement, dated August 13, 2015, byand between the Registrant and St. Vincent’s Hospital Sydney Limited 10-Q 001-34655 11/09/2015 10.3 10.42* License Agreement, dated December 18, 2015, by and between theRegistrant and EUSA Pharma (UK) Limited X Additional Exhibits 21.1 Subsidiaries of the Registrant X 23.1 Consent of Ernst & Young LLP X 31.1 Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended. X 31.2 Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended. X 32.1 Certification of principal executive officer pursuant to 18 U.S.C. §1350,as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 32.2 Certification of principal financial officer pursuant to 18 U.S.C. §1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X 101.INS XBRL Instance Document. X 101.SCH XBRL Taxonomy Extension Schema Document. X 101.CAL XBRL Taxonomy Calculation Linkbase Document. X 101DEF XBRL Taxonomy Extension Definition Linkbase Document. X 101.LAB XBRL Taxonomy Label Linkbase Document. X 101.PRE XBRL Taxonomy Presentation Linkbase Document. X †Confidential treatment has been granted as to certain portions, which portions have been omitted and separately filed with the Securities andExchange Commission.*Confidential treatment has been requested as to certain portions, which portions have been omitted and separately filed with the Securities andExchange Commission.  Exhibit 10.19April 21, 2015Keith Ehrlich58 Pine Hill LaneConcord, MA 01742 Dear Keith:It is with great pleasure that we extend you this offer of employment to join AVEO Pharmaceuticals. The following letter sets forth the proposed terms andconditions of your offer of employment.Position. Your position will be Chief Financial Officer reporting to me as Chief Executive Officer, and you will be designated a “Section 16 officer” (withthe meaning of Rule 16a-1(f) under the Securities Exchange Act of 1934). If you accept this offer, your employment with the Company shall commence on amutually agreed upon date.Compensation:·Base Salary. Your initial annual salary will be $300,000 paid semi-monthly. You will be eligible for a salary review in our 2015 common reviewcycle, and your salary will be pro-rated based on your effective date of employment. ·Incentive Bonus. Commencing in 2015, you will be eligible to participate in AVEO’s performance-based incentive bonus program. Your bonus targetis 40% of your base annual salary and is subject to corporate and individual performance assessments. Payment of the annual bonus requires approvalby the AVEO Board of Directors and is pro-rated based on your effective date of employment. ·Cash Bonus. Upon commencing employment, you will receive $75,000 as a one-time bonus to be paid in two installments as follows: oif you remain an employee of the Company in good standing through December 31, 2015, you shall be entitled to receive a lump-sum cashpayment during the following regular pay period equal to $50,000; and oif you remain an employee of the Company in good standing through March 31, 2016, you shall be entitled to receive a lump-sum cashpayment during the following regular pay period equal to $25,000. ·Stock Options. Subject to approval of the Company’s Compensation Committee, the Company shall grant you stock options to purchase 400,000shares of common stock pursuant to the Company’s 2010 Equity Incentive Plan. The options will vest over 4 years from your hire date with 25% of theoptions vesting after 12 months and the remainder on a monthly basis thereafter. Commencing in 2016, you will be also eligible to participate in the Company’s annual renewal equity program. Subject to the Company’s OptionCommittee approval, your renewal incentive stock options will be based on your performance and pro-rated to your effective date of employment. Therenewal options will vest on a monthly basis over 4 years from the grant date. Benefits. The Company offers a competitive benefits program. As an employee, you will be able eligible to participate in the family health, dental,individual life, and disability insurance; a 401(k) savings plan; three weeks of paid vacation per year accrued on per pay period basis; twelve paid holidays ayear; flexible spending accounts for eligible medical and dependent care expenses; and a commuter assistance program. For more details, please refer to theenclosed Benefits Summary.Page 1 of 2 Change in Control. Please refer to the document included with this offer of employment entitled Key Employee Change in Control Severance Benefits Planwhich is attached hereto as Exhibit A and incorporated herein by reference. Contingencies. Your offer of employment is contingent upon AVEO’s review and determination of a successful completion of a background investigation,which may include an evaluation of both your credit and criminal history. On your start date you will be required to sign a standard employee Invention and Non-Disclosure Agreement attached hereto as Exhibit B. Further, the Federal government requires you to provide proper identification verifying your eligibility to work in the United States. Please bring documentsnecessary to complete the Employment Eligibility Verification Form I-9 on your first date of employment. Refer to the enclosed Form I-9 for a list ofacceptable documents. Other. We expect that you will devote your professional efforts to the business and affairs of AVEO and, accordingly, will not pursue any other employmentor business opportunities outside of the Company unless approved by your management and Human Resources. Miscellaneous. This offer of employment is intended to outline the terms of compensation and benefits available to you should you choose to accept thisposition. It is not intended to imply any contract or contractual rights. Your employment will be at-will. Accordingly, you or the Company may end theemployment relationship for any reason, at any time. This letter, together with the Key Employee Change in Control Severance Benefits Plan and the Invention and Non-Disclosure Agreement to be executed byyou and the Company, constitutes our entire offer regarding the terms and conditions of your prospective employment by the Company. It supersedes anyprior agreements, or other promises or statements (whether oral or written) regarding the offered terms of employment. If you decide to accept the terms of this letter, please sign one of the enclosed copies and return it to our office (attn: Human Resources.) This offer ofemployment is valid until April 22, 2015. Keith, we are very excited about having you join AVEO and have every expectation of a productive and rewarding relationship together. If you have anyquestions regarding this offer, please call Tracey Janesheski at 617-299-5791.AVEO PHARMACEUTICALS, INC. Accepted and Agreed: By: /s/ Michael Bailey By: /s/ Keith EhrlichMichael Bailey Keith EhrlichPresident & Chief Executive Officer Page 2 of 2 EXHIBIT A AVEO PHARMACEUTICALS, INC. KEY EMPLOYEE CHANGE IN CONTROL SEVERANCE BENEFITS PLAN SECTION 1. INTRODUCTION The Key Employee Change in Control Severance Benefits Plan (the “Plan”) is designed to provide separation pay and benefits to certain eligibleemployees of AVEO Pharmaceuticals, Inc. (“the “Company”) whose employment is involuntarily terminated without cause or voluntarily terminated forgood reason as set forth in this Plan. SECTION 2. DEFINITIONS For purposes of this Plan, the following terms shall have the meanings set forth below: (a) “BASE SALARY” means the annual base salary for an Eligible Employee as in effect on the Change in Control Date, or as increasedthereafter. (b) “BOARD” means the Board of Directors of the Company. (c) “CAUSE” means, in the good faith determination of the Board of Directors, the occurrence of any of the following events: (i) conviction of, orplea of, nolo contendere with respect to any felony or a crime involving moral turpitude, (ii) commission of an act of personal dishonesty or breach offiduciary duty involving personal profit in connection with the Company, (iii) commission of an act, or failure to act, which is found to have involvedwillful misconduct or gross negligence on an Eligible Employee’s part, in the conduct of his or her duties as an employee of the Company, (iv) willful andmaterial failure or refusal to perform services as an employee of the Company, (v) any failure to fulfill the terms and conditions under which and EligibleEmployee is employed by the Company, or (vi) willful and material failure or refusal to carry out a direct, lawful written request of the Board of Directors, theCompany’s Chief Executive Officer or an Eligible Employee’s immediate supervisor. (d) “CHANGE IN CONTROL” means the occurrence of any of the events set forth in subsections (A) or (B) below, provided that such event(s)constitute (i) a change in the ownership of the Company (as defined in Treasury Regulation Section 1.409A-3(i)(5)(v)), (ii) a change in effective control of theCompany (as defined in Treasury Regulation Section 1.409A-3(i)(5)(vi)), or (iii) a change in the ownership of a substantial portion of the assets of theCompany (as defined in Treasury Regulation Section 1.409A-3(i)(5)(vii)):(A) when a person, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, a amended)acquires beneficial ownership of the Company’s capital stock equal to 50% or more of either: (X) the then-outstanding shares of the Company’s commonstock (the “Outstanding Company Common Stock”) or (Y) the combined voting power of the Company’s then-outstanding securities entitled to votegenerally in the election of directors (the “Outstanding Company Voting Securities”) provided, however, that for purposes of this subsection (A), thefollowing acquisitions of securities shall not constitute a Change in Control: (1) any acquisition of securities directly from the Company (excluding anacquisition of securities pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stockor voting securities of the Company, unless the Person exercising, converting or exchanging such security acquired such security directly from the Companyor an underwriter or agent of the Company) or (2) any acquisition of securities by the Company; or(B) upon the consummation by the Company of a reorganization, merger, consolidation, statutory share exchange or a sale or otherdisposition of all or substantially all of the assets of the Company in one or a series of transactions (a “Business Combination”), provided that, in each case,the persons who were the Company’s  beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such BusinessCombination do not beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting powerof the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in suchBusiness Combination (which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all ofthe Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to suchBusiness Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, respectively. (e) “CHANGE IN CONTROL DATE” means the first date on which a Change of Control occurs. (f) “INVOLUNTARY TERMINATION WITHOUT CAUSE” means an Eligible Employee’s dismissal or discharge by the Company (or, ifapplicable, by any successor entity) for a reason other than Cause. The termination of employment will not be deemed to be an “Involuntary TerminationWithout Cause” if such termination occurs as a result of the Eligible Employee’s voluntary resignation without Good Reason, death or disability. (g) “MANAGEMENT TEAM” shall include any executive officer, senior vice-president and vice-president of the Company and other employeesof the Company nominated by the chief executive officer and ratified by the Compensation Committee. (h) “QUALIFYING TERMINATION” means that an Eligible Employee’s employment terminates due to an Involuntary Termination WithoutCause or a Voluntary Termination for Good Reason, in either case, within eighteen (18) months following a Change in Control Date. (i) “VOLUNTARY TERMINATION FOR GOOD REASON” means any action by the Company without the Eligible Employee’s prior consentwhich results in he or she voluntarily terminating his or her employment with the Company (or, if applicable, with any successor entity) after any of thefollowing are undertaken by the Company (or, if applicable, by any successor entity) without such Eligible Employee’s express consent, provided, however,that a termination for Good Reason can only occur if (i) the Eligible Employee has given the Company a written notice of termination indicating theexistence of a condition giving rise to Good Reason and the Company has not cured the condition giving rise to Good Reason within thirty (30) days afterreceipt of such notice of termination, and (ii) such notice of termination is given within ninety (90) days after the initial occurrence of the condition givingrise to Good Reason and further provided that a termination for Good Reason shall occur no more than one hundred eighty (180) days after the initialoccurrence of the condition giving rise to Good Reason: (A) any requirement by the Company that the Eligible Employee perform his or her principal dutiesoutside a radius of 50 miles from the Company’s Cambridge, Massachusetts location, (B) any material diminution in the Eligible duties, responsibilities orauthority; or (C) a material reduction in the Eligible Employee’s base salary (unless such reduction is effected in connection with a general and proportionatereduction of compensation for all employees of his or her level). SECTION 3. ELIGIBILITY AND PARTICIPATION An individual is deemed an “Eligible Employee” and, therefore, eligible to participate in the Plan if he or she is a member of the Company’sManagement Team at the time of such individual’s termination of employment with the Company, and such employment terminates due to an event whichconstitutes a Qualifying Termination. SECTION 4. BENEFITS Eligible Employees are eligible to receive the following benefits on the following conditions: (a) SALARY AND BONUS PAYOUT. Commencing in the first month following the month of a Qualifying Termination and the Release set forthin Section (f) below becoming binding on the Eligible Employee, Eligible Employees will be paid in periodic installments consistent with the Company’spayroll procedures as then in effect and continuing for a number of months equal to the product of the Eligible Employee’s “Severance2 Multiple” (as set forth below) times 12, a total sum equal to: (i) Severance Multiple times the Eligible Employee’s Base Salary; (ii) the Eligible Employee’sSeverance Multiple times his/her target bonus on the date of the Qualifying Termination; and (iii) the Eligible Employee’s target bonus on the date oftermination multiplied by a fraction, the numerator of which shall equal the number of days the Eligible Employee was employed by the Company during theCompany fiscal year in which the termination occurs and the denominator of which shall equal 365. Severance Multiple shall be based on the following: Chief Executive Officer—1.5 Chief Financial Officer, Chief Business Officer, Chief Medical Officer, Senior Vice Presidents—1.0 Vice Presidents and other Employees Nominated By CEO and ratified by Compensation Committee—0.5 (b) HEALTH BENEFITS. Provided the Eligible Employee timely elects continued coverage under federal COBRA law, the Company shall pay,on the Eligible Employee’s behalf, the portion of premiums for the type of group health insurance coverage, including coverage for his or her eligibledependents, that the Company paid prior to his or her termination of employment for a period following his or her Qualifying Termination based on theEligible Employee’s level as follows: Chief Executive Officer—18 months Chief Financial Officer, Chief Business Officer, Chief Medical Officer, Senior Vice Presidents—12 months Vice Presidents and other Employees Nominated By CEO and ratified by Compensation Committee—6 months provided, however, that the Company will pay such premiums for the Eligible Employee and his/her eligible dependents only for coverage for which suchindividual and those dependents were enrolled immediately prior to the Qualifying Termination. The Eligible Employee shall continue to be required topay that portion of the premium of such group health insurance coverage, including coverage for his/her eligible dependents that he/she had been requiredto pay as an active employee immediately prior to the Qualifying Termination of employment (subject to change). For the balance of the period that anEligible Employee is eligible to coverage under federal COBRA law, the Eligible Employee shall be eligible to maintain coverage for himself/herself andhis/her eligible dependents at the Eligible Employee’s own expense in accordance with applicable law. (c) EQUITY ACCELERATION. In addition to any other rights that Eligible Employees may have with respect to the acceleration of the vestingof any stock options or restricted stock awards (“Awards”) granted to such Eligible Employees pursuant to the Company’s 2002 Stock Incentive Plan, asamended (the “2002 Stock Incentive Plan”), or any successor plan, including without limitation those certain change-of-control related acceleration rights(upon a termination without cause) approved by the board of directors of the Company on December 11, 2007, and notwithstanding any provision to thecontrary contained in the 2002 Stock Incentive Plan, the instrument evidencing any Award or any other agreement between an Eligible Employee and theCompany, each such Award shall be immediately exercisable in full and/or free of all restrictions on repurchase, as the case may be, if the EligibleEmployee’s employment with the Company or the acquiring or succeeding corporation is terminated as a result of a Qualifying Termination.(d) EARNED BUT UNPAID BENEFITS. As of the Qualifying Termination date an Eligible Employee will also be eligible to receive any earnedbut unpaid benefits including salary earned but unpaid, annual bonus for the most recently completed financial year and payment for unused accruedvacation.3 (e) RELEASE. To receive benefits under this Plan, an Eligible Employee must execute after the Qualifying Termination a release of claims infavor of the Company, in the form attached to this Plan as Exhibit A and such release must become effective in accordance with its terms. (f) TERMINATION OF BENEFITS. Benefits under this Plan shall terminate immediately if an Eligible Employee, at any time, violates anyproprietary information, confidentiality, non-competition or non-solicitation obligation to the Company, or any other continuing obligation to theCompany. (g) NON-DUPLICATION OF BENEFITS. Eligible Employees are not eligible to receive benefits under this Plan more than one time and are noteligible to receive benefits under any other Company change-of-control severance plan, arrangement or agreement.(h) TAX WITHHOLDING. Any payments that an Eligible Employee receives under this Plan shall be subject to all required tax withholding.(i) DISTRIBUTIONS. The following rules shall apply with respect to distribution of the payments and benefits, if any, to be provided to theEligible Employee under this Section 4:(A) It is intended that each installment of the payments and benefits provided under Section 4 shall be treated as a separate “payment” forpurposes of Section 409A of the U.S. Internal Revenue Code of 1986, as amended, and the guidance issued thereunder (“Section 409A”). Neither theCompany nor the Eligible Employee shall have the right to accelerate or defer the delivery of any such payments or benefits except to the extent specificallypermitted or required by Section 409A;(B) If, as of the date of the “separation from service” of the Eligible Employee from the Company, the Eligible Employee is not a “specifiedemployee” (each within the meaning of Section 409A), then each installment of the payments and benefits shall be made on the dates and terms set forth inSection 4; and(C) If, as of the date of the “separation from service” of the Eligible Employee from the Company, the Eligible Employee is a “specifiedemployee” (each, for purposes of this Agreement, within the meaning of Section 409A), then:(x) Each installment of the payments and benefits due under Section 4 that, in accordance with the dates and terms set forthherein, will in all circumstances, regardless of when the separation from service occurs, be paid within the short-term deferral period (as defined in Section409A) shall be treated as a short-term deferral within the meaning of Treasury Regulation Section 1.409A-1(b)(4) to the maximum extent permissible underSection 409A;; and(y) Each installment of the payments and benefits due under Section 4 that is not paid within the Short-Term Deferral Periodand that would, absent this subsection, be paid within the six-month period following the “separation from service” of the Eligible Employee of theCompany shall not be paid until the date that is six months and one day after such separation from service (or, if earlier, the death of the Eligible Employee),with any such installments that are required to be delayed being accumulated during the six-month period and paid in a lump sum on the date that is sixmonths and one day following the Eligible Employee’s separation from service and any subsequent installments, if any, being paid in accordance with thedates and terms set forth herein; provided, however, that the preceding provisions of this sentence shall not apply to any installment of payments and benefitsif and to the maximum extent that that such installment is deemed to be paid under a separation pay plan that does not provide for a deferral of compensationby reason of the application of Treasury Regulation 1.409A-1(b)(9)(iii) (relating to separation pay upon an involuntary separation from service) or TreasuryRegulation 1.409A-1(b)(9)(v) (relating to reimbursements and certain other separation payments). Such payments shall bear interest at an annual rate equalto the prime rate as set forth in the Eastern edition of the Wall Street Journal on the Date of Termination, from the Date of Termination to the date ofpayment. Any installments that qualify for the exception under Treasury4 Regulation Section 1.409A-1(b)(9)(iii) must be paid no later than the last day of the second taxable year of the Eligible Employee following the taxable yearof the Eligible Employee in which the separation from service occurs.SECTION 5. OTHER TERMINATIONSAn otherwise Eligible Employee shall NOT be eligible to receive benefits under this Plan if (i) the Eligible Employee’s employment terminatesdue to death, disability or any other reason other than a Qualifying Termination; or (ii) an Eligible Employee’s employment is terminated within thirty (30)days of his or her refusal to accept an offer of comparable employment by any successor to the Company (provided that “comparable employment” shallmean employment at a business office whose location is not violative of Section 2(g)(i), with duties and responsibilities not violative of Section 2(g)(ii) andwith a reduction in such Eligible Employee’s base salary not violative of 2(g)(iii). SECTION 6. CLAIMS PROCEDURE Ordinarily, severance benefits will be paid to an Eligible Employee without to having to file a claim or take any action other than signing arelease as provided in Section 4(f) of this Plan and, where applicable, not revoking such agreement during the applicable revocation period. If an EligibleEmployee believes that he or she is entitled to severance benefits under the Plan that are not being paid, he or she may submit a written claim for payment tothe Company. Any claim for benefits shall be in writing, addressed to the Company and must be sufficient to notify the Company of the benefit claimed. Ifsuch claim is denied, the Company shall within a reasonable period of time provide a written notice of denial. The notice will include the specific reasons fordenial, the provisions of the Plan on which the denial is based, and the procedure for a review of the denied claim. Where appropriate, it will also include adescription of any additional material or information necessary to complete or perfect the claim and an explanation of why that material or information isnecessary. Eligible Employees may request in writing a review of a claim denied by the Company and may review pertinent documents and submit issuesand comments in writing to the Company. The Company shall provide a written decision upon such request for review of a denied claim. The decision of theCompany upon such review shall be final. SECTION 7 MISCELLANEOUS The Company reserves the right to amend or terminate this Plan at any time; provided however, that this Plan may not be amended or terminatedfollowing the Change in Control Date and further provided, that Section 4(c) of this Plan shall not be amended without the Eligible Employee’s consentunless the Board of Directors of the Company determines that the amendment, taking into account any other related action, would not materially adverselyaffect the Eligible Employee. This Plan shall be binding upon any surviving entity resulting from a Change in Control and upon any other person who is asuccessor by merger, acquisition, consolidation or otherwise to the business formerly carried on by the Company without regard to whether or not suchperson actively adopts or formally continues the Plan. The Plan shall be interpreted in accordance with the laws of the Commonwealth of Massachusetts.5 EXHIBIT A RELEASE Certain capitalized terms used in this Release are defined in the Key Employee Change in Control Severance Plan (the “Plan”) which I havereviewed. In order to receive the benefits as set forth in the Plan, I acknowledge that I must enter into this Release and have it become binding upon me. Except as otherwise set forth in this Release, I hereby release, acquit and forever discharge the Company, its parents and subsidiaries, and theirofficers, directors, agents, servants, employees, shareholders, predecessor, successors, assigns and affiliates as well as its and their representatives, agents,insurers and reinsurers, and employee benefit programs (and the trustees, administrators, fiduciaries and insurers of such programs), past, present and future(hereafter, the “Released Parties”) from any and all claims, charges, complaints, demands, actions, causes of action, suits, rights, debts, sums of money, costs,accounts, reckonings, covenants, contracts, agreements, promises, doings, omissions, damages, executions, obligations, liabilities, and expenses (includingattorneys’ fees and costs), of every kind and nature which I ever had or now have against the Released Parties, including, but not limited to, those claimsarising out of my employment with and/or separation from the Company, including, but not limited to, all claims under Title VII of the Civil Rights Act of1964, 42 U.S.C. § 2000e et seq., the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., the Americans With Disabilities Act of 1990, 42 U.S.C. §12101 et seq., the Family and Medical Leave Act, 29 U.S.C. § 2601 et seq., the Worker Adjustment and Retraining Notification Act (“WARN”), 29 U.S.C. §2101 et seq., Section 806 of the Corporate and Criminal Fraud Accountability Act of 2002, 18 U.S.C. § 1514(A), the Rehabilitation Act of 1973, 29 U.S.C. §701 et seq., Executive Order 11246, Executive Order 11141, the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., the Employee Retirement IncomeSecurity Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., the Massachusetts Fair Employment Practices Act., M.G.L. c. 151B, § 1 et seq., the MassachusettsCivil Rights Act, M.G.L. c. 12, §§ 11H and 11I, the Massachusetts Equal Rights Act, M.G.L. c. 93, § 102 and M.G.L. c. 214, § 1C, the Massachusetts Laborand Industries Act, M.G.L. c. 149, § 1 et seq., the Massachusetts Privacy Act, M.G.L. c. 214, § 1B, and the Massachusetts Maternity Leave Act, M.G.L. c. 149,§ 105D, all as amended; all common law claims including, but not limited to, actions in tort, defamation and breach of contract; all claims to any non-vestedownership interest in the Company, contractual or otherwise, including, but not limited to, claims to stock or stock options; and any claim or damage arisingout of my employment with or separation from the Company (including a claim for retaliation) under any common law theory or any federal, state or localstatute or ordinance not expressly referenced above; provided, however, that nothing in this Agreement prevents me from filing, cooperating with, orparticipating in any proceeding before the EEOC or a state Fair Employment Practices Agency (except that you acknowledge that you may not be able torecover any monetary benefits in connection with any such claim, charge or proceeding); provided, further, that nothing in this paragraph shall be construedin any way to release the Company from its obligation to indemnify me from any third party action brought against me based on my employment with theCompany, pursuant to any applicable agreement or applicable law or to reduce or eliminate any coverage I may have under the Company’s director andofficer liability policy, if any. I understand and agree that, as a condition for payment to me of the Plan benefits, I shall not make any false, disparaging or derogatory statementsto any media outlet, industry group, financial institution or current or former employee, consultant, client or customer of the Company regarding theCompany or any of its directors, officers, employees, agents or representatives or about the Company’s business affairs and financial condition; provided,however, that nothing herein shall prevent me from making truthful disclosures to any governmental entity or in any litigation or arbitration. 6 I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under ADEA. I also acknowledge that theconsideration given under the Plan for the waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was alreadyentitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (A) my waiver and release do not apply to any rightsor claims that may arise on or after the date I execute this Release; (B) I should consult with an attorney prior to executing this Release; (C) I have been givenmore than twenty-one (21) days to consider this Release (although I may choose to voluntarily execute this Release earlier); (D) I have seven (7) daysfollowing the execution of this Release by the parties to revoke the Release by notifying the Company; and (E) this Release shall not be effective until thedate upon which the revocation period has expired, which shall be the eighth day after this Release is executed by me provided I have not timely revoked. Keith Ehrlich Signature: Date: 7Confidential Materials omitted and filed separately with theSecurities and Exchange Commission. Double asterisks denote omissions Exhibit 10.42 LICENSE AGREEMENTBY AND BETWEENEUSA PHARMA (UK) LIMITEDANDAVEO PHARMACEUTICALS, INCDated: December 18, 2015 TABLE OF CONTENTS ARTICLE 1. DEFINITIONS1ARTICLE 2. DEVELOPMENT AND COMMERCIALIZATION132.2Plans and Meetings132.3Clinical Trials in the Territory162.4Sharing of Partner Clinical and Other Data172.5Sharing of AVEO Clinical and Other Data182.6Record Keeping192.7Communications with Regulatory Authorities192.8Adverse Event/Safety Reporting Protocol202.9Legal Compliance202.10Technology Transfer212.11Support by AVEO212.12Supply of License Product222.13Recalls22ARTICLE 3. LICENSE GRANTS223.1Licenses to Partner223.2Sublicensing by Partner233.3Compliance with KHK Agreement243.4Use of Patents and Know-How263.5Reservation of Rights263.6No Implied Licenses263.7Technology Sublicensed from Third Parties263.8Cross-Territory Sales263.9Inventions by Service Providers27ARTICLE 4. COMPENSATION284.1Research and Development Funding284.2Milestone Payments284.3Royalty Payments304.4Royalty Reduction304.5Joint Development Cost Sharing314.6Amounts Due to KHK314.7Quarterly Payment Timing314.8Royalty Reports31- i - 4.9Payment Method324.10No Credits or Refunds324.11Taxes324.12Value Added Tax324.13Blocked Currency334.14Foreign Exchange334.15Partner Records; Inspection334.16AVEO Records; Inspection344.17Interest35ARTICLE 5. PATENTS355.1Ownership and Disclosure of Inventions355.2Prosecution of Patents365.3Patent Term Extensions395.4Infringement of Patents by Third Parties395.5Infringement of Third-Party Rights425.6Patent Marking435.7Patent Oppositions and Other Proceedings435.8In-Licensed Patents435.9Trademarks45ARTICLE 6. CONFIDENTIALITY466.1Core Confidential Information466.2Treatment of Confidential Information466.3Authorized Disclosure466.4Termination of Prior Agreements476.5Publicity476.6Publications48ARTICLE 7. REPRESENTATIONS AND WARRANTIES487.1General Representations and Warranties487.2AVEO’s Warranties497.3AVEO’s Covenants527.4Partner’s Warranties and Covenants527.5Disclaimer Concerning Technology53ARTICLE 8. INDEMNIFICATION548.1Indemnification by Partner54- ii -8.2Indemnification by AVEO558.3Procedure568.4Insurance578.5Limitation of Liability57ARTICLE 9. TERM AND TERMINATION579.1Term579.2Termination for Breach579.3Termination for Bankruptcy589.4Termination for Patent Challenge589.5Elective Termination589.6AVEO’s Rights upon Certain Terminations599.7Grant Back609.8Partner’s Rights upon Certain Terminations609.9Survival60ARTICLE 10. DISPUTE RESOLUTION6110.1Seeking Consensus6110.2Arbitration6110.3Governing Law6310.4Injunctive Relief; Remedy for Breach of Exclusivity6310.5Patent Disputes63ARTICLE 11. MISCELLANEOUS6311.1Export Control6311.2Entire Agreement; Amendment6411.3Bankruptcy6411.4Force Majeure6411.5Notices6411.6Maintenance of Records6511.7Construction6511.8Ambiguities6611.9Assignment6611.10Independent Contractors6611.11Counterparts6611.12Severability66- iii -11.13Headings6711.14No Waiver6711.15No Third Party Beneficiaries6711.16Costs6711.17Further Assurances67 - iv -LICENSE AGREEMENTThis LICENSE AGREEMENT (this “Agreement”) is entered into as of December 18, 2015 (the “Effective Date”) byand between EUSA PHARMA (UK) LIMITED, with its principal offices at Breakspear Park, Breakspear Way, Hemel Hempstead,HP24TZ, United Kingdom (“Partner”), and AVEO PHARMACEUTICALS, INC., a Delaware corporation with its principaloffices at One Broadway, 14th Floor, Cambridge, MA 02142 (“AVEO”). AVEO and Partner may be referred to herein each,individually, as a “Party” or, collectively, as the “Parties.”RECITALSWHEREAS, AVEO and KHK (as defined herein) have previously entered into the KHK Agreement (as defined herein)under which they have collaborated in the development, manufacture and commercialization of products incorporating the proprietarycompound known as tivozanib for the treatment of cancer, with AVEO holding the rights to develop and commercialize such productsoutside of Asia;WHEREAS, Partner is engaged in the development and commercialization of specialty pharmaceutical products in Europeand other countries around the world; andWHEREAS, Partner is interested in obtaining an exclusive right and license to develop and commercialize tivozanib in theField (as defined herein) in the countries listed in Exhibit A (the “Partner Territory”), and AVEO is willing to grant such rights andlicenses to Partner, while retaining all rights outside of the Field and the Partner Territory, all as more particularly set forth below.NOW, THEREFORE, in consideration of the foregoing premises and the covenants and obligations set forth in thisAgreement, the Parties agree as follows:ARTICLE 1.DEFINITIONSThe initially capitalized terms below in this Article have the following meanings as used throughout this Agreement.Derivative forms of these defined terms shall be interpreted accordingly.1.1“Affiliate” means, with respect to a Party, any entity that, directly or indirectly, through one or moreintermediaries, controls, is controlled by or is under common control with such Party. For this purpose, “control” means the ownershipof fifty percent (50%) or more of the voting securities entitled to elect the directors or management of the entity, or the actual power toelect or direct the management or policies of the entity, whether by law, contract or otherwise.1.2“Annual Regulatory Report” has the meaning given in Section 2.4(a).1.3“AVEO Indemnitees” has the meaning given it in Section 8.1(a).- 1 - 1.4“AVEO Program Inventions” means any and all Inventions made after the Effective Date (a) that relate to (i)the Licensed Compound or Licensed Products, (ii) any method of making, using (including a method of administration or dosage form)or testing the Licensed Compound or Licensed Products, or (iii) any article necessary or useful to practice (or in the case of testing, ofor for the presence of) any method described in clause (ii) above, and (b) that are Controlled by AVEO and discovered, made, orconceived solely by employees of AVEO or its Affiliates or Third Parties acting on behalf of or in conjunction with AVEO or itsAffiliates, other than Partner Program Inventions or Joint Inventions. 1.5“AVEO Program Invention Patents” means all Patents claiming or disclosing AVEO Program Inventions.1.6“AVEO Territory” means all countries and their respective possessions other than the Partner Territory and theKHK Territory.1.7“AVEO’s Knowledge” means the actual knowledge of AVEO’s President and Chief Executive Officer, ChiefFinancial Officer, Chief Medical Officer, Vice President of Corporate Development and Alliance Management, Senior CorporateCounsel and Vice President of Technical Operations, and in respect of any intellectual property matters means that such people havemade diligent enquiries of AVEO’s external intellectual property counsel.1.8“Business Day” means a day other than Saturday, Sunday or a public holiday in New York, New York USA orEngland.1.9“Calendar Year” means each successive period of twelve (12) calendar months commencing on 1st January.1.10“Clinical Regulatory Filings” means data, filings or materials relating to Licensed Compounds or LicensedProducts submitted to the applicable Regulatory Authorities, including (a) data derived from clinical trials, and (b) data, filings ormaterials relating to or contained in any CMC or DMF.1.11“CMC” means the Chemistry, Manufacturing and Controls portion of any application for Marketing Approval.1.12“Combination Products” means products in forms suitable for human applications that contain a LicensedCompound together with one or more other active ingredients that are sold either as a fixed dose/unit or as separate doses/units in asingle package.1.13“Commercial Plan” has the meaning given it in Section 2.2(d).1.14“Commercially Reasonable Efforts” means the efforts required in order to carry out a task in a diligent andsustained manner without undue interruption, pause or delay, which level is at least commensurate with the level of efforts that abiopharmaceutical company would devote to a product of similar potential and having similar commercial and scientific advantagesand disadvantages resulting from such company’s own research efforts (i.e., explicitly ignoring the royalty, milestone and all otherpayments due AVEO under this Agreement), taking into- 2 - account its safety and efficacy, the competitiveness of alternative products, its proprietary position, pricing, reimbursement and othermarket-specific factors, and all other relevant factors. Commercially Reasonable Efforts requires (without limitation) that the Partyexerting such efforts (a) promptly assign responsibility for its obligations to specific employee(s) who are held accountable for progressand monitor such progress on an ongoing basis, (b) set and continue to seek to achieve specific and meaningful objectives for carryingout such obligations, and (c) make and implement decisions and allocate resources designed to advance progress with respect to suchobjectives, in each case in a commercially reasonable manner. 1.15“Competing Product” means any pharmaceutical product or product candidate that: (a) contains (i) [**]. Forthe purpose of this Competing Product definition, [**] means any composition of matter [**]. For purposes of this Competing Productdefinition, [**] during the Term.1.16“Competitive Infringement” has the meaning given it in Section 5.4(b).1.17“Confidential Information” means all proprietary confidential non-public information received by either Party(the “Receiving Party”) from the other Party (the “Disclosing Party”) or disclosed by either Party to the other Party pursuant to thisAgreement, which information is disclosed under circumstances reasonably indicating that it is confidential. As between the Parties, theKHK Agreement is the Confidential Information of AVEO. Notwithstanding the foregoing, Confidential Information shall not includeinformation that, in each case as demonstrated by competent written documentation:(a)is publicly disclosed and made generally available to the public by the Disclosing Party, either before orafter it becomes known to the Receiving Party;(b)was known to the Receiving Party, without obligation to keep it confidential, prior to the date ofdisclosure by the Disclosing Party;(c)is subsequently disclosed to the Receiving Party by a Third Party lawfully in possession thereof withoutobligation to keep it confidential and without a breach of such Third Party’s obligations of confidentiality;(d)has been publicly disclosed or made generally available to the public other than through any act oromission of the Receiving Party in breach of this Agreement; or(e)has been independently developed by the Receiving Party without the aid, application or use of theDisclosing Party’s Confidential Information (the competent written proof of which must be contemporaneous with such independentdevelopment).1.18“Control” means, with respect to any Know-How, Patent Right or other intellectual property right, possessionby a Party, directly or through an Affiliate controlled by such Party (whether by ownership or license (other than pursuant to thisAgreement)) of the ability to grant a license or sublicense as provided for herein without violating the terms of any pre-existing writtenagreement with any Third Party. Any Patent, Know-How or other intellectual property right that is licensed or acquired by a Partyfollowing the Effective Date and- 3 - that would otherwise be considered to be under the Control of a Party shall not be deemed to be under the Control of such Party if theapplication of such definition in the context of any licenses or sublicenses granted to the other Party under this Agreement wouldrequire the granting Party to make any additional payments or royalties to a Third Party in connection with such license or sublicensegrants, unless the other Party agrees to pay the additional payments or royalties to the Third Party. 1.19“Debtor” has the meaning given it in Section 11.3.1.20“Dispute” has the meaning given it in Section 10.1.1.21“Distributor” means any non-sublicensee Third Party (i.e., any Third Party that is not granted a sublicense ofthe Licensed Technology) that has been granted the right to distribute or resell in the Partner Territory any quantities of LicensedProduct, which quantities are sold by Partner or its Affiliates or Sublicensees.1.22“DMF” means a Drug Master File in the United States or equivalent filing or filing serving a similar purpose inanother regulatory jurisdiction.1.23“Dollar” or “$” means United States Dollars.1.24“EMA” means European Medicines Agency.1.25“FDA” means the United States Food and Drug Administration or any successor entity.1.26“Field” means the diagnosis, prevention and treatment of any diseases and conditions in humans other than non-oncologic diseases or conditions of the eye in humans.1.27“First Commercial Sale” means, with respect to any Licensed Product, the first sale by Partner or one of itsAffiliates or Sublicensees to a Third Party of such Licensed Product in a country in the Partner Territory after Marketing Approval ofsuch Licensed Product has been obtained in such country; which for the avoidance of doubt, shall include named patient sales even ifmade prior to such Marketing Approval.1.28“Force Majeure” has the meaning given it in Section 11.4.1.29“FTE” means a full-time equivalent person year of scientific, technical, regulatory or professional work. AnFTE shall consist of [**] hours per year, with any portion of an FTE calculated based upon hours worked divided by such annual total.1.30“FTE Rate” means [**] Dollars ($[**]) per FTE.1.31“GAAP” means U.S. generally accepted accounting principles, consistently applied.1.32“Generic Product” means, with respect to a Licensed Product in any country in the Partner Territory, anypharmaceutical product that contains the Licensed Compound and that- 4 - is distributed by a Third Party under a Marketing Approval approved by a Regulatory Authority in reliance, in whole or in part, on theprior approval (or on safety or efficacy data submitted in support of the prior approval) of such Licensed Product, including anyproduct authorized for sale in the EU pursuant to a provision of Articles 10, 10a or 10b of Parliament and Council Directive2001/83/EC as amended (including an application under Article 6.1 of Parliament and Council Regulation (EC) No 726/2004 thatrelies for its content on any such provision) or in any other country or jurisdiction pursuant to all equivalents of such provisions;provided, however, that a product licensed or produced by Partner or its Affiliates or Sublicensee(s) (i.e., an authorized genericproduct) will not constitute a Generic Product. 1.33“Independent Study” has the meaning given it in Section 2.2(c).1.34“Indication” shall mean a distinct primary disease or medical condition (e.g., heart failure) including in relationto cancer, different forms of cancer (e.g. skin cancer or lung cancer) and in respect of cancer different cancer subtypes for which it isnecessary to undertake separate clinical trials (not including phase I clinical trials) to obtain Marketing Approval for a product for suchform of cancer (e.g. small cell lung cancer and non-small cell lung cancer or squamous non-small cell lung cancer and non-squamousnon-small cell lung cancer or hepatocellular carcinoma and hepatoblastoma shall be separate Indications). Different lines of treatmentfor the same cancer subtype are not separate indications. Thus the Parties agree that (i) first line treatment and third line monotherapytreatment of RCC will not be considered separate Indications. The parties also agree that if it is necessary to undertake a separateregistrational clinical trial to obtain Marketing Approval for a Combination Product including the Licensed Compound and acheckpoint inhibitor, that will be considered a separate Indication for purposes of this Agreement.1.35“Infringement” has the meaning given it in Section 5.4(a).1.36“Invention” means any and all patentable inventions first conceived or reduced to practice by or on behalf ofeither Party or any of its Affiliates or sublicensees in the course of development activities in respect of the Licensed Technology underthis Agreement. Inventorship of all Inventions shall be determined in accordance with United States patent law.1.37“Joint Development Plan” has the meaning given it in Section 2.2(b).1.38“Joint Inventions” means any and all Inventions, other than AVEO Program Inventions or Partner ProgramInventions, that are discovered, made, or conceived jointly by (a) employees of AVEO or its Affiliates or Third Parties acting on behalfof or in conjunction with AVEO or its Affiliates and (b) employees of Partner or its Affiliates or Sublicensees or Third Parties actingon behalf of or in conjunction with Partner or its Affiliates or Sublicensees, such that a party under each of prong (a) and prong (b) areboth named as joint inventors.1.39“Joint Patents” means all Patents that claim Joint Inventions.1.40“JSC” has the meaning given it in Section 2.2(a).- 5 - 1.41“Key Launch Countries” means France, Germany, Italy, Spain, United Kingdom and the Key Non-EULicensed Countries. 1.42“Key Non-EU Licensed Countries” means Brazil, Argentina, Venezuela, Australia and South Africa,provided that the Parties may change this by documented mutual agreement by the JSC under the procedure in Section 2.1.1.43“KHK” means Kyowa Hakko Kirin Co., Ltd., a Japanese corporation with its principal offices at 1-6-1,Ohtemachi, Chiyoda-ku, Tokyo, 100-8185, Japan.1.44“KHK Agreement” means that certain License Agreement entered into as of December 21, 2006 by andbetween AVEO and KHK, as amended from time to time.1.45“KHK Indemnitees” has the meaning given it in Section 8.1(b).1.46“KHK Territory” means the following countries and their respective territories and possessions: Afghanistan,Bahrain, Bangladesh, Bhutan, Brunei, Cambodia, India, Indonesia, Iran, Iraq, Israel, Japan, Jordan, Kuwait, Laos, Lebanon, Malaysia,Maldives, Mongolia, Myanmar, Nepal, North Korea, Oman, Pakistan, People’s Republic of China (including Hong Kongand Macao), Philippines, Qatar, Saudi Arabia, Singapore, South Korea, Sri Lanka, Syria, Taiwan, Thailand, Timor Leste, Turkey,United Arab Emirates, Vietnam and Yemen.1.47“Know-How” means (i) all information, techniques, data, inventions, practices, methods, processes, knowledge,know-how, skill, experience, technical data, test results (including pharmacological, toxicological, clinical, analytical and qualitycontrol data, regulatory submissions, correspondence and communications, and marketing, distribution, pricing, cost, manufacturing,patent and legal data or descriptions), and (ii) compositions of matter, assays and other materials.1.48“Licensed Compound” means 1-[2-chloro-4-(6,7-dimethoxyquinolin-4-yl)oxyphenyl]-3-(5-methyl-1,2-oxazol-3-yl)urea, otherwise known as tivozanib and any and all acids, bases, salts, stereoisomers, racemates, tautomers, polymorphs,complexes, chelates, crystalline and amorphous forms, prodrugs, solvates (including hydrates) metabolites and metabolic precursors(whether active or inactive) thereof.1.49“Licensed Know-How” means all Know-How that (a) is Controlled by AVEO as of the Effective Date of thisAgreement or thereafter during the Term, and (b) is necessary or reasonably useful in the research, development, manufacture andcommercialization of any Licensed Compound, Licensed Product, or method of using (including methods of administration) or testingany of the foregoing (or any article necessary or useful to practice any such method) including but not limited to all Clinical RegulatoryFilings, Safety Data and CMC data related to such Know-How Controlled by AVEO after the Effective Date, but excluding anyKnow-How in-licensed by AVEO after the Effective Date for which AVEO would owe a Third Party consideration if AVEO grantsrights thereunder to Partner (unless Partner agrees in writing to pay such consideration), and further subject to the limited use of datafrom AVEO’s Independent Studies prior to Opt-In as described in Section 2.2(c). For purposes of clarity,- 6 - Licensed Know-How includes (a), to the extent Controlled by AVEO, “Licensed Know-How” licensed by KHK to AVEO pursuantto the KHK Agreement and (b) the Know-How listed in Exhibit C. AVEO will provide instructions to its contractors identifiedin Exhibit C for them to disclose such items of Know-How listed in Exhibit C to Partner after the Effective Date within six (6) monthsof the Effective Date but earlier if and as required and on a timely basis for the Marketing Approval submission to the EMA for theLicensed Product in RCC, and to respond to requests for further information from the EMA as it considers such submission, and shalltake all additional actions reasonably necessary to facilitate such transfer (other than payment of monies or relinquishment of otherrights of AVEO). If required by any such contractor, AVEO will pay the reasonable costs incurred by such contractor in transferringsuch Licensed Know-How listed in Exhibit C. The Licensed Know-How disclosed by the contractors instead of directly by AVEOshall nevertheless be deemed disclosed by AVEO under this Agreement for purposes of the “Confidential Information” definition. 1.50“Licensed Patents” means (a) the Listed AVEO Patents, (b) the AVEO Program Invention Patents, (c)AVEO’s interest in the Joint Patents and (d) all other Patents Controlled by AVEO during the Term that claim or otherwise cover theLicensed Compound or any Licensed Product, or any method of making, using (including methods of administration) or testing of anyof the foregoing, but excluding any Patent in-licensed by AVEO after the Effective Date for which AVEO would owe a Third Partyconsideration if AVEO grants rights thereunder to Partner.1.51“Licensed Product Biomarker” means any and all biomarkers (including metabolite, DNA, RNA and proteinprofiles) discovered or developed by or on behalf of AVEO or Partner during the Term that (a) are for use with (including use inclinical testing of or use in any decision whether to prescribe), or (b) relate to, are associated with or are correlated with patientpopulations and/or tumors that do or do not respond to treatment with, in the case of each of (a) and (b), any one (1) or more LicensedProduct(s). For purposes of clarity, Licensed Product Biomarkers include biomarker tests for detecting and measuring levels of any ofthe biomarker molecules described in the preceding sentence, whether in the form of testing products, test kits or tests performed at acentralized testing laboratory. Any such biomarker or biomarker test is a Licensed Product Biomarker regardless of its stage ofdiscovery, development, advancement or commercialization, and whether or not the biomarker or biomarker test is already validated orrecognized by any Regulatory Authority. For purposes of this definition, biomarkers or biomarker tests “discovered or developed byor on behalf of Partner” include those discovered or developed by Partner’s Affiliates, Sublicensees or contractors.1.52“Licensed Product” means (a) any and all pharmaceutical compositions that contain the Licensed Compoundand (b) other than for purposes of Article 4 hereof, a Licensed Product Biomarker intended for use in the Field discovered ordeveloped by or on behalf of Partner or its Affiliates.1.53“Licensed Technology” means both Licensed Patents and Licensed Know-How.1.54“Listed AVEO Patents” means (a) all patents and patent applications listed in Exhibit B as may be updatedfrom time to time during the Term; (b) all patent applications- 7 - (including provisional and utility applications) claiming priority to or common priority with or based on any of the foregoing, includingall divisionals, continuations, continuations-in-part, patents of addition and substitutions of any of the foregoing; (c) all patents issuingon any of the foregoing, and all reissues, reexaminations, renewals and extensions of any of the foregoing, (d) all counterparts to theforegoing in other countries; and (e) all supplementary protection certificates, restoration of patent term and other similar rights ofAVEO and its Affiliates based on any of the foregoing. 1.55“Losses” has the meaning given it in Section 8.1.1.56“M&A Event” has the meaning given it in Section 11.9.1.57“Marketing Approval” means, with respect to a Licensed Product, all approvals (including supplements,amendments, pre- and post-approvals), licenses, registrations and authorizations (other than Pricing Approval) of any national, supra-national (e.g. the EMA), regional, state or local regulatory agency, department, bureau, commission, council or other governmentalauthority necessary for the manufacture, distribution, use or sale of such Licensed Product in a regulatory jurisdiction. For clarity, theMarketing Approvals with respect to the Licensed Products in the Partner Territory shall be issued in the name of Partner or itsdesignated Affiliate or Sublicensee.1.58“Net Sales” means the gross amount invoiced by Partner or its Affiliates and Sublicensees (and by Distributorsif used by Partner to sell Licensed Products in France, Germany, Italy, Spain, United Kingdom, Belgium, Netherlands, Luxembourg,Austria, Poland, Portugal, Denmark, Finland, Iceland, Norway and Sweden) for the sale of Licensed Products in the Partner Territory(for the avoidance of doubt, such sales shall include named patient sales if sold for a profit but not if disposed of for free or at cost), lessany of the following applicable deductions related to such sale and, except in the case of (e), included in the invoiced amounts: (a)normal, customary trade discounts (including volume discounts), credits, chargebacks, reductions, and rebates, and allowances andadjustments for rejections, recalls, outdated products, returns, in each event whether voluntary or required; (b) freight, shipping,insurance, sales, use, excise, value-added and similar customs, taxes, tariffs or duties imposed on such sale, transfer, or otherdisposition; (c) credits actually given or allowances actually made for wastage replacement, governmental program rebates, indigentpatient and similar programs to provide Licensed Product on a no-profit or at-cost basis, to the extent actually deducted from the grossamount invoiced and either not required to be paid by, or refunded to, the customer or other payor; (d) amounts repaid or credits takenby reason of rejections, defects or returns or because of retroactive price reductions (to be clear, other than retroactive price reductionsgranted as part of any collections efforts or to resolve uncollectible accounts) or due to recalls or government laws or regulationsrequiring rebates; (e) an allowance for bad debt and uncollectible accounts, not to exceed [**] percent ([**]%) of the gross amountinvoiced and not to exceed the amount of the allowance actually used by the invoicing entity to account for bad debt and uncollectibleaccounts with respect to such invoiced amounts to prepare the invoicing entity’s audited financial statements for financial reportingpurposes. Even if there is overlap between any of deductions (a)-(d), each individual item shall only be deducted once in each NetSales calculation. Bad debt and uncollectible accounts shall be addressed solely by the deduction of the allowance provided for inclause (e) above in this paragraph, and any write-off of bad debt or uncollectible accounts- 8 - shall not be deemed encompassed in any of deductions (a)-(d). Net Sales shall not include amounts for any Licensed Productfurnished to a Third Party for which payment is not intended to be and is not received, such as Licensed Products used in clinical trialsor Licensed Products distributed as promotional or free goods and free named patient supplies; provided that the amounts of suchLicensed Products so made available are reasonable for the intended purpose and within customary amounts; and provided, further,that this sentence is not intended to address accounting for quantities of Licensed Products associated with bad debt or uncollectibleaccounts (which, to be clear, shall be dealt with only under clause (e) above). Net Sales excludes amounts from sales or other dispositions of Licensed Product between Partner and any of its Affiliates orSublicensees, solely to the extent that such entity purchasing a Licensed Product resells such Licensed Product to a Third Party andsuch resale is included in Net Sales.Net Sales includes sales to any Distributor. If, in addition to or in lieu of a transfer price paid for quantities of LicensedProduct supplied, any Distributor provides consideration to Partner or its Affiliates or Sublicensees in connection with the grant ofrights to distribute any Licensed Product, then such consideration shall be included in the calculation of Net Sales in the quarter inwhich it is received by Partner, its Affiliates or Sublicensees.Net Sales amounts shall be determined from the books and records of Partner and its Affiliates and Sublicensees maintainedin accordance with GAAP consistently applied, and such amounts shall be calculated using the same accounting principles used forother products of Partner and its Affiliates and Sublicensees for financial reporting purposes.On a country-by-country basis, on expiry of the Royalty Term in a country, sales of a Licensed Product in such country shallnot be included in determining Net Sales for the purpose of establishing aggregate global Net Sales for the sales milestones in Section4.2(c) or the royalty rates in Section 4.3.In the event that a Licensed Product is sold in any country in the form of a Combination Product, Net Sales of suchCombination Product shall be adjusted by multiplying actual Net Sales of such Combination Product in such country calculatedpursuant to the foregoing definition of “Net Sales” by the fraction A/(A+B), where A is the average invoice price in such country ofany Licensed Product that contains the Licensed Compound as such Combination Product as its sole active ingredient(s), if soldseparately in such country and B is the average invoice price in such country of each product that contains active ingredient(s) otherthan the Licensed Compound contained in such Combination Product as its sole active ingredient(s), if sold separately in such country;provided that the invoice price in a country for each Licensed Product that contains only the Licensed Compound and each productthat contains solely active ingredient(s) other than the Licensed Compound, included in the Combination Product shall be for a quantitycomparable to that used in such Combination Product and of substantially the same class, purity and potency or functionality, asapplicable. If either such Licensed Product that contains the Licensed Compound as its sole active ingredient or a product that containsthe active ingredient(s) (other than the Licensed Product), in the Combination Product as its sole active ingredient(s) is not soldseparately in a particular country, the Parties shall negotiate in good faith a reasonable adjustment to Net Sales in such country thattakes into account the medical- 9 - contribution to the Combination Product of and all other factors reasonably relevant to the relative value of, the Licensed Compound,on the one hand and all of the other active ingredient(s), as applicable, collectively, on the other hand, provided that until suchnegotiation and adjustment is completed, the Parties agree that Net Sales shall be calculated under the assumption that the LicensedCompound and each other active ingredient in the Combination Product have equal value.1.59“Ophthotech Agreement” means the Research and Exclusive License Agreement between OphthotechCorporation and AVEO dated November 10, 2014.1.60“Opt-In” has the meaning given it in Section 2.2(c).1.61“Other Licensee(s)” means any Third Party to which AVEO, KHK or any of their respective Affiliates hasgranted a license or sublicense to research, develop, manufacture or commercialize the Licensed Compound or a Licensed Productoutside of the Partner Territory or for use outside of the Field.1.62“Partner Indemnitees” has the meaning given it in Section 8.2.1.63“Partner Know-How” means all Know-How that Partner develops or owns or Controls during the Term thatrelates in any way to the Licensed Compound or Licensed Products, or method of making, using (including methods of administration)or testing of any of the foregoing (or any article necessary or useful to practice any such method). The Partner Know-How includes allclinical data generated in clinical trials of the Licensed Product by or on behalf of Partner or its Affiliates subject to the limited use ofdata from Partner’s Independent Studies prior to Opt-In as described in Section 2.2(c).1.64“Partner Patents” means all Patents that claim Partner Program Inventions.1.65“Partner Program Inventions” means any and all Inventions that (a) relate to (i) the research, manufacture,development, commercialization and/or use of Licensed Compound or Licensed Products in the Field, (ii) any method of making,using (including a method of administration or dosage form) or testing the Licensed Compound or Licensed Products for use in theField, or (iii) any article necessary or useful to practice (or in the case of testing, of or for the presence of) any method described inclause (ii) above, and (b) that are Controlled by Partner and discovered, made, or conceived solely by employees of Partner or itsAffiliates or Third Parties acting on behalf of or in conjunction with Partner or its Affiliates.1.66“Partner Region” means any of (i) Europe, (ii) Latin America (excluding Mexico), (iii) Africa and SouthAfrica, or (iv) Australasia and New Zealand, with each Partner Region including the countries listed under such Partner Region inExhibit A.1.67“Partner Territory” has the meaning set forth in the Recitals above.1.68“Partner Third-Party Claim” has the meaning given it in Section 8.2(c).1.69“Party” and “Parties” have the meanings given such terms in the opening paragraph of this Agreement.- 10 - 1.70“Patent” means any patent application or patent anywhere in the world, including all of the following kinds:provisional, utility, divisional, continuation, continuation-in-part, and substitution applications; and utility, re-issue, re-examination,renewal and extended patents, and patents of addition, and any supplementary protection certificates, restoration of patent terms andother similar rights. 1.71“Pharmstandard Agreement” the License Agreement between JSC Pharmstandard Ufimskiy Vitamin Plantand AVEO dated 4 August 2015.1.72“Plans” means, as applicable, any Joint Development Plan, any Commercial Plan and/or any study design for anIndependent Study.1.73“Pricing Approval” means the approval or governmental decision establishing a price for a Licensed Productthat can be charged to consumers and will be reimbursed by the applicable government authority(ies) in such country.1.74“Prior Agreement” means the Confidential Disclosure Agreement between the Parties effective September 10,2015.1.75“Program Invention Patent Rights” means all Patents that claim Program Inventions.1.76“Program Inventions” means, collectively, AVEO Program Inventions, Partner Program Inventions and JointProgram Inventions.1.77“Prosecuting Party” has the meaning given it in Section 5.2(c)(ii).1.78“RCC” means renal cell carcinoma.1.79“Regulatory Authority” means any national, supra-national, regional, state or local regulatory agency,department, bureau, commission, council or other governmental entity in the Partner Territory involved in the granting of MarketingApproval for biological or pharmaceutical products.1.80“Regulatory Documentation” shall mean (i) AVEO’s NDA for the Licensed Compound submitted to theFDA in 2012; (ii) the regulatory dossier, or MAA, for the RCC indication in electronic CTD format that is suitable for immediatesubmission to the EMA (provided that the Parties agree that for all purposes under this Agreement the MAA shall be deemed suitablefor immediate submission to the EMA upon such submission by Partner, and that the subsequent evaluation of such MAA by theEMA shall have no bearing on such suitability); and (iii) AVEO’s completed manufacturing process validation protocols, final reports,and master validation for the Licensed Products, and (iv) to the extent relating to the Licensed Compound and necessary for Partner’sexercise of its rights under this Agreement (a) any and all other INDs, registrations, licenses, authorizations and approvals; (b) reportsand material correspondence submitted to or received from Regulatory Authorities and supporting documents with respect thereto, ineach case (a) and (b) that are in the possession, custody or control of AVEO and existing at the Effective Date- 11 - 1.81“[**]” has the meaning given it in Section 5.4(i)(ii)(A). 1.82“Royalty Term” means, on a Licensed Product-by-Licensed Product and country-by-country basis, the periodbeginning on the First Commercial Sale of such Licensed Product in such country until the later to occur of (a) ten (10) years after theEffective Date, (b) the expiration of regulatory data exclusivity or market exclusivity in such country, or (c) the expiration of the lastValid Claim claiming or covering the composition, use or manufacture of the Licensed Product in the country in which such LicensedProduct is manufactured or sold.1.83“Safety Data” means adverse event information and other information (if any) required by one (1) or moreRegulatory Authorities to be reported to such Regulatory Authorities under applicable laws.1.84“SEC” has the meaning given it in Section 6.5(c)(iii).1.85“Sublicensee” means a Third Party to whom Partner (or its Affiliate) has granted a sublicense under anyLicensed Technology and shall not include a Distributor.1.86“Term” has the meaning given in Section 9.1.1.87“Third Party” means any person or entity other than a Party or an Affiliate of a Party.1.88“Third-Party Claim” has the meaning given it in Section 8.1(a).1.89“United States Business Day” means any day other than a Saturday, Sunday, or a day in which banks in NewYork, New York are closed.1.90“Valid Claim” means a claim of an issued and unexpired patent within the Licensed Patents which has notbeen: (a) disclaimed, cancelled, withdrawn or abandoned, (b) dedicated to the public, (c) declared invalid, unenforceable, unpatentableor revoked by a decision of a court, government agency other authority of competent jurisdiction from which no appeal can be or hasbeen taken, or (d) admitted to be invalid or unenforceable through reexamination, reissue or otherwise.1.91“Value Added Tax” shall mean (a) in relation to any jurisdiction within the EU, the tax imposed by the CouncilDirective on the common system of value added tax (2006/112) and any national legislation implementing that directive together withlegislation supplemental thereto and the equivalent tax (if any) in that jurisdiction; and (b) in any other country, any other value added,goods and services or similar tax chargeable on the supply or deemed supply of goods or services under applicable legislation; but, ineach event, excluding any US sales tax.1.92“Withholding Taxes” has the meaning given it in Section 4.11.- 12 - ARTICLE 2.DEVELOPMENT AND COMMERCIALIZATION2.1Diligence Obligations. Partner shall use Commercially Reasonable Efforts, at its sole cost and expense, to (i)commercialize the Licensed Product for the RCC Indication (if Marketing Approval is granted) in the Partner Territory, (ii) subject toAVEO’s full compliance with its obligations under Sections 2.10 and 2.11, file an application for, and diligently seek, MarketingApproval of a Licensed Product for the treatment of RCC with the EMA aiming for a target filing date of either February 8, 2016 orMarch 7, 2016, and (iii) thereafter (but not later than [**] after obtaining Marketing Approval from the EMA), file an application forMarketing Approval of a Licensed Product for the treatment of RCC in each of the Key Non-EU Licensed Countries unless Partnerprovides a reasonable reason why not to file in such country and in which case the Parties shall agree a replacement country. AVEOshall provide data and support for such filing in accordance with Sections 2.10 and 2.11. The scope of such commercializationactivities shall include using Commercially Reasonable Efforts to seek Marketing Approval in the Key Launch Countries and each ofthe Key Non-EU Licensed Countries and upon receipt of Marketing Approval, (ii) using Commercially Reasonable Efforts to seekPricing Approval, and (iii) using Commercially Reasonable Efforts to launch the Licensed Product in each country where MarketingApproval and Pricing Approval is obtained, provided that the Pricing Approval is reasonably acceptable to Partner, and (iv)Commercially Reasonable Efforts thereafter to actively promote to the appropriate audience(s) all Licensed Products that haveMarketing Approval and Commercially Reasonable Efforts to fill the market demand for them in the countries where they areapproved. Partner shall use Commercially Reasonable Efforts to launch all Licensed Products in the Key Launch Countries within[**] days of receiving Marketing Approval and Pricing Approval in such country, provided that the Pricing Approval is reasonablyacceptable to Partner. Partner shall perform all of the foregoing activities in accordance with the prevailing industry standards and incompliance with all applicable laws. Partner shall not be relieved of its diligence obligations hereunder by the granting of anysublicense(s). The activities and achievements of any Sublicensee(s) shall be counted, however, towards Partner’s performancehereunder. After the Effective Date and through the submission by Partner of the application for Marketing Approval of the LicensedProduct for the treatment of RCC with the EMA, Partner shall, on a reasonable and timely basis, (a) take all actions necessary toprepare and deliver to AVEO any information or materials required from Partner for the completion of such submission, (b) provide itscomments to AVEO, if any, on draft submission documents and (c) otherwise cooperate with AVEO in AVEO’s preparation of thesubmission.2.2Plans and Meetings.(a)Joint Steering Committee. The Parties will establish a joint steering committee (the “JSC”) to provideadvice and make recommendations on how to conduct the overall collaboration. The JSC shall meet once every [**] months withineach Calendar Year and may be conducted by telephone, videoconference or in person, provided that there is at least [**] per CalendarYear. Any in-person JSC meetings shall be held on an alternating basis between AVEO’s and EUSA’s facilities, unless otherwiseagreed by the Parties. Each Party shall be responsible for its own expenses in attending such meetings. Each Party shall keep the otherreasonably informed, through the JSC, of the details and progress of the activities in its- 13 - respective territory. The JSC will consist of [**] representatives appointed by AVEO and [**] representatives appointed byPartner. The initial members of the JSC will be nominated by the Parties promptly following the Effective Date. Such representativesshall be individuals suitable in seniority and experience and having delegated authority to make decisions of the JSC with respect tomatters within the scope of the JSC’s responsibilities; provided that it is understood that such individuals may need to seek appropriateauthority from the relevant Party with respect to certain matters. Either Party may replace its respective JSC representatives at any timewith prior written notice to the other Party; provided that such replacement is of comparable authority and scope of functionalresponsibility within that Party’s organization as the person he or she is replacing. Each Party will designate one of its[**] representatives who possesses a thorough understanding of the scientific and business issues relevant to this Agreement to act asthe co-chair of the JSC. The co-chairs will be responsible for ensuring that activities occur as set forth in this Agreement, includingensuring that the JSC meetings occur, material recommendations and decisions of the JSC are properly reflected in minutes of the JSC,and any dispute is given prompt attention and resolved in accordance with Article 10 of this Agreement. During each meeting of theJSC, the JSC shall discuss (i) progress made in developing and commercializing Licensed Products in the Field since the previousmeeting; (ii) the coordination of the attendance at, presentations and other matters relating to the promotion of Licensed Products in theField at international seminars and conferences by KHK, Partner, AVEO and Other Licensees; and (iii) any modifications to Plans thathave been made since the previous meeting and the reasons for such modifications, it being understood that no modifications may bemade to such a plan that would result in failure of the diligence obligations in Section 2.1 to be satisfied. The JSC shall review anddiscuss the overall strategy for the development, manufacturing and commercialization of the Licensed Products in the Field, andcoordinate the Parties’ respective activities for the Licensed Products between the Partner Territory and the AVEO Territory; providedthat, AVEO shall be responsible for all activities and decisions with respect to the AVEO Territory and Partner shall be responsible forall activities and decisions with respect to the Partner Territory in the Field. (b)In coordination of activities, the Parties shall consider joint development opportunities. Any agreementsbetween the Parties to conduct joint development activities shall be reflected in a joint development plan, to be reviewed and agreedupon by the Parties (the “Joint Development Plan”). If the Parties agree to a Joint Development Plan, then no later than thirty (30)days prior to each anniversary of the creation of such Joint Development Plan, the Parties shall agree to an updated Joint DevelopmentPlan. If either Partner or AVEO, or any of their respective (sub)licensees, desires to conduct a new clinical study or program which isnot included in the Joint Development Plan, either, for example, to generate data for use in the development or promotion of theLicensed Product, or for reimbursement or pricing purposes, the proposing Party would present the proposed design and associatedcosts of such study or series of studies to the JSC. If the other Party agrees, the Parties would amend the Joint Development Plan toinclude such study or program as a jointly-funded study or program and the associated costs would be deemed joint development costsand shared pursuant to a cost-sharing ratio to be agreed to by the Parties, and all resulting data and Know-How would be available foruse by each Party in each of their respective territories. With respect to development activities that are not mutually agreed to withinthe Joint Development Plan, each party shall have the right to conduct Independent Studies.- 14 - (c)Independent Studies. In the event that a Party, or any of its respective (sub)licensees, proposes a studythat the other Party does not desire to co-fund (each, an “Independent Study”), the proposing Party would have the right to proceedwith such Independent Study; provided, however, such Party would be solely responsible for the conduct and costs of such trial, andthe non-funding party would have no rights to use any resulting data or Know-How for regulatory or commercialization purposes,except with respect to Safety Data or other information necessary to support Safety Data disclosure requirements in any filings withregulatory agencies in its territory, unless and until such non-funding Party “opts-in” to co-fund such study (the “Opt-In”). If a PartyOpts-In it may use the resulting data and Know-How for any purpose consistent with the provisions of this Agreement. A Partyconducting an Independent Study shall provide regular updates to the other Party at each JSC meeting on the progress and results ofthe Independent Study. At the conclusion of an Independent Study, the Party conducting the Study shall disclose in writing to the otherParty all data from the Independent Study and all other relevant documentation and information relating to the Independent Studyreasonably requested by the other Party to allow the other Party to make a fully informed decision on whether to Opt-In. Should theother Party elect to Opt-In, it must do so within [**] days of disclosure of all such data, documentation and information. With respect toAVEO’s planned phase 3 RCC study targeting the third line RCC setting (intended to support FDA approval for first and third lineRCC and an EMA approval for third line RCC to complement the first line RCC approval), Partner may elect to Opt-In byreimbursing AVEO for fifty percent (50%) of AVEO’s total costs for such study, such reimbursement not to exceed a total of TwentyMillion Dollars ($20,000,000). Should Partner elect to Opt-In to such study, it must do so within [**] days of disclosure in writing toPartner of all data from the study and all other relevant documentation and information relating to the study reasonably requested byPartner that would (a) support an application for Marketing Approval with the EMA or in one of the Key Launch Countries ifMarketing Approval for the RCC Indication has been refused or (b) support an application for extension of Marketing Approval withthe EMA or in one of the Key Launch Countries if Marketing Approval for the RCC Indication has been granted. With respect toAVEO’s planned phase 1 combination studies with a checkpoint inhibitor, Partner may elect to Opt-In by reimbursing AVEO for fiftypercent (50%) of AVEO’s total costs for such studies, such reimbursement not to exceed a total Two Million Dollars ($2,000,000),upon approval of the application for Marketing Approval for the Licensed Product by the EMA. For any other Independent Studiesconducted by either Party, the funding Party and non-funding Party may elect to discuss potential terms for an Opt-In that wouldinclude a mutually agreeable (i) reimbursement by the non-funding Party and (ii) to the extent applicable, rate of cost-sharing for anyongoing and expected subsequent development costs related thereto pursuant to an agreed upon cost-sharing ratio; provided that, thenon-funding Party may not elect to Opt-In following regulatory approval in the particular indication being studied, unless otherwisemutually agreed to by the Parties. (d)Commercial Plans. Beginning [**] days after submission of the first application for MarketingApproval of a Licensed Product in the Partner Territory, Partner shall deliver to AVEO a written plan that summarizes, by country inthe Partner Territory, sales expectations, target audience, promotional and launch activities and anticipated commercialization expensefor Licensed Products (the “Commercial Plan”). Once Partner begins to deliver Commercial Plans to AVEO, Partner shall providean updated Commercial Plan- 15 - to AVEO on at least an annual basis, at the same time that an annual update to the Joint Development Plan is made (if the Parties haveentered into a Joint Development Plan), and shall notify AVEO of any material changes in the Commercial Plan no later than at thenext JSC meeting. The Parties agree that the Commercial Plan shall not be subject to any prior approval or consent of AVEO. (e)Activities of Affiliates and Sublicensees. The Parties shall include in each Plan and update thereto theaccomplishments and activities of its respective Affiliates and sublicensees in the development and commercialization of LicensedProducts for the Field in its territory as if such accomplishments or activities were such Parties’.(f)Disclosure to KHK. Partner hereby acknowledges and agrees that this Agreement, any agreementbetween Partner and a Sublicensee, the Plans, all updates thereto, and all other plans, reports, data and information provided to AVEOhereunder may be disclosed to KHK in accordance with and subject to the KHK Agreement provided that it is subject to the terms ofArticle 6 hereof. Upon Partner’s reasonable request AVEO shall seek KHK’s written consent to Partner attending the annualDevelopment Committee (as defined in the KHK Agreement) meeting to discuss the AVEO Annual Development Plan (as defined inthe KHK Agreement).2.3Clinical Trials in the Territory.(a)KHK. Partner acknowledges that, under Section 3.8 of the KHK Agreement, KHK (whether itself orthrough its Affiliates, its licensees and distributors) retains the right to conduct clinical trials of Licensed Product in the Partner Territoryif needed to support KHK’s (or its Affiliate’s or its licensee’s or distributor’s) development or commercialization of Licensed Productsfor the KHK Territory, subject to the prior written consent of AVEO, such consent not be unreasonably withheld, delayed orconditioned. Under the KHK Agreement, KHK has agreed to provide advance notification to AVEO before seeking to commence(i.e. before filing any clinical trial application to enable) such trials in the Partner Territory in order to obtain such consent, and so thatKHK and AVEO and/or Partner, as applicable, may choose to coordinate their activities to the extent such parties desire to do so.(b)KHK. To the extent that either Party receives any notification from KHK with respect to the proposedconduct of clinical trials in the Partner Territory in the Field, such Party shall promptly notify the other Party thereof, and the Partiesshall cooperate with each other in good faith on an appropriate response to KHK with respect thereto and in discussions with eachother and with KHK with respect to KHK’s proposed conduct of clinical trials in the Partner Territory; provided that, as between theParties, Partner shall make the final decision with regard to such response.(c)AVEO. If AVEO intends to conduct any clinical trials in the Partner Territory, it shall provide advancenotification to Partner before seeking to commence (i.e. before filing any clinical trial application to enable) such clinical trials. AVEOshall consult with Partner as to the scope and location of such clinical trials, take Partner’s views into account and shall not conductsuch clinical trials (or any aspects of them) if Partner can demonstrate that they would be reasonably likely to materially affect Partner’sdevelopment and/or commercialization- 16 - of Licensed Products in any part of the Partner Territory. Partner, having been advised of the scope and location of such proposedclinical trials, hereby grants consent to AVEO’s conduct of clinical trials in the Partner Territory for (i) the planned phase 3 RCC studytargeting the third line RCC setting (intended to support FDA approval for first and third line RCC and an EMA approval for thirdline RCC to complement the first line RCC approval) and (ii) the planned phase 1 combination studies of the Licensed Product with acheckpoint inhibitor. (d)Partner. If Partner intends to conduct any clinical trials in the AVEO Territory (other than in thecountries and for the reason specified in the last sentence of this paragraph), it shall provide advance notification to AVEO beforeseeking to commence (i.e. before filing any clinical trial application to enable) such clinical trials. Partner shall consult with AVEO asto the scope and location of such clinical trials, take AVEO’s views into account and shall not conduct such clinical trials (or anyaspects of them) if AVEO can demonstrate that they would be reasonably likely to materially affect AVEO’s development and/orcommercialization of Licensed Products in any part of the AVEO Territory. Under the Pharmstandard Agreement, AVEO does nothave the right to conduct, or to consent to Partner conducting, clinical trials in Azerbaijan, Armenia, Belarus, Georgia, Kazakhstan,Kyrgyzstan, Moldova, Russian Federation, Tajikistan, Turkmenistan, Uzbekistan and Ukraine.2.4Sharing of Partner Clinical and Other Data.(a)Annual Reports. From time to time (but no less frequently than annually), Partner shall disclose toAVEO a written summary, in a form reasonably acceptable to AVEO, of clinical data with respect to Licensed Compounds andLicensed Products generated by or under authority of Partner since the last such disclosure. It is understood that Partner’s obligation toprovide summaries under this Section 2.4 can be fulfilled by providing a copy of the annual report describing clinical developmentwith respect to Licensed Products (each an “Annual Regulatory Report”) conducted by or on behalf of Partner, that Partner (orothers acting under its authority, including Sublicensees) provides to Regulatory Authorities in the Partner Territory, it beingunderstood that such Annual Reports shall be the Confidential Information of Partner and subject to the terms of Article 6 herein.(b)Access to Information. Subject to the limitation on the ability of a Party to use data from IndependentStudies conducted by the other Party prior to Opt-In as described in Section 2.2(c), upon the request of AVEO delivered reasonably inadvance, Partner shall provide prompt and complete access to and the right to use for purposes of the development andcommercialization of Licensed Compounds and Licensed Products for any purpose outside the Partner Territory, any clinical data,Clinical Regulatory Filings, Safety Data and CMC data generated by Partner, its Affiliates and its Sublicensees. Partner shall includeits Sublicensees’ Clinical Regulatory Filings data, Safety Data and CMC data in its reports to AVEO hereunder (or cause theSublicensee to provide such a report to AVEO), and shall provide access to its Sublicensees’ Clinical Regulatory Filings and CMCdata on the same basis as if the Sublicensees were such Party. If requested by AVEO, the Parties shall discuss any of Partner’s AnnualRegulatory Reports or other filings or data shared by Partner hereunder. In addition to the reports, filings or data required to be sharedas stated above in this Section 2.4, if reasonably necessary for AVEO or its Affiliates, KHK or Other Licensees to have access to theunderlying raw data, case report forms or other original documents (including laboratory notebooks)- 17 - generated by or on behalf of Partner (or its Affiliates and Sublicensees), Partner shall provide copies, or if required by RegulatoryAuthorities, access to the originals, of such items it being understood that such reports, filings and data shall be the ConfidentialInformation of Partner and subject to the terms of Article 6 herein. (c)KHK Access. Partner acknowledges that KHK has the right under the KHK Agreement to obtainaccess to any reports, filings and data provided by Partner (and its Affiliates and Sublicensees) hereunder; provided that such data shallbe kept confidential and shall not be used to compete with Partner. Should Partner produce any data from an Independent Study inwhich AVEO does not elect to Opt-In, AVEO shall provide such data to KHK.2.5Sharing of AVEO Clinical and Other Data.(a)Annual Reports. Within thirty (30) days from the Effective Date and from time to time thereafter (butno less frequently than annually), AVEO shall disclose to Partner a written summary, in a form reasonably acceptable to Partner, ofclinical data with respect to Licensed Compounds and Licensed Products generated by or under authority of AVEO since the last suchdisclosure. It is understood that AVEO’s obligation to provide summaries under this Section 2.5 can be fulfilled by providing a copy ofthe Annual Regulatory Report conducted by or on behalf of AVEO, that AVEO (or others acting under its authority, includingsublicensees) provides to Regulatory Authorities in the AVEO Territory (each an “Annual Regulatory Report”). AVEO shallprovide Partner with a copy of each of the AVEO Overall Clinical Development Plan (as defined in the KHK Agreement) and theAVEO Clinical Development Plan (as defined in the KHK Agreement) at the same time as it provides copies of such documents toKHK.(b)Access to Information. Subject to the limitation on the ability of a Party to use data from IndependentStudies conducted by the other Party prior to Opt-In as described in Section 2.2(c), upon the request of Partner delivered reasonably inadvance, AVEO shall provide prompt and complete access to and the right to use for purposes of the development andcommercialization of Licensed Compounds and Licensed Products for any purpose in the Partner Territory in the Field, any clinicaldata, Clinical Regulatory Filings, Safety Data and CMC data generated by AVEO, its Affiliates and its sublicensees, as necessary oruseful to practice in the Field. AVEO shall include its sublicensees’ Clinical Regulatory Filings data, Safety Data and CMC data in itsreports to AVEO hereunder (or cause the sublicensee to provide such a report to AVEO), and shall provide access to its sublicensees’Clinical Regulatory Filings and CMC data on the same basis as if the sublicensees were such Party. If requested by Partner, the Partiesshall discuss any of AVEO’s Annual Regulatory Reports or other filings or data shared by AVEO hereunder. In addition to thereports, filings or data required to be shared as stated above in this Section 2.5, if reasonably necessary for Partner or its Affiliates orSublicensees to have access to the underlying raw data, case report forms or other original documents (including laboratory notebooks)generated by or on behalf of AVEO (or its Affiliates and sublicensees), AVEO shall provide copies, or if required by RegulatoryAuthorities, access to the originals, of such items, it being understood that such reports, filings and data shall be the ConfidentialInformation of AVEO and subject to the terms of Article 6 herein.- 18 - (c)Partner Access. The Parties acknowledge that Partner, as a sublicensee of AVEO under the KHKAgreement, has the right under the KHK Agreement to obtain access to any reports, filings and data related to Licensed Products in theField provided by KHK to AVEO under the KHK Agreement; it being understood that (i) such reports, filings and data shall bedeemed AVEO’s Confidential Information for purposes of this Agreement, and (ii) such access shall not be construed in any way topermit Partner (or its Affiliates or Sublicensees) to use such reports, filings or data outside of the scope of the licenses granted toPartner hereunder. Such reports shall be provided by AVEO to Partner within 7 days of receipt by AVEO and if Partner requestsAVEO to obtain access to any of KHK’s reports, filings and data related to Licensed Products in the Field then AVEO shall obtainsuch access from KHK on Partner’s behalf. 2.6Record Keeping. Each Party shall maintain complete and accurate records of all work (includingresearch, development, clinical, manufacturing and commercialization) it conducts (itself or through its Affiliates or Third Parties)under this Agreement and all results, data and developments made pursuant to its efforts under this Agreement. Such records shall becomplete and accurate and shall fully and properly reflect all work done and results achieved in the performance of this Agreement insufficient detail and in good scientific manner appropriate for patent and regulatory purposes. Such records shall be maintained for aslong as required by applicable law.2.7Communications with Regulatory Authorities.(a)Each Party shall keep the other Party informed on an ongoing basis regarding its (or its Affiliate’s orsublicensee’s) regulatory strategy, planned regulatory submissions and material communications with Regulatory Authorities withrespect to all Licensed Products. Partner shall not communicate with Regulatory Authorities in the AVEO Territory regarding anyLicensed Compound or Licensed Product without AVEO’s advance written consent, such consent not to be unreasonably withheld,delayed or conditioned. Partner shall not communicate with Regulatory Authorities in the KHK Territory regarding any LicensedCompound or Licensed Product without KHK’s advance written consent, which AVEO shall seek upon Partner’s request and whichshall not be unreasonably withheld, delayed or conditioned. In addition, Partner shall promptly furnish to AVEO copies of allcorrespondence that Partner (or its Affiliate or Sublicensee) receives from, or submits to, any Regulatory Authority (including contactreports concerning conversations or substantive meetings) relating to any Licensed Product. Partner shall also provide to AVEO anymeeting minutes that reflect material communications with any Regulatory Authority regarding a Licensed Product.(b)AVEO shall not communicate with Regulatory Authorities inside of the Partner Territory regarding anyLicensed Compound or Licensed Product without Partner’s advance written consent, such consent not to be unreasonably withheld,delayed or conditioned. In addition, AVEO shall promptly furnish to Partner copies of all correspondence that AVEO (or its Affiliateor Other Licensee) receives from, or submits to, any Regulatory Authority (including contact reports concerning conversations orsubstantive meetings) relating to any Licensed Product. AVEO shall also provide to Partner any meeting minutes that reflect materialcommunications with any Regulatory Authority regarding a Licensed Product.- 19 - (c)Subject to Partner’s agreement to the scope and location of any clinical trials to be conducted by AVEOin the Field in the Partner Territory in accordance with Section 2.3(c), AVEO shall not be required to obtain Partner’s consent tocommunicate with Regulatory Authorities with respect to such clinical trials, and notwithstanding the provisions of Section 2.2(a),Partner shall have no responsibility or decision making authority for activities and decisions of AVEO with respect to such clinicaltrials conducted by AVEO in the Partner Territory. (d)Subject to AVEO’s agreement to the scope and location of any clinical trials to be conducted byPartner in the Field in the AVEO Territory in accordance with Section 2.3(d), Partner shall not be required to obtain AVEO’sconsent to communicate with Regulatory Authorities with respect to such clinical trials, and notwithstanding the provisions of Section2.2(a), AVEO shall have no responsibility or decision making authority for activities and decisions of Partner with respect to suchclinical trials conducted by Partner in the AVEO Territory.(e)Partner acknowledges that KHK has the right to attend and observe (but not participate actively in) anymaterial meeting or material conference call between Partner and any Regulatory Authority regarding Licensed Products in the PartnerTerritory and, if requested by AVEO, Partner shall reasonably cooperate with AVEO in coordinating the logistics of any suchattendance or observation by KHK.2.8Adverse Event/Safety Reporting Protocol. Within [**] days of the Effective Date, the Parties shallmutually agree in writing as to a detailed protocol regarding the exchange of all adverse event information on an ongoing basis,including a timeline. Such protocol must provide a timeline and scope for reporting between the Parties that is at least sufficient toallow both Parties and KHK, and their other licensees and sublicensees to satisfy their reporting obligations to Regulatory Authoritiesduring the Term, worldwide. Once the protocol is agreed, each Party shall comply with it, and may propose updates to it from time totime. Each Party shall reasonably consider the other’s proposed updates and not withhold consent to any such updates that are neededto allow a Party to satisfy its reporting requirements to Regulatory Authorities (current or future, worldwide). Each Party shall requireits Affiliates, Other Licensees, distributors (including the Distributors) and sublicensees, as applicable, to also comply with suchprotocol.2.9Legal Compliance. In conducting any development activities hereunder, each Party shall, and shall causeits Affiliates and Sublicensees/Other Licensees (as appropriate) to, use Commercially Reasonable Efforts to ensure that its employees,agents, clinical institutions and clinical investigators comply with all applicable Regulatory Authority statutory and regulatoryrequirements with respect to Licensed Products, including those regarding protection of human subjects, financial disclosure by clinicalinvestigators, approvals by research ethics committees, Good Clinical Practices, Good Laboratory Practices, Good ManufacturingPractices, and any conditions imposed by a reviewing research ethics committee or Regulatory Authority, and comparable laws,statutes and regulatory requirements throughout the Partner Territory/AVEO Territory, as applicable.- 20 - 2.10Technology Transfer. AVEO shall transfer to Partner, at no cost to Partner, in support of Partner’sapplication for Marketing Approval with the EMA: (i) AVEO’s NDA for the Licensed Compound submitted to the FDA in 2012;(ii) the regulatory dossier, or MAA, for the RCC Indication in electronic CTD format that is suitable for immediate submission to theEMA; and (iii) the Licensed Know-How set out in Exhibit C within [**] months of the Effective Date but earlier if and as required andon a timely basis for the Marketing Approval submission to the EMA for the Licensed Product in RCC, and to respond to requests forfurther information from the EMA as it considers such submission. AVEO shall also transfer to Partner or its nominee, at no cost toPartner, the benefit of and interest in the orphan drug designation for the Licensed Product with number EU/3/10/747 (the “OrphanDrug Designation”) free from all encumbrances. AVEO shall or shall procure that any of its Affiliates will as soon as reasonablypossible after the Effective Date sign any notices, applications, submissions, reports and other instruments, documents, correspondenceor filings presented to it by Partner or its nominee that are necessary for: (i) the transfer to Partner or its nominee of the Orphan DrugDesignation; or (ii) maintaining, renewing or varying the Orphan Drug Designation in the period from the Effective Date until thetransfer of the Orphan Drug Designation. 2.11Support by AVEO. Partner may from time to time request the additional reasonable assistance ofAVEO in supporting Partner’s development, regulatory affairs and manufacturing activities with respect to Licensed Products in thePartner Territory. Such support shall be provided as follows:(a)Until the grant of Marketing Approval by the EMA for the RCC Indication, in relation to the filing, andpreparation for filing of the MAA for the RCC Indication and responding to questions from the EMA in relation to the MAA for theRCC Indication, AVEO shall provide an average (for the period from the Effective Date to the grant of Marketing Approval by theEMA for the RCC Indication) of approximately [**] hours of ad hoc assistance per month to Partner and its Affiliates and contractorsin relation to all aspects of such MAA (e.g. CMC, Medical Affairs etc.) at no cost to Partner and shall use reasonable endeavors toanswer all requests as promptly as possible and provide full and complete answers to the extent that the relevant information is knownto and documentation held by AVEO. Partner agrees to reimburse AVEO at the FTE Rate at the end of each three month periodfollowing the Effective Date to the extent that AVEO has provided more than [**] hours of such assistance during such three monthperiod, with a true-up to the average of [**] hours per month to be completed by the Parties at the end of each subsequent three monthperiod.(b)In relation to all support requested by AVEO other than that described in Section 2.11(a):(i)With regard to ad hoc questions from Partner and its Affiliates and contractors AVEO shallprovide answers to such questions free of charge; and(ii)With regard to Partner projects that require sustained support by AVEO in excess of [**]hours in a three month period until the grant of Marketing Approval by the EMA for the RCC Indication, upon mutual writtenagreement of the Parties as to the scope and timing of such support, AVEO will use Commercially Reasonable Efforts to provide suchagreed-upon support activities to Partner. Partner shall reimburse AVEO for its reasonable costs- 21 - and expenses incurred in performing such additional agreed-upon support activities, including fully-burdened FTE-basedcompensation for its employees at the FTE Rate and all out of pocket expenses at cost, in each case within [**] days of a receipt of aninvoice therefor provided that Partner has previously approved in writing all FTE costs and expenses. (c)For the avoidance of doubt, AVEO shall be responsible for the costs of support provided by vendorsand consultants to AVEO in connection with preparation of the MAA, including without limitation PAREXEL InternationalCorporation, prior to the delivery to Partner of the regulatory dossier, or MAA, for the RCC Indication in electronic CTD format that issuitable for immediate submission to the EMA (“MAA Delivery”), but AVEO shall not be responsible for such costs after March 7,2016. Partner shall be responsible for the costs of support provided by vendors and consultants, including without limitationPAREXEL International Corporation, after MAA Delivery, or after March 7, 2016, if that occurs prior to MAA Delivery.2.12Supply of License Product. Partner shall be responsible for the manufacturing and supply of theLicensed Products for the Partner Territory; provided, however, that AVEO will introduce Partner to its contract manufacturingvendors (Hamari, Masy Systems, Catalent and Almac) and will use reasonable good faith efforts to assist Partner in its efforts toestablish such supply.2.13Recalls.(a)Notification. Each Party shall, within [**] hours, notify the other Party in writing if it determines thatany event, incident or circumstance has occurred which may result in the need for a “recall” or “market withdrawal” (or similar eventas defined in the applicable national, state or local laws and regulations in the Partner Territory) (hereinafter referred to as a “Recall”)of a Licensed Product or any lot(s) thereof. AVEO shall also promptly notify Partner if AVEO receives any such notification fromKHK or any other entity with respect to an actual or potential Recall in the KHK Territory or any other country. Partner acknowledgesthat AVEO may disclose to KHK any information about an actual or potential Recall in the Partner Territory, including informationobtained from Partner hereunder.(b)Allocation of Responsibility for Recalls. If at any time (i) any Regulatory Authority issues a request,directive or order for a Recall of a Licensed Product in the Partner Territory, or (ii) a court of competent jurisdiction orders a Recall ofa Licensed Product in the Partner Territory, then the Parties shall promptly consult with each other on the appropriate course of actionto be undertaken and the Parties shall reasonably cooperate with each other in the implementation of any Recall in the PartnerTerritory, provided that Partner shall have final decision-making authority with respect thereto. Partner shall bear all costs andexpenses for the Recall in the Partner Territory.ARTICLE 3.LICENSE GRANTS3.1Licenses to Partner. Subject to the terms and conditions of this Agreement, AVEO hereby grants toPartner during the Term, an exclusive, royalty-bearing (in accordance- 22 - with Article 4) license or sublicense, as applicable, under the Licensed Technology (i) to research, develop, manufacture, use, sell,offer for sale and import Licensed Compound and Licensed Products for the Field, including to supply the Licensed Product on anamed patient basis, in the Partner Territory; and (ii) to make, have made and use the Licensed Compounds and Licensed Productsanywhere in the world for purposes of the activities described in clause (i) and (ii) subject to Section 2.3(d), to clinically test LicensedProducts in the AVEO Territory and, subject to the prior written consent of KHK to be sought by AVEO and which shall not beunreasonably withheld, delayed or conditioned, the KHK Territory, solely for the purposes of the activities described in clause(i). The license granted to Partner in this Section 3.1 shall be sublicenseable solely as provided in Section 3.2, but shall otherwise benon-assignable and non-transferable (except as part of assigning this Agreement pursuant to Section 11.9). 3.2Sublicensing by Partner. Partner shall be entitled to grant sublicenses under its license of Section 3.1subject to all of the following:(a)Partner may choose such Sublicensees in its own discretion and the number of its Sublicensees shall notbe limited;(b)Partner must provide AVEO with a true, accurate and complete copy of each sublicense within [**]United States Business Days after execution;(c)such Sublicensees cannot further sublicense except if all of the following conditions are satisfied: (i) thefurther sublicenses must be on terms consistent with this Agreement, including this Section 3.2; and (ii) the economic terms of thefurther sublicenses must be such that the further sublicensing does not reduce the consideration that will be paid to AVEO hereunder,relative to what it would have been had Partner’s direct Sublicensee conducted the activities;(d)each sublicense shall be subject to the terms and conditions of this Agreement and the KHKAgreement, and Partner shall ensure that its agreements with Sublicensees are consistent with and impose obligations consistent withthe terms and conditions regarding Sublicensees set forth in this Agreement and the KHK Agreement. Without limiting the generalityof the foregoing, Partner shall in particular require its Sublicensees to make available Clinical Regulatory Filings, Safety Data, andunderlying detailed data to AVEO and/or KHK as required by Section 2.4. In addition to the foregoing, in any sublicense Partner shallobtain ownership of or the right to grant KHK and its Affiliates and licensees, including AVEO, a royalty-free license having at leastthe same scope as the license of Section 3.3(e) under: (i) all Patents claiming inventions developed by or for the Sublicensee inLicensed Product-related activities that if invented by Partner would be Partner Program Inventions; and (ii) all Know-How developedin such activities that if owned or Controlled by Partner would be Partner Know-How;(e)Partner shall remain responsible for each of its and its Affiliates’ Sublicensees’ compliance with theapplicable terms and obligations of this Agreement, and any breach thereof by any such Sublicensee shall be deemed a breach of thisAgreement by Partner; and- 23 - (f)Partner shall not be entitled to grant sublicenses in Germany, France, Italy, Spain and the UnitedKingdom; provided that Partner shall be entitled to grant sublicenses to its Affiliates in such countries, subject to the sublicenseautomatically terminating upon such Affiliate ceasing to be an Affiliate of Partner. 3.3Compliance with KHK Agreement.(a)Partner acknowledges that the licenses granted to it pursuant to Section 3.1 include sublicenses toKnow-How and Patents that have been licensed to AVEO by KHK pursuant to the KHK Agreement, and that such sublicenses aresubject to the terms and conditions of the KHK Agreement. In the event of any conflict or inconsistency between this Agreement (orany agreement with an Affiliate or Sublicensee entered into under this Agreement) and the KHK Agreement, the Parties shallreasonably cooperate with each other and, if necessary, with KHK to implement terms under this Agreement (or such other agreementwith an Affiliate or Sublicensee) that comply with the terms set forth in the KHK Agreement, subject to Section 3.3(c).(b)AVEO shall have the sole right and responsibility for interacting with KHK with respect to any matterrequiring such interaction with KHK under this Agreement or the KHK Agreement.(c)AVEO shall obtain Partner’s consent, which may be withheld in Partner’s absolute discretion, beforeexercising its right to terminate the KHK Agreement, as set forth in Section 10.4 of the KHK Agreement, with respect to any countrywithin Partner Territory.(d)AVEO shall furnish Partner with copies of all notices received by AVEO relating to any alleged breachor default by AVEO under the KHK Agreement. Subject to consultation with Partner, AVEO shall use Commercially ReasonableEfforts to cure any such breach or default. Notwithstanding the foregoing, if AVEO is unable to address the alleged breach or defaultwithin the [**] day cure period set forth in Section 9.2 of the KHK Agreement, and KHK elects to terminate the KHK Agreement,then the following provisions shall apply:(i)The sublicense granted by AVEO to Partner under the KHK Agreement shall survive inaccordance with the terms of Section 10.7 of the KHK Agreement.(ii)Notwithstanding the foregoing, if Partner (or any of its Affiliates or Sublicensees) havecontributed to the breach or default giving rise to KHK’s termination of the KHK Agreement, AVEO shall have the right to terminatethis Agreement in its entirety upon written notice to Partner and the effects of termination set forth in Sections 9.6 and 9.7 shall apply,except that, if requested by AVEO, Partner shall (and shall require its Affiliates and Sublicensees to) grant the rights, and perform theactivities, set forth in Sections 9.6 and 9.7 directly to KHK.(e)Grant-Back License.(i)To AVEO. Subject to the limitations on the use of clinical data from Independent Studies setforth in Section 2.2(c), Partner hereby grants to AVEO a non-- 24 - exclusive, royalty-free, irrevocable, sublicensable license under such Partner Program Inventions, Partner Patents and Partner Know-How (i) to research, develop, register, use, distribute, manufacture, package, promote, market, sell, offer for sale and import LicensedCompound and any Licensed Product in the AVEO Territory, provided that such proposed use or practice will not cause any detrimentto the Licensed Product or its commercialization in the Partner Territory, and (ii) to make and have made Licensed Compound and anyLicensed Product worldwide for purposes of the activities described in clause (i), and (iii) subject to Section 2.3(c), to clinically testLicensed Products anywhere in the world to obtain data to support any application for Marketing Approval in the AVEO Territory.AVEO shall provide Partner a copy of any such sublicense agreement within [**] Business Days of consummation of such sublicenseagreement. (ii)To KHK – Licensed Compound.To the extent that any Partner Program Invention or PartnerPatent or Partner Know-How constitutes AVEO Product IP (as defined in the KHK Agreement), Partner hereby grants to AVEO anexclusive, irrevocable, royalty-free license, with the right to grant sublicenses to KHK, under such Partner Program Invention, PartnerPatent and Partner Know-How for KHK and its Other Licensees (i) to research, develop, register, use, distribute, manufacture,package, promote, market, sell, offer for sale and import Licensed Compound and any Licensed Product (but excluding LicensedProduct Biomarkers which are dealt with in Section 3.3(e)(iii) below) in the KHK Territory, (ii) to make and have made LicensedCompound and any Licensed Product (but excluding Licensed Product Biomarkers which are dealt with in Section 3.3(e)(iii) below)worldwide for purposes of the activities described in clause (i), and (iii) to clinically test Licensed Products anywhere in the world toobtain data to support any application for Marketing Approval in the KHK Territory.(iii)To KHK – Licensed Product Biomarkers. To the extent that any Partner Program Inventionor Partner Patent or Partner Know-How constitutes AVEO Product IP (as defined in the KHK Agreement), Partner hereby grants toAVEO a non-exclusive, irrevocable, royalty-free license, with the right to grant sublicenses to KHK, under such Partner ProgramInvention, Partner Patent and Partner Know-How for KHK and its Other Licensees (i) to research, develop, use, sell, offer for sale andimport Licensed Product Biomarkers in the KHK Territory, (ii) to make and have made Licensed Compound and any LicensedProduct worldwide for purposes of the activities described in clause (i), and (iii) to clinically test Licensed Products anywhere in theworld to obtain data to support any application for Marketing Approval in the KHK Territory(iv)Partner retains the right under any Partner Program Invention or Partner Patent or PartnerKnow-How that constitutes AVEO Product IP (as defined in the KHK Agreement) to research develop, manufacture and havemanufactured Licensed Compounds and Licensed Products on a worldwide basis in furtherance of Partner’s development and/orcommercialization of Licensed Products for the Field in the Partner Territory. Such licenses in Sections 3.3(e)(ii) and (iii) may besublicensed by KHK in accordance with Section 4.6 of the KHK Agreement. AVEO shall provide Partner a copy of any suchsublicense agreement within four (4) United States Business Days of receipt from KHK.- 25 - 3.4Use of Patents and Know-How. Each Party hereby covenants that it (and its Affiliates and sublicensees,as applicable) shall not practice the Patents or Know-How licensed to such Party hereunder outside the scope of the licenses to suchParty under this Agreement. 3.5Reservation of Rights. Notwithstanding the scope of the license granted to Partner under Section 3.1,AVEO and its Affiliates and Other Licensees shall at all times reserve the right to make or have made the Licensed Compound andLicensed Product in the Partner Territory solely for use outside of the Partner Territory or for use outside of the Field worldwide. Inaddition, no right, title or interest is granted by either Party whether expressly or by implication to or under any Patents or Know-How,other than those rights and licenses expressly granted in this Agreement.3.6No Implied Licenses. Except as explicitly set forth in this Agreement, neither Party grants under itsintellectual property (including Patents) any license, express or implied, to the other Party.3.7Technology Sublicensed from Third Parties. The licenses granted under this Article 3, to the extentthey include (or come to include) sublicenses under Patents or Know-How of a Third Party, shall be subject to the terms andconditions of the agreement governing the license under which the sublicense is granted. If a good faith dispute between a Third Party(including KHK) and the Party that entered into a license with such Third Party arises about the interpretation of any provision of theagreement governing such Third Party license (including the KHK Agreement), the other Party shall use its Commercially ReasonableEfforts to ensure that its actions, if any, under this Agreement do not detrimentally affect the ability of the allegedly breaching Party tocontest the interpretation advanced by such Third Party; provided, however, that in no event shall the obligation to exercise suchCommercially Reasonable Efforts require such Party to waive any rights granted to it under this Agreement or otherwise available to itat law or in equity.3.8Cross-Territory Sales.(a)The Parties recognize that it is possible that Licensed Products originally sold by Partner (or its Affiliate,Sublicensee or distributor) in the Partner Territory may be imported and resold in the AVEO Territory or the KHK Territory. Partnershall take reasonable measures to prevent any such imports and/or sales, to the full extent permitted by law. Without limiting theforegoing, Partner shall, and shall cause its Affiliates, Sublicensees and distributors to, (a) label Licensed Products sold by it as beingfor sale in the Partner Territory (or a country thereof); and (b) refrain from selling Licensed Products to any entity that Partner or itsAffiliate, Sublicensee or distributor has reason to believe will resell quantities of Licensed Product in the AVEO Territory or the KHKTerritory.(b)The Parties recognize that it is possible that Licensed Products originally sold by AVEO or KHK (or itsAffiliate, Other Licensee or distributor) in the AVEO Territory or KHK Territory may be imported and resold in the PartnerTerritory. AVEO shall, and shall procure that KHK shall, take reasonable measures to prevent any such imports and/or sales, to thefull extent permitted by law. Without limiting the foregoing, AVEO shall, and shall cause its Affiliates, Sublicensees and distributorsand KHK to, (a) label Licensed Products sold by it as- 26 - being for sale in the AVEO Territory or KHK Territory (or a country thereof); and (b) other than as may occur pursuant to theOphthotech Agreement, refrain from selling Licensed Products to any entity that AVEO or KHK or its Affiliate, Other Licensee ordistributor has reason to believe will resell quantities of Licensed Product in the Partner Territory. 3.9Inventions by Service Providers.(a)From all contractors performing services in connection with the manufacture, research, developmentand/or commercialization of Licensed Compounds and Licensed Products (excluding Sublicensees who will be entitled to sell theLicensed Product for their own account), Partner shall (i) obtain the royalty-free right of access and use by AVEO, KHK and its OtherLicensees (including further sublicenses by KHK and such Other Licensees) to Clinical Regulatory Filings and Safety Data developedby any such contractors, as well as all underlying original data and documentation as described in Section 2.5, for purposes ofdevelopment and commercialization of Licensed Products in the Field in the AVEO Territory and the KHK Territory under thisAgreement, and (ii) obtain the royalty-free right to grant to AVEO non-exclusive sublicenses (including the right of AVEO to grantfurther sublicenses, and further sublicenses by such sublicensees), having at least the same scope as the license to AVEO in Section3.5(d), under the Patents and Know-How developed by such contractors in the course of conducting activities with respect to LicensedCompounds or Licensed Products that if claiming an invention invented by Partner or Know-How owned or Controlled by Partnerwould be Partner Program Inventions or Partner Patents or Partner Know-How. Information provided by a Partner contractor (or of aPartner contractor provided by Partner) to AVEO under this Section 3.9(a) shall be the Confidential Information of Partner and subjectto the Terms of Article 6 herein. Partner shall ensure that any and all Inventions made after the Effective Date (a) that relate to (i) theLicensed Compound or Licensed Products, (ii) any method of making, using (including a method of administration or dosage form) ortesting the Licensed Compound or Licensed Products, or (iii) any article necessary or useful to practice (or in the case of testing, of orfor the presence of) any method described in clause (ii) above, and that are discovered, made, or conceived solely by employees ofPartner or its Affiliates or Third Parties acting on behalf of or in conjunction with Partner or its Affiliates, other than LicensedTechnology, are Controlled by Partner.(b)From all contractors performing services in connection with the manufacture, research, developmentand/or commercialization of Licensed Compounds or Licensed Products (excluding KHK and Other Licensees, who will be entitled tosell the Licensed Product for their own account), AVEO shall (i) obtain the royalty-free right of access and use by Partner and itsAffiliates and Sublicensees (including further sublicenses by such Sublicensees) to Clinical Regulatory Filings and Safety Datadeveloped by any such contractors as well as all underlying original data and documentation as described in Section 2.4, for purposesof development and commercialization of Licensed Products in the Field in the Partner Territory under this Agreement, and (ii) obtainthe royalty-free right to grant to Partner non-exclusive Sublicenses (including the right of Partner to grant further Sublicenses, andfurther sublicenses by such Sublicensees), having at least the same scope as the license to Partner in Section 3.1, under the Patents andKnow-How developed by such contractors in the course of conducting activities with respect to Licensed Compounds or LicensedProducts that if claiming an invention invented by AVEO or Know-How owned or Controlled by AVEO would be AVEO- 27 - Program Inventions or AVEO Know-How. Information provided by an AVEO contractor (or of a AVEO contractor provided byAVEO) to Partner and its Sublicensees under this Section 3.9(b) shall be the Confidential Information of AVEO and subject to theterms of Article 6 herein. AVEO shall ensure that any and all Inventions made after the Effective Date (a) that relate to (i) the LicensedCompound or Licensed Products, (ii) any method of making, using (including a method of administration or dosage form) or testingthe Licensed Compound or Licensed Products, or (iii) any article necessary or useful to practice (or in the case of testing, of or for thepresence of) any method described in clause (ii) above, and that are discovered, made, or conceived solely by employees of AVEO orits Affiliates or Third Parties acting on behalf of or in conjunction with AVEO or its Affiliates, other than Partner Program Inventionsor Joint Inventions, are Controlled by AVEO. ARTICLE 4.COMPENSATION4.1Research and Development Funding. Partner will pay to AVEO for the research and developmentcosts incurred by AVEO to fund activities directly in furtherance of Licensed Product clinical, regulatory and manufacturing processdevelopment in support of obtaining Marketing Approval (a) Two Million Five Hundred Thousand Dollars ($2,500,000) withinfifteen (15) days of the Effective Date and provision of a valid tax invoice to Partner by AVEO for such amount (in the form of ExhibitE), and (b) Four Million Dollars ($4,000,000) upon EMA grant of Marketing Approval for the RCC Indication. Partner shall notifyAVEO of such approval promptly AVEO shall provide a valid tax invoice to Partner for such amount which shall be payable byPartner within fifteen (15) days of receipt of such invoice.4.2Milestone Payments.(a)Regulatory Milestones for RCC. Partner will pay to AVEO the following nonrefundable (butwithout prejudice to Partner’s right to bring a claim for breach of this Agreement, including damages for loss) milestone payments onceeach upon the first occurrence of the corresponding event as set forth below:Event MilestoneEvent PaymentReimbursement approval for the RCC Indication in each of the Key LaunchCountries other than the Key Non-EU Licensed Countries$2,000,000,per country, up to $10,000,000 totalGrant of Marketing Approval in 3 of 5 of the Key Non-EU Licensed Countries$2,000,000 (b)Regulatory Milestones for Other Indications. Partner will pay to AVEO the followingnonrefundable milestone payments upon each Licensed Product Indication achieved in addition to the RCC Indication, for up to amaximum of three additional Indications, and a Combination Product comprising the Licensed Compound and a checkpoint inhibitor,as described in Section 1.34 above shall be considered a separate Indication:Event MilestoneEvent Payment- 28 - EMA filing for Marketing Approval$2,000,000EMA grant of Marketing Approval$5,000,000 (c)Sales Milestones. Partner will pay to AVEO as additional consideration for the exclusive license grant,the following one-time sales milestone payments in respect of the first Calendar Year in which aggregate global Net Sales of allLicensed Products in that Calendar Year in the Partner Territory achieve the thresholds set out below:Calendar Year Net Sales of Licensed ProductsPaymentFirst Calendar Year in which aggregate global Net Sales of all LicensedProducts for that Calendar Year in the Partner Territory surpass $[**][**]First Calendar Year in which aggregate global Net Sales of all LicensedProducts for that Calendar Year in the Partner Territory surpass $[**][**]First Calendar Year in which aggregate global Net Sales of all LicensedProducts for that Calendar Year in the Partner Territory surpass $[**][**]First Calendar Year in which aggregate global Net Sales of all LicensedProducts for that Calendar Year in the Partner Territory surpass $[**][**]First Calendar Year in which aggregate global Net Sales of all LicensedProducts for that Calendar Year in the Partner Territory surpass $[**][**]First Calendar Year in which aggregate global Net Sales of all LicensedProducts for that Calendar Year in the Partner Territory surpass $[**][**]First Calendar Year in which aggregate global Net Sales of all LicensedProducts for that Calendar Year in the Partner Territory surpass $[**][**] For the sake of clarity, each sales milestone payment is separate and may only be earned once, but if more than one NetSales threshold is reached in the same Calendar Year, all of such sales milestone amounts shall be due and owing at the end of suchyear. The aggregate amount of the sales milestone payments that may be paid to AVEO during the Term if all seven thresholds aresatisfied is Three Hundred Thirty Five Million Dollars ($335,000,000).(d)Payments by Partner under this Section 4.3 shall be payable to AVEO within thirty (30) days after suchachievement (whether achieved by or on behalf of Partner, its Affiliate or any Sublicensee, or any other entity acting on behalf of anyof them).(e)Partner shall notify AVEO of the achievement of each of the foregoing milestones within fifteen (15)days after each such achievement. Any milestone payments shall be reflected on a valid tax invoice provided to Partner by AVEO.- 29 - 4.3Royalty Payments. Partner shall pay AVEO royalties, calculated as a percentage of annual Net Sales ofLicensed Products in the Partner Territory, using the following royalty rates: Amount of annual Net SalesRoyalty RateFor that portion of Net Sales in any given Calendar Year of less than or equal to$[**][**]%For that portion of Net Sales in any given Calendar Year of greater than $[**],but less than or equal to $[**][**]%For that portion of Net Sales in any given Calendar Year of greater than $[**],but equal to or less than $[**][**]%For that portion of Net Sales in any given Calendar Year of greater than $[**][**]% The obligation to pay royalties under this Section 4.3 shall continue on a country-by-country basis and a Licensed Productby Licensed Product basis in the Partner Territory until the expiration of the Royalty Term for such Licensed Product in such countryor the effective date of termination of this Agreement pursuant to Article 9.4.4Royalty Reduction.(a)Notwithstanding the foregoing, if it becomes necessary for Partner or its Affiliates or Sublicensees toaccess patent rights claiming priority from [**] in order to make, use or sell a Licensed Product in the Partner Territory (i.e., if it issuesand covers the Licensed Product actually being commercialized, and withstands any challenge KHK may choose to bring), then:(i)Partner acknowledges that KHK will be responsible for taking a license thereunder (on anexclusive or non-exclusive basis) or another similar right (such as a covenant not to sue) and for sublicensing (or otherwise transferringsuch license to AVEO and/or Partner and their respective Affiliates or sublicensees) in accordance with the terms of the KHKAgreement. Partner also acknowledges that KHK’s financial responsibility for any consideration due the licensor or damages assessedbased on such Partner’s exercise of the rights that KHK obtains shall be limited (A) overall, to the amount of sublicensing revenue thatKHK receives from AVEO with respect to this Agreement, and (B) with respect to consideration due to KHK’s licensor on Net Saleshereunder, to the amount of sublicensing revenue that KHK receives from AVEO based on Net Sales hereunder with any remainingamounts payable by Partner;(ii)Subject to consultation with Partner, AVEO shall enforce the provisions of Section 5.6 of theKHK Agreement against KHK if KHK fails to comply with aforementioned obligations under the KHK Agreement; and(iii)To the extent that AVEO is notified by KHK of KHK’s intent to commence any formalchallenge to any such patents, AVEO will notify Partner and the Parties shall reasonably cooperate with each other and with KHK todiscuss and seek to reach a common understanding whether such challenge would be likely to have a material adverse effect on- 30 - AVEO’s or Partner’s (or their respective Affiliates’ or sublicensees’) ability to commercialize the Licensed Product in the PartnerTerritory and the most sensible course of action weighing the relevant probabilities, costs and benefits. (b)If, at any time during the Royalty Term for a Licensed Product in a country in the Partner Territory, oneor more Generic Products is commercially available in such country and, for the calendar quarter for which a royalty payment is beingmade by Partner hereunder such Generic Product(s) in the aggregate have a market share of more than [**] percent ([**]%) of theaggregate market share of such Licensed Product and Generic Products (based on data provided by a reliable data source mutuallyacceptable to the Parties) as measured by unit sales in such country, then the royalties payable for such calendar quarter under Section4.3 for such Licensed Product in such country shall be reduced by [**] percent ([**]%).(c)Subject to Section 4.4(a), in the event that Partner requires a license of any Third Party rights in respectof the development, manufacture, use or sale of Licensed Products in any country in the Partner Territory, Partner will be responsiblefor obtaining license; provided that, Partner may deduct any reasonable legal costs incurred by Partner, its Affiliates and Sublicenseestogether with any royalties on Net Sales of the Licensed Product payable to such Third Party as follows: [**] percent ([**]%) of suchpayments will be deducted from royalties due to AVEO on account of Net Sales of the Licensed Product in those countries whereAVEO is due such a royalty and in respect of which Partner, its Affiliates and Sublicensees have incurred legal costs; provided thatthis will not reduce AVEO’s royalty to less than [**] percent ([**]%) of the amount otherwise due. Deductions not exhausted in anycalendar quarter may be carried into future calendar quarters.4.5Joint Development Cost Sharing. In connection with any Joint Development Plan agreed by AVEOand Partner under Section 2.2(b), on a quarterly basis, the Parties shall exchange records of their respective costs and expenses.Following such exchange, there will be a dollar-for-dollar true-up: (i) if the applicable costs and expenses of Partner exceed Partner’sagreed share of the applicable costs and expenses, AVEO shall pay to Partner the amount of such excess, and (ii) if the applicable costsand expenses of AVEO exceed AVEO’s agreed share of the applicable costs and expenses, Partner shall pay to AVEO the amount ofsuch excess.4.6Amounts Due to KHK. AVEO shall be responsible for all payment obligations to (a) KHK under theKHK Agreement, and (b) any other Third Party licensor of AVEO under license agreements existing as of the Effective Date, onaccount of the exploitation of Licensed Products in the Partner Territory.4.7Quarterly Payment Timing. All royalties due under Section 4.3 shall be paid quarterly, on a country-by-country basis, within forty five (45) days after the end of the relevant calendar quarter for which royalties are due or, if later, withinseven (7) days after AVEO has provided Partner with a valid tax invoice for such amount.4.8Royalty Reports.(a)Reports. Within thirty (30) days after the end of each calendar quarter, Partner shall provide to AVEOa final written report stating:- 31 - (i)a statement of the amount of gross sales of Licensed Products in the Partner Territory duringsuch calendar quarter; (ii)an itemized calculation of Net Sales (A) in the Partner Territory as a whole and (B) on acountry-by-country basis, showing for both (A) and (B) deductions provided for in the definition of Net Sales during such calendarquarter; and(iii)a calculation of the royalty payment due on such Net Sales for such calendar quarter.(b)Certain Requirements. Each report shall provide the information required on a country-by-countryand Licensed Product-by-Licensed Product basis. Without limiting the generality of the foregoing, Partner shall require its Affiliatesand Sublicensees to account for its Net Sales and to provide such reports with respect thereto as if such sales were made by Partner.4.9Payment Method. Except as provided in Section 4.13 regarding blocked currency, all payments dueunder this Agreement to AVEO shall be made by bank wire transfer in immediately available funds to an account designated byAVEO. All payments hereunder shall be made in Dollars. Each Party shall bear all fees, commissions and any other costs charged byits own bank in connection with bank transfers under this Agreement.4.10No Credits or Refunds. All payments to AVEO hereunder shall be noncreditable and nonrefundable,except only (a) without prejudice to Partner’s right to bring a claim for breach of this Agreement, including damages for loss and (b) tothe extent that an audit conducted pursuant to Section 4.15 below confirms that Partner had overpaid amounts to AVEO, in which casePartner may credit such overpaid amounts against future amounts payable to AVEO hereunder.4.11Taxes. Partner shall be responsible for and may withhold from payments made to AVEO under thisAgreement any taxes required to be withheld by Partner under applicable law. Accordingly, if any such taxes are levied on suchpayments due hereunder (“Withholding Taxes”), Partner shall (a) deduct the Withholding Taxes from the payment amount, (b) pay allapplicable Withholding Taxes to the proper taxing authority, and (c) send evidence of the obligation together with proof of taxpayment to AVEO within thirty (30) days following that tax payment. If AVEO has the possibility to apply for any exemption from, orreduction in the rate of, withholding taxes under any double taxation or similar agreement or treaty in force from time to time andrequests Partner’s assistance, the Parties shall reasonably cooperate in seeking such exemption or reduction.4.12Value Added Tax. Notwithstanding anything contained in Section 4.11, this Section 4.12 shall applywith respect to value added tax (“VAT”). All payments by Partner to AVEO under this Agreement shall be exclusive of VAT, whichshall not be deducted or offset from any amount payable by Partner to AVEO under this Agreement. If any VAT is chargeable inrespect of any payments, Partner shall pay VAT at the applicable rate in respect of any such payments following the receipt of a VATinvoice in the appropriate form issued by AVEO in respect of those payments, such VAT to be payable on the later of the due date ofthe payment of- 32 - the payments to which such VAT relates and thirty (30) days after the receipt by Partner of the applicable invoice relating to that VATpayment. 4.13Blocked Currency. In each country where the local currency is blocked and cannot be removed fromthe country, royalties accrued in that country shall be paid to AVEO in the country in local currency by deposit in a local bankdesignated by AVEO, unless the Parties otherwise agree.4.14Foreign Exchange. If any currency conversion shall be required in connection with the calculation ofamounts payable hereunder, such conversion shall be made using the average of the exchange rates for the purchase and sale ofDollars, as reported by The Wall Street Journal. on the last Business Day of the calendar quarter to which such payment pertains. Withany payment in relation to which a currency conversion is performed to calculate the amount of payment due, Partner, shall provide toAVEO a true, accurate and complete copy of The Wall Street Journal exchange rates used in the calculation.4.15Partner Records; Inspection(a)Partner shall keep, and ensure that its Affiliates keep, complete and accurate records of its costs andexpenses incurred under the Joint Development Plan and any Independent Study conducted by Partner, and its sales and otherdispositions (including use in clinical trials, or provision on a compassionate use basis, or as marketing samples, or as named patientsales) of the Licensed Products including all such records that may be necessary for the purposes of calculating all payments due underthis Agreement. Such records shall be kept for a period of five (5) years from the end of the calendar quarter in which such costs orexpenses were incurred or such sale or other disposition was made. Partner shall make such records available for inspection by anaccounting firm selected by AVEO under Section 4.15(c) at Partner’s premises on reasonable notice during regular business hours (inaccordance with the remaining provisions of this Section 4.15) no more than once in any Calendar Year.(b)Upon timely request and at least thirty (30) days’ prior written notice from AVEO, Partner shall permitsuch audit to be conducted during regular business hours in such a manner as to not unnecessarily interfere with Partner’s normalbusiness activities. Such audit shall be limited to results in any period that has not previously been audited under this Section 4.15, notto exceed five (5) years prior to the audit notification.(c)At AVEO’s expense no more than once per Calendar Year, AVEO has the right to retain anindependent certified public accountant from a nationally recognized accounting firm to perform on behalf of AVEO an audit,conducted in accordance with GAAP, of such books and records of Partner and its Affiliates as are deemed necessary by theindependent public accountant to report on Net Sales for the period or periods requested by AVEO and the correctness of any report orpayments made under this Agreement (all subject to subsection (b)).(d)Partner shall ensure that its Sublicensees keep complete and accurate records of such Sublicensee’scosts and expenses incurred under the Joint Development Plan and any Independent Study conducted by Partner, and sales and otherdispositions (including use in- 33 - clinical trials, provision on a compassionate use basis, or as marketing samples, or as named patient sales) of the Licensed Productsincluding all such records that may be necessary for the purposes of calculating all payments due under this Agreement. Partner shallrequire that such Sublicensee make such records available for inspection by Partner or an independent accounting firm selected byPartner, at least once during any Calendar Year in which the agreement between Partner and any Sublicensee is in effect and thereafterfor a period of five (5) years after the Calendar Year to which the audit pertains. Upon the reasonable request of AVEO with respect toany such Sublicensee, and no more than once in any five Calendar Years, Partner shall exercise its audit rights with respect suchSublicensee and shall report the results of such audit to AVEO in accordance with Section 4.15(f). (e)All information, data, documents and abstracts referred to in this Section 4.15 shall be used only for thepurpose of verifying compliance with this Agreement, shall be treated as Partner’s Confidential Information subject to the obligationsof this Agreement and need neither be retained more than one (1) year after completion of an audit hereof, if an audit has beenrequested; nor more than five (5) years from the end of the Calendar Year to which each shall pertain; nor more than three (3) yearsafter the date of the expiration or termination of this Agreement.(f)Audit results shall be shared between the Parties, and may be provided by AVEO to KHK. The auditorshall be bound by written obligations to Partner (and, where applicable, any Sublicensee) of confidentiality and non-use (other thanuses required by this Section 4.15).(g)If the audit reveals an underpayment, Partner shall promptly pay to AVEO the amount of suchundisputed underpayment plus interest in accordance with Section 4.17. If the audit reveals that the undisputed monies owed byPartner to AVEO has been understated by more than ten percent (10%) for the period audited, Partner shall, in addition, pay thereasonable costs of such audit. If the audit reveals an undisputed overpayment, the amount of such overpayment shall be payable toPartner as provided in Section 4.10.4.16AVEO Records; Inspection(a)AVEO shall keep, and ensure that its Affiliates keep, complete and accurate records of its costs andexpenses incurred under the Joint Development Plan and any Independent Study conducted by AVEO including all such records thatmay be necessary for the purposes of calculating all payments due by or to AVEO under this Agreement. AVEO shall make suchrecords available for inspection by an accounting firm selected by Partner under Section 4.16(c) at Partner’s premises on reasonablenotice during regular business hours (in accordance with the remaining provisions of this Section 4.16) no more than once in anyCalendar Year. Such records shall be kept for a period of five (5) years from the end of the calendar quarter in which such costs orexpenses were incurred.(b)Upon timely request and at least thirty (30) days’ prior written notice from Partner, AVEO shall permitsuch audit to be conducted during regular business hours in such a manner as to not unnecessarily interfere with AVEO’s normalbusiness activities. Such audit- 34 - shall be limited to results in any period that has not previously been audited under this Section 4.16, not to exceed five (5) years prior tothe audit notification. (c)At Partner’s expense no more than once per Calendar Year, Partner has the right to retain anindependent certified public accountant from a nationally recognized accounting firm to perform on behalf of Partner an audit,conducted in accordance with GAAP, of such books and records of AVEO and its Affiliates as are deemed necessary by theindependent public accountant to report on its costs and expenses incurred under the Joint Development Plan and any IndependentStudy and the correctness of any report or payments made under this Agreement (all subject to subsection (b)).(d)AVEO shall ensure that its licensees and contractors keep complete and accurate records of suchlicensees’ and contractors’ costs and expenses incurred under the Joint Development Plan and any Independent Study conducted byAVEO including all such records that may be necessary for the purposes of calculating all payments due under this Agreement.AVEO shall require that such licensees and contractors make such records available for inspection by Partner or an independentaccounting firm selected by Partner, at least once during any Calendar Year.(e)All information, data, documents and abstracts referred to in this Section 4.16 shall be used only for thepurpose of verifying compliance with this Agreement, shall be treated as AVEO’s Confidential Information subject to the obligationsof this Agreement and need neither be retained more than one (1) year after completion of an audit hereof, if an audit has beenrequested; nor more than five (5) years from the end of the Calendar Year to which each shall pertain; nor more than three (3) yearsafter the date of the expiration or termination of this Agreement.(f)Audit results shall be shared between the Parties. The auditor shall be bound by written obligations toAVEO (and, where applicable, any licensee or contractor) of confidentiality and non-use (other than uses required by this Section4.16.(g)If the audit reveals an underpayment by AVEO, AVEO shall promptly pay to Partner the amount ofsuch undisputed underpayment plus interest in accordance with Section 4.17. If the audit reveals that the undisputed monies owed byAVEO to Partner has been understated by more than ten percent (10%) for the period audited, AVEO shall, in addition, pay thereasonable costs of such audit.4.17Interest. If either Party fails to make any payment due to the other Party under this Agreement, theninterest shall accrue from the date the particular payment is due until paid at a rate equal to the Dollars prime or equivalent rate perannum quoted by The Wall Street Journal on the first Business Day after such payment is due, plus [**] percent ([**]%).ARTICLE 5.PATENTS5.1Ownership and Disclosure of Inventions.- 35 - (a)AVEO Program Inventions. AVEO shall solely own the AVEO Program Inventions and the AVEOProgram Invention Patents. (b)Partner Program Inventions. Partner shall solely own the Partner Program Inventions and PartnerProgram Invention Patents.(c)Joint Inventions. AVEO and Partner shall jointly own (as provided for below in Section 5.1(d)) theJoint Inventions and Joint Patents.(d)U.S. Patent Law Nature of Joint Ownership.(i)The joint ownership of Joint Inventions and Joint Patents under Section 5.1(c) shall be, on aworldwide basis with respect to each jurisdiction in which such a jointly owned Patent exists, joint ownership in accordance with andbearing with it the same rights as the joint ownership interests would have under U.S. patent laws in the absence of a written agreement(including the right to practice the invention without having to obtain consent from and without having any duty of accounting to theother Party; and including the right to license others to do the same, without having to obtain consent from and without having anyduty of accounting to the other Party), except solely to the extent explicitly provided to the contrary in this Agreement (includingArticle 3). Without limiting the generality of the foregoing, if under applicable law a separate written agreement is still required toformalize the joint ownership, the parties shall in good faith negotiate and execute such an agreement on terms consistent with thisAgreement.(ii)To implement the rights of joint ownership throughout the world as provided for in clause (i)above, each Party hereby assigns to the other, and hereby grants to the other all consents, licenses and waivers, in each case that arenecessary to achieve such joint ownership and the rights associated with such joint ownership (as described in clause (i) above)worldwide, and agrees to provide documents evidencing or that may be required to record such assignments, consents, licenses andwaivers promptly upon the other Party’s request. Each of the foregoing assignments and other grants is coupled with an interest.Promptly after being requested in writing, each Party shall provide to the other all documents and instruments required to evidence orrecord any such assignments, consents, licenses or waivers, or (to the extent otherwise consistent with this Agreement) to enforce rightsin the assigned Patents. This Section 5.1(d)(ii) shall not be deemed, read, or used to contradict or undermine the Parties’ rights andobligations as set forth in Articles 3 and 4.(e)Invention Disclosure. Without modifying or limiting the ownership and rights as provided for inSections 5.1(a)-(d), each Party shall promptly disclose to the other Party any Partner Program Invention, AVEO Program Inventionand Joint Invention, as applicable, prior to any public disclosure or filing of a patent application and allow sufficient time for commentand review by the other Party as to whether such other Party would recommend for a Patent to be filed (by the Party or Parties who isor are entitled to do so in accordance with Section 5.2).5.2Prosecution of Patents.- 36 - (a)Listed AVEO Patents and AVEO Program Invention Patents. Subject to Section 5.8:(i)As between AVEO and Partner, AVEO shall be responsible for the filing, prosecution andmaintenance of the Listed AVEO Patents and AVEO Program Invention Patents on a worldwide basis, including in the PartnerTerritory; provided that, Partner shall be responsible for paying one hundred percent (100%) of the prosecution and maintenance costswith respect to Listed AVEO Patents and AVEO Program Invention Patents in the Partner Territory (so long as such costs arereasonably and properly incurred and do not exceed an amount agreed to by the Parties acting in good faith).(ii)Partner shall have the right to review and comment upon AVEO’s prosecution of the AVEOProgram Invention Patents and Listed AVEO Patents, in each case in the Partner Territory. AVEO shall provide (or have provided byits patent attorney) to Partner, a copy of each substantive communication received from any patent authority, and a copy of eachproposed submission to a patent authority in the Partner Territory regarding an AVEO Program Invention Patent reasonably inadvance (but no less than thirty (30) days for Partner’s review) of making such filing. Furthermore, with respect to the preparation,filing, prosecution and maintenance of Listed AVEO Patents and AVEO Program Invention Patents in the Partner Territory, AVEOagrees to: (A) keep Partner reasonably informed with respect to such activities; (B) consult with Partner regarding such matters,including the final abandonment of any AVEO Program Invention Patent and Listed AVEO Patents claims; and (C) reasonablyconsider Partner’s comments.(iii)If AVEO determines to abandon or not maintain any Patent that is a Listed AVEO Patent oran AVEO Program Invention Patent in each case in the Partner Territory, then AVEO shall provide Partner with at least thirty (30)days’ prior written notice of such determination. If Partner requests, and confirms its commitment to pay one hundred percent (100%)of the prosecution and maintenance costs with respect to such Patents, then AVEO shall not abandon and shall continue to maintainsuch Patents.(b)Partner Patents.Subject to Section 5.8:(i)Partner shall be responsible for filing, prosecution and maintenance of the Partner Patents on aworldwide basis. Partner shall be responsible for paying one hundred percent (100%) of the prosecution and maintenance costs withrespect to Partner Patents worldwide.(ii)AVEO shall have the right to review and comment upon Partner’s prosecution of the PartnerPatents in the AVEO Territory. Partner shall provide (or have provided by its patent attorney) to AVEO, a copy of each substantivecommunication received from any patent authority in the AVEO Territory, and a copy of each proposed submission to a patentauthority regarding an Partner Patent reasonably in advance (but no less than thirty (30) days for AVEO’s review) of making suchfiling. Furthermore, with respect to the preparation,- 37 - filing, prosecution and maintenance of Partner Patents in the AVEO Territory, Partner agrees to: (A) keep AVEO reasonably informedwith respect to such activities; (B) consult with AVEO regarding such matters, including the final abandonment of any Partner Patentclaims; and (C) reasonably consider AVEO’s comments. (iii)If Partner determines to abandon or not maintain any Partner Patent in the AVEO Territory,then Partner shall provide AVEO with at least thirty (30) days’ prior written notice of such determination (or such other period of timereasonably necessary to allow AVEO to assume such responsibilities). If AVEO requests, AVEO may assume control, at its ownexpense, for the filing, prosecution and maintenance of any such Partner Patent solely owned by Partner that would otherwise havegone abandoned (but not, for clarity, any Partner Patent that is in-licensed or jointly-owned), without affecting any of the otherfinancial terms set forth in this Agreement.(c)Joint Patents.Subject to Section 5.8:(i)With respect to each Joint Invention, as between AVEO and Partner, Partner shall prepare,file, prosecute and maintain the corresponding Joint Patents in the Partner Territory, and AVEO shall prepare, file, prosecute andmaintain the corresponding Joint Patents in the AVEO Territory and KHK Territory provided that the Parties shall mutually agree onwhich Party shall file the initial patent application disclosing any Joint Invention and shall mutually agree as to the content and scope ofsuch first filing and shall share the costs equally. Partner shall be responsible for paying one hundred percent (100%) of the prosecutionand maintenance costs with respect to Joint Patents in the Partner Territory and AVEO shall be responsible for paying one hundredpercent (100%) of the prosecution and maintenance costs with respect to Joint Patents in the AVEO Territory and KHK Territory.(ii)AVEO shall have the right to review and comment upon Partner’s prosecution andmaintenance of Joint Patents in the Partner Territory, and Partner shall have the right to review and comment upon AVEO’sprosecution and maintenance of Joint Patents in the AVEO Territory and KHK Territory. The Party responsible for prosecution andmaintenance (the “Prosecuting Party”) of Joint Patents shall provide (or have provided by its patent attorney) to the other Party, acopy of each substantive communication received from any patent authority, and a copy of each proposed submission to a patentauthority regarding a Joint Patent reasonably in advance (but no less than thirty (30) days for the other Party’s review) of making suchfiling. Furthermore, the Prosecuting Party agrees to: (A) keep the other Party reasonably informed with respect to such activities; (B)consult with the other Party regarding such matters, including the final abandonment of any Joint Patent claims; and (C) reasonablyconsider the other Party’s comments.(iii)If the Prosecuting Party determines to abandon or not maintain any Joint Patent, then suchProsecuting Party shall provide the other Party with at least sixty (60) days’ prior written notice of such determination (or such otherperiod of time reasonably necessary to allow the other Party to assume such responsibilities). If the other Party requests, the other Partyshall have the right, at its expense, to control the filing, prosecution and- 38 - maintenance of the Patent that would otherwise have gone abandoned, without affecting any of the other financial terms set forth inthis Agreement. (d)Certain Proceedings. For the purposes of this Section 5.2, “prosecution” shall include defending theapplicable Patents in proceedings such as oppositions, reexaminations, interferences, nullities or other administrative actions in which aThird Party contests the inventorship, validity, title or enforceability of a Patent; provided, however, in the event there is conflictbetween this Section 5.2 and Section 5.4, or conflict between Sections 5.2 and 5.5, then Section 5.4 or Section 5.5 shall control.(e)Affiliates/Sublicensees. Partner may grant to its Affiliates or Sublicensees all or certain of its rights withrespect to the preparation, filing, prosecution and maintenance of Partner Patents, set forth in this Section 5.2, and AVEO may grant toits Affiliates and Other Licensees all or certain of its rights with respect to the preparation, filing and prosecution of the Listed AVEOPatents and AVEO Program Invention Patents set forth in this Section 5.2.5.3Patent Term Extensions. Unless the Parties agree otherwise (and subject to the terms of the KHKAgreement), AVEO and Partner agree that, in each country where one or more of the Licensed Patents is eligible for extension of thepatent term, the composition of matter patent, designated as KRN 1 in Exhibit B to this Agreement (the “Composition Patent”), shallbe extended. If the Composition Patent has not issued, has expired, or is otherwise not eligible for extension in a country in the PartnerTerritory, then AVEO and Partner shall discuss (with each other and, subject to Section 3.3(a), with KHK) and seek to reach mutualagreement for which, if any, of the Patents within the Licensed Patents, Partner shall apply to extend the patent term with respect toLicensed Products, pursuant to patent term extension laws or regulations or supplemental protection certificate laws and regulations inthe Partner Territory. If AVEO and Partner cannot reach agreement as to whether to apply to extend the term of a particular Patent inthe Partner Territory, then Partner shall have the right to make the final decision.Partner acknowledges that, KHK’s consent is required(in KHK’s sole discretion) for the extension of any Licensed Patent (as defined in the KHK Agreement) other than a License-SpecificLicensed Patent (as defined in the KHK Agreement).5.4Infringement of Patents by Third Parties.(a)Notification. Each Party shall promptly notify the other Party in writing if the notifying Partyreasonably believes that any Licensed Patent or Partner Patent is being or has been infringed or misappropriated in the PartnerTerritory, AVEO Territory and KHK Territory by a Third Party (such infringement, together with any that may be imminentlythreatened to occur by any potential generic version of a Licensed Product arising under the implementing procedures of 35 U.S.C.271(e)(2) or ex-U.S. equivalent, “Infringement,” and “Infringe” shall be interpreted accordingly). In addition, AVEO shall promptlynotify Partner in writing if AVEO receives any notice from KHK that any Partner Patent is Infringed in the KHK Territory.(b)Competitive Infringement of Listed AVEO Patents, AVEO Program Invention Patents andJoint Patents.- 39 - (i)First Right. With respect to activities or conduct of a Third Party that compete with, or areexpected to compete with, or otherwise materially affect the market for, Licensed Products in Partner Territory and in the Field(“Competitive Infringement”), Partner (or its Affiliate) shall have the first right, but not the obligation, to enforce the Listed AVEOPatents, AVEO Program Invention Patents and Joint Patents with respect to any such Competitive Infringement at its own expense.Partner shall reasonably consider AVEO’s comments on any such enforcement activities. (ii)Back-up Right. If Partner does not bring action to prevent or abate the CompetitiveInfringement within [**] days after notification thereof to or by Partner pursuant to Section 5.4(a), then AVEO (or its Affiliate) shallhave the right, but not the obligation, to bring an appropriate action against any Third Party engaged in such Competitive Infringement,whether direct or contributory, at its own expense; provided, however, that AVEO shall not initiate legal action without first conferringwith Partner and considering in good faith Partner’s reasons for not bringing any such action.(c)Competitive Infringement of Partner Patents. For purposes of clarity, Partner or its Affiliates shallhave the sole right, but not the obligation, to enforce the Partner Patents with respect to any Competitive Infringement in the PartnerTerritory. Partner and its Affiliates shall keep AVEO reasonably informed with respect to any such enforcement activities, and shallreasonably consider AVEO’s comments on any such enforcement activities, including conferring with AVEO with respect to anydecision by Partner or the applicable Affiliate for not bringing any action to prevent or abate the Competitive Infringement.(d)Infringement Outside of the Field. As between AVEO and Partner, AVEO or its Affiliates shallhave the sole right, but not the obligation, to enforce the Licensed Patents with respect to any Infringement outside of the Field,provided that AVEO shall not, and shall procure that its Affiliates, licensees, assignees or any other party that acquires rights in theLicensed Patents from AVEO do not, enforce any Licensed Patents outside the Field without Partner’s prior written consent, whichshall not be unreasonably withheld. Without otherwise limiting Partner’s ability to withhold its consent, the Parties agree that it shall bereasonable for Partner to withhold such consent if Partner reasonably believes that (i) such enforcement presents a risk of the loss inwhole or in part (directly or indirectly) of any of the Licensed Patents in the Partner Territory and (ii) that the total worldwide NetSales of Licensed Product in the Partner Territory for the previous calendar year was more than $[**] . If Partner does consent to suchenforcement action, AVEO and its Affiliates shall keep Partner reasonably informed with respect to any such enforcement activities tothe extent reasonably likely to impact Partner’s rights in the Field. In situations of Infringement that is both in the Field and outside ofthe Field, or that is taking place in both the Partner Territory and the AVEO Territory, the Parties shall confer with each other and takesuch action in such manner as they shall agree, provided that each Party shall have the right to make decisions about enforcingLicensed Patents in its respective territory.(e)KHK Right to Enforce Certain Infringements. Partner acknowledges that KHK has certain rights(but not the obligation) under the KHK Agreement to enforce certain Licensed Patents with respect to activities or conduct of a ThirdParty in or for the Field in the- 40 - KHK Territory or outside the Field worldwide, and that each of the Party’s rights and obligations with respect to enforcement ofLicensed Patents hereunder shall be subject to such KHK rights. (f)Third Party Infringement of Joint Patents. With respect to any Third Party Infringement of JointPatents in the Partner Territory outside of the Field, the Parties shall confer with each other and take such action in such manner as theyshall agree. If the Parties are unable after a reasonable period of time to agree on how to proceed, then each Party may, at its own costand expense, exercise its rights as joint owner of the affected Joint Patent in accordance with the allocation of joint ownership rights asexpressed in Section 5.1.(g)Participation of the Other Party with Respect to Infringement Suits. If a Party brings an actionagainst Infringement under Section 5.4(b) or Section 5.4(f), the other Party shall be entitled to separate representation in such matter bycounsel of its own choice and at its own expense, and such Party shall cooperate fully with the Party bringing such action including bybeing joined as a party plaintiff if necessary to obtain standing for such action (all at the expense of the prosecuting Party). Partneracknowledges that KHK has the right under the KHK Agreement to participate in any such action in accordance with the termsthereof.(h)Settlement.(i)AVEO shall not settle a claim brought under Section 5.4(b) or Section 5.4(f) involvingAVEO Program Invention Patents or Joint Patents in a manner that would limit or restrict the ability of Partner to research, develop,make, have made, use, sell, offer for sale and import Licensed Products for use in the Field in the Partner Territory or impair theexclusivity of Partner’s rights hereunder without the prior written consent of Partner (which consent shall not be unreasonablywithheld, conditioned or delayed) and, if applicable, KHK.(ii)Partner shall not settle a claim brought under Section 5.4(b), Section 5.4(c) or Section 5.4(f)involving AVEO Program Invention Patents and Joint Patents or Partner Patents, as applicable, that would limit or restrict the ability ofAVEO to research, develop, make, have made, use, sell, offer for sale and import Licensed Products in the AVEO Territory or for useoutside of the Field worldwide, or that would limit or restrict the ability of KHK to sell Licensed Products in the KHK Territory or foruse outside the Field worldwide, or impair the exclusivity of KHK’s rights under the KHK Agreement, in each case without the priorwritten consent of AVEO (which consent shall not be unreasonably withheld, conditioned or delayed) and, if applicable, KHK.(i)Allocation of Proceeds. If monetary damages are recovered from any Third Party in an action broughtby a Party under this Section 5.4, such recovery shall be allocated as set forth below:(i)first, to reimburse the Parties for any costs and expenses incurred by such Parties in suchlitigation (including, for this purpose, a reasonable allocation of expenses of internal counsel or other personnel acting in such capacity(i.e., coordination of litigation matters and the like)) to the extent not previously reimbursed and, solely to the extent required underSection 5.5(g) of the KHK Agreement, to reimburse KHK for costs and expenses incurred by KHK in such litigation; and- 41 - (ii)second, with respect to actions brought by Partner under Section 5.4(b)(i) or 5.4(f) that claimsan AVEO Product Invention (as defined in the KHK Agreement), the portion of any remaining amounts after the allocation in clause(i) above that represents recovery for Infringement in the Partner Territory shall be applied to KHK as follows: (A)the portion of any such remaining amounts that represents recovery for [**] onany action brought under Section 5.4(b)(i) above (1) to the extent [**], with the remaining portion of the [**] that does notrepresent treble or punitive damages being allocated to AVEO and Partner in accordance with clause (iii) below; and (2)[**] percent ([**]%) of any [**] representing [**] shall be allocated to KHK with the remaining [**] percent ([**]%)allocated to AVEO and Partner in accordance with clause (iii) below;(B)the [**] on any action brought by KHK after exercising its back-up enforcementrights under Section 6.5(b)(ii) of the KHK Agreement shall be allocated to KHK in the same amount as under subclause (A)above;(C)the portion of any such remaining amounts that represents recoveries in relation tolost sales of Licensed Products in the AVEO Territory or outside of the Field (as such term is defined in the KHKAgreement) in the Partner Territory shall be allocated to KHK; and(D)the portion of any such remaining amounts that represents recovery forInfringement in an action brought with respect to any Licensed Patents that fall within the definition of Jointly OwnedProduct Patents (as defined in the KHK Agreement) or Joint Other Invention Patents (as defined in the KHK Agreement)pursuant to Section 6.5(d) of the KHK Agreement shall be [**] percent ([**]%) to KHK and [**] percent ([**]%) to Partnerunless KHK and AVEO agree in writing to a different allocation (which agreement AVEO shall not provide to KHKwithout Partner’s agreement on such terms); and(iii)with respect to actions brought by Partner under Section 5.4(b)(i), or 5.4(f), any remainingamounts after the allocation in clauses (i) and (ii) above shall be allocated [**] percent ([**]%) to AVEO and [**] percent ([**]%) toPartner ; and(iv)with respect to actions brought by AVEO under Section 5.4(b)(ii), 5.4(d) or 5.4(f), anyremaining amounts after the allocation in clause (i) above shall, as between AVEO and Partner, be retained by AVEO.(j)Affiliates/Sublicensees. Partner may grant to its Affiliates or Sublicensees its rights to enforce LicensedPatents as set forth in this Section 5.4, and vice versa for AVEO and its Affiliates and its Other Licensees.5.5Infringement of Third-Party Rights. If any Licensed Product manufactured, used or sold by Partner, itsAffiliates or Sublicensees for use in the Field becomes the subject of a Third Party’s claim or assertion of Infringement of a Patentgranted by a jurisdiction within the Partner Territory, the Party first having notice of the claim or assertion shall promptly notify the- 42 - other Party, and the Parties shall promptly confer to consider the claim or assertion and the appropriate course of action. Unless theParties otherwise agree in writing, each Party shall have the right to defend itself against a suit that names it as a defendant, subject tothe indemnification provisions of Article 8. Neither Party shall enter into any settlement of any claim described in this Section 5.5 thataffects the other Party’s rights or interests (or the rights or interests of KHK under the KHK Agreement) without such other Party’s (orKHK’s, if applicable) written consent, which consent shall not be unreasonably withheld or delayed. In any event, the Parties shallreasonably assist one another and cooperate in any such litigation at the other Party’s request and expense. 5.6Patent Marking. Partner (or its Affiliate, Sublicensee or Distributor) shall mark Licensed Productsmarketed and sold by Partner (or its Affiliate, Sublicensee or Distributor) hereunder with appropriate Licensed Patent numbers orindicia at AVEO’s request to the extent permitted by applicable law, in those countries in which such notices affect recoveries ofdamages or equitable remedies available with respect to infringements of patents.5.7Patent Oppositions and Other Proceedings. If either Party desires to bring an opposition, action fordeclaratory judgment, nullity action, interference, reexamination or other attack upon the validity, title or enforceability of a Patentowned or controlled by a Third Party that covers or may cover the manufacture, use for the Field or sale of any Licensed Product, suchParty shall so notify the other Party. The Parties shall discuss in good faith the rationale for, and proposed actions to be taken, withrespect to such opposition or other action.5.8In-Licensed Patents.(a)Partner acknowledges that:(i)pursuant to Section 6.2(a) of the KHK Agreement, KHK shall have the first right andresponsibility for filing, prosecution and maintenance of the Listed AVEO Patents and any other Licensed Patents that fall within thedefinition of Kirin Product Invention Patents (as defined in the KHK Agreement) on a worldwide basis, with AVEO having step-inrights on prosecution and maintenance if KHK determines to abandon or not maintain any such Listed AVEO Patent and also underSection 6.2(a) of the KHK Agreement AVEO has the right to inter alia review and comment on such prosecution. In relation to suchPatents in the Partner Territory in the Field, AVEO shall provide Partner with the same rights as AVEO has under Section 6.2(a) of theKHK Agreement (except as to the assumption of abandoned Patents) and shall promptly pass all comments of Partner to KHK;(ii)pursuant to Section 6.2(c) of the KHK Agreement, KHK shall have the first right andresponsibility for filing, prosecution and maintenance of any Licensed Patents that fall within the definition of Jointly Owned ProductPatents (as defined in the KHK Agreement) in the KHK Territory, and, as between KHK and AVEO, AVEO shall have the first rightand responsibility for filing, prosecution and maintenance of such Licensed Patents in the Partner Territory, subject to (A) keeping theother party reasonably informed with respect to such activities, consulting with the other party on such matters (including with respectto final abandonment of any claims), and reasonably considering the other party’s comments, (B) reasonable cooperation and mutualagreement on (and sharing costs equally with respect to)- 43 - filings that are applicable to both the KHK Territory and the Partner Territory, and (C) the other party having the right to step-in onprosecution and maintenance if the original prosecuting party determines to abandon or not maintain any such Licensed Patent in thewould-be-abandoning party’s territory; (iii)pursuant to Section 6.2(d) of the KHK Agreement, KHK and AVEO have agreed to conferand agree upon which party shall prosecute and/or maintain any Joint Other Invention Patent (as defined in the KHK Agreement).AVEO shall not undertake such conference or agreement with KHK with respect to any Licensed Patent without the Parties’ mutualagreement (which agreement shall not be unreasonably withheld, conditioned or delayed by either Party);(iv)if AVEO or Partner, as applicable, does not bring action to prevent or abate CompetitiveInfringement of any Licensed Patents within [**] days (or [**] days in the case of an action brought under the Hatch-Waxman Act orany ex-U.S. equivalent of the Hatch-Waxman Act) after notification thereof to or by such Party pursuant to Section 5.4(a) above, thenKHK shall have a back-up right under Section 6.5(b)(ii) of the KHK Agreement to bring, at its own expense, an appropriate action inthe Partner Territory against any person or entity engaged in any such Competitive Infringement directly or contributorily. The Partiesacknowledge that KHK has agreed under the KHK Agreement not to initiate legal action without first conferring with AVEO (andAVEO shall not undertake such conference without Partner to the extent related to any Competitive Infringement in the PartnerTerritory, unless otherwise mutually agreed by the Parties) and considering in good faith AVEO’s (and Partner’s, if applicable) reasonsfor not bringing any such action;(v)KHK shall have the sole right under Section 6.5(b)(iii) of the KHK Agreement to enforce theListed AVEO Patents and Licensed Patents that fall within the definition of Kirin Product Invention Patents (as defined in the KHKAgreement) and/or Jointly Owned Product Patents (as defined in the KHK Agreement) with respect to activities or conduct of a ThirdParty in or for the Field in the KHK Territory or outside the Field (as defined in the KHK Agreement) worldwide;(vi)KHK shall have the exclusive right under Section 6.5(c) of the KHK Agreement to preventor abate any Infringement of any Listed AVEO Patents or Licensed Patents that fall within the definition of Kirin Product InventionPatents (as defined in the KHK Agreement) anywhere in the world (including in the Partner Territory) other than CompetitiveInfringement in the Partner Territory or Infringement in the AVEO Territory resulting from activities or conduct of a Third Party in theKHK Territory that compete with, or are expected to compete with, or otherwise materially affect the market for, Licensed Products inthe AVEO Territory. In such event, the Parties acknowledge that KHK has agreed to notify AVEO of such Infringement (in whichevent, AVEO shall notify Partner) and to keep AVEO reasonably informed with respect to the disposition of any action taken inconnection therewith (in which event, AVEO shall pass along such information to Partner);(vii)With respect to any Third Party Infringement of any Licensed Patents that fall within thedefinition of Jointly Owned Product Patents (as defined in the KHK Agreement) anywhere in the world (including in the PartnerTerritory) other than a Competitive- 44 - Infringement in the Partner Territory or an Infringement in the KHK Territory that competes with, or is expected to compete with, orotherwise materially affect the market for, Licensed Products in the KHK Territory, AVEO (and Partner, with respect to anyCompetitive Infringement in the Partner Territory) shall confer with KHK pursuant to Section 6.5(d) of the KHK Agreement and takesuch action in such manner as all parties agree. If the parties are unable after a reasonable period of time to agree on how to proceed,then KHK and AVEO may exercise their rights as joint owners of the affected Licensed Patent in accordance with the allocation ofjoint ownership rights as expressed in Section 6.1 of the KHK Agreement; and (viii)Pursuant to Section 6.5(e) of the KHK Agreement, if either AVEO or Partner brings anaction against Infringement related to any of the Licensed Patents under Section 5.4 above for which KHK has back-up enforcementrights, the Parties acknowledge that KHK shall be entitled to separate representation in such matter by counsel of its own choice and atits own expense.(b)Subject to Section 3.7, without limiting the generality of clause (a) above, if there are at any time anyLicensed Patents that are in-licensed by AVEO instead of owned by AVEO (or any AVEO Affiliate) and that are made known toPartner by AVEO in writing, then Sections 5.2, 5.3 and 5.4 shall apply to the prosecution or enforcement of such Patents, as the casemay be, in the same way as if they were Licensed Patents owned by AVEO, to the full extent AVEO has prosecution and enforcementrights under the agreement by which AVEO received its license rights to such Patents that are in-licensed by AVEO instead of ownedby AVEO (or any AVEO Affiliate), and subject to the rights of the Third Party licensor under such agreement.(c)If there are at any time any Partner Patents that are in-licensed by Partner instead of owned by Partner(or a Partner Affiliate) and that are made known to AVEO by Partner in writing, then Sections 5.2, 5.3 and 5.4 shall apply to theprosecution and enforcement of such Patents, as the case may be, in the same way as if they were Partner Patents owned by Partner, tothe full extent Partner has prosecution and enforcement rights under the agreement by which Partner received its license rights to suchPartner Patents that are in-licensed by Partner instead of owned by Partner (or an Partner Affiliate), and subject to the rights of theThird Party licensor under such agreement.5.9Trademarks.(a)Trademark Cross License. Partner may select and own one or more trademarks of its choice for thepackaging, promotion, marketing and sale of the Licensed Products in the Partner Territory.Each of the Parties agrees to grant to theother Party an exclusive, fully paid-up, royalty-free, sublicenseable license to use the granting Party’s trademark(s) for packaging,promotion, marketing and sale of the Licensed Products (or AVEO’s products in the AVEO Territory) in each Party’s respectiveterritory; provided, however, (i) the good will associated with each trademark shall remain with the granting Party, (ii) the grantingParty shall have the right to review in advance and consent (such consent not to be unreasonably withheld or delayed) to eachproposed use of the granting Party’s trademark by the other Party, and (iii) each Party agrees that it will not use the granting Party’strademarks in a manner that- 45 - may harm the goodwill or reputation of the granting Party in relation to the Licensed Product or otherwise. (b)Compensation. Each of the Parties agrees to reimburse the granting Party for all costs of filing,obtaining and maintaining registration of the trademarks in the grantee Party’s territory.(c)Termination. Upon the expiration or termination of this Agreement, each Party shall immediatelydiscontinue (except for a reasonable period not to exceed 180 days to sell existing inventory) all use of the other Party’s trademarks atno cost whatsoever to the granting Party, and each Party shall immediately return to the granting Party all material relating to thegranting Party’s trademarks.ARTICLE 6.CONFIDENTIALITY6.1Core Confidential Information. Each Party shall, and shall cause its Affiliates and contractors and theirrespective officers, directors, employees and agents to, keep confidential, and not publish or otherwise disclose, and not use directly orindirectly for any purpose, any confidential and proprietary information of such Party relating to any Licensed Compounds or LicensedProducts (the “Core Information”); except to the extent (i) the Core Information is in the public domain through no fault of suchParty, its Affiliates or any of their respective officers, directors, employees or agents, (ii) such disclosure or use would be expresslypermitted under Section 6.3 as if such information was Confidential Information, (iii) such information is of the type customarilydisclosed in the ordinary course of business, including in scientific journals or in scientific, industry or investor meetings, and suchdisclosure would not materially and adversely affect the rights of the other Party under this Agreement, or (iv) such disclosure or use isotherwise expressly permitted by the terms of this Agreement. For clarification, the disclosure by AVEO to Partner or by Partner toAVEO of Core Information shall not cause such information to cease to be subject to the provisions of this Section 6. In the event thisAgreement is terminated in its entirety this Section 6.1 shall have no continuing force or effect and Core Information shall be deemedto be Confidential Information of AVEO or Partner, as applicable, for purposes of the surviving provisions of this Agreement.6.2Treatment of Confidential Information. The Parties agree that during the Term, and for a period of five(5) years after the Term expires in the last country in which it expires or is terminated, a Party receiving Confidential Information of theother Party shall (a) maintain in confidence such Confidential Information to the same extent such Party maintains its own most highlyconfidential proprietary information (but at a minimum each Party shall use Commercially Reasonable Efforts), (b) not disclose suchConfidential Information to any Third Party without prior written consent of the other Party, and (c) not use such ConfidentialInformation for any purpose except those permitted by this Agreement or the KHK Agreement.6.3Authorized Disclosure. Notwithstanding Section 6.1 or Section 6.2, a Party may disclose ConfidentialInformation of the other Party to the extent such disclosure is reasonably necessary in the following instances:- 46 - (a)filing for, prosecuting or maintaining Patents; (b)regulatory filings;(c)prosecuting or defending litigation;(d)complying with applicable governmental regulations and/or submitting information to tax or othergovernmental authorities, provided that if the receiving Party is required by law to make any public disclosures of ConfidentialInformation of the disclosing Party, to the extent it may legally do so, it will give reasonable advance notice to the disclosing Party ofsuch disclosure and will use its reasonable efforts to secure confidential treatment of Confidential Information prior to its disclosure(whether through protective orders or otherwise);(e)to (i) its Affiliates, and to prospective and actual licensees, sublicensees, employees, consultants, agents,accountants, lawyers, advisors and investors, and (ii) others in order to (and solely to the extent required to) exercise such Party’s rightsor fulfill its obligations under this Agreement and the KHK Agreement (including commercialization and/or sublicensing of LicensedPatents, Licensed Know-How or Licensed Products) on a need to know basis, each of whom in (i) and (ii) prior to disclosure must bebound by similar obligations of confidentiality and non-use substantially equivalent in scope to those set forth in this Article 6 and thatare of reasonable duration in view of the circumstances of the disclosure; and(f)to the extent mutually agreed to in writing by the Parties.6.4Termination of Prior Agreements. This Agreement supersedes the Prior Agreement. All informationexchanged between the Parties under or otherwise subject to the Prior Agreement shall be deemed Confidential Information (inaccordance with and to the extent set forth in the definition of such term in Article 1), and shall be subject to the terms of this Article 6.6.5Publicity.(a)The Parties have agreed to issue a joint press release in the form and with the content set forth in ExhibitD for the initial public announcement of the execution of this Agreement. Any other publication, news release or other publicannouncement regarding the execution or terms of this Agreement, shall first be reviewed and approved by both Parties, whichapproval shall not be unreasonably withheld, conditioned or delayed.(b)In addition, Partner shall notify AVEO in advance of any public announcement regarding LicensedProducts’ performance and achievements hereunder. AVEO shall have the right to review and comment upon such publicannouncement and Partner agrees to reasonably consider AVEO’s comments.(c)The terms of this Agreement shall be treated as Confidential Information of both Parties.(i)Such terms may be disclosed by a Party to individuals or entities covered by Section 6.3(e)(i)(but not Section 6.3(e)(ii), except for KHK) above, each of whom- 47 - prior to disclosure must be bound by similar obligations of confidentiality and non-use substantially equivalent in scope to those setforth in this Article 6. (ii)Disclosure of the terms of this Agreement (but not other Confidential Information receivedfrom the other Party) may also be made, to actual or potential bankers, lenders, and investors of the disclosing Party, who are bound toobligations of confidentiality and non-use substantially equivalent in scope to those set forth in this Article 6; provided, however, thatPartner shall not be permitted to disclose the terms of the KHK Agreement.(iii)In addition, if AVEO is legally required to file a copy of this Agreement with the U.S.Securities and Exchange Commission (“SEC”) in connection with such Party’s regular reporting obligations as a public company,AVEO shall attempt to obtain confidential treatment of economic and trade secret information for which such treatment is reasonablyavailable in accordance with applicable laws and regulations and SEC practice.(iv)The Parties acknowledge that AVEO is required under Section 7.4 of the KHK Agreementto obtain KHK’s prior approval (not to be unreasonably withheld, conditioned or delayed) with respect to any publication, newsrelease or public announcement regarding the terms of the KHK Agreement, to use good faith efforts to notify KHK in advance of anysignificant public announcement regarding Licensed Products’ performance and achievement and, if either Party is required to file acopy of this Agreement with the SEC, to provide KHK, at least thirty (30) days in advance of such filing, with a draft set of redactionsto this Agreement (as it relates to the KHK Agreement) for which any confidential treatment will be sought, and to incorporate KHK’scomments as to additional terms KHK would like to see redacted, and seek confidential treatment for such additional terms (exceptonly in the limited circumstances where confidential treatment is manifestly unavailable). Partner shall reasonably cooperate withAVEO with respect to AVEO’s efforts to comply with the foregoing obligations to KHK under the KHK Agreement.6.6Publications. The Parties acknowledge that AVEO is required under Section 7.5 of the KHK Agreementto provide KHK with an opportunity to review any proposed abstracts, manuscripts or scientific presentations (including verbalpresentations) which relate to development or commercialization activities for any Licensed Product, at least thirty (30) days prior totheir intended submission for publication, and to not submit any such abstract or manuscript for publication until KHK is given areasonable period of time to secure patent protection for any material in such publication which it believes to be patentable. Partnershall reasonably cooperate with AVEO with respect to AVEO’s efforts to comply with the foregoing obligation to KHK under theKHK Agreement.ARTICLE 7.REPRESENTATIONS AND WARRANTIES7.1General Representations and Warranties. Each Party represents, warrants and covenants to the otherthat:- 48 - (a)It is duly organized and validly existing under the laws of its state or country of incorporation, and hasfull corporate power and authority to enter into this Agreement and to carry out the provisions hereof. (b)It is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder, andthe person or persons executing this Agreement on its behalf has and have been duly authorized to do so by all requisite corporateaction.(c)This Agreement is legally binding upon it and enforceable in accordance with its terms. The execution,delivery and performance of this Agreement by it does not conflict with any agreement, instrument or understanding, oral or written, towhich it is a party or by which it may be bound, nor violate any material law or regulation of any court, governmental body oradministrative or other agency having jurisdiction over it.(d)It has not granted, and shall not grant during the Term of the Agreement, any right to any Third Partywhich would conflict with the rights granted to the other Party hereunder. It has (or shall have at the time performance is due)maintained and shall maintain and keep in full force and effect all agreements necessary to perform its obligations hereunder.(e)It is not aware of any action, suit or inquiry or investigation instituted by any governmental agencywhich questions or threatens the validity of this Agreement.7.2AVEO’s Warranties. AVEO represents and warrants to Partner that, as of the Effective Date:(a)It has supplied Partner with a true, correct and complete copy of the KHK Agreement and thePharmstandard Agreement and Ophthotech Agreement.(b)The KHK Agreement is in full force and effect and is legally binding upon AVEO and KHK.(c)To AVEO’s Knowledge, KHK does not have cause to terminate the KHK Agreement and AVEO isnot in default under any material provision of the KHK Agreement.(d)The Listed AVEO Patents are owned or Controlled solely and exclusively by AVEO in the Field, freeand clear of any liens, charges and encumbrances, and AVEO has the right to grant to Partner the rights and licenses set forthhereunder.(e)Except as may be provided in the KHK Agreement, Ophthotech Agreement and the PharmstandardAgreement, neither AVEO nor its Affiliates, nor to AVEO’s Knowledge KHK or its Affiliates, has granted expressly or otherwise anyassignment, license or other extension of right, covenant not to sue or other similar interest or benefit, exclusive or otherwise, to, underor in the Licensed Patents or the Licensed Know-How with respect to the Licensed Compound and or the Licensed Products in theField for the Partner Territory, and no Third Party other than KHK has retained any right or other similar interest or benefit, exclusiveor otherwise to under or in the Licensed Patents in the Field in the Partner Territory,- 49 - (f)The Listed AVEO Patents set out on Exhibit B is a complete and accurate list of all Patents Controlledby AVEO anywhere in the Partner Territory that claim the composition of the Licensed Compound, the current Licensed Productformulation, any method that is specific to manufacturing the Licensed Compound or currently used by or on behalf of AVEO or itsAffiliates to manufacture the Licensed Compound or the use of the Licensed Compound in the Field or that are otherwise necessary orrequired for Partner to fully exercise its rights under this Agreement. (g)To AVEO’s Knowledge, prior to the Effective Date, the Licensed Patents are being diligently procuredfrom the respective patent offices in accordance with applicable law and the Licensed Patents have been filed and maintained properlyand correctly and all applicable fees have been paid on or before the due date for payment.(h)Neither AVEO nor its Affiliates nor, to AVEO’s Knowledge, KHK, has received any written notice ofany claim, and does not know of any grounds for such a claim, that any Patent or trade secret right owned or controlled by a ThirdParty would be infringed or misappropriated by the use, sale, offer for sale or importation of Licensed Compounds or LicensedProducts as contemplated by this Agreement.(i)Neither AVEO nor its Affiliates, or to AVEO’s Knowledge KHK nor its Affiliates, is aware of theexistence of any documentation or publication or conduct by or on behalf of KHK or AVEO or their Affiliates that would bring intoquestion the validity or enforceability of the Listed AVEO Patents.(j)To AVEO’s Knowledge, (i) no proceeding is pending or threatened that challenges AVEO’s or KHK’sownership or Control, as applicable, of the Licensed Patents, and (ii) the Licensed Patents are not subject to any pending or threatenedre-examination, opposition, interference or litigation proceedings, and AVEO does not know of any grounds for any such foregoingproceedings.(k)To AVEO’s Knowledge, apart from those companies selling the Licensed Compound for research use,the Licensed Technology is not being infringed or misappropriated by any Third Party..(l)Other than matters which have been disclosed in AVEO’s filings with the United States Securities andExchange Commission, there is no action, claim, demand, suit, proceeding, arbitration, grievance, citation, summons, or subpoena ofany nature (civil, criminal, regulatory or otherwise), in law or in equity, pending or, to AVEO’s Knowledge, threatened, or anygrounds for any, against AVEO or its Affiliates relating to the Licensed Patents, the Licensed Know-How or the transactioncontemplated by this Agreement.(m)Other than payments to AVEO’s Third Party contractors in connection with Section 1.49 of thisAgreement, none of the Licensed Patents Controlled by AVEO at the Effective Date or the Licensed Know-How require the paymentof consideration by AVEO or its Affiliates, or by Partner or its Affiliates, to any Third Party (excluding KHK) in connection with thegrant of rights to Partner and its Affiliates under this Agreement, or the exercise of such rights by Partner or its Affiliates.- 50 - (n)To AVEO’s Knowledge, each of the Listed AVEO Patents properly identifies each and every inventorof the claims thereof as determined in accordance with the laws of the jurisdiction in which such Listed AVEO Patent is issued or suchapplication is pending. (o)To AVEO’s Knowledge, each person who has or has had any rights in or to any Listed AVEO Patentshas assigned and has executed an agreement assigning its entire right, title and interest in and to such Listed AVEO Patents to AVEOor KHK as appropriate. To AVEO’s Knowledge, no current officer, employee, agent or consultant of AVEO or any of its Affiliatesor KHK or any of its Affiliates is in violation of any term of any assignment or other agreement regarding the protection of LicensedPatents.(p)To AVEO’s Knowledge, the inventions claimed or covered by the Listed AVEO Patents (a) were notconceived, discovered, developed or otherwise made in connection with any research activities funded, in whole or in part, by thefederal government of the United States or any agency thereof and (b) are not a “subject invention” as that term is described in 35U.S.C. Section 201(e) and (c) are not otherwise subject to the provisions of the Patent and Trademark Law Amendments Act of 1980,as amended, codified at 35 U.S.C. §§ 200-212, as amended, as well as any regulations promulgated pursuant thereto, including in 37C.F.R. Part 401.(q)AVEO has made (or will make as provided in this Agreement) available to Partner all RegulatoryDocumentation and Licensed Know-How listed in Exhibit C in its possession or Control related to the Licensed Compound or theLicensed Products. All such Regulatory Documentation is (and if made available after the Effective Date, will be) true, complete andcorrect.(r)[Intentionally omitted].(s)Neither AVEO nor to AVEO’s Knowledge any licensee (including KHK), nor any of its or theirrespective officers or employees has (a) committed (or after the Effective Date, will commit) an act, (b) made (or after the EffectiveDate, will make) a statement or (c) failed (or after the Effective Date, will fail) to act or make a statement that, in any case ((a), (b) and(c)), that (i) would be or create an untrue statement of material fact or fraudulent statement to the FDA or any other RegulatoryAuthority with respect to the development of the Licensed Compound or the Licensed Products or (ii) could reasonably be expected toprovide a basis for the FDA to invoke its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery and IllegalGratuities”, set forth in 56 Fed. Reg. 46191 (September 10, 1991) and any amendments thereto or any analogous laws or policies inthe Partner Territory, with respect the exploitation of the Licensed Compound or the Licensed Products.(t)AVEO and to AVEO’s Knowledge, KHK and AVEO’s Other Licensees, have conducted, allexploitation of the Licensed Compound and the Licensed Products, and the Regulatory Documentation has been prepared andmaintained, in accordance with applicable good laboratory and clinical practice and law.- 51 - (u)True, complete and correct copies (as of the Effective Date) of all material adverse information withrespect to the safety and efficacy of the Licensed Compound known to AVEO have been provided to Partner at least two (2) daysprior to the Effective Date. (v)To AVEO’s Knowledge, the representations and warranties of AVEO in this Agreement and theinformation, documents and materials furnished to Partner in connection with its period of diligence prior to the Effective Date, do not,taken as a whole and in light of the nature of such information, documents and materials and taking into consideration the informationthat Partner has learned prior to the Effective Date during its diligence process, (a) contain any untrue statement of a material fact or (b)omit to state any material fact necessary to make the statements or facts contained therein, in light of the circumstances of Partner’sdecision to enter into this Agreement, not misleading.(w)To AVEO’s Knowledge (which for clarity shall not require any additional investigation by AVEO’sexternal intellectual property counsel) the license grant of the Licensed Technology to Partner pursuant to the terms of this Agreementprovides Partner with all intellectual property rights necessary to manufacture and exploit the Licensed Compound for the RCCIndication in the Field in the Partner Territory.7.3AVEO’s Covenants.(a)Except for the development and manufacture of Licensed Products pursuant to, and in accordance with,the terms and conditions set forth in Sections 3.3(e)(i) and 3.5 of this Agreement, during the Term neither AVEO nor any of itsAffiliates (i) shall develop or commercialize any Competing Product in the Partner Territory, (ii) shall collaborate with any Third Party,shall grant to any Third Party the right, or shall engage in activities on behalf of any Third Party, to develop or commercialize anyCompeting Product, in each case in the Partner Territory or (iii) shall grant to any Third Party any license or other right under anyLicensed Technology to develop or commercialize any Competing Product in the Partner Territory.(b)AVEO agrees that any amendments to the KHK Agreement that adversely affect Partner’s rights orobligations under this Agreement shall be agreed by AVEO only with the prior written consent of Partner, not to be unreasonablywithheld or delayed.7.4Partner’s Warranties and Covenants.(a)Except for the development and commercialization of Licensed Products pursuant to, and in accordancewith, the terms and conditions set forth in this Agreement, during the Term neither Partner nor any of its Affiliates (i) shall develop orcommercialize any Competing Product in the Partner Territory or the AVEO Territory, (ii) shall collaborate with any Third Party, shallgrant to any Third Party the right, or shall engage in activities on behalf of any Third Party, to develop or commercialize anyCompeting Product, in each case in the Partner Territory or the AVEO Territory, or (iii) shall grant to any Third Party any license orother right under any Licensed Technology to develop or commercialize any Competing Product in the Partner Territory or the AVEOTerritory.- 52 - (b)Partner represents and warrants to AVEO that as of the Effective Date it does not have any VEGFReceptor Inhibitor at any stage of development or commercialization for the diagnosis, prevention or treatment of any form ofcancer. Partner further covenants and agrees, that in case it or an Affiliate or Sublicensee proposes to develop or commercialize anyVEGF Receptor Inhibitor in the Field in the Partner Territory, Partner shall: (i)provide an overall clinical development plan for the Licensed Compound (if Partner isconducting any development) (at the same level of detail as the AVEO Overall Clinical Development Plan as defined in the KHKAgreement) to AVEO;(ii)to exert at least Commercially Reasonable Efforts to develop and commercialize LicensedProducts (without any lowering of such standard on account of any other VEGF Receptor Inhibitor);(iii)to exert efforts on Licensed Products at least as great as any other VEGF Receptor Inhibitor,taking into account all relevant factors such as the relative stage of development of the products, unique development issues related toeach of the products, and potential uses for the products;(iv)Promptly (within no more than [**] days after requested by KHK) meet with the KHKDevelopment Committee (as defined in the KHK Agreement) and AVEO through a representative of the Partner at the level of at leastVice President or above.(c)Partner represents, warrants and covenants that in the course of the development of Licensed Products,it shall not during the Term use, any employee or consultant who has been debarred by the applicable Regulatory Authorities, or, to thebest of Partner’s knowledge, who was or is the subject of debarment proceedings by the applicable Regulatory Authorities. Partnerfurther covenants that Partner and its Sublicensees, and their respective officers, agents and employees, will not commit or fail tocommit any act, or make or fail to make any statement that would be or create an untrue statement of material fact or fraudulentstatement to any Regulatory Authority with respect to the development or commercialization of the Licensed Compound or theLicensed Products or could reasonably be expected to provide a basis for the FDA to invoke its policy respecting “Fraud, UntrueStatements of Material Facts, Bribery and Illegal Gratuities”, set forth in 56 Fed. Reg. 46191 (September 10, 1991) and anyamendments thereto or any analogous laws or policies in the Partner Territory, with respect the exploitation of the Licensed Compoundor the Licensed Products.7.5Disclaimer Concerning Technology. EXCEPT AS OTHERWISE EXPRESSLY PROVIDEDHEREIN, THE PATENTS AND KNOW-HOW PROVIDED BY EACH PARTY HEREUNDER ARE PROVIDED “AS IS”AND EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED,INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR APARTICULAR PURPOSE, NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIESOR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN ALL CASES WITH RESPECTTHERETO. Without limiting the generality of the foregoing, each Party expressly does not warrant (a) the success of activitiesperformed pursuant to this Agreement or (b) the- 53 - safety, efficacy or usefulness for any purpose of the Patents or Know-How it provides under this Agreement or the subject matter ofthem. ARTICLE 8.INDEMNIFICATION8.1Indemnification by Partner.(a)Partner shall indemnify, hold harmless and defend AVEO and each of its Affiliates, all of theirrespective officers, directors, employees and agents, and each of their respective successors, heirs and assigns (collectively, the“AVEO Indemnitees”) from and against any and all losses, damages, liabilities, judgments, fines, amounts paid in settlement,expenses and costs of defense (including reasonable attorneys’ fees and witness fees) (collectively, “Losses”) resulting from anydemand, claim, action or proceeding brought or initiated by a Third Party (each, a “Third-Party Claim”) against any AVEOIndemnitees(s) to the extent that such Third-Party Claim arises out of:(i)the breach or alleged breach of any representation, warranty or covenant by Partner in Article7 of this Agreement;(ii)any breach of any term of this Agreement by a Partner Indemnitee;(iii)the negligence or willful misconduct of any Partner Indemnitee (defined in Section 8.2); or(iv)the research, development, manufacture, storage, handling, use, sale, offer for sale orimportation of Licensed Products by or for the Partner Indemnitees, provided that such Third Party Claim results from negligence orwillful misconduct of Partner Indemnitees;provided in each case that (x) the AVEO Indemnitees comply with the procedure set forth in Section 8.3; and (y) such indemnity shallnot apply to the extent AVEO has an indemnification obligation pursuant to Section 8.2 for such Loss or such Loss was caused by abreach of any term of this Agreement by any AVEO Indemnitee. Partner shall require equivalent indemnification of the AVEOIndemnitees as in clause (iii) of the foregoing sentence from each Sublicensee as to such Sublicensee’s activities described in suchclause (iii).(b)Partner shall indemnify, hold harmless and defend KHK, KHK’s Affiliates, KHK’s and its Affiliates’sublicensees and all of the respective officers, directors, employees and agents of each of the foregoing entities (collectively, the “KHKIndemnitees”) from and against any and all Losses resulting from any Third-Party Claim against any KHK Indemnitees(s) to theextent that such Third-Party Claim arises out of the research, development, manufacture, storage, handling, use, sale, offer for sale orimportation of Licensed Compounds or Licensed Products; provided that (i) the KHK Indemnitees comply with the procedure set forthin Section 8.3 of the KHK Agreement; and (ii) such indemnity shall not apply to the extent KHK has an indemnification obligationpursuant to Section 9.2 of the KHK Agreement for such Loss.- 54 - 8.2Indemnification by AVEO. (a)AVEO shall indemnify, hold harmless and defend Partner, Partner’s Affiliates, Partner’s and itsAffiliates’ Sublicensees and all of the respective officers, directors, employees and agents of each of the foregoing entities (collectively,the “Partner Indemnitees”) from and against any and all Losses resulting from any Third-Party Claim against them to the extent thatsuch Third-Party Claim arises out of:(i)the breach or alleged breach of any representation, warranty or covenant by AVEO in Article7 of this Agreement; or(ii)any breach of any term of this Agreement by an AVEO Indemnitee; or(iii)the negligence or willful misconduct of any AVEO Indemnitee;provided in each case that (y) the Partner Indemnitees comply with the procedure set forth in Section 8.3; and (z) such indemnity shallnot apply to the extent Partner has an indemnification obligation pursuant to Section 8.1 for such Loss or such Loss was caused by abreach of any term of this Agreement by any Partner Indemnitee.(b)In addition, the Parties acknowledge that, pursuant to Section 9.2 of the KHK Agreement, KHK hasagreed to indemnify, hold harmless and defend AVEO and its sublicensees and all of the respective officers, directors, employees andagents of the foregoing entities from and against any and all Losses resulting from any Third-Party Claim against AVEO or itssublicensees to the extent that such Third-Party Claim arises out of:(i)the breach or alleged breach of any representation, warranty or covenant by KHK in Article 8of the KHK Agreement; or(ii)the negligence or willful misconduct of any Kirin Indemnitee (as defined in the KHKAgreement);provided in each case that (x) AVEO and the applicable sublicensee(s) comply with the procedure set forth in Section 9.3 of the KHKAgreement, and (y) such indemnity shall not apply to the extent that AVEO has an indemnification obligation to KHK for such Losspursuant to Section 9.1 of the KHK Agreement.(c)If Partner, as a sublicensee of AVEO, seeks to be indemnified by KHK with respect to a Third-PartyClaim as set forth in Section 8.2(b) above and pursuant to Section 9.2 of the KHK Agreement (“Partner Third-Party Claim”),Partner shall promptly notify AVEO thereof and, in order to ensure compliance with the procedure set forth in Section 9.3 of the KHKAgreement, each Party shall comply with the procedures set forth below:(i)To the extent that AVEO receives prompt notice from Partner of any Partner Third-PartyClaim, AVEO shall provide KHK with prompt notice of such Partner Third-Party Claim giving rise to KHK’s indemnificationobligation pursuant to Section 9.2 of the KHK Agreement and the exclusive ability to defend (with the reasonable cooperation ofAVEO- 55 - and Partner, at KHK’s expense on a pass-through basis) or settle any such claim. The Parties acknowledge that, pursuant to Section9.3 of the KHK Agreement, KHK has agreed not to enter into any settlement for damages other than monetary damages withoutAVEO’s written consent (which consent shall not be given by AVEO unless and until the Parties mutually agree to do so, suchagreement not to be unreasonably withheld, delayed or conditioned by either Party). (ii)The Parties acknowledge that, pursuant to Section 9.3 of the KHK Agreement, AVEO hasthe right to participate in the defense of any claim or suit that has been assumed by KHK under Section 9.2 of the KHK Agreement. Ifrequested by Partner, AVEO shall use its reasonable efforts to obtain KHK’s consent to Partner’s participation, along with AVEO, inthe defense of any claim or suit with respect to any Partner Third-Party Claim that has been assumed by KHK under Section 9.2 of theKHK Agreement; it being understood that any participation by Partner in such suit or claim shall be conducted at Partner’s ownexpense and with counsel of Partner’s own choice(iii)The Parties acknowledge that, pursuant to Section 9.3 of the KHK Agreement, if AVEOand KHK cannot agree as to the application of Section 9.1 or Section 9.2 of the KHK Agreement as to any particular Partner Third-Party Claim (which agreement shall not be given or withheld by AVEO unless and until the Parties mutually agree to do so, suchagreement not to be unreasonably withheld, delayed or conditioned by either Party), AVEO and KHK may conduct separate defensesof such Partner Third-Party Claim. In such case, as between AVEO and Partner, AVEO shall have the exclusive right to assume thedefense of such Partner Third-Party Claim, including any settlement thereof (provided that AVEO shall not enter into any settlementfor damages other than monetary damages without Partner’s written consent, which shall not be unreasonably withheld, delayed orconditioned), and Partner shall have the right to participate in such defense, at Partner’s own expense and using counsel of Partner’sown choice. The Parties acknowledge that AVEO reserves the right, and shall use its best efforts, to claim indemnity from KHK inaccordance with Section 9.2 of the KHK Agreement upon resolution of the underlying Partner Third-Party Claim.8.3Procedure. To be eligible for its AVEO Indemnitees or Partner Indemnitees (as applicable) to beindemnified hereunder, a Party shall provide the indemnifying Party with prompt notice of the Third-Party Claim giving rise to theindemnification obligation pursuant to this Article 8 and the exclusive ability to defend (with the reasonable cooperation of theindemnified Party, at the defending Party’s expense on a pass-through basis) or settle any such claim; provided, however, that theindemnifying Party shall not enter into any settlement other than by the payment of monetary damages without the indemnified Party’swritten consent, such consent not to be unreasonably withheld, delayed or conditioned. The indemnified Party shall have the right toparticipate, at its own expense and with counsel of its choice, in the defense of any claim or suit that has been assumed by theindemnifying Party. If the Parties cannot agree as to the application of Sections 8.1 and 8.2 to any particular Third Party Claim, theParties may conduct separate defenses of such Third Party Claim. Each Party reserves the right to claim indemnity from the other inaccordance with Sections 8.1 and 8.2 above upon resolution of the underlying claim, notwithstanding the provisions of this Section 8.3requiring the indemnified Party to tender to the indemnifying Party the exclusive ability to defend such claim or suit.- 56 - 8.4Insurance. Partner shall procure and maintain insurance or self- insurance, including product liabilityinsurance, adequate to cover its obligations hereunder and which are consistent with normal business practices of prudent companiessimilarly situated, at all times during which any Licensed Product is being clinically tested in human subjects or commerciallydistributed or sold by or on behalf of Partner. At a minimum, prior to the first Marketing Approval of a Licensed Product in the PartnerTerritory, Partner shall be insured for [**] Dollars ($[**]) to cover its obligations under this Agreement. After receipt of suchMarketing Approval, Partner shall be insured for a minimum of [**] Dollars ($[**]) to cover its obligations under this Agreement. It isunderstood that such insurance or self-insurance shall not be construed to create a limit of Partner’s liability with respect to itsindemnification obligations under this Article 8. Partner shall provide AVEO with written evidence of such insurance or self-insuranceupon request. Partner shall provide AVEO with written notice at least thirty (30) days prior to the cancellation, non-renewal or materialchange in such insurance or self-insurance which materially adversely affects the rights of AVEO hereunder. 8.5Limitation of Liability. EXCEPT TO THE EXTENT SUCH PARTY MAY BE REQUIRED TOINDEMNIFY THE OTHER PARTY UNDER THIS ARTICLE 8 OR IN RESPECT OF A BREACH OF ARTICLE 6,NEITHER PARTY NOR ITS RESPECTIVE AFFILIATES AND LICENSEES (INCLUDING SUBLICENSEES AND OTHERLICENSEES) SHALL BE LIABLE FOR SPECIAL, INCIDENTAL, EXEMPLARY, CONSEQUENTIAL OR PUNITIVEDAMAGES, INCLUDING LOST PROFITS, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT,WHETHER IN CONTRACT, WARRANTY, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE.ARTICLE 9.TERM AND TERMINATION9.1Term. This Agreement shall become effective on the Effective Date and, unless it is earlier terminatedpursuant to this Article 9, shall continue on a Licensed Product-by-Licensed Product and country by country basis in the PartnerTerritory until the expiration of the Royalty Term in a country (the “Term”), at which time Partner shall have an irrevocable, perpetual,fully paid-up, fully sublicensable, exclusive license to the Licensed Technology in respect of such Licensed Product in such country.9.2Termination for Breach.(a)Notice. If either Party believes that the other is in material breach of this Agreement, then the non-breaching Party may deliver written notice of such breach to the other Party. To be an effective notice under this Section 9.2(a), thewritten notice must (i) explicitly reference this Section 9.2, and (ii) explicitly state that if the breach is not cured, the notifying Party willhave the right to terminate this Agreement as follows: in the event of a material breach of this Agreement, the non-breaching Party shallhave the right to terminate this Agreement in its entirety (if the breach is material to the Agreement as a whole) or, if the breach ismaterial to the Agreement in a Partner Region, with respect to such Partner Region (according to where the breach occurs). Theallegedly breaching Party shall have ninety (90) days from receipt of such notice to cure such breach; provided that the cure periodshall be thirty (30) days for breaches involving nonpayment of any amount due hereunder.- 57 - (b)Failure to Cure. If the Party receiving notice of breach fails to cure such breach within such ninety(90) day period (or thirty (30) day period in the case of non-payment breaches), the Party originally delivering the notice may terminatethis Agreement effective immediately upon delivery of a second written notice to the allegedly breaching Party. Notwithstanding theforegoing: (a) except in the event the basis of the alleged material breach is a failure to make payment(s) under this Agreement, suchninety (90)-day cure period shall be extended for an additional ninety (90) days or such longer period as is reasonably required to curesuch breach if the breaching Party is employing ongoing, good faith efforts to cure such alleged material breach; (b) in the event thebasis of the alleged material breach is a failure to make payment(s) under this Agreement and the alleged breaching Party (i) notifies thenon-breaching Party, during such thirty (30)-day cure period, of a bona fide dispute regarding whether such payment(s) are due and (ii)pays the undisputed portion of such payment(s) on or before providing such notice, such thirty (30)-day cure period shall be tolledpending resolution of such dispute pursuant to Section 10, and in the event the dispute is finally resolved against the Party allegedly inmaterial breach, the applicable cure period shall commence upon such final resolution; and (c) in the event the basis of the allegedmaterial breach is other than a failure to make payment(s) under this Agreement and the alleged breaching Party notifies the non-breaching Party, during such ninety (90)-day cure period, of a bona fide dispute regarding the alleged breach, such ninety (90)-daycure period shall be tolled pending resolution of such dispute pursuant to Section 10, and in the event the dispute is finally resolvedagainst the Party allegedly in material breach, the applicable cure period shall commence upon such final resolution. 9.3Termination for Bankruptcy. This Agreement may be terminated by either Party immediately uponwritten notice to the other Party and to the extent permitted under applicable laws, rules, or regulations, upon the filing or institution ofbankruptcy, reorganization, liquidation or receivership proceedings, or upon an assignment of a substantial portion of the assets for thebenefit of creditors by the other Party; provided, however, that in the case of any involuntary bankruptcy proceeding such right toterminate shall only become effective if the other Party consents to the involuntary bankruptcy or such proceeding is not dismissedwithin ninety (90) days after the filing thereof.9.4Termination for Patent Challenge. If Partner or any of its Affiliates or Sublicensees (a) initiates orrequests an interference, post-grant review, inter-partes review, reexamination, protest, opposition, nullity or similar proceeding withrespect to any Licensed Patent, (b) makes, files or maintains any claim, demand lawsuit, or cause of action to challenge the validity orenforceability of any Licensed Patent, (c) opposes any extension of, or the grant of a supplementary protection certificate with respectto, any Licensed Patent, or (d) funds or otherwise provides material assistance to any other Person with respect to any of the foregoing,AVEO shall have the right to terminate this Agreement upon thirty (30) days’ prior written notice to Partner. Any such terminationshall only become effective if Partner or its Affiliate or Sublicensee, as applicable, has not withdrawn such action before the end of theabove notice period.9.5Elective Termination. Partner shall have the right, in its sole discretion, to terminate this Agreement on aPartner Region by Partner Region basis or in its entirety by providing not less than one hundred eighty (180) days’ prior written noticeto AVEO; provided,- 58 - however, that Partner shall be obligated to continue to share in any costs of development previously agreed and committed to in writingas part of a Joint Development Plan (i.e., costs for ongoing clinical trials agreed to prior to such termination as part of a JointDevelopment Plan, even where such trials continue beyond termination). 9.6AVEO’s Rights upon Certain Terminations. Upon termination of this Agreement by AVEO underSection 9.2, 9.3 or 9.4 or by Partner under Section 9.5 (but not expiration of this Agreement):(a)License Termination. The licenses granted by AVEO to Partner under Article 3 shall terminate.(b)Regulatory Filings. To the extent permitted by applicable law, Partner shall transfer to AVEO allfilings made with a Regulatory Agency in any jurisdiction that must be made prior to commencing clinical testing in humans,applications for Marketing Approval, Marketing Approvals, Pricing Approvals, drug dossiers, master files and other regulatory filingsand regulatory correspondence related to any Licensed Compounds or Licensed Products that it Controls as of the effective date ofsuch termination. If Partner is restricted under applicable law from transferring ownership of any of the foregoing items to AVEO,Partner shall grant AVEO (or its designee) a right of reference or use to such item. Partner shall take all permitted actions reasonablynecessary to effect such transfer or grant of right of reference or use to AVEO.(c)Data. Partner shall transfer to AVEO its entire right, title, and interest in and to all preclinical andclinical data, Clinical Regulatory Filings, Safety Data and all other supporting data, including pharmacology, toxicology, chemistry andbiology data, in Partner’s Control as of the effective date of such termination related to, and to the extent necessary or reasonably usefulfor AVEO to continue the development, manufacture or commercialization of, Licensed Compounds and Licensed Products.(d)No Further Representations. Partner shall discontinue making any representation regarding its statusas a licensee of AVEO in the Partner Territory and in the Field for Licensed Compounds and Licensed Products and shall ceaseconducting all activities with respect to the marketing, promotion, sale or distribution of all of the foregoing.(e)Transition Assistance. To the extent requested by AVEO, for a period of [**] months following theeffective date of termination, Partner shall also provide such assistance as may be reasonably necessary to transfer and/or transitionover a reasonable period of time to AVEO any licenses and other contracts specific to Licensed Compounds and Licensed Products(including clinical trial and manufacturing agreements with respect thereto), to the extent such agreements are in effect as of theeffective date of termination and such assignment is permitted.(f)Remaining Inventories. AVEO shall have the right to purchase from Partner all of the inventory ofLicensed Products held by Partner as of the effective date of termination at a price equal to Partner’s fully burdened manufacturingcost, determined in accordance with GAAP. AVEO shall notify Partner within [**] months after termination whether AVEO elects toexercise such right.- 59 - (g)Transfer of Contracts. To the extent requested by AVEO, for a period of six (6) months following theeffective date of termination, Partner shall provide, at a reasonable cost to AVEO, such assistance as may be reasonably necessary totransfer or transition over such period of time to AVEO any license agreements or other contracts specific to Licensed Compounds andLicensed Products (including clinical trial and manufacturing agreements), to the extent such agreements are in effect as of the effectivedate of termination and such assignment or transfer is permitted. (h)Prosecution and Enforcement. The provisions of Article 5 (other than Section 5.1) shall beterminated; provided that, as between the Parties, AVEO shall have the sole right (but not the obligation) to prosecute, maintain andenforce all Licensed Patents and Joint Patents, and Partner shall provide such assistance and cooperation as may be reasonablynecessary in connection with the transition of prosecution and enforcement responsibilities to AVEO with respect to any LicensedPatents and Joint Patents with respect to which Partner (or its Affiliate or Sublicensee) had prosecution, maintenance or enforcementresponsibility prior to the effective date of termination, including execution of such documents as may be necessary to effect suchtransition.(i)Transfer of Marketing-Related Materials. Partner shall transfer to AVEO all promotional materials,customer data, competitive intelligence data, market research and other materials, information or data related to the marketing,promotion or sale of Licensed Compounds and Licensed Products Controlled by Partner as of the effective date of such termination, tothe extent necessary or reasonably useful for the commercialization of Licensed Compounds and Licensed Products.(j)Affiliates and Sublicensees.Partner shall cause its Affiliates and Sublicensees to comply withSection 9.6 as if they were Partner.9.7Grant Back. Upon termination of this Agreement for any reason, Partner shall grant to AVEO, andhereby does grant, an irrevocable, perpetual, royalty bearing, worldwide, non-exclusive license, with the right to grant sublicenses,under the Partner Patents, Partner Know-How Controlled by Partner, Joint Inventions and Joint Patents to develop, make, have made,use, sell, offer for sale or import Licensed Compounds and Licensed Products. Royalties shall be payable by AVEO to Partner only ifAVEO uses the license to Partner Patents in the AVEO Territory, and shall be at a reasonable royalty rate to be established by anexpert in such determinations agreed to by both Parties, and otherwise on the same terms as set out herein in relation to LicensedProducts and the terms of Sections 4.3.4, 4.4, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15 and 4.17 shall apply mutatis mutandis.9.8Partner’s Rights upon Certain Terminations. Upon termination of this Agreement by Partner underSections 9.2, 9.3 or 9.5, (a) the licenses granted by AVEO to Partner under Article 3 shall terminate and (b) Partner shall discontinuemaking any representation regarding its status as a licensee of AVEO in the Partner Territory and in the Field for Licensed Compoundsand Licensed Products and shall cease conducting all activities with respect to the marketing, promotion, sale or distribution of all ofthe foregoing.9.9Survival.- 60 - (a)The following provisions shall survive any expiration or termination of this Agreement in its entirety:Articles 6, 8 and 10, and Sections 2.6, 2.8, 3.3(e), 4.15, 4.16 (for a period of one year post termination or expiry), 7.5, 9.1, 9.6, 9.7,9.8, 11.2, 11.3, 11.5, 11.6, 11.7, 11.8, 11.12, 11.13, 11.14 and 11.15. (b)Expiration and termination of this Agreement shall not relieve the Parties of any liability which accruedhereunder prior to the effective date of such termination nor preclude either Party from pursuing all rights and remedies it may havehereunder or at law or in equity with respect to any breach of this Agreement nor prejudice either Party’s right to obtain performance ofany obligation.ARTICLE 10.DISPUTE RESOLUTION10.1Seeking Consensus. If any dispute, controversy or claim arising out of or relating to the validity,construction, enforceability, performance or breach of this Agreement arises between the Parties (a “Dispute”), then upon the writtenrequest of either Party, the Parties shall have senior executives with decision-making authority of each Party meet and discuss thematter in good faith. The written request shall explain the nature of the Dispute and refer to the relevant provisions of the Agreementupon which the Dispute is based. The complaining Party shall also set forth a proposed solution to the problem, including a suggestedtime frame within which the Parties must act. The non-complaining Party must respond in writing within [**] days of receiving thenotice with an explanation, including references to the relevant provisions of the Agreement and a response to the proposed solutionand suggested time frame for action. The complaining Party must initiate the scheduling of this resolution meeting. The Parties shallhave such senior executives, and other personnel as necessary, meet within [**] days after the initial request in writing by either Party.The Parties shall discuss possible options for resolving the Dispute, including a discussion of whether mediation may be a usefulmechanism for resolving the Dispute; provided that neither Party shall be obligated to enter into or participate in mediation. If thematter is not resolved within [**] following the request for discussions, and the Parties have not agreed upon mediation, then eitherParty may then invoke arbitration in accordance with this Article 10. If mediation takes place and is unsuccessful, then either Party maythen invoke arbitration in accordance with this Article 10.10.2Arbitration.(a)Notice of Arbitration. Any Dispute which may arise between the Parties that is not resolved pursuantto Section 10.1 shall be settled by binding arbitration as set forth in this Section 10.2, excluding any Patent Disputes as specified inSection 10.5 (which shall be resolved pursuant to Section 10.5). Either Party, following the end of the [**] day period referenced inSection 10.1, may refer such issue to arbitration by submitting a written notice of such request to the other Party.(b)Selection of Arbitrators. The number of arbitrators to resolve any Dispute submitted to arbitrationunder Section 10.2(a) shall be three (3). Each Party shall select one (1) arbitrator within [**] days following receipt of notice underSection 10.2(a), and the two arbitrators selected by the Parties shall be responsible for selecting the third arbitrator. Each- 61 - arbitrator shall be neutral and independent of both Parties and all of their respective Affiliates, shall have significant experience andexpertise in licensing and partnering agreements in the pharmaceutical and biotechnology industries. If the two arbitrators selected bythe Parties cannot agree on a third arbitrator within [**] days following either Party’s request for arbitration hereunder, then such thirdarbitrator shall be appointed by JAMS, Inc. which arbitrator must meet the foregoing criteria. (c)Location; Proceedings. The place of arbitration shall be New York, New York. The proceedings shallbe conducted pursuant to the rules set forth by JAMS, Inc. for streamlined arbitration proceedings. All proceedings andcommunications shall be in English. Each Party shall have the right to be represented by counsel of its own choosing.(d)Discovery. The Parties agree that discovery appropriate to the issues in the dispute shall be permittedin the arbitration, including reasonable document requests, pre-hearing exchanges of information, expert witness disclosures, limiteddepositions of important witnesses and other appropriate discovery; provided that such discovery shall be limited to the narrower of(i) the scope of discovery agreed to by the Parties, or if none can be agreed, established by the arbitrators, and (ii) such discovery aswould be permitted by the Federal Rules of Civil Procedure and is approved by the arbitrators, keeping in mind the goal of anexpedited and efficient proceeding.(e)Procedural Rules; Statute of Limitations. The arbitration shall be governed by the procedural andsubstantive law set forth in Section 10.3. The statute of limitations of the State of New York applicable to the commencement of alawsuit shall apply to the commencement of arbitration under this Article 11; provided that such statute of limitations shall be tolledwith respect to the subject matter of any Dispute upon delivery of a Party’s written request under Section 10.1 relating to such Dispute;provided, further, that if the senior executives are unable to resolve such Dispute within the [**] day period specified in Section 10.1,the Parties agree to file the notice of arbitration within [**] days thereafter.(f)Costs. Each Party shall bear its own costs and expenses and attorneys’ fees in the arbitration, exceptthat the arbitrators may order the non-prevailing Party to bear all or an appropriate part (reflective of the relative success on the issues)of the costs and expenses and reasonable attorneys’ fees incurred by the prevailing Party based on the relative merits of each Party’spositions on the issues in the Dispute. The Party that substantially prevails in the arbitration proceeding shall be reimbursed anypayments it has made in respect of the arbitrators’ fees and expenses and any administrative fees of arbitration.(g)Award. Any award rendered by the arbitrators shall be final and binding on the Parties, and shall begoverned by the terms and conditions hereof, including the limitation on damages set forth in Section 8.5. Any award to be paid by oneParty to the other Party as determined by the arbitrators shall be promptly paid in Dollars free of any tax, deduction or offset; and anycosts, fees or taxes incident to enforcing the award shall, to the maximum extent permitted by applicable law, be charged against theParty resisting enforcement. Each Party agrees to abide by the award rendered in any arbitration conducted pursuant to this Article 10,judgment may be entered upon the final award in any court of competent jurisdiction, including any court of competent jurisdiction inthe United States or in Japan. The award shall include- 62 - interest from the date of any damages incurred for breach of the Agreement, and from the date of the award until paid in full, at the rateset forth in Section 4.17. (h)Confidentiality. All proceedings and decisions of the arbitrator shall be deemed ConfidentialInformation of each of the Parties, and shall be subject to Article 6. Except as required by applicable law, neither Party shall make (orinstruct the arbitrator to make) any public announcement with respect to the proceedings or decision of the arbitrators without priorwritten consent of the other Party. The existence of any dispute submitted to arbitration, and the award, shall be kept in confidence bythe Parties and the arbitrators, except as required in connection with the enforcement of such award or as otherwise required byapplicable law.(i)Survivability. Any duty to arbitrate under this Agreement shall remain in effect and be enforceable aftertermination of this Agreement for any reason.10.3Governing Law. This Agreement shall be governed by and construed under the substantive laws of theState of New York, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretationof this Agreement to the substantive law of another jurisdiction.10.4Injunctive Relief; Remedy for Breach of Exclusivity. Nothing in this Article 10 will preclude eitherParty from seeking equitable relief or interim or provisional relief from a court of competent jurisdiction, including a temporaryrestraining order, preliminary injunction or other interim equitable relief, concerning a dispute either prior to or during any arbitration ifnecessary to protect the interests of such Party or to preserve the status quo pending the arbitration proceeding. Specifically, the Partiesagree that a material breach by either Party of its obligations in Article 6 of this Agreement may cause irreparable harm to the otherParty, for which damages may not be an adequate remedy. For the avoidance of doubt, nothing in this Section 10.4 shall otherwiselimit a breaching Party’s opportunity to cure a material breach as permitted in accordance with Section 9.2.10.5Patent Disputes.. Notwithstanding Section 10.2, any Dispute relating to the scope, validity,enforceability or infringement of any Licensed Patents, Partner Patents or Joint Patents shall be submitted to a court of competentjurisdiction in the country in which such Patent rights were granted or arose.ARTICLE 11.MISCELLANEOUS11.1Export Control. This Agreement is made subject to any restrictions concerning the export of productsor technical information from the United States or other countries which may be imposed upon or related to AVEO or Partner fromtime to time. Each Party agrees that it shall not export, directly or indirectly, any technical information acquired from the other Partyunder this Agreement or any products using such technical information to a location or in a manner that at the time of export requiresan export license or other governmental approval, without first obtaining the written consent to do so from the appropriate agency orother governmental entity.- 63 - 11.2Entire Agreement; Amendment. This Agreement (including the Exhibits hereto) sets forth thecomplete, final and exclusive agreement and all the covenants, promises, agreements, warranties, representations, conditions andunderstandings between the Parties hereto and supersedes and terminates all prior agreements and understandings between the Parties(including the Prior Agreement with respect to Confidential Information). There are no covenants, promises, agreements, warranties,representations, conditions or understandings, either oral or written, between the Parties other than as are set forth herein and therein.No subsequent alteration, amendment, change or addition to this Agreement shall be binding upon the Parties unless reduced to writingand signed by an authorized officer of each Party. 11.3Bankruptcy. All rights and licenses granted under or pursuant to this Agreement by either Party to theother are and shall be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of rights to “intellectualproperty” as defined under Section 101(52) of the U.S. Bankruptcy Code. Each Party agrees that the other Party, as a licensee of suchrights under this Agreement, shall retain and may fully exercise all of its rights and elections under the U.S. Bankruptcy Code. Withoutlimiting the foregoing, the Parties further agree that if a bankruptcy proceeding is commenced by or against one Party (the “Debtor”)then, in the event the Debtor rejects this Agreement pursuant to Section 365 of the U.S. Bankruptcy Code or otherwise applicable lawand the other Party elects to retain its rights hereunder pursuant to Section 365(n) of the U.S. Bankruptcy Code or otherwise applicablelaw, the other Party shall be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual propertyand all embodiments of such intellectual property. The Parties further agree, without limiting the foregoing, that unless and until theDebtor rejects this Agreement pursuant to applicable law, the Debtor shall perform all of its obligations hereunder or immediatelyprovide to the other Party a complete duplicate of (or complete access to, as appropriate) any such intellectual property and allembodiments of such intellectual property, and the same, if not already in the other Party’s possession; provided, however, that uponassumption of this Agreement by the Debtor pursuant to Section 365 of the U.S. Bankruptcy Code or otherwise applicable law, theother Party shall promptly return all such tangible materials, intellectual property and embodiments thereof that have been provided to itsolely as a result of this Section 11.3.11.4Force Majeure. Both Parties shall be excused from the performance of their obligations under thisAgreement to the extent that such performance is prevented by a Force Majeure and the nonperforming Party promptly provides noticeof the prevention to the other Party. Such excuse shall be continued so long as the condition constituting Force Majeure continues andthe nonperforming Party takes reasonable efforts to remove the condition. For purposes of this Agreement, “Force Majeure” meansconditions beyond a Party’s reasonable control or ability to plan for, including acts of God, war, terrorism, civil commotion, laborstrike or lock-out, epidemic, failure or default of public utilities or common carriers, and destruction of production facilities or materialsby fire, earthquake, storm or like catastrophe; provided, however, the payment of invoices due and owing hereunder shall not beexcused by reason of a Force Majeure affecting the payor.11.5Notices. Any notice required or permitted to be given under this Agreement shall be in writing, shallspecifically refer to this Agreement and shall be deemed to have been sufficiently given for all purposes if mailed by first class certifiedor registered mail, postage- 64 - prepaid, express delivery service or personally delivered. Unless otherwise specified in writing, the mailing addresses of the Partiesshall be as described below. If to Partner:EUSA Pharma (UK) LimitedBreakspear Park,Breakspear Way,Hemel Hempstead, HP24TZUnited KingdomAttention: Chief Executive OfficerIn the case of AVEO:AVEO Pharmaceuticals, Inc.One Broadway, 14th FloorCambridge, Massachusetts 02142Attention: Chief Executive OfficerCopy to: VP Corporate Development and Alliance ManagementFacsimile: (617) 995-4995with a required copy to:Choate, Hall & StewartTwo International PlaceBoston, MA 02110Attn: Robert A. Licht, Esq.11.6Maintenance of Records. Each Party shall keep and maintain all records required by law or regulationwith respect to Licensed Products and shall make copies of such records available to the other Party upon request.11.7Construction. This Agreement has been prepared jointly and shall not be strictly construed againsteither Party. Any reference in this Agreement to an Article, Section, subsection, paragraph, clause, or Exhibit shall be deemed to be areference to any Article, Section, subsection, paragraph, clause, or Exhibit, of or to, as the case may be, this Agreement. Except wherethe context otherwise requires, (a) any definition of or reference to any agreement, instrument or other document refers to suchagreement, instrument other document as from time to time amended, supplemented or otherwise modified (subject to any restrictionson such amendments, supplements or modifications set forth herein or therein), (b) any reference to any laws refers to such laws asfrom time to time enacted, repealed or amended, (c) the words “herein,” “hereof” and hereunder,” and words of similar import, refer tothis Agreement in its entirety and not to any particular provision hereof, (d) the words “include,” “includes” and “including” shall bedeemed to be followed by the phrase “but not limited to,” “without limitation” or words of similar import, and (e) the word “or” has theinclusive meaning represented by the phrase “and/or”, (f) the words “date hereof” refers to the Effective Date, (g) the word “extent” inthe phrase “to the extent” means the degree to which a subject or other thing- 65 - extends, and such phrase does not mean simply “if”; and (g) definitions contained in this Agreement are applicable to the singular aswell as the plural forms of such terms. 11.8Ambiguities. Ambiguities, if any, in this Agreement shall not be construed against any Party,irrespective of which Party may be deemed to have authored the ambiguous provision.11.9Assignment. Neither this Agreement nor any right or obligation hereunder may be assigned or otherwisetransferred by any Party without the consent of the other Party; provided, however, that any Party may, without such consent, assignthis Agreement, (a) in whole or in part (divided on a geographic basis but not otherwise), to any of its respective Affiliates; providedthat such Party shall remain jointly and severally liable with such Affiliate in respect of all obligations so assigned; such Affiliate hasacknowledged and confirmed this in writing effective as of such assignment or other transfer; and such Affiliate shall be bound by thisAgreement as if it were a party to it as and to the identical extent applicable to the transferor; or (b) as a whole, if either Party mergeswith, or all or substantially all of its business or assets are acquired by, another entity (whether by merger, sale of assets, sale of stock,by way of security to a bank or other financial institution, or otherwise) (an “M&A Event”), to the Party’s merger partner or theacquirer as part of that M&A Event. Each Party agrees that, notwithstanding any provisions of this Agreement to the contrary, if thisAgreement is assigned by a Party in connection with an M&A Event, such assignment shall not provide the non-assigning Party withrights or access to intellectual property or technology of the acquirer of the assigning Party. Any permitted assignment shall be bindingon the successors of the assigning Party. Any assignment or attempted assignment by either Party in violation of the terms of thisSection 11.9 shall be null and void.11.10Independent Contractors. It is expressly agreed that AVEO and Partner shall be independentcontractors and that the relationship between them shall not constitute a partnership, joint venture or agency. Neither AVEO norPartner shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shallbe binding on the other Party, without the prior written consent of the other Party to do so.11.11Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shallbe deemed an original, but all of which together shall constitute one and the same instrument. Signature pages may be exchangedelectronically in portable document format (.pdf) form.11.12Severability. If any provision of this Agreement is held to be invalid or unenforceable in the alternativedispute resolution proceedings specified in Article 10 from which no court appeal can be or is taken, the provision shall be consideredsevered from this Agreement and shall not serve to invalidate any remaining provisions hereof. The Parties shall make a good faitheffort to replace any invalid or unenforceable provision with a valid and enforceable one such that the objectives contemplated by theParties when entering this Agreement may be realized.- 66 - 11.13Headings. The headings for each article and section in this Agreement have been inserted forconvenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular articleor section. 11.14No Waiver. Any delay in enforcing a Party’s rights under this Agreement or any waiver as to aparticular default or other matter shall not constitute a waiver of such Party’s rights to the subsequent enforcement of its rights underthis Agreement, excepting only as to an express written and signed waiver as to a particular matter for a particular period of timeexecuted by an authorized officer of the waiving Party.11.15No Third Party Beneficiaries. Except as expressly set forth in this Agreement, no Third Party shall bedeemed an intended third party beneficiary hereunder or have any right to enforce any obligation of this Agreement.11.16Costs. Each Party shall bear its own legal costs of and incidental to the preparation, negotiation andexecution of this Agreement.11.17Further Assurances. Each Party shall perform, or caused to be performed, all further acts and thingsand execute and deliver such further documents as may be necessary or as the other Party may reasonably require to implement or giveeffect to this Agreement[signature page follows] - 67 - IN WITNESS WHEREOF, Partner and AVEO have caused this Agreement to be executed by their duly authorized officersas of the Effective Date.EUSA PHARMA (UK) LIMITED AVEO PHARMACEUTICALS, INC By:/s/ Lee Morley By:/s/ Michael BaileyName:Lee Morley Name: Title:CEO Title:President & Chief Executive Officer - 68 - Exhibit AEuropeLatin America (excluding Mexico)Africa and South AfricaAustralasia and New ZealandEurope includes: oAlbania oAndorra oAustria oBelgium oBosnia and Herzegovina oBulgaria oCroatia oCyprus oCzech Republic oDenmark oEstonia oFinland oFrance oGermany oGreece oHungary oIceland oIreland oItaly oKosovo oLatvia oLiechtenstein oLithuania oLuxembourg oMacedonia oMalta oMonaco oMontenegro oThe Netherlands oNorway oPoland oPortugal oRomania oSan Marino oSerbia oSlovakia oSlovenia oSpain- 69 -  oSweden oSwitzerland oUnited Kingdom oVatican CityLatin America includes: oArgentina oBelize oBolivia oBrazil oChile oColombia oCosta Rica oEcuador oEl Salvador oFrench Guiana oGuatemala oGuyana oHonduras oNicaragua oPanama oParaguay oPeru oSuriname oUruguay oVenezuelaNorth and South Africa includes: oAlgeria oAngola oBenin oBotswana oBritish Indian Ocean oBurkina Faso oBurundi oCameroon oCape Verde Islands oCentral African Republic oChad oComoros oCongo, Democratic Republic of oCongo, Republic of oCote d’Ivoire oDjibouti oEgypt  oEquatorial Guinea oEritrea oEthiopia oGabon oGambia, The oGhana oGuinea oGuinea-Bissau oKenya oLesotho oLiberia oLibya oMadagascar oMalawi oMali oMauritania oMauritius oMayotte oMorocco oMozambique oNamibia oNiger oNigeria oReunion oRwanda oSaint Helena oSao Tome & Principe oSenegal oSeychelles oSierra Leone oSomalia oSouth Africa oSudan oSwaziland oTanzania oTogo oTunisia oUganda oZambia oZimbabweAustralasia and New Zealand includes: oAustralia oBougainville oCook Islands oFederated States of Micronesia  oFiji oFrench Polynesia oKiribati oNauru oNew Caledonia oNew Zealand oPapua New Guinea oSamoa oSolomon Islands oTokelau Islands oTonga oTuvalu oVanuatu oWallis & Futuna Islands Exhibit BListed AVEO Patents AVEO No.JurisdictionFiledApplication No.StatusPatent No.ExpirationTivozanib [**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**][**]Tivozanib [**][**][**][**][**][**][**][**]Tivozanib [**][**][**][**][**][**][**][**][**][**][**][**][**][**] [**] Exhibit CThe information is to be delivered in electronic format where possible.PRECLINICAL & CLINICAL[**]REGULATORY[**]SAFETY[**].CMC[**]MEDICAL AFFAIRS (for clarity, materials prepared prior to AVEO’s tivozanib NDA review)[**]MARKETING (for clarity, materials prepared prior to AVEO’s tivozanib NDA review)[**]LEGAL/IP[**] Exhibit DPress Release (Section 6.4(a))DRAFT – NOT FOR RELEASEAVEO and EUSA Pharma Announce Exclusive Licensing Agreement for Tivozanib in EuropeEUSA to Submit Marketing Authorization Application for Tivozanib in Advanced RCC in Q1 2016AVEO to Host Conference Call Today, December 21, 2015 at 9:00 AM ETCAMBRIDGE, Mass. and HEMEL HEMPSTEAD, England – December 21, 2015 – AVEO Oncology (NASDAQ:AVEO) andEUSA Pharma, a newly-established specialty pharmaceutical business with global reach, today announced an exclusive licenseagreement in which AVEO has granted EUSA Pharma European rights to tivozanib for the treatment of advanced renal cell carcinoma(“RCC”). The agreement also includes a number of additional territories outside North America, including South America and SouthAfrica, and additional potential indications.Under the terms of the agreement, EUSA Pharma will pay AVEO an upfront research and development funding payment of $2.5million, and up to $394 million in potential payments and milestones, assuming successful achievement of specified development,regulatory and commercialization objectives, as well as a tiered royalty ranging from a low double digit up to mid-twenty percent onnet sales of tivozanib in the agreement’s territories. A percentage of milestone and royalty payments received by AVEO are due toKyowa Hakko Kirin as a sublicensing fee.EUSA Pharma plans to submit a Marketing Authorization Application for tivozanib as a first line treatment for advanced RCC to theEuropean Medicines Agency in the first quarter of 2016. Under the terms of the agreement, EUSA Pharma will undertake and fundfuture regulatory and commercial activities to bring tivozanib to market and commercialize the product within the agreement’sterritories.“Tivozanib has the potential to become an important new first line treatment for advanced renal cell carcinoma in Europe, and we lookforward to submitting a Marketing Authorization Application in the coming months,” said Lee Morley, chief executive officer ofEUSA Pharma. “As a recently established specialty pharma company, we have ambitious growth plans, and tivozanib is a strongstrategic fit with our portfolio of marketed specialty products, as we increase our focus on oncology.”“Our agreement with EUSA Pharma marks a critical step in the execution of our company strategy. Between our partnership withEUSA and our previous agreements with Ophthotech and Pharmstandard, we have a solid foundation to potentially generate near-termcapital and long-term value for this important asset while retaining commercial rights to tivozanib in oncology in North America,” saidMichael Bailey, president and chief executive officer of AVEO. “These tivozanib partnerships collectively amount to over $35 millionin potential payments over the next 18 months in addition to potential payments from our other licensed pipeline assets, which couldprovide substantial additional funding to support our tivozanib development strategy for North America. We look forward to working with the experienced commercial and regulatory team at EUSAPharma as they seek to successfully commercialize tivozanib in Europe.”Today’s Conference Call InformationAVEO will host a conference call today, December 21, at 9:00 am (ET). The call can be accessed by dialing (866) 428-2694(domestic) or (704) 908-0403 (international) five minutes prior to the start time and providing the passcode 9082338. A live webcast ofthe conference call can be accessed by visiting the investors section of the AVEO website at www.aveooncology.com. A replay of thewebcast will be archived on the AVEO website for two weeks following the call.About TivozanibTivozanib is an oral, once-daily, investigational vascular endothelial growth factor (VEGF) tyrosine kinase inhibitor (TKI). It is apotent, selective and long half-life inhibitor of all three VEGF receptors and is designed to optimize VEGF blockade while minimizingoff-target toxicities, potentially resulting in improved efficacy and minimal dose modifications. Tivozanib has been evaluated in severaltumors types, including renal cell, colorectal and breast cancers.About EUSA PharmaFounded in March 2015, EUSA Pharma is a specialty pharmaceutical company. The company has commercial operations in the USand Europe, and a wider distribution network in approximately 40 countries around the world. Currently, EUSA has a portfolio offive approved and several named-patient specialty hospital products, and the company has ambitious plans to expand this throughacquisition and in-licensing. EUSA is led by an experienced management team with a strong record of building successful specialtypharmaceutical companies, and is supported by significant funding raised from leading life science investor Essex Woodlands.EUSA Pharma’s products include: Caphosol® for the treatment of oral mucositis, a common and debilitating side-effect of radiationtherapy and high-dose chemotherapy; Collatamp®, a gentamicin-collagen implant licensed either in haemostasis or for the preventionand treatment of surgical site infection; Custodiol® solution for use in the preservation of organs for transplantation; Fomepizole® forthe treatment of ethylene glycol poisoning; and Xenazine® for the treatment of movement disorders associated with Huntington’schorea.For more information please visit www.eusapharma.com.About AVEOAVEO Oncology (AVEO) is a biopharmaceutical company committed to developing targeted therapies through biomarker-driveninsights to provide improvements in patient outcomes where significant unmet medical needs exist. AVEO’s proprietary HumanResponse Platform™ has delivered unique insights into cancer and related disease biology that AVEO is seeking to leverage in theclinical development strategy of its therapeutic candidates. For more information, please visit the company’s website atwww.aveooncology.com.AVEO Cautionary Note Regarding Forward-Looking StatementsThis press release contains forward-looking statements of AVEO within the meaning of The Private Securities Litigation Reform Actof 1995 that involve substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this press release are forward-looking statements. The words“anticipate,” “believe,” “expect,” “intend,” “may,” “plan,” “could,” “should,” “seek,” “would” “look forward,” or the negative of theseterms or other similar expressions, are intended to identify forward-looking statements, although not all forward-looking statementscontain these identifying words. These forward-looking statements include, among others, statements about: the expected benefits ofAVEO’s agreement with EUSA Pharma; the amount, timing and potential receipt of payments under the EUSA agreement; AVEO’sdevelopment plans for tivozanib; AVEO’s beliefs about its ability to execute on its strategies for tivozanib; AVEO’s ability to generatenear-term capital and long-term value for tivozanib; and AVEO’s expectations that its tivozanib partnerships could provide over $35million in potential payments in the next 18 months, and that its receipt of this and other potential payments from other licensedpipeline assets could provide substantial additional funding to support its tivozanib development strategy for North America. Actualresults or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements thatAVEO makes due to a number of important factors, including risks relating to: AVEO’s ability to maintain its agreement with EUSAPharma and its other licensees, and its ability, and the ability of its licensees, to achieve development and commercialization objectivesunder these arrangements; AVEO’s ability, and the ability of its licensees, to demonstrate to the satisfaction of applicable regulatoryagencies the safety, efficacy and clinically meaningful benefit of AVEO’s product candidates; AVEO’s ability to successfullyimplement its strategic plans; AVEO’s ability to successfully enroll and complete clinical trials of its product candidates; AVEO’sability to achieve and maintain compliance with all regulatory requirements applicable to its product candidates; AVEO’s ability toobtain and maintain adequate protection for intellectual property rights relating to its product candidates and technologies;developments, expenses and outcomes related to AVEO’s ongoing shareholder litigation and SEC investigation; AVEO’s ability toraise the substantial additional funds required to achieve its goals; unplanned capital requirements; adverse general economic andindustry conditions; competitive factors; and those risks discussed in the section titled “Risk Factors” in AVEO’s most recent AnnualReport on Form 10-K, its quarterly reports on Form 10-Q and its other filings with the SEC. The forward-looking statements in thispress release represent AVEO’s views as of the date of this press release. AVEO anticipates that subsequent events and developmentsmay cause its views to change. While AVEO may elect to update these forward-looking statements at some point in the future, itspecifically disclaims any obligation to do so. You should, therefore, not rely on these forward-looking statements as representingAVEO’s views as of any date other than the date of this press release.AVEO Contact:David Pitts, Argot Partners(212) 600-1902aveo@argotpartners.comEUSA Contacts:Lee MorleyRob BudgeChief ExecutiveRJB CommunicationsEUSA PharmaTel: +44 (0)1865 760969Tel: +44 (0)330 5001140Mobile: +44 (0)7710 741241 Exhibit ETax Invoice (Section 4.1)EXAMPLE VAT INVOICEABC plc26 Green Road, South Croydon, CR2 5ZXVAT Reg. No. 987 6543 21 Sales invoice No 15,618 AN Other Ltd 9 North Street London N8 5QQ Time of supply 31/01/12Date of Issue 3/02/15 QuantityDescription and priceAmountexcludingVATVAT rateVAT £0 %£ VAT Total EXHIBIT 21.1SUBSIDIARIES OF THE REGISTRANT Name Jurisdiction of Organization Percentage OwnershipAVEO Pharma Limited United Kingdom 100%AVEO Securities Corporation Massachusetts 100% EXHIBIT 23.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-165530, 333-175390 and 333-189565 and Form S-3 No.333-203932) of AVEO Pharmaceuticals, Inc. of our reports dated March 15, 2016, with respect to the consolidated financial statements of AVEOPharmaceuticals, Inc. and the effectiveness of internal control over financial reporting of AVEO Pharmaceuticals, Inc., included in this Annual Report (Form10-K) for the year ended December 31, 2015/s/ Ernst & Young LLPBoston, MassachusettsMarch 15, 2016 Exhibit 31.1CERTIFICATIONI, Michael Bailey, certify that: 1.I have reviewed this Annual Report on Form 10-K of AVEO Pharmaceuticals, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period coveredby this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have: a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which this report is being prepared; b.Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accounting principles; c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: March 15, 2016 /s/ Michael Bailey Michael BaileyChief Executive Officer (Principal Executive Officer) Exhibit 31.2CERTIFICATIONI, Keith S. Ehrlich, certify that: 1.I have reviewed this Annual Report on Form 10-K of AVEO Pharmaceuticals, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period coveredby this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have: a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which this report is being prepared; b.Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accounting principles; c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: March 15, 2016 /s/ Keith S. Ehrlich Keith S. Ehrlich, C.P.A.Chief Financial Officer (Principal Financial Officer) EXHIBIT 32.1CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report on Form 10-K of AVEO Pharmaceuticals, Inc. (the “Company”) for the fiscal year ended December 31, 2015 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Michael Bailey, Chief Executive Officer of the Company,hereby certifies, pursuant to 18 U.S.C. Section 1350, that, to his knowledge on the date hereof:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 15, 2016 /s/ Michael Bailey Michael BaileyChief Executive Officer (Principal Executive Officer) EXHIBIT 32.2CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report on Form 10-K of AVEO Pharmaceuticals, Inc. (the “Company”) for the fiscal year ended December 31, 2015 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Keith Ehrlich, Chief Financial Officer of the Company,hereby certifies, pursuant to 18 U.S.C. Section 1350, that, to his knowledge on the date hereof:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 15, 2016 /s/ Keith S. Ehrlich Keith S. Ehrlich, C.P.A.Chief Financial Officer (Principal Financial Officer) 

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