AVEO Pharmaceuticals
Annual Report 2017

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One)☒☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended: December 31, 2017Or☐☐TRANSITION 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 Capital 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 ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate 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 ☒ No ☐Indicate 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 ☒ No ☐Indicate 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. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growthcompany. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Checkone): Large accelerated filer ☐ Accelerated filer ☒Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒The aggregate market value of the registrant’s common stock, $0.001 par value per share, held by non-affiliates of the registrant, based on the last reported sale price of thecommon stock on the Nasdaq Capital Market at the close of business on June 30, 2017, was $218,171,452The number of shares outstanding of the registrant’s Common Stock as of March 8, 2018 were 118,867,471.Documents incorporated by reference:Portions of our definitive proxy statement for our 2018 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 I5 Item 1.Business5 Item 1A.Risk Factors37 Item 1B.Unresolved Staff Comments68 Item 2.Properties68 Item 3.Legal Proceedings68 Item 4.Mine Safety Disclosures69 PART II70 Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities70 Item 6.Selected Financial Data72 Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations73 Item 7A.Quantitative and Qualitative Disclosures about Market Risk96 Item 8.Financial Statements and Supplementary Data97 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure135 Item 9A.Controls and Procedures135 Item 9B.Other Information137 PART III138 Item 10.Directors, Executive Officers and Corporate Governance138 Item 11.Executive Compensation138 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters138 Item 13.Certain Relationships and Related Person Transactions, and Director Independence138 Item 14.Principal Accountant Fees and Services138 PART IV139 Item 15.Exhibits, Financial Statement Schedules139 Item 16.Form 10-K Summary139 SIGNATURES143 2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 InformationAny statement contained in this Annual Report on Form 10-K or in the documents we incorporate by reference herein other than a statement ofhistorical fact, may be a forward-looking statement, including statements regarding our and our collaborators’ future discovery, development andcommercialization efforts, our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives ofmanagement. In some cases, you can identify forward-looking statements by such terms as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,”“intend,” “may,” “plan,” “project,” “should,” “target,” “will,” “would” or other words that convey uncertainty of future events or outcomes to identify theseforward-looking statements. Forward-looking statements may include, but are not limited to, statements about: •the initiation, timing, progress and results of future clinical trials, and our development programs; •our plans to develop and commercialize our product candidates; •our ability to secure new collaborations, maintain existing collaborations or obtain additional funding; •the timing or likelihood of regulatory filings and approvals; •the implementation of our business model, strategic plans for our business, product candidates and technology; •our commercialization, marketing and manufacturing capabilities and strategy; •the rate and degree of market acceptance and clinical utility of our products; •our competitive position; •our intellectual property position; •developments and projections relating to our competitors and our industry; •our estimates of the period in which we anticipate that existing cash, cash equivalents and investments will enable us to fund our current andplanned operations; •our estimates regarding expenses, future revenue, capital requirements and needs for additional financing; and •our ability to continue as a going concern.Our actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, includingrisks relating to: •our ability to maintain our third-party collaboration agreements and our ability, and the ability of our licensees, to achieve development andcommercialization objectives under these arrangements; •our ability, and the ability of our licensees, to demonstrate to the satisfaction of applicable regulatory agencies the safety, efficacy andclinically meaningful benefit of our product candidates; •our ability to successfully enroll and complete clinical trials of our product candidates, including our TIVO-3 trial; •our ability to achieve and maintain compliance with all regulatory requirements applicable to our product candidates; •our ability to obtain and maintain adequate protection for intellectual property rights relating to our product candidates and technologies; •developments, expenses and outcomes related to our ongoing stockholder litigation; •our ability to successfully implement our strategic plans; •our ability to raise the substantial additional funds required to achieve our goals; •unplanned capital requirements; •adverse general economic and industry conditions; •competitive factors; 3 •our ability to continue as a going concern; and •those risks discussed under the heading “Risk Factors” in Part I, Item 1A of this report.If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance or achievements may varymaterially from any future results, performance or achievements expressed or implied by the forward-looking statements we make.You should consider these factors and the other cautionary statements made in this report and the documents we incorporate by reference herein asbeing applicable to all related forward-looking statements wherever they appear in this report or the documents incorporated by reference. While we mayelect to update forward-looking statements wherever they appear in this report or the documents incorporated by reference herein, we do not assume, andspecifically disclaim, any obligation to do so, whether as a result of new information, future events or otherwise, unless required by law. 4PART IITEM 1.BusinessOverviewWe are a biopharmaceutical company dedicated to advancing a broad portfolio of targeted medicines for oncology and other areas of unmet medicalneed. Our strategy is to retain North American rights to our oncology portfolio while securing partners in development and commercialization outside ofNorth America. We are working to develop and commercialize our lead candidate tivozanib in North America as a treatment for renal cell carcinoma, or RCC.We have entered into partnerships to fund the development and commercialization of our preclinical and clinical stage assets, including AV-203 andficlatuzumab in oncology and AV-380 in cachexia. Tivozanib (FOTIVDA®), which we have outlicensed outside of North America, is approved in theEuropean Union, as well as Norway and Iceland, for the first-line treatment of adult patients with advanced RCC, or aRCC, and for adult patients who arevascular endothelial growth factor receptor, or VEGFR, and mTOR pathway inhibitor-naïve following disease progression after one prior treatment withcytokine therapy for aRCC. We are currently seeking a partner to develop our AV-353 platform, a preclinical asset, worldwide for the potential treatment ofpulmonary arterial hypertension, or PAH.Going ConcernWe have identified conditions and events that raise substantial doubt about our ability to continue as a going concern. To continue as a goingconcern, we must secure additional funding to support our current operating plan. As of December 31, 2017, we had approximately $33.5 million in existingcash, cash equivalents and marketable securities. In the first quarter of 2018 to-date, we have raised an additional approximate $1.9 million in net funding.Based on these available cash resources, we do not have sufficient cash on hand to support current operations for at least the next twelve months from thedate of filing this Annual Report on Form 10-K. This condition raises substantial doubt about our ability to continue as a going concern. For a furtherdiscussion of our liquidity, please refer to Part II, Item 7 of this report under the heading “Management’s Discussion and Analysis of Financial Condition andResults of Operations—Liquidity and Capital Resources—Operating Capital Requirements and Going Concern” and Note 1 to our consolidated financialstatements included elsewhere in this Annual Report on Form 10-K.TivozanibOur pipeline includes our lead candidate tivozanib, an oral, once-daily, vascular endothelial growth factor receptor tyrosine kinase inhibitor, orVEGFR TKI. Tivozanib is a potent, selective and long half-life inhibitor of all three VEGF receptors and is designed to optimize VEGF blockade whileminimizing off-target toxicities, potentially resulting in improved efficacy and minimal dose modifications. Tivozanib has been investigated in severaltumor types, including renal cell, hepatocellular, colorectal and breast cancers, as well as in non-oncologic ocular conditions. In 2006, we acquired theexclusive rights to develop and commercialize tivozanib in all countries outside of Asia and the Middle East under a license from Kyowa Hakko Kirin Co.,Ltd. (formerly Kirin Brewery Co. Ltd.), or KHK. In 2015, we entered into a license agreement with EUSA Pharma (UK) Limited, or EUSA, under which wegranted EUSA the right to develop and commercialize tivozanib for all diseases and conditions in humans, excluding non-oncologic eye conditions, inEurope (excluding Russia, Ukraine and the Commonwealth of Independent States), Latin America (excluding Mexico), Africa, Australasia and New Zealand.Clinical and Regulatory Development in RCCRCC First-line Phase 3 Trial (TIVO-1): We conducted a global phase 3 clinical trial, which we refer to as the TIVO-1 trial, comparing the efficacy andsafety of tivozanib with sorafenib (Nexavar®), an approved therapy, for first-line treatment of RCC. The trial met its primary endpoint for progression-freesurvival, or PFS, with a median PFS in the tivozanib arm of 11.9 months compared with 9.1 months in the sorafenib arm. The trial also showed significantimprovement in overall response rate, or ORR, of 33.1% for tivozanib and 23.3% for sorafenib. The trial showed a favorable tolerability profile for tivozanib,as evidenced by fewer dose interruptions and dose reductions than sorafenib. However, the trial showed a non-statistically significant trend favoring thesorafenib treatment group in overall survival, or OS, with a final median OS for the tivozanib treatment arm of 28.2 months and a final median OS for thesorafenib arm of 30.8 months. We believe that the imbalance in subsequent therapy combined with the significant activity seen with tivozanib treatmentfollowing sorafenib contributed to the discordance in the efficacy results in the TIVO-1 trial between the PFS and ORR benefit, which significantly favoredtivozanib, and the OS, which trended in favor of sorafenib.In 2012, we submitted a NDA to the U.S. Food and Drug Administration, or FDA, seeking U.S. marketing approval for tivozanib. In June 2013, theFDA issued a complete response letter informing us that it would not approve tivozanib for the first-line treatment of aRCC based solely on the data from thissingle pivotal trial (TIVO-1), and recommended that we perform an additional clinical trial adequately sized to assure the FDA that tivozanib does notadversely affect OS.TIVO-1 Extension Study - One-way crossover from sorafenib to tivozanib (Study 902): We completed a TIVO-1 extension study in which patients withaRCC received tivozanib as second-line treatment subsequent to disease progression on the sorafenib arm in the TIVO-1 first-line RCC trial. The final resultsshowed a median PFS of 11.0 months, a median OS of 21.6 months and an ORR of 18%, demonstrating the clinically meaningful activity of tivozanib in aVEGFR treatment refractory population. We presented the final results at the 2015 American Society of Clinical Oncology, or ASCO, Annual Meeting. 5European Marketing Approval: Our licensee EUSA submitted a marketing authorization application, or MAA, for tivozanib for the treatment of RCCto the European Medicines Agency, or EMA, in February 2016. The MAA was based primarily on the results from the TIVO-1 clinical trial of tivozanib in thefirst-line treatment of RCC, combined with the TIVO-1 extension trial, and one phase 1 and two phase 2 trials in RCC. On May 17, 2017, EUSA completedan oral explanation to the Committee for Medicinal Products for Human Use, or CHMP, which is the scientific committee of the EMA. On June 23, 2017, theCHMP issued an opinion recommending tivozanib for approval as a first-line treatment of adult patients with aRCC and for adult patients who are VEGFRand mTOR pathway inhibitor-naive following disease progression after one prior treatment with cytokine therapy for aRCC.In August 2017, the European Commission granted marketing authorization to EUSA for tivozanib in all 28 countries of the European Union, Norwayand Iceland. Tivozanib is sold under the brand name FOTIVDA. FOTIVDA is approved for the first-line treatment of adult patients with aRCC and for adultpatients who are VEGFR and mTOR pathway inhibitor-naïve following disease progression after one prior treatment with cytokine therapy for aRCC. In November 2017, EUSA commercially launched FOTIVDA with the initiation of product sales in Germany. In February 2018, the United Kingdom’sNational Institute for Health and Care Excellence, or the NICE, published a Final Appraisal Determination recommending FOTIVDA for the first-linetreatment of adult patients with aRCC. This positive recommendation allows for reimbursement approval of FOTIVDA in the UK. EUSA is in the process ofapplying for reimbursement approval in additional European countries.RCC Third Line Phase 3 Trial (TIVO-3): In May 2016, we initiated enrollment and treatment of patients in a phase 3 trial of tivozanib in the third-linetreatment of patients with aRCC, which we refer to as the TIVO-3 trial. The TIVO-3 clinical trial was designed to address the FDA’s concern about thenegative OS trend expressed in the complete response letter from June 2013. Our intention is to seek regulatory approval in the United States for tivozanibbased on results from the TIVO-3 study as a third-line treatment for RCC. In addition, we plan to seek approval in the first-line using these data together withthe results from the TIVO-1 trial. Our TIVO-3 trial design, which we reviewed with the FDA, provided for a randomized, controlled, multi-center, open-labelphase 3 clinical trial randomized 1:1 to receive either tivozanib or sorafenib. Subjects enrolled in the trial must have failed two systemic therapies, includinga VEGFR TKI. Patients may have received prior immunotherapy, including immune checkpoint (PD-1) inhibitors, reflecting the evolving treatmentlandscape. The primary objective of the TIVO-3 trial is to show improved PFS. Secondary endpoints include OS, safety and ORR. The trial’s sites are locatedin North America and Europe. The TIVO-3 trial does not include a crossover design; accordingly, patients who progress in one therapy are not offered theopportunity to cross over to the other therapy.The TIVO-3 trial has enrolled a total of 351 patients and has passed three semi-annual safety data assessments. In October 2017, we successfullypassed a pre-planned interim futility analysis for TIVO-3. Based on the results of the futility analysis, which were reviewed by an independent statistician, thetrial continued as planned without modification. We expect to receive and report topline data from the TIVO-3 trial (including PFS and preliminary OS data)in the second quarter of 2018, approximately 8-10 weeks after the 255th event (progression determined by an independent radiology committee or death) isreported. RCC PD-1 Combination Trial with Opdivo® (TiNivo): In recent clinical trials, VEGFR TKI and immune checkpoint (PD-1) inhibitor combinationshave shown promising efficacy in treating aRCC. However, several combinations of non-specific VEGFR TKIs with anti-PD-1 antibodies have encounteredtoxicity levels that we believe have challenged or prohibited such VEGFR TKIs from safely combining with PD-1 inhibitors for RCC treatment, or requiredthem to combine at reduced doses, which can potentially reduce efficacy. In our clinical trials, tivozanib has demonstrated lower rates of key potentialoverlapping toxicities with PD-1 inhibitors. Based on this data, we believe that tivozanib’s tolerability profile may allow tivozanib to combine with PD-1inhibitors with improved tolerability.In March 2017, we initiated enrollment in a phase 1b/2 clinical trial of tivozanib in combination with Opdivo (nivolumab), an immune checkpoint(PD-1) inhibitor, for the treatment of aRCC, which we refer to as the TiNivo trial. The phase 1b/2 trial enrolled a total of 28 patients. We are sponsoring thetrial, for which Bristol-Myers Squibb, or BMS, has supplied nivolumab. The TiNivo trial is being led by the Institut Gustave Roussy in Paris under thedirection of Professor Bernard Escudier, MD, Chairman of the Genitourinary Oncology Committee. The phase 1b portion of the trial enrolled six patients. InJune 2017, we successfully completed the phase 1 dose escalation portion of the trial, where oral tivozanib was administered in two escalating dose cohortsin combination with intravenous nivolumab at a constant 240 mg every two weeks. The full dose tivozanib regimen of 1.5 mg daily for 21 days, followed bya 7-day rest period, was selected as the recommended phase 2 dose for the expansion portion of the trial. On November 3, 2017, the results from the phase 1bportion of the phase 1b/2 TiNivo trial were presented at the 16th International Kidney Cancer Symposium of the Kidney Cancer Association. The phase 1bportion of the trial demonstrated that the combination of tivozanib and nivolumab was well tolerated to the full dose and schedule of single agent tivozanib,with no dose limiting toxicities. 6The phase 2 portion of the trial, which enrolled an additional 22 patients, was designed to assess the safety, tolerability, and anti-tumor activity of thecombination of tivozanib and nivolumab. On February 10, 2018, we presented the preliminary results from the phase 2 portion of the trial on 27 of the 28patients with available data at the 2018 ASCO Genitourinary Cancers Symposium. The combination was generally well tolerated. Treatment-related Grade3/4 adverse events occurred in 44% of patients, the most common of which was hypertension. Preliminary efficacy was assessed in 14 patients treated withthe full dose and schedule of oral tivozanib in combination with intravenous nivolumab and enrolled at least four months prior to the data cutoff date. Ofthese, seven had received at least one prior systemic therapy and seven were treatment naive. An ORR was observed in 64% of patients (partial responses),and a disease control rate (partial response + stable disease) was observed in 100% of patients. At the time of data collection, 11 of 14 evaluable patientsremained on study.Following the receipt of these preliminary results in the TiNivo trial, we and our development partner EUSA intend to explore further development oftivozanib as a combination therapy with immune checkpoint inhibitors.Clinical Development in HCCNCCN-AVEO Phase 1b/2 Trial. In January 2018, Dr. Renuka Iyer from the Roswell Park Cancer Institute presented data from a multicenter,investigator-sponsored phase 1b/2 trial of tivozanib in previously untreated patients with advanced, unresectable hepatocellular carcinoma (HCC). The datawere presented at the 2018 ASCO Gastrointestinal Cancers Symposium. The phase 1b/2 trial was one of several studies funded by a grant provided to theNational Comprehensive Cancer Network by AVEO.The trial, designed to evaluate the safety and efficacy of tivozanib in advanced HCC, enrolled a total of 21 patients at three trial sites. In the phase 1bportion of the trial, which used a modified 3+3 dose escalation design, 8 patients were dosed with tivozanib starting at 1.0 mg daily for 21 days followed by 7days off drug, with inter-patient escalation to 1.5 mg daily or de-escalation to 0.5 mg daily based on cumulative dose-limiting toxicities (DLT). Tivozanib at1.0 mg daily had no DLTs and was selected for the phase 2 expansion portion.Of 19 evaluable patients in the phase 2 portion of the trial, at a median follow up of 16.9 months, the trial’s primary endpoint of median PFS and PFSat week 24 were 5.5 months and 47%, respectively. A partial response was seen in 4 of 19 patients (21%) and stable disease (SD) in 8 of 19 patients (42%), fora disease control rate of 63%. OS at 6 and 12 months was 58% and 25%, respectively, with a median OS of 7.5 months. Notably, four patients havemaintained SD for over two years. There were no significant changes in hepatitis B or hepatitis C viral load during study treatment. Tivozanib was generallywell tolerated at 1.0 mg daily, with adverse events consistent with those observed in previous tivozanib trials.We plan to explore the further development of tivozanib in HCC, both as a monotherapy and potentially as a combination therapy.FiclatuzumabFiclatuzumab is a potent Hepatocyte Growth Factor, or HGF, inhibitory antibody. HGF is the sole known ligand of the c-Met receptor, which isbelieved to trigger many activities that are involved in cancer development and metastasis. In April 2014, we and Biodesix, Inc., or Biodesix, entered into aworldwide Co-Development and Collaboration Agreement, or the Biodesix Agreement, to develop and commercialize ficlatuzumab. The BiodesixAgreement was amended in October 2016 to provide, among other things, for equal cost sharing in the development of ficlatuzumab.Development in HNSCC. We and Biodesix are funding an investigator-sponsored clinical trial of ficlatuzumab in combination with ERBITUX®(cetuximab) in squamous cell carcinoma of the head and neck, or HNSCC. In June 2017, preliminary results from the phase 1 trial were presented at the 2017ASCO Annual Meeting. The trial of ficlatuzumab in combination with the EGFR inhibitor cetuximab in patients with cetuximab-resistant, metastatic HNSCCdemonstrated activity with an overall response rate of 17% (two partial responses out of 12 patients), a disease control rate of 67% and prolonged PFS and OScompared to historical controls, in addition to being well tolerated. A randomized, phase 2, multicenter, investigator-initiated trial to confirm these findingswas initiated in the fourth quarter of 2017 under the direction of Julie E. Bauman, MD, MPH, Chief, Division of Hematology/Oncology at the University ofArizona Cancer Center. The phase 2 trial is expected to enroll approximately 60 patients randomized to receive either ficlatuzumab alone or ficlatuzumaband cetuximab.Development in AML. We and Biodesix are funding an investigator-sponsored clinical trial of ficlatuzumab in combination with Cytosar® (cytarabine)in acute myeloid leukemia, or AML. In June 2017, preliminary results from the phase 1 trial were presented at the 2017 ASCO Annual Meeting. This trial,exploring ficlatuzumab in combination with high-dose cytarabine in patients with high risk relapsed or refractory AML, demonstrated early signs oftolerability and activity, including a 50% complete response rate in the eight evaluable patients. The phase 2 portion is ongoing and expected to enroll tenadditional patients. 7Development in pancreatic cancer. We and Biodesix are funding an investigator-sponsored clinical trial of ficlatuzumab in combination with nab-paclitaxel and gemcitabine in pancreatic cancer. The trial was initiated in December 2017 to test the safety and tolerability of ficlatuzumab when combinedwith nab-paclitaxel and gemcitabine in previously untreated metastatic pancreatic ductal cancer (PDAC). The goal of the trial, which is based on preclinicalfindings demonstrating a synergistic effect of these drugs in a preclinical model of PDAC, is designed to determine maximum tolerated dose of ficlatuzumabwhen combined with gemcitabine and nab-paclitaxel. Secondary outcome measures include response rate and progression free survival. The trial, which isbeing conducted under the direction of Kimberly Perez, M.D. at the Dana-Farber Cancer Institute, is expected to enroll approximately 30 patients.We continue to evaluate additional opportunities for the further clinical development of ficlatuzumab. The expansion of the ficlatuzamab clinicalprogram would require the manufacturing of additional clinical supplies.AV-203AV-203 is a potent anti-ErbB3 (also known as HER3) specific monoclonal antibody with high ErbB3 affinity. We have observed potent anti-tumoractivity in mouse models. AV-203 selectively inhibits the activity of the ErbB3 receptor, and our preclinical studies suggest that neuregulin-1, or NRG1 (alsoknown as heregulin), levels predict AV-203 anti-tumor activity. We have completed a phase 1 dose escalation trial of AV-203, which established arecommended phase 2 dose, demonstrated good tolerability and promising early signs of activity, and reached the maximum planned dose of AV-203monotherapy. In 2014, the expansion cohort of this trial was discontinued to conserve capital resources.In March 2016, we entered into a collaboration and license agreement with CANbridge Life Sciences Ltd., or CANbridge, under which we grantedCANbridge the exclusive right to develop, manufacture and commercialize AV-203 in all countries other than the United States, Canada and Mexico.CANbridge has completed work to optimize the manufacturing of AV-203, and in December 2017, CANbridge filed an IND application in China in order toinitiate clinical trials of AV-203. Subject to the decision by the Chinese regulatory authorities regarding CANbridge’s IND application, CANbridge expectsthat AV-203 will reenter the clinic in 2018.AV-380AV-380 is a potent humanized IgG1 inhibitory monoclonal antibody targeting growth differentiation factor 15, or GDF15 a divergent member of theTGF-ß family, for the potential treatment or prevention of cachexia. Cachexia is defined as a multi-factorial syndrome of involuntary weight losscharacterized by an ongoing loss of skeletal muscle mass (with or without loss of fat mass) that cannot be fully reversed by conventional nutritional supportand leads to progressive functional impairment. Cachexia is associated with various cancers as well as chronic kidney disease, congestive heart failure,chronic obstructive pulmonary disease, or COPD, anorexia nervosa and other diseases. We believe that AV-380 represents a unique approach to treatingcachexia because it addresses key underlying mechanisms of the syndrome. AV-380 focuses on a significant area of patient need. It is estimated thatapproximately 30% of all cancer patients die due to cachexia and over half of cancer patients who die do so with cachexia present (J Cachexia SarcopeniaMuscle 2010). In the United States alone, 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).We have established preclinical proof-of-concept for GDF15 as a key driver of cachexia by demonstrating, in animal models, that the administration ofGDF15 induces cachexia, and that inhibition of GDF15 reverses cachexia and provides a potential indication of an OS benefit. We have demonstratedpreclinical proof-of-concept for AV-380 in multiple cancer cachexia models and have completed cell line development.In August 2015, we entered into a license agreement under which we granted Novartis International Pharmaceutical Ltd., or Novartis, the exclusiveright to develop and commercialize AV-380 and our related antibodies. Under this agreement, Novartis is responsible for all activities and costs associatedwith the further development, regulatory filing and commercialization of AV-380 worldwide. Novartis has informed us that the AV-380 programdevelopment continues, but that timelines for development are uncertain. In connection with the AV-380 program, we have in-licensed certain patents andpatent applications from St. Vincent’s Hospital Sydney Limited in Sydney, Australia, which we refer to as St. Vincent’s. 8AV-353 PlatformThe AV-353 platform includes a number of potent inhibitory antibody candidates specific to Notch 3. The Notch 3 pathway is important in cell-to-cellcommunication involving gene regulation mechanisms that control multiple cell differentiation processes during the entire life cycle. Scientific literature hasimplicated the Notch 3 receptor pathway in multiple diseases, including cancer, cardiovascular diseases and neurodegenerative conditions. Publications,including Nature Medicine (2009), have implicated the Notch 3 pathway in PAH, a rare and life-threatening disorder that affects approximately 250,000people worldwide (Global Data 2016 PAH Opportunity Analyzer; 2012 Decision Resources PAH Report) and is caused by thickening of the arterial walls insmall arteries between the heart and the lungs, resulting in restricted blood flow. Currently, no known cure for PAH exists. Existing treatments for PAH havefocused on controlling symptoms by avoiding vasoconstriction and increasing vasodilation of blood vessels but have not reversed the underlying cause ofthe disease. However, the results of a preclinical research study conducted at the University of California at San Diego and presented in a poster at theNovember 2016 American Heart Association meeting using one of our anti-Notch3 antibody candidates generated preclinical data that supports the ability ofthe antibody to potentially reverse the thickening of vascular smooth muscle cells, which would represent a disease-modifying approach to treatment.We are currently seeking a partner to develop the AV-353 platform worldwide for the potential treatment of PAH.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, Xbiotech Inc.,Novartis, BMS, Merck & Co., Merrimack Pharmaceuticals, Inc., Arqule, Inc., Exelixis, Inc., Eisai Co., Ltd., Merck KGaA and AstraZeneca plc are pursuing thedevelopment or are currently marketing pharmaceuticals that target VEGF, HGF, ErbB3, Notch 3 or other pathways that could compete with our developmentcandidates in oncology, cachexia, age-related macular degeneration, or AMD, and PAH. It is probable that the number of companies seeking to developproducts and therapies for the treatment of unmet needs in the lives of people with cancer, cachexia, AMD, and PAH 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, or more effectively marketed and sold, than any drug we may commercialize and mayrender our product candidates obsolete or non-competitive before we can recover the expenses of developing and commercializing any of our productcandidates. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available.TivozanibThere are currently eleven FDA-approved drugs in oncology which target the VEGF receptors. Eight of the FDA-approved VEGF pathway inhibitorsare oral small molecule receptor TKIs. Nexavar (sorafenib) and Stivarga (regorafenib) are marketed by Bayer, Sutent (sunitinib) and Inlyta (axitinib) aremarketed by Pfizer, and Votrient (pazopanib) is marketed by Novartis. Most of these approved VEGF TKIs are not specific to VEGFR 1, 2 and 3. Nexavar isapproved for aRCC and unresectable HCC. Stivarga is approved for refractory metastatic colorectal cancer, or mCRC, and refractory gastrointestinal stromaltumors, or GIST. Sutent is approved for aRCC, GIST, and progressive, well-differentiated pancreatic neuroendocrine tumors. Inlyta is approved for aRCC afterfailure of one prior systemic therapy. Votrient is approved for aRCC and advanced soft tissue sarcoma after prior chemotherapy. Caprelsa (vandetanib),marketed by Sanofi Genzyme is approved for advanced medullary thyroid cancer, Lenvima (lenvatinib) marketed by Eisai is approved for differentiatedthyroid cancer, and RCC following one prior anti-angiogenic therapy in combination with everolimus, and Cabometyx (cabozantinib), marketed by Exelixis,is approved for RCC.Avastin (bevacizumab), marketed by Roche/Genentech, Inc., is a monoclonal antibody approved for intravenous administration in combination withother anti-cancer agents for the treatment of mCRC and ovarian cancer, cervical cancer, non-squamous non-small cell lung cancer, and metastatic RCC incombination with interferon alfa. It is also approved as a monotherapy for the treatment of glioblastoma in patients with progressive disease following priortherapy. Zaltrap (zif-aflibercept), marketed by Sanofi S.A. and Regeneron Pharmaceuticals, Inc., is a VEGF-trap molecule that binds to multiple circulatingVEGF factors, and is approved in combination with standard chemotherapy agents for treatment of second line metastatic CRC. Cyramza (ramucirumab),marketed by Lilly, is an antibody that binds to the VEGF-2 receptor that is approved for the treatment of advanced gastric or gastro-esophageal junctionadenocarcinoma as monotherapy or in combination with paclitaxel, metastatic CRC in combination with FOLFIRI and in combination with docetaxel for thetreatment of NSCLC. 9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 anti-PD-1/PD-L1 and anti CTLA-4 antibodies present additional competition for tivozanib in aRCC. For example,Opdivo (nivolumab), marketed by BMS, is an approved anti-PD-1 for second line RCC. Additional clinical trials that are testing mono and combinationtherapies of PD-1/PD-L1 with other immuno-oncology targets and VEGF TKIs targeting RCC are underway. We are aware of several ongoing phase 3registration studies evaluating PD-1/PD-L1 inhibitors in combination with anti-angiogenic agents or other immune therapies for RCC. Positive phase 3 trialresults have recently been announced from CheckMate-214, a Bristol-Myers Squibb trial combining nivolumab and ipilimumab vs sunitinib in first lineRCC, and also for the phase 3 IMmotion151 combination trial of bevacizumab and atezolizumab vs sunitinib in first line RCC. If approved, thesecombinations could present additional competition for tivozanib.FiclatuzumabWe believe the products that are considered competitive with ficlatuzumab include those agents targeting the HGF/c-Met pathway. The agentsexclusively targeting this pathway include Lilly’s c-Met receptor antibody LY-2875358, currently in multiple phase 2 trials. In addition, Roche hasconducted multiple phase 3 trials for a c-Met receptor antibody onartuzumab (MetMAb/ 5D5 Fab). Roche announced that an independent data monitoringcommittee recommended that its phase 3 trial of onartuzumab in second and third line NSCLC be stopped due to lack of efficacy. ArQule, Inc. and DaiichiSankyo, Inc., under a collaboration agreement, completed a phase 3 trial of ARQ-197 (tivantinib) in liver cancer that failed to meet its primary endpoint.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/Cabometyx, cabozantinib), Mirati Therapeutics’ (formerly MethylGene) 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-028060 and Sanofi-Aventis U.S. LLC’s SAR-125844, EMDSerono, Inc.’s MSC2156119J, Amgen BioPharma’s AMG-337 and AMG-208, Lilly’s merestinib (LY2801653), Les Laboratoires Servier SAS’s S-49076,AstraZeneca and Hutchison MediPharma Limited’s savolitinib, Merck KGaA’s tepotinib, AbbVie Inc.’s ABT-700, Deciphera Pharmaceuticals, LLC’saltiratinib, Betta Pharmaceuticals Co., Ltd.’s BPI-9016 and Bristol-Myers Squibb Company’s and Aslan Pharmaceuticals’ BMS-777607. AV-203We 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 in heregulin positive NSCLC, and Daiichi Sankyo, Inc.’s andAmgen, Inc.’s patritumab (AMG-888), which recently entered phase 2 clinical development for head and neck cancer and metastatic breast cancer. Otherclinical-stage ErbB3-specific competitors include Roche’s RG-7116, Novartis’s elgemtumab, Regeneron’s REGN1400, GSK’s GSK-2849330, Merus N.V.’sMCLA-128, AstraZeneca’s sapitinib, Celldex Therapeutics Inc.’s KTN-3379 and Sihuan Pharmaceutical Holdings Group Ltd.’s pirotinib and sirotinib.Clinical stage competitors targeting ErbB3 in addition to other targets include Roche’s MEHD7945A, and Merrimack Pharmaceuticals MM-111 and MM-141.AV-380Only 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. 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 Biotherapeutics, Inc.’s PINTA745. Of these, both Lilly’s LY2495655 and PINTA 745 have announced failures to demonstrate clinical proof of concept in their respective phase 2 trials.Novartis is currently studying bimagrumab (BYM-338), an agent targeting the activin receptor. Drugs with other mechanisms currently in or recentlycompleting phase 2 clinical trials include Alder Biotherapeutics Inc.’s clazakizumab (ALD-518, targeting IL-6), PsiOxus Therapeutics, Ltd.’s MT-102 (dualacting catabolic/anabolic transforming agent), Acacia Pharma Group plc’s APD-209 (progestin/ß2 antagonist) and Ohr Pharmaceutical, Inc.’s OHR118(cytoprotectant/immunomodulator). PsiOxus’s espindolol has completed phase 1 trials. 10AV-353 PlatformThere are currently no Notch 3-specific inhibitors approved or in clinical trials in oncology or PAH indications. Pfizer recently stopped developmentof PF-06650808, a Notch 3-specific antibody drug conjugate which was in phase 1 trials in multiple oncology indications. However, a number of agents forapplications in oncology are being explored which target the Notch 3 receptor and may inhibit other Notch receptors including Notch 1, Notch 2 and Notch4, including BMS-906024, BMS-986115, BMS-871 and Tarextumab (OMP-59R5).There are multiple treatments approved for PAH through various other mechanisms apart from Notch 3 inhibition. These include treatments such asepithelial receptor antagonists, phosphodiesterase type 5 inhibitors, and prostacyclin analogues. We do not believe that any of these approved therapies hasdemonstrated disease modifying effects.Strategic PartnershipsCANbridgeIn March 2016, we entered into a collaboration and license agreement with CANbridge, or the CANbridge Agreement, under which we grantedCANbridge the exclusive right to develop, manufacture and commercialize AV-203, our proprietary ErbB3 (HER3) inhibitory antibody, for the diagnosis,treatment and prevention of disease in humans and animals in all countries other than the United States, Canada and Mexico. Under the terms of theCANbridge Agreement, if we determine to grant a license to any ErbB3 inhibitory antibody in the United States, Canada or Mexico, we are obligated to firstnegotiate with CANbridge for the grant to CANbridge of a license to such rights. The parties have both agreed not to directly or indirectly develop orcommercialize any other ErbB3 inhibitory antibody product during the term of the CANbridge Agreement other than pursuant to the CANbridge Agreement.CANbridge has responsibility for all activities and costs associated with the further development, manufacture, regulatory filings andcommercialization of AV-203 throughout its licensed territory. CANbridge is obligated to use commercially reasonable efforts to develop and obtainregulatory approval for AV-203 in each of China, Japan, the United Kingdom, France, Italy, Spain, and Germany. CANbridge will bear all costs fordevelopment of AV-203 through proof-of-concept in Esophageal Squamous Cell Carcinoma, after which we would expect to contribute to certain worldwidedevelopment costs.Pursuant to the CANbridge Agreement, CANbridge paid us an upfront fee of $1.0 million in April 2016. CANbridge also agreed to reimburse us$1.0 million for certain manufacturing costs and expenses that we previously incurred. CANbridge paid this manufacturing reimbursement in twoinstallments of $0.5 million each, including one in March 2017 and one in September 2017, net of foreign withholding taxes. We are also eligible to receiveup to $42.0 million in potential development and regulatory milestone payments and up to $90.0 million in potential sales based milestone payments basedon annual net sales of licensed products. Upon commercialization, we are eligible to receive a tiered royalty, with a percentage range in the low double-digits, on net sales of approved licensed products. CANbridge’s obligation to pay royalties for each licensed product expires on a country-by-country basison the later of the expiration of patent rights covering such licensed product in such country, the expiration of regulatory data exclusivity in such countryand ten years after the first commercial sale of such licensed product in such country. A percentage of any milestone and royalty payments received by us,excluding upfront and reimbursement payments, is due to Biogen Idec International GmbH, or Biogen Idec, as a sublicensing fee under our option andlicense agreement, up to $50 million, with Biogen dated March 18, 2009, as amended.The term of the CANbridge Agreement commenced on the effective date and will continue until the last to expire royalty term applicable to licensedproducts. Either party may terminate the CANbridge Agreement in the event of a material breach of the CANbridge Agreement by the other party that remainsuncured for a period of 45 days, in the case of a material breach of a payment obligation, and 90 days in the case of any other material breach. CANbridgemay terminate the CANbridge Agreement without cause at any time upon 180 days’ prior written notice to us. We may terminate the CANbridge Agreementupon thirty days’ prior written notice if CANbridge challenges any of the patent rights licensed to CANbridge under the CANbridge Agreement.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 eye conditions. EUSAis obligated to use commercially reasonable efforts to seek regulatory approval for and commercialize tivozanib throughout its licensed territories for RCC.EUSA has responsibility for all activities and costs associated with the further development, manufacture, regulatory filings and commercialization oftivozanib in its licensed territories. In September 2017, EUSA elected to exercise an opt-in right under the license agreement to co-develop the TiNivo trial,and we and EUSA have announced our intention to further collaborate in future development activities for tivozanib across our territories. 11Under the license agreement, EUSA made research and development reimbursement payments to us of $2.5 million upon the execution of the licenseagreement in 2015 and $4.0 million in September 2017 upon its receipt of marketing approval from the EMA for tivozanib (FOTIVDA) for the treatment ofRCC. In September 2017, EUSA elected to opt-in to co-develop the TiNivo trial. As a result of EUSA’s exercise of its opt-in right, it became an activeparticipant in the ongoing conduct of the TiNivo trial and is able to utilize the resulting data from the TiNivo trial for regulatory and commercial purposes inits territories. EUSA made an additional research and development reimbursement payment to us of $2.0 million upon its exercise of its opt-in right. Thispayment was received in October 2017, in advance of the completion of the TiNivo trial, and represents EUSA’s approximate 50% share of the total estimatedcosts of the TiNivo trial. We are also eligible to receive an additional research and development reimbursement payment from EUSA of fifty percent (50%) ofour total costs for our TIVO-3 trial, up to $20.0 million, if EUSA elects to opt-in to that trial.We are entitled to receive milestone payments of $2.0 million per country upon reimbursement approval, if any, for RCC in each of France, Germany,Italy, Spain and the United Kingdom, and an additional $2.0 million for the grant of marketing approval, if any, in three of the following five countries:Argentina, Australia, Brazil, South Africa and Venezuela. In February 2018, EUSA obtained reimbursement approval from the NICE in the United Kingdomin first line RCC. Accordingly, we earned a $2.0 million milestone payment that was received from EUSA in March 2018. We are also eligible to receive apayment of $2.0 million in connection with a filing by EUSA with the EMA for marketing approval, if any, for tivozanib for the treatment of each of up tothree additional indications and $5.0 million per indication in connection with the EMA’s grant of marketing approval for each of up to three additionalindications, as well as up to $335.0 million upon EUSA’s achievement of certain sales thresholds. Upon commercialization, we are eligible to receive tiereddouble-digit royalties on net sales, if any, of licensed products in its licensed territories ranging from a low double digit up to mid-twenty percent dependingon the level of annual net sales. In November 2017, we began earning sales royalties upon EUSA’s commencement of the first commercial launch oftivozanib (FOTIVDA) with the initiation of product sales in Germany.The research and development reimbursement payments under the EUSA license agreement are not subject to the 30% sublicensing fee to KHK,subject to certain limitations. We would, however, owe KHK 30% of other, non-research and development payments we may receive from EUSA pursuant toour license agreement, including EU reimbursement approval milestones in up to five specified EU countries, EU marketing approvals for up to threeadditional indications beyond RCC, marketing approvals in up to three specified licensed territories outside of the EU, sales-based milestones and royalties,as set forth above. The $2.0 million milestone we earned in February 2018 upon EUSA’s reimbursement approval from the NICE in the UK in first line RCC issubject to the 30% KHK sub-license fee, or $0.6 million.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 breach for nonpayment of any amount due under the license agreement, and (b) ninety (90) days in the case of any othermaterial breach. EUSA may terminate the license agreement at any time upon one hundred eighty (180) days’ prior written notice. In addition, we mayterminate 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 worldwide license agreement with Novartis, under which we granted Novartis the exclusive right to develop andcommercialize AV-380 and our related antibodies that bind to GDF15. Under this agreement, Novartis is responsible for all activities and costs associatedwith the further development, regulatory filing and commercialization of AV-380 worldwide.Novartis made an upfront payment to us of $15.0 million in September 2015. In December 2015, Novartis also exercised its right under the licenseagreement to acquire our inventory of clinical quality drug substance, reimbursing us approximately $3.5 million for such existing inventory. We are alsoeligible to receive (a) up to $51.2 million in potential clinical milestone payments and up to $105.0 million in potential regulatory milestone payments tiedto the commencement of clinical trials and to regulatory approvals of products developed under the license agreement in the United States, the EuropeanUnion and Japan; and (b) up to $150.0 million in potential sales based milestone payments based on annual net sales of such products. If the product iscommercialized, we would be eligible to receive tiered royalties on net sales of approved 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 anyresulting approved therapeutic products. Certain milestones achieved by Novartis would trigger milestone payment obligations from us to St. Vincent’s,under our amended and restated license agreement with St. Vincent’s. In addition, royalties on approved products, if any, will be payable to St. Vincent’s, andwe and Novartis will share that obligation equally. 12In February 2017, Novartis paid $1.8 million out of its future payment obligations to us under the license agreement. The funds were used to satisfy a$1.8 million time-based milestone obligation that we owed to St. Vincent’s on March 2, 2017. Novartis will reduce any subsequent payment obligations tous, if any, by the $1.8 million. We recognized the $1.8 million of consideration as revenue during the three months ended March 31, 2017, as the amount wasfixed and determinable and non-refundable, and we do not have any further performance obligations to Novartis in connection with the license agreement.This payment reduces the aggregate future amounts potentially payable by Novartis to us under the license agreement by the $1.8 million, but does notamend any other terms of the Novartis license agreement.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.BiodesixIn April 2014, we and Biodesix entered into the Biodesix Agreement to develop and commercialize ficlatuzumab. Under the Biodesix Agreement,we granted Biodesix perpetual, non-exclusive rights to certain intellectual property, including all clinical and biomarker data related to ficlatuzumab, todevelop and commercialize VeriStrat®, Biodesix’s proprietary companion diagnostic test. Biodesix granted us perpetual, non-exclusive rights to certainintellectual property, including diagnostic data related to VeriStrat, with respect to the development and commercialization of ficlatuzumab; each licenseincludes the right to sublicense, subject to certain exceptions.Under the Biodesix Agreement, we and Biodesix are each required to contribute 50% of all clinical, regulatory, manufacturing and other costs todevelop ficlatuzumab. Pending marketing approval or the sublicense of ficlatuzumab, and subject to the negotiation of a commercialization agreement, eachparty would share equally in commercialization profits and losses, subject to our right to be the lead commercialization party. Prior to the first commercialsale of ficlatuzumab, each party has the right to elect to discontinue participating in further development or commercialization efforts with respect toficlatuzumab, which is referred to as an “Opt-Out”. If either we or Biodesix elects to Opt-Out, with such party referred to as the “Opting-Out Party,” then theOpting-Out Party shall not be responsible for any future costs associated with developing and commercializing ficlatuzumab other than any ongoing clinicaltrials. If we elect to Opt-Out, we 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. After election of an Opt-Out, the non-opting outparty shall have sole decision-making authority with respect to further development and commercialization of ficlatuzumab. Additionally, the Opting-OutParty shall be entitled to receive, if ficlatuzumab is successfully developed and commercialized, a royalty equal to 10% of net sales of ficlatuzumabthroughout the world, if any, subject to offsets under certain circumstances. Prior to any Opt-Out, the parties shall share equally in any payments receivedfrom a third-party licensee; provided, however, after any Opt-Out, the Opting-Out Party shall be entitled to receive only a reduced portion of such third-partypayments. The agreement remains in effect until the expiration of all payment obligations between the parties related to development and commercializationof ficlatuzumab, unless earlier terminated.In September 2016, we and Biodesix announced the termination of the FOCAL trial, a phase 2 proof-of-concept clinical trial of ficlatuzumab in whichVeriStrat was used to select clinical trial subjects. We and Biodesix are currently funding investigator sponsored trials of ficlatuzumab, alone and incombination, in HCCN, AML and pancreatic cancer.In addition, we and Biodesix are funding investigator-sponsored clinical trials, including ficlatuzumab in combination with ERBITUX® (cetuximab)in squamous cell carcinoma of the head and neck, ficlatuzumab in combination with Cytosar (cytarabine) in acute myeloid leukemia and ficlatuzumab incombination with nab-paclitaxel and gemcitabine in pancreatic cancer. St. Vincent’s HospitalIn July 2012, we entered into a license agreement with St. Vincent’s, under which we obtained an exclusive, worldwide license to develop,manufacture and commercialize products for therapeutic applications that benefit from inhibition or decreased expression or activity of MIC-1, which is alsoknown as GDF15. We believe GDF15 is a novel target for cachexia, and we are exploiting this license in our AV-380 program for cachexia. Under theagreement, we have the right to grant sublicenses subject to certain restrictions. We have a right of first negotiation to obtain an exclusive license to certainimprovements that St. Vincent’s or third parties may make to licensed therapeutic products. Under the license agreement, St. Vincent’s also granted us non-exclusive rights for certain related diagnostic products and research tools. 13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$0.7 million. In August 2015, in connection with the execution of our license agreement with Novartis, we entered into an amended and restated agreementwith St. Vincent’s pursuant to which we made a $1.5 million upfront payment to St. Vincent’s. Under our license agreement with St. Vincent’s, we areobligated to use diligent efforts to conduct research and clinical development and commercially launch at least one licensed therapeutic product. We arerequired to make milestone payments, up to an aggregate total of $16.7 million, upon the earlier of achievement of specified development and regulatorymilestones or a specified date for the first indication, and upon the achievement of specified development and regulatory milestones for the second and thirdindications, for licensed therapeutic products, some of which payments may be increased by a mid to high double-digit percentage rate for milestonespayments made after we grant any sublicense under the license agreement, depending on the sublicensed territory. In February 2017, Novartis paid$1.8 million out of its future payment obligations to us under the license agreement. The funds were used to satisfy a $1.8 million time-based milestoneobligation that we owed to St. Vincent’s on March 2, 2017.In addition, we will be required to pay tiered royalty payments equal to a low-single-digit percentage of any net sales we or our sublicensees makefrom licensed therapeutic products, an obligation we share with Novartis equally. The royalty rate escalates within the low-single-digit range during eachcalendar year based 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 such country orexpiration of the last-to-expire valid claim of the licensed patents covering such licensed therapeutic product in such country, and are subject to offsets undercertain circumstances.The license agreement remains 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.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 preclinical 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.Biogen IdecIn March 2009, we entered into an exclusive option and license agreement with Biogen Idec regarding the development and commercialization of ourdiscovery-stage ErbB3-targeted antibodies for the potential treatment and diagnosis of cancer and other diseases in humans outside of North America. InMarch 2014, we amended our agreement with Biogen Idec, and regained worldwide rights to AV-203. Pursuant to the amendment, we were obligated to ingood faith use reasonable efforts to seek a collaboration partner to fund further development and commercialization of ErbB3-targeted antibodies. Wesatisfied this obligation in March 2016 upon entering into our license agreement with CANbridge. We are obligated to pay Biogen Idec a percentage ofmilestone payments we receive under the CANbridge agreement and single-digit royalty payments on net sales related to the sale of AV-203, up tocumulative maximum amount of $50.0 million.Kyowa Hakko KirinIn December 2006, we entered into a license agreement with KHK under which we obtained an exclusive license, with the right to grant sublicensessubject to certain restrictions, to research, develop, manufacture and commercialize tivozanib, pharmaceutical compositions thereof and associatedbiomarkers in all potential indications. Our exclusive license covers all territories in the world except for Asia and the Middle East, where KHK has retainedthe rights to tivozanib. 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 ofany and all human diseases and conditions. We and KHK each have access to and can benefit from the other party’s clinical data and regulatory filings withrespect 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. Prior tothe first anniversary of the first post-marketing approval sale of tivozanib in our territory, neither we nor any of our subsidiaries has the right to conductcertain clinical trials of, seek marketing approval for or commercialize any other cancer product that also works by inhibiting the activity of a VEGF receptor. 14We have upfront, milestone and royalty payment obligations to KHK under our license agreement. Upon entering into the license agreement withKHK, we made an upfront payment in the amount of $5.0 million. In March 2010, we made a milestone payment to KHK in the amount of $10.0 million inconnection with the dosing of the first patient in our first phase 3 clinical trial of tivozanib (TIVO-1). In December 2012, we made a $12.0 million milestonepayment to KHK in connection with the acceptance by the FDA of our 2012 new drug application, or NDA, filing for tivozanib. Each milestone under theKHK agreement is a one-time only payment obligation. Accordingly, we did not owe KHK another milestone payment in connection with the dosing of thefirst patient in our TIVO-3 trial, and would not owe a milestone payment to KHK if we file an NDA with the FDA following the completion of our TIVO-3clinical trial. If we obtain approval for tivozanib in the U.S., we would owe KHK a one-time milestone payment of $18.0 million, provided that we do notsublicense U.S. rights for tivozanib prior to obtaining a U.S. regulatory approval. If we were to sublicense the U.S. rights, the associated U.S. regulatorymilestone would be replaced by a specified percentage of sublicensing revenue, as set forth below.If we sublicense any of our rights to tivozanib to a third party, as we have done with EUSA pursuant to our license agreement, the sublicense definesthe payment obligations of the sublicensee, which may vary from the milestone and royalty payment obligations under our KHK license relating to rights weretain. We are required to pay KHK a fixed 30% of amounts we receive from our sublicensees, including upfront license fees, milestone payments androyalties, but excluding amounts we receive in respect of research and development reimbursement payments or equity investments, subject to certainlimitations.Certain research and development reimbursement payments by EUSA, including the $2.5 million upfront payment in December 2015, the $4.0 millionin September 2017 upon the approval from the EMA of tivozanib (FOTIVDA) and the $2.0 million upon EUSA’s election in September 2017 to opt-in to co-develop the TiNivo trial were not subject to sublicense revenue payments to KHK. In addition, if EUSA elects to opt-in to the TIVO-3 trial, the additionalresearch and development reimbursement payment from EUSA of fifty percent (50%) of the total trial costs, up to $20.0 million, would also not be subject toa sublicense revenue payment to KHK, subject to certain limitations. We would, however, owe KHK 30% of other, non-research and development paymentswe may receive from EUSA pursuant to our license agreement, including EU reimbursement approval milestones in up to five specified EU countries, EUmarketing approvals for up to three additional indications beyond RCC, marketing approvals in up to three specified licensed territories outside of the EU,sales-based milestones and royalties. The $2.0 million milestone we earned in February 2018 upon EUSA’s reimbursement approval from the NICE in the UKin first line RCC is subject to the 30% KHK sub-license fee, or $0.6 million.We are also required to pay tiered royalty payments on net sales we make of tivozanib in our North American territory, which range from the low tomid-teens as a percentage of net sales. The royalty rate escalates within this range based on increasing tivozanib sales. Our royalty payment obligations in aparticular country 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 offirst commercial 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.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 continue to build a strong intellectual property portfolio, and, whenever possible, we seek to have multiple tiers of patent protection for ourproduct candidates.TivozanibWith respect to tivozanib, we have exclusively licensed from KHK its patents that cover the molecule and its therapeutic use, a key step inmanufacturing the molecule, and a crystal form of the molecule.With respect to tivozanib, we have the following in-licensed patents: •U.S.: 3 granted patents with expirations ranging from 2018 to 2023 •Europe: 3 granted patents with expirations ranging from 2018 to 2023 •Canada: 1 granted patent expiring in 2022 •Australia: 1 granted patent expiring in 2022 15The U.S. patent covering the tivozanib molecule and its therapeutic use is expected to expire in 2022. However, in view of the length of time thattivozanib has been under regulatory review at the FDA, a patent term extension of up to five years may be available under The Drug Price Competition andPatent Term Restoration Act of 1984, or the Hatch-Waxman Act, which, if a five-year extension were to be granted, would extend the term of this patent to2027. In addition, Supplementary Protection Certificates (SPCs) have been filed in over 15 European countries, including, Belgium, Denmark, France,Germany, Great Britain, Italy, Netherlands, Spain, and Switzerland, for the corresponding patent in those countries that cover the tivozanib molecule, which,if granted, could extend the term of the patent in each of those countries up to 2027.KHK has filed an International (PCT) patent application directed to a new invention corresponding to a formulation for tivozanib withophthalmologic applications. Pursuant to the KHK license agreement, we have exclusive, sub-licensable rights to this new invention and the correspondingknow-how outside of Asia and the Middle East. FiclatuzumabWith respect to our anti-HGF platform, including ficlatuzumab, we have six 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 platform we have: •U.S.: 6 granted patents with expirations ranging from 2027 to 2028 •Europe: 1 granted patent expiring in 2027 •Japan: 2 granted patents expiring in 2027 •Canada: 1 granted patent expiring in 2027 •Australia: 1 granted patent expiring in 2027AV-203With respect to our anti-ErbB3 platform, including AV-203, we have four U.S. patents and two pending U.S. patent applications covering our anti-ErbB3 antibodies, nucleic acids and expression vectors encoding the antibodies, host cells, methods of making the antibodies, and methods of treatmentusing our anti-ErbB3 antibodies, which are expected to expire from 2031 to 2032. With respect to our anti-ErbB3 platform we have: •U.S.: 4 granted patents, and 2 pending patent applications, if granted, with expirations ranging from 2031 to 2032 •Europe: 1 granted patent, and 1 pending patent application, if granted, with expirations ranging from 2031 to 2032 •Japan: 2 granted patents, and 1 pending patent application, if granted, with expirations ranging from 2031 to 2032 •Canada: 2 pending patent applications, if granted, with expirations ranging from 2031 to 2032 •Australia: 1 granted patent, and 1 pending patent application, if granted, with expirations ranging from 2031 to 2032Anti-GDF15 AntibodiesWith respect to our anti-GDF15 platform, we have exclusively licensed certain patent rights from St. Vincent’s, which include a granted U.S. patentdirected to a method of increasing appetite and/or body weight upon administering an effective amount of an anti-GDF15 antibody (patent expiration 2029).With respect to the licensed patent rights, we have: •U.S.: 1 granted patent, and 1 pending patent application, if granted, with expirations ranging from 2025 to 2029 •Europe: 1 granted patent, and 1 pending patent application, if granted, expiring in 2025 •Japan: 2 granted patents expiring in 2025 •Canada: 1 granted patent expiring in 2025 •Australia: 1 granted patent expiring in 2025 16In addition, we also own two issued U.S. patents and a pending U.S. patent application covering our anti-GDF15 antibodies and methods of treatingcachexia and inhibiting loss of muscle mass associated with cachexia using our anti-GDF15 antibodies. These patents and patent application, if granted,would be expected to expire in 2033. We also have three pending U.S. patent applications directed to methods of treating or preventing congestive heartfailure or chronic kidney disease using an anti-GDF15 antibody, and methods of treating a subject with cancer anorexia-cachexia syndrome with an anti-cancer agent and an anti-GDF antibody. These patent applications, if granted, would be expected to expire in 2035.With respect to our GDF15 platform, we have: •U.S.: 2 granted patents, and 4 pending patent applications, if granted, with expirations ranging from 2033 to 2035 •Europe: 4 pending patent applications with expirations, if granted, ranging from 2033 to 2035 •Japan: 3 pending patent applications with expirations, if granted, ranging from 2033 to 2035 •Canada: 2 pending patent applications with expirations, if granted, ranging from 2033 to 2035 •Australia: 2 pending patent applications with expirations, if granted, ranging from 2033 to 2035AV-353 PlatformWith respect to our AV-353 platform, we own an issued U.S. patent, a non-provisional U.S. patent application, and an International (PCT) patentapplication covering our anti-Notch3 antibodies, nucleic acids and expression vectors encoding the antibodies, host cells, methods of making the antibodies,and methods of treatment using the antibodies. The issued U.S. patent and non-provisional U.S. patent application, if granted, would be expected to expire in2033, whereas the International (PCT) patent application, if nationalized in the U.S. and granted, would be expected to expire in 2037. With respect to our AV-353 platform, we have: •U.S.: 1 granted patent, and 1 pending patent application, if granted, expiring in 2033 •Europe: 1 pending patent application expiring, if granted, in 2033 •International (PCT): 1 pending patent application, which if nationalized and granted, will expire in 2037 The 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 our pharmaceutical products receive FDA approval, we expect toapply for patent term extensions on patents covering those products. For example, SPCs have been filed in over 15 European countries for the patentcovering the tivozanib molecule, which, if granted, could extend the term of the patent in each of those European countries up to 2027.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 that contains broadclaims related to the use of a tyrosine kinase inhibitor in combination with a DNA damaging agent such as chemotherapy or radiation, and we have receivedwritten notice from the patent owners indicating that they believe we may need a license from them in order to avoid infringing their patent rights. Withregard to ficlatuzumab, we are aware of two separate families of United States patents and foreign counterparts, with each of the two families being owned bya different third party, that contain broad claims related to anti-HGF antibodies having certain binding properties and their use. 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. 17Over the years, we have found it necessary or prudent to obtain licenses from third-party intellectual property holders. Where licenses are readilyavailable at reasonable cost, such licenses are considered a normal cost of doing business. In other instances, however, we may have used the results offreedom-to-operate studies to guide our research away from areas where we believed we were likely to encounter obstacles in the form of third-partyintellectual property. For example, where a third party holds relevant intellectual property and is a direct competitor, a license might not be available oncommercially 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 or using certain aspects of our technology platform as a result of patentinfringement claims asserted against us. This could have a material adverse effect on our business.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.TrademarksWe seek trademark protection in the U.S. and other jurisdictions where available and when appropriate. We have filed applications and obtainedregistrations for several trademarks intended for potential use in the marketing of tivozanib, including the trademark FOTIVDA, which we have registered inthe United States and over 20 other jurisdictions, and for which we have filed applications in additional countries. We own U.S. and European Unionregistrations for a logo containing FOTIVDA in combination with a flame design. We own a U.S. registration for HUMAN RESPONSE PLATFORM, atrademark that we use in connection with our research and development. We own U.S. registrations for AVEO, AVEO (in stylized letters), THE HUMANRESPONSE and AVEO ONCOLOGY THE HUMAN RESPONSE (in stylized letters), trademarks that we use in connection with our business in general. Wehave also registered AVEO as a trademark in over 20 other jurisdictions.Manufacturing We or our partners currently contract with third parties, to the extent we require, for the manufacture of our product candidates and intend to do so inthe future for both clinical and potential commercial needs. We do not own or operate manufacturing facilities for the production of clinical or commercialquantities of our product candidates. We currently have no plans to build our own clinical or commercial scale manufacturing capabilities. Although we relyon contract manufacturers, we have personnel with extensive manufacturing experience to oversee the relationships with our contract manufacturers, orCMOs.One of our contract manufacturers has manufactured what we believe to be sufficient quantities of tivozanib 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. The same manufacturer is currently manufacturing sufficient quantities of drug product (capsules) potentially needed forlaunch of tivozanib. We also engaged another packager to bottle, label and serialize potential commercial launch supply. We believe that we currently haveadequate supplies of tivozanib to support current and projected clinical trials. In addition, we have initiated manufacturing activities for additionaltivozanib drug product to support potential commercial launch in the United States in 2019.To date, third-party manufacturers have met the needs for manufacturing clinical trial supplies for all our pipeline products. There are alternatemanufacturers with capability to supply for current clinical or potential future commercial needs. Contracting with additional CMOs may require significantlead-times and result in additional costs. 18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 to regulation by the FDA under the Public Health ServiceAct, or PHSA, FDCA and related regulations, and other federal, state and local statutes and regulations. The failure of an applicant to comply with theapplicable regulatory requirements at any time during the product development process, including non-clinical testing, clinical testing, the approval processor post-approval process, may result in delays to the conduct of a study, regulatory review and approval and/or administrative or judicial sanctions. Thesesanctions may include, but are not limited to, the FDA’s refusal to allow an applicant to proceed with clinical trials, refusal to approve pending applications,license suspension or revocation, withdrawal of an approval, warning letters, adverse publicity, product recalls, product seizures, total or partial suspension ofproduction or distribution, injunctions, fines and civil or criminal investigations and penalties brought by the FDA or Department of Justice, or DOJ, or othergovernment entities, including state agencies. An applicant seeking approval to market and distribute a new drug or biological product in the United States must typically undertake the following: •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 investigational new drug application, or 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 an NDA, for a drug candidate product and a biological licensing application, or BLA, for a biologicalproduct 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 similar foreign standards, which we refer to as cGMPs,requirements and to assure that the facilities, methods and 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. 19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 beforeclinical 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.Following commencement of a clinical trial under an IND, the FDA may also place a clinical hold or partial clinical hold on that trial. A clinical holdis an order issued by the FDA to the sponsor to delay a proposed clinical investigation or to suspend an ongoing investigation. A partial clinical hold is adelay or suspension of only part of the clinical work requested under the IND. For example, a specific protocol or part of a protocol is not allowed to proceed,while other protocols may do so. No more than 30 days after imposition of a clinical hold or partial clinical hold, the FDA will provide the sponsor a writtenexplanation of the basis for the hold. Following issuance of a clinical hold or partial clinical hold, an investigation may only resume after the FDA hasnotified the sponsor that the investigation may proceed. The FDA will base that determination on information provided by the sponsor correcting thedeficiencies previously cited or otherwise satisfying the FDA that the investigation can proceed.A sponsor may choose, but is not required, to conduct a foreign clinical study under an IND. When a foreign clinical study is conducted under an IND,all FDA IND requirements must be met unless waived. When a foreign clinical study is not conducted under an IND, the sponsor must ensure that the studycomplies with certain regulatory requirements of the FDA in order to use the study as support for an IND or application for marketing approval. Specifically,on April 28, 2008, the FDA amended its regulations governing the acceptance of foreign clinical studies not conducted under an investigational new drugapplication as support for an IND or a new drug application. The final rule provides that such studies must be conducted in accordance with good clinicalpractice, or GCP, including review and approval by an independent ethics committee, or IEC, and informed consent from subjects. The GCP requirements inthe final rule encompass both ethical and data integrity standards for clinical studies. The FDA’s regulations are intended to help ensure the protection ofhuman subjects enrolled in non-IND foreign clinical studies, as well as the quality and integrity of the resulting data. They further help ensure that non-INDforeign studies are conducted in a manner comparable to that required for IND studies.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 trial at least annually. The IRBmust review and approve, among other things, the trial protocol and informed consent information to be provided to trial 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, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product candidate has been associatedwith unexpected serious harm 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 DSMB, or committee. This group provides authorization for whether or not a trial may move forward atdesignated check points based on access that only the group maintains to available data from the trial. Suspension or termination of development during anyphase of clinical trials can occur if it is determined that the participants or patients are being exposed to an unacceptable health risk. Other reasons forsuspension or termination may be made by us based on evolving business objectives and/or competitive climate.Information about clinical trials must be submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination onits ClinicalTrials.gov website. 20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 trial protocols detailing, among other things, the inclusion andexclusion criteria, the objectives of the trial, 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 studies include the initial introduction of an investigational new drug or biological product into humans. 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. •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 trial, 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. •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 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. Phase 1, Phase 2 and Phase 3 clinical trials may not becompleted successfully within any specified period, or at all. Furthermore, the FDA or the sponsor or the data monitoring committee may suspend orterminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. TheFDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted.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 is a vehicle through which applicants formally propose that the FDA approve a new product for marketing and sale in the United States forone or more indications. Every new drug product candidate must be the subject of an approved NDA before it may be commercialized in the UnitedStates. Under federal law, the submission of most NDAs is subject to an application user fee, which for federal fiscal year 2018 is $2,421,495 for anapplication requiring clinical data. The sponsor of an approved NDA is also subject to an annual program fee, which for fiscal year 2018 is $304,162. Certainexceptions and waivers are available for some of these fees, such as an exception from the application fee for products with orphan designation and a waiverfor certain small businesses. 21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. Under the FDA Reauthorization Act of 2017, the FDAmust implement a protocol to expedite review of responses to inspection reports pertaining to certain applications, including applications for products inshortage or those for which approval is dependent on remediation of conditions identified in the inspection report.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 FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA’ssatisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or sixmonths depending on the type of information included. Even with submission of this additional information, the FDA ultimately may decide that theapplication 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, Priority Review and Regenerative Advanced Therapy 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 referred to as fast track designation, breakthrough therapy designation, priority reviewdesignation and regenerative advanced therapy designation. 22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 products,for the 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 Trackproduct’s application before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinicaldata submitted by the sponsor, that a Fast Track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for thesubmission of the remaining information and the sponsor must pay applicable user fees. However, the FDA’s time period goal for reviewing a Fast Trackapplication does not begin until the last section of the application is submitted. In addition, the Fast Track designation may be withdrawn by the FDA if theFDA believes that the designation is no longer supported by data emerging in the clinical trial process.Second, a product may be designated as a Breakthrough Therapy if it is intended, either alone or in combination with one or more other products, totreat a serious or life‑threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvementover existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDAmay take certain actions with respect to Breakthrough Therapies, including holding meetings with the sponsor throughout the development process;providing timely advice to the product sponsor regarding development and approval; involving more senior staff in the review process; assigning across‑disciplinary project lead for the review team; and taking other steps to design the clinical trials in an efficient manner.Third, the FDA may designate a product for priority review if it is a product that treats a serious condition and, if approved, would provide asignificant improvement in safety or effectiveness. The FDA determines, on a case‑ by‑case basis, whether the proposed product represents a significantimprovement when compared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in thetreatment of a condition, elimination or substantial reduction of a treatment‑limiting product reaction, documented enhancement of patient compliance thatmay lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to directoverall attention and resources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on a marketing application from tenmonths to six months.Finally, with passage of the 21st Century Cures Act, or the Cures Act, in December 2016, Congress authorized the FDA to accelerate review andapproval of products designated as regenerative advanced therapies. A product is eligible for this designation if it is a regenerative medicine therapy that isintended to treat, modify, reverse or cure a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug has thepotential to address unmet medical needs for such disease or condition. The benefits of a regenerative advanced therapy designation include earlyinteractions with FDA to expedite development and review, benefits available to breakthrough therapies, potential eligibility for priority review andaccelerated approval based on surrogate or intermediate endpoints.Accelerated Approval PathwayThe FDA may grant accelerated approval to a product for a serious or life‑threatening condition that provides meaningful therapeutic advantage topatients over existing treatments based upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predictclinical benefit. The FDA may also grant accelerated approval for such a condition when the product has an effect on an intermediate clinical endpoint thatcan be measured earlier than an effect on irreversible morbidity or mortality, or IMM, and that is reasonably likely to predict an effect on irreversiblemorbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack ofalternative treatments. Products granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditionalapproval.For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign orother measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. Surrogate endpoints can often be measured more easilyor more rapidly than clinical endpoints. An intermediate clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely topredict the clinical benefit of a drug, such as an effect on IMM. The FDA has limited experience with accelerated approvals based on intermediate clinicalendpoints, but has indicated that such endpoints generally may support accelerated approval where the therapeutic effect measured by the endpoint is notitself a clinical benefit and basis for traditional approval, if there is a basis for concluding that the therapeutic effect is reasonably likely to predict theultimate clinical benefit of a product.The accelerated approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is required tomeasure the intended clinical benefit of a product, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. Thus, acceleratedapproval has been used extensively in the development and approval of products for treatment of a variety of cancers in which the goal of therapy isgenerally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large trials to demonstratea clinical or survival benefit. Thus, the benefit of accelerated approval derives from the potential to receive approval based on surrogate endpoints soonerthan possible for trials with clinical or survival endpoints, rather than deriving from any explicit shortening of the FDA approval timeline, as is the case withpriority review. 23The accelerated approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional post‑approvalconfirmatory studies to verify and describe the product’s clinical benefit. As a result, a product candidate approved on this basis is subject to rigorouspost‑marketing compliance requirements, including the completion of Phase 4 or post‑approval clinical trials to confirm the effect on the clinical endpoint.Failure to conduct required post‑approval studies, or confirm a clinical benefit during post‑marketing studies, would allow the FDA to initiate expeditedproceedings to withdraw approval of the product. All promotional materials for product candidates approved under accelerated regulations are subject toprior review by the FDA.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 often require prior FDA approval before being implemented. FDAregulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsorand any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in thearea 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. If a company is found to have promoted off-label uses, it may become subject to adverse public relations and administrative and judicialenforcement by the FDA, the Department of Justice, or the Office of the Inspector General of the Department of Health and Human Services, as well as stateauthorities. This could subject a company to a range of penalties that could have a significant commercial impact, including civil and criminal fines andagreements that materially restrict the manner in which a company promotes or distributes drug products.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. 24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 Act, 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 active moiety that has previously been approved by the FDA in any other NDA. Anactive moiety is the molecule or ion responsible for the physiological or pharmacological action of the drug substance. In cases where such NCE exclusivityhas been granted, an ANDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IVcertification, in which case the applicant may submit its application four years following the original product approval. The FDCA also provides for a periodof three years of exclusivity if the NDA includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, thatwere conducted by or for the applicant and are essential to the approval of the application.The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or more new clinical investigations, other thanbioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the approval of the application. This three-yearexclusivity period often protects changes to a previously approved drug product, such as a new dosage form, route of administration, combination orindication. Three-year exclusivity would be available for a drug product that contains a previously approved active moiety, provided the statutoryrequirement for a new clinical investigation is satisfied. Unlike five-year NCE exclusivity, an award of three-year exclusivity does not block the FDA fromaccepting ANDAs seeking approval for generic versions of the drug as of the date of approval of the original drug product. The FDA typically makesdecisions about awards of data exclusivity shortly before a product is approved.The FDA must establish a priority review track for certain generic drugs, requiring the FDA to review a drug application within eight (8) months for adrug that has three (3) or fewer approved drugs listed in the Orange Book and is no longer protected by any patent or regulatory exclusivities, or is on theFDA’s drug shortage list. The new legislation also authorizes FDA to expedite review of ‘‘competitor generic therapies’’ or drugs with inadequate genericcompetition, including holding meetings with or providing advice to the drug sponsor prior to submission of the application.Hatch-Waxman Patent Certification and the 30-Month StayUpon approval of an NDA or a supplement thereto, NDA sponsors are required to list with the FDA each patent with claims that cover the applicant’sproduct or an approved method of using the product. Each of the patents listed by the NDA sponsor is published in the Orange Book. When an ANDAapplicant files its application with the FDA, the applicant is required to certify to the FDA concerning any patents listed for the reference product in theOrange Book, except for patents covering methods of use for which the ANDA applicant is not seeking approval. To the extent that the Section 505(b)(2)applicant is relying on studies conducted for an already approved product, the applicant is required to certify to the FDA concerning any patents listed for theapproved product in the Orange Book to the same extent that an ANDA applicant would. 25Specifically, the applicant must certify with respect to each patent that: •the required patent information has not been filed; •the listed patent has expired; •the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or •the listed patent is invalid, unenforceable or will not be infringed by the new product.A certification that the new product will not infringe the already approved product’s listed patents or that such patents are invalid or unenforceable iscalled a Paragraph IV certification. If the applicant does not challenge the listed patents or indicates that it is not seeking approval of a patented method ofuse, the application will not be approved until all the listed patents claiming the referenced product have expired (other than method of use patents involvingindications for which the applicant is not seeking approval).If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification tothe NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringementlawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a ParagraphIV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months after the receipt of the Paragraph IV notice,expiration of the patent, or a decision in the infringement case that is favorable to the ANDA applicant.To the extent that the Section 505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is required to certifyto the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA applicant would. As a result,approval of a Section 505(b)(2) NDA can be stalled until all the listed patents claiming the referenced product have expired, until any non-patent exclusivity,such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product has expired, and, in the case of aParagraph IV certification and subsequent patent infringement suit, until the earlier of 30 months, settlement of the lawsuit or a decision in the infringementcase that is favorable to the Section 505(b)(2) applicant.Patent Term Restoration and ExtensionA patent claiming a new drug product may be eligible for a limited patent term extension under the Hatch-Waxman Act, which permits a patentrestoration of up to five years for patent term lost during product development and the FDA regulatory review. The restoration period granted on a patentcovering a product is typically one-half the time between the effective date of a clinical investigation involving human beings is begun and the submissiondate of an application, plus the time between the submission date of an application and the ultimate approval date. Patent term restoration cannot be used toextend the remaining term of a patent past a total of 14 years from the product’s approval date. Only one patent applicable to an approved product is eligiblefor the extension, and the application for the extension must be submitted prior to the expiration of the patent in question. A patent that covers multipleproducts for which approval is sought can only be extended in connection with one of the approvals. The United States Patent and Trademark Office reviewsand approves the application for any patent term extension or restoration in consultation with the FDA.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. As of January 1, 2018, the FDA has approved nine biosimilar products for use in the United States. No interchangeablebiosimilars, however, have been approved. The FDA has issued several guidance documents outlining an approach to review and approval ofbiosimilars. Additional guidance 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. 26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 demonstratethe 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 Prescription Drug User Fee Act, or PDUFA, goaldates for the regulatory review and approval process, although it does convey certain advantages such as tax benefits and exemption from the PDUFAapplication 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 Studies and ExclusivityUnder the Pediatric Research Equity Act of 2003, an NDA or supplement thereto must contain data that are adequate to assess the safety andeffectiveness of the product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatricsubpopulation for which the product is safe and effective. Sponsors must also submit pediatric study plans prior to the assessment data. Those plans mustcontain an outline of the proposed pediatric study or studies the applicant plans to conduct, including study objectives and design, any deferral or waiverrequests and other information required by regulation. The applicant, the FDA, and the FDA’s internal review committee must then review the informationsubmitted, consult with each other and agree upon a final plan. The FDA or the applicant may request an amendment to the plan at any time.For drugs intended to treat a serious or life-threatening disease or condition, the FDA must, upon the request of an applicant, meet to discusspreparation of the initial pediatric study plan or to discuss deferral or waiver of pediatric assessments. In addition, FDA will meet early in the developmentprocess to discuss pediatric study plans with sponsors and FDA must meet with sponsors by no later than the end-of-phase 1 meeting for serious or life-threatening diseases and by no later than ninety (90) days after FDA’s receipt of the study plan.The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval ofthe product for use in adults, or full or partial waivers from the pediatric data requirements. Additional requirements and procedures relating to deferralrequests and requests for extension of deferrals are contained in FDASIA. Unless otherwise required by regulation, the pediatric data requirements do notapply to products with orphan designation.The FDA Reauthorization Act of 2017 established new requirements to govern certain molecularly targeted cancer indications. Any company thatsubmits an NDA three years after the date of enactment of that statute must submit pediatric assessments with the NDA if the drug is intended for the treatmentof an adult cancer and is directed at a molecular target that FDA determines to be substantially relevant to the growth or progression of a pediatriccancer. The investigation must be designed to yield clinically meaningful pediatric study data regarding the dosing, safety and preliminary efficacy toinform pediatric labeling for the product. 27Pediatric 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 the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’srequest, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within the statutory timelimits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product are extended by six months. This is not a patent termextension, but it effectively extends the regulatory period during which the FDA cannot approve another application.FDA Approval and Regulation of Companion DiagnosticsIf safe and effective use of a therapeutic depends on an in vitro diagnostic, then the FDA generally will require approval or clearance of thatdiagnostic, known as a companion diagnostic, at the same time that the FDA approves the therapeutic product. In August 2014, the FDA issued finalguidance clarifying the requirements that will apply to approval of therapeutic products and in vitro companion diagnostics. According to the guidance, ifFDA determines that a companion diagnostic device is essential to the safe and effective use of a novel therapeutic product or indication, FDA generally willnot approve the therapeutic product or new therapeutic product indication if the companion diagnostic device is not approved or cleared for thatindication. Approval or clearance of the companion diagnostic device will ensure that the device has been adequately evaluated and has adequateperformance characteristics in the intended population. The review of in vitro companion diagnostics in conjunction with the review of our therapeutictreatments for cancer will, therefore, likely involve coordination of review by the FDA’s Center for Drug Evaluation and Research and the FDA’s Center forDevices and Radiological Health Office of In Vitro Diagnostics Device Evaluation and Safety.Under the FDCA, in vitro diagnostics, including companion diagnostics, are regulated as medical devices. In the United States, the FDCA and itsimplementing regulations, and other federal and state statutes and regulations govern, among other things, medical device design and development,preclinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, salesand distribution, export and import, and post‑market surveillance. Unless an exemption applies, diagnostic tests require marketing clearance or approval fromthe FDA prior to commercial distribution. The FDA previously has required in vitro companion diagnostics intended to select the patients who will respond to the product candidate to obtainpre-market approval, or PMA, simultaneously with approval of the therapeutic product candidate. The PMA process, including the gathering of clinical andpreclinical data and the submission to and review by the FDA, can take several years or longer. It involves a rigorous premarket review during which theapplicant must prepare and provide the FDA with reasonable assurance of the device’s safety and effectiveness and information about the device and itscomponents regarding, among other things, device design, manufacturing and labeling. PMA applications are subject to an application fee, which exceeds$250,000 for most PMAs fees for medical device product review; for federal fiscal year 2018, the standard fee for review of a PMA is $310,764 and the smallbusiness fee is $77,691.After a device is placed on the market, it remains subject to significant regulatory requirements. Medical devices may be marketed only for the usesand indications for which they are cleared or approved. Device manufacturers must also establish registration and device listings with the FDA. A medicaldevice manufacturer’s manufacturing processes and those of its suppliers are required to comply with the applicable portions of the QSR, which cover themethods and documentation of the design, testing, production, processes, controls, quality assurance, labeling, packaging and shipping of medical devices.Domestic facility records and manufacturing processes are subject to periodic unscheduled inspections by the FDA. The FDA also may inspect foreignfacilities that export products to the U.S.The 21st Century Cures ActOn December 13, 2016, President Obama signed the Cures Act into law. The Cures Act is designed to modernize and personalize healthcare, spurinnovation and research, and streamline the discovery and development of new therapies through increased federal funding of particular programs. Itauthorizes increased funding for the FDA to spend on innovation projects. The new law also amends the Public Health Service Act to reauthorize and expandfunding for the National Institutes of Health. The Act establishes the NIH Innovation Fund to pay for the cost of development and implementation of astrategic plan, early stage investigators and research. It also charges NIH with leading and coordinating expanded pediatric research. Further, the Cures Actdirects the Centers for Disease Control and Prevention to expand surveillance of neurological diseases.With amendments to the FDCA and the Public Health Service Act, or PHSA, Title III of the Cures Act seeks to accelerate the discovery, development,and delivery of new medicines and medical technologies. To that end, and among other provisions, the Cures Act reauthorizes the existing priority reviewvoucher program for certain drugs intended to treat rare pediatric diseases until 2020; creates a new priority review voucher program for drug applicationsdetermined to be material national security threat medical countermeasure applications; revises the FDCA to streamline review of combination productapplications; requires FDA to evaluate the potential use of “real world evidence” to help support approval of new indications for approved drugs; provides anew “limited population” approval pathway for antibiotic and antifungal drugs intended to treat serious or life-threatening infections; and authorizes FDA todesignate a drug as a “regenerative advanced therapy,” thereby making it eligible for certain expedited review and approval designations. 28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 GCP, a system for the approval of clinicaltrials in the European Union has been implemented through national legislation of the member states. Under this system, an applicant must obtain approvalfrom the competent national authority of a European Union member state in which the clinical trial is to be conducted, or in multiple member states if theclinical trial is to be conducted in a number of member states. Furthermore, the applicant may only start a clinical trial at a specific study site after thecompetent ethics committee has issued a favorable opinion. The clinical trial application (“CTA”) must be accompanied by an investigational medicinalproduct dossier with supporting information prescribed by Directive 2001/20/EC and Directive 2005/28/EC and corresponding national laws of the memberstates and further detailed in applicable guidance documents.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 become directly applicable to and binding in all 28 EU Member States without the need for anynational implementing legislation. The new Clinical Trials Regulation (EU) No 536/2014 will become applicable no earlier than 2019. 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.PRIME Designation in the EUIn March 2016, the European Medicines Agency, or EMA, launched an initiative to facilitate development of product candidates in indications, oftenrare, for which few or no therapies currently exist. The PRIority MEdicines, or PRIME, scheme is intended to encourage drug development in areas of unmetmedical need and provides accelerated assessment of products representing substantial innovation reviewed under the centralized procedure. Products fromsmall- and medium-sized enterprises, or SMEs, may qualify for earlier entry into the PRIME scheme than larger companies. Many benefits accrue to sponsorsof product candidates with PRIME designation, including but not limited to, early and proactive regulatory dialogue with the EMA, frequent discussions onclinical trial designs and other development program elements, and accelerated marketing authorization application assessment once a dossier has beensubmitted. Importantly, a dedicated Agency contact and rapporteur from the Committee for Human Medicinal Products (CHMP) or Committee for AdvancedTherapies (CAT) are appointed early in PRIME scheme facilitating increased understanding of the product at EMA’s Committee level. A kick-off meetinginitiates these relationships and includes a team of multidisciplinary experts at the EMA to provide guidance on the overall development and regulatorystrategies.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 CHMP. Acceleratedevaluation may be granted by the CHMP in exceptional cases. These are defined as circumstances in which a medicinal product is expected to be of a “majorpublic health interest.” Three cumulative criteria must be fulfilled in such circumstances: the seriousness of the disease, such as severely disabling or life-threatening diseases, to be treated; the absence or insufficiency of an appropriate alternative therapeutic approach; and anticipation of high therapeuticbenefit. In these circumstances, the EMA ensures that the opinion of the CHMP is given within 150 days.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 29accordance with this procedure, an applicant submits an application for marketing authorization to the reference EU Member State and the concerned EUMember States. This application is identical to the application that would be submitted to the EMA for authorization through the centralized procedure. Thereference EU Member State prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid application. The resultingassessment report is submitted to the concerned EU Member States which, within 90 days of receipt, must decide whether to approve the assessment reportand related materials. If a concerned EU Member State cannot approve the assessment report and related materials due to concerns relating to a potentialserious risk to public health, disputed elements may be referred to the European Commission, whose decision is binding on all EU Member States. Inaccordance with the mutual recognition procedure, the sponsor applies for national marketing authorization in one EU Member State. Upon receipt of thisauthorization the sponsor can then seek the recognition of this authorization by other EU Member States. Authorization in accordance with either of theseprocedures will result in authorization of the 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.Regulatory Data Protection in the European UnionIn the European Union, new chemical entities approved on the basis of a complete independent data package qualify for eight years of dataexclusivity upon marketing authorization and an additional two years of market exclusivity pursuant to Regulation (EC) No 726/2004, as amended, andDirective 2001/83/EC, as amended. Data exclusivity prevents regulatory authorities in the European Union from referencing the innovator’s data to assess ageneric (abbreviated) application for a period of eight years. During the additional two‑year period of market exclusivity, a generic marketing authorizationapplication can be submitted, and the innovator’s data may be referenced, but no generic medicinal product can be marketed until the expiration of themarket exclusivity. The overall ten‑year period will be extended to a maximum of eleven years if, during the first eight years of those ten years, the marketingauthorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to authorization, isheld to bring a significant clinical benefit in comparison with existing therapies. Even if a compound is considered to be a new chemical entity so that theinnovator gains the prescribed period of data exclusivity, another company may market another version of the product if such company obtained marketingauthorization based on an MAA with a complete independent data package of pharmaceutical tests, preclinical tests and clinical trials.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 trial 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.Orphan drug exclusivity will not bar approval of another product under certain circumstances, including if a subsequent product with the same drug orbiologic for the same indication is shown to be clinically superior to the approved product on the basis of greater efficacy or safety, or providing a majorcontribution to patient care, or if the company with orphan drug exclusivity is not able to meet market demand. This is the case despite an earlier courtopinion holding that the Orphan Drug Act unambiguously required the FDA to recognize orphan exclusivity regardless of a showing of clinical superiority.Brexit and the Regulatory Framework in the United KingdomOn June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the European Union (commonly referred to as “Brexit”). Thereafter,on March 29, 2017, the country formally notified the European Union of its intention to withdraw pursuant to 30Article 50 of the Lisbon Treaty. The withdrawal of the United Kingdom from the European Union will take effect either on the effective date of thewithdrawal agreement or, in the absence of agreement, two years after the United Kingdom provides a notice of withdrawal pursuant to the EU Treaty. Sincethe regulatory framework for pharmaceutical products in the United Kingdom. covering quality, safety and efficacy of pharmaceutical products, clinicaltrials, marketing authorization, commercial sales and distribution of pharmaceutical products is derived from European Union directives and regulations,Brexit could materially impact the future regulatory regime which applies to products and the approval of product candidates in the United Kingdom. Itremains to be seen how, if at all, Brexit will impact regulatory requirements for product candidates and products in the United Kingdom.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. Additionally, a payor’s decision to provide coverage for a product does not imply that an adequatereimbursement rate will be approved. Further, one payor’s determination to provide coverage for a drug product does not assure that other payors will alsoprovide coverage and reimbursement for the product, and the level 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. 31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; •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 third-party payors, including private insurers. 32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 andtransfers of value to other health care providers and health care entities, or marketing expenditures. State and foreign laws also govern the privacy andsecurity of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thuscomplicating compliance efforts.Healthcare ReformA primary trend in the U.S. healthcare industry and elsewhere is cost containment. There have been a number of federal and state proposals during thelast few years regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for drugs and other medicalproducts, 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 ACA, which, among other things, includes changes to the coverage and payment for products undergovernment health care programs. Among the provisions of the ACA of importance to our potential product 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 productsthat are 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 products to eligible beneficiaries during their coverage gap period as a condition for the manufacturers’outpatient products 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 (“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. However, the IPAB implementation has been notbeen clearly defined. The PPACA provided that under certain circumstances, IPAB recommendations will become law unless Congress enactslegislation 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 product spending. Funding has been allocated to support the mission ofthe Center for Medicare and Medicaid Innovation from 2011 to 2019.Other legislative changes have been proposed and adopted in the United States since the PPACA was enacted. For example, in August 2011, theBudget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction,tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2012 through 2021, was unable to reach required goals, therebytriggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of upto 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2024 unless additional Congressional action is taken. In January2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to severalproviders, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recoveroverpayments to providers from three to five years. 33These new laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any ofour product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used. Further,there have been several recent U.S. congressional inquiries and proposed state and federal legislation designed to, among other things, bring moretransparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare andreform government program reimbursement methodologies for drug products.Further, since enactment of the ACA, there have been numerous legal challenges and Congressional actions to repeal and replace provisions of thelaw. For example, with enactment of the Tax Cuts and Jobs Act of 2017, which was signed by the President on December 22, 2017, Congress repealed the“individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, will become effective in2019. According to the Congressional Budget Office, the repeal of the individual mandate will cause 13 million fewer Americans to be insured in 2027 andpremiums in insurance markets may rise. Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year2018 that delayed the implementation of certain ACA-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsoredinsurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exemptmedical devices. The Congress will likely consider other legislation to replace elements of the ACA, during the next Congressional session.The Trump Administration has also taken executive actions to undermine or delay implementation of the ACA. In January 2017, President Trumpsigned an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay theimplementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, ormanufacturers of pharmaceuticals or medical devices. In October 2017, the President signed a second Executive Order allowing for the use of associationhealth plans and short-term health insurance, which may provide fewer health benefits than the plans sold through the ACA exchanges. At the same time, theTrump Administration announced that it will discontinue the payment of cost-sharing reduction (CSR) payments to insurance companies until Congressapproves the appropriation of funds for such CSR payments. The loss of the CSR payments is expected to increase premiums on certain policies issued byqualified health plans under the ACA. A bipartisan bill to appropriate funds for CSR payments was introduced in the Senate, but the future of that bill isuncertain.There have been, and likely will continue to be, additional legislative and regulatory proposals at the foreign, federal, and state levels directed atbroadening the availability of healthcare and containing or lowering the cost of healthcare. Such reforms could have an adverse effect on anticipatedrevenues from product candidates that we may successfully develop and for which we may obtain marketing approval and may affect our overall financialcondition and ability to develop product candidates.Further, there have been several recent U.S. congressional inquiries and proposed federal and proposed and enacted state legislation designed to,among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs ofdrugs under Medicare and reform government program reimbursement methodologies for drug products. At the federal level, Congress and the Trumpadministration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the state level,individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological productpricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparencymeasures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional health care authorities andindividual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in theirprescription drug and other health care programs. These measures could reduce the ultimate demand for our products, once approved, or put pressure on ourproduct pricing.EmployeesAs of December 31, 2017, we had 19 employees. None of our employees is represented by a labor union or is covered by a collective bargainingagreement. We consider our relationship with our employees to be good. 34Research and Development CostsOur research and development costs were $25.2 million, $23.7 million and $12.9 million for the years ended December 31, 2017, 2016 and 2015,respectively. Research and development expenses are charged to expense as incurred. Research and development expenses consist of costs incurred inperforming research and development activities, including internal costs for salaries, bonuses, benefits, stock-based compensation, facilities, and research-related overhead, and external costs for clinical trials, drug manufacturing and distribution, license fees, consultants and other contracted servicesSegment and Geographic InformationWe view our operations and manage our business in one operating segment. As of December 31, 2017, we operate only in the United States.Executive Officers of the RegistrantThe following table lists the positions, names and ages of our executive officers as of March 13, 2018:Executive Officers Michael P. Bailey 52 Chief Executive Officer, President and DirectorMatthew Dallas 42 Chief Financial OfficerMichael N. Needle 58 Chief Medical OfficerNikhil Mehta 59 SVP Regulatory and Quality AssuranceKaruna Rubin 41 SVP and General Counsel Michael P. Bailey was appointed President and Chief Executive Officer and a member of our Board of Directors in January 2015. Mr. Bailey joinedour company in September 2010 as Chief Commercial Officer and was named Chief Business Officer in June 2013. Prior to joining our company, Mr. Baileyserved as Senior Vice President, Business Development and Chief Commercial Officer at Synta Pharmaceuticals Corp., a biopharmaceutical company focusedon research, development and commercialization of oncology medicines, from 2008 to September 2010. From 1999 to 2008, Mr. Bailey worked at ImCloneSystems Incorporated, a biopharmaceutical company focused on the development and commercialization of treatments for 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 oncologyindications, as well as new product planning for the ImClone development portfolio, which included CYRAMZA® (ramucirumab) and PORTRAZZA®(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 SmithKline 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.Matthew Dallas was appointed Chief Financial Officer in June 2017. From February 2015 to March 2017, Mr. Dallas served as Chief Financial Officerand Treasurer of CoLucid Pharmaceuticals, Inc., a position he held through that biopharmaceutical company’s initial public offering and subsequentacquisition, for approximately $960 million, by Eli Lilly and Company. From 2011 to February 2015, he served as Vice President of Finance and Treasurerof AVEO. Mr. Dallas previously worked at Genzyme Corporation from 2000 to 2011, NEN Life Sciences from 1999 to 2000, and Kimberly-Clark Corporationfrom 1997 to 1999 where he held various positions of increasing responsibility in finance and accounting. Mr. Dallas holds a B.S. in Finance from theUniversity of Tennessee, Knoxville.Michael N. Needle, M.D. was appointed Chief Medical Officer in January 2015. Dr. Needle has played central roles in the development of oncologyand hematology drugs including Erbitux® (cetuximab), Revlimid® (lenalidomide) and Pomalyst® (pomolidimide). Dr. Needle served as Chief MedicalOfficer for Array BioPharma Inc., a biopharmaceutical company, from April 2013 to September 2014. From April 2012 to April 2013, Dr. Needle was ChiefMedical Officer of the Multiple Myeloma Research Foundation and Consortium (MMRF), a research organization. From 2010 to 2012, Dr. Needle wasAssistant Professor of Pediatrics at the College of Physicians and Surgeons of Columbia University. From 2004 to 2010, he held multiple Vice Presidentlevel positions at Celgene Corporation, a biotechnology company, in Clinical Research and Development in Oncology, Strategic Medical BusinessDevelopment, and Pediatric Strategy. Dr. Needle also served as the Vice President of Clinical Affairs at ImClone from 2000 to 2004. Dr. Needle performed hisfellowship in Pediatric Hematology/Oncology at the Children’s Hospital Medical Center, the Fred Hutchinson Cancer Research Center of the University ofWashington in Seattle and the University of Texas M.D. Anderson Cancer Center in Houston. Dr. Needle has held faculty positions at the University ofPennsylvania and Columbia University. Dr. Needle 35graduated from Binghamton University with a Bachelor of Arts in Physics and received his medical degree from SUNY Downstate Medical Center, inBrooklyn, New York.Nikhil Mehta, Ph.D. was appointed Senior Vice President Regulatory and Quality Assurance in November 2017. From June 2016 to September 2017,Dr. Mehta served as Executive Vice President and Chief Regulatory Strategist at Tang Capital Management, where he worked on the establishment of twobiopharmaceutical companies, Odonate Therapeutics and Sentier Therapeutics. From April 2015 to June 2016, Dr. Mehta served as Global Head ofRegulatory Affairs at Baxalta, a period during which the company gained approval for ADYNOVATE®, VONVENDI®, and OBIZUR. From 2010 to 2015, hewas Vice President, Global Regulatory Affairs, Oncology, Hematology, Immunology and Diagnostics, at Merck & Company, where he played a key role inthe development and first approval of Merck’s checkpoint inhibitor KEYTRUDA. Prior to Merck, Dr. Mehta held positions of increasing responsibilitywithin regulatory affairs at Shire HGT, ImClone Systems, Bristol-Myers Squibb and Hoffmann-La Roche, where he played key roles in the approvals ofELAPRASE®, VPRIV®, FIRAZYR® and ERBITUX. Dr. Mehta holds a Ph.D. in Chemical and Biochemical Engineering from Rutgers University.Karuna Rubin was appointed Senior Vice President and General Counsel in February 2018. Ms. Rubin served as our Vice President, Legal Affairs andCorporate Secretary from July 2016 to January 2018, and as our Senior Corporate Counsel from July 2015 to July 2016. Prior to joining our company, Ms.Rubin was an associate at Arnold & Porter LLP from 2001 to 2006, and then again from 2008 to August 2013. From 2006 to 2008, Ms. Rubin served asAssistant General Counsel of Cenveo, Inc. Ms. Rubin received her J.D. from Columbia Law School and A.B. in International Relations from BrownUniversity.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. 36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 factors mentioned in the discussion below will be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may differ materially from those anticipated in our forward-looking statements. We undertake noobligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consultany further disclosure we make in our reports filed with the SEC.Risks Related to Our Financial Position and Need for Additional CapitalWe have identified conditions and events that raise substantial doubt about our ability to continue as a going concern.We may be forced to delay or reduce the scope of our development programs and/or limit or cease our operations if we are unable to obtain additionalfunding to support our current operating plan. We have identified conditions and events that raise substantial doubt about our ability to continue as a goingconcern. As of December 31, 2017, we had approximately $33.5 million in existing cash, cash equivalents and marketable securities. In the first quarter of2018 to-date, we have raised an additional approximate $1.9 million in net funding, including approximately $ 0.5 million received in January 2018 relatedto the exercise of warrants to purchase 0.5 million shares of common stock issued in connection with our 2016 private placement, which we refer to as thePIPE Warrants and $1.4 million in net partnership-related funding in connection with the $2.0 million milestone payment by EUSA for the February 2018reimbursement approval by the NICE for RCC in the UK that was received in March 2018, net of the corresponding 30% sub-license fee due to KHK. Basedon these available cash resources, we believe we do not have sufficient cash on hand to support current operations for at least the next twelve months from thedate of filing this Annual Report on Form 10-K. This condition raises substantial doubt about our ability to continue as a going concern within one year afterthe date these financial statements are issued. Management’s plans in this regard are described in Note 1 of the consolidated financial statements includedelsewhere in this Annual Report on Form 10-K However, we cannot guarantee that we will be able to obtain sufficient additional funding when needed or thatsuch funding, if available, will be obtainable on terms satisfactory to us. In the event that these plans cannot be effectively realized, there can be no assurancethat we will be able to continue as a going concern.We have incurred significant losses since inception and anticipate that we will continue to incur significant operating losses for the foreseeable future. It isuncertain if we will ever attain profitability, which would depress the market price of our common stock.We have incurred net losses of $65.0 million, $26.9 million and $15.0 million for the years ended December 31, 2017, 2016 and 2015, respectively,and, as of December 31, 2017, had an accumulated deficit of $587.0 million. To date, we have not commercialized any products or generated any revenuesfrom the sale of products, and absent the realization of sufficient revenues from product sales, we may never attain profitability. Our losses have resultedprincipally from costs incurred in our discovery and development activities. We anticipate that we will continue to incur significant operating costs over thenext several years as we seek to develop our product candidates. As noted above, we and our auditors have identified conditions and events that raisesubstantial doubt about our ability to continue as a going concern.If we do not successfully develop and obtain and maintain regulatory approval for our existing and future pipeline of product candidates andeffectively manufacture, market and sell any product candidates that are approved, we may never generate product sales. Even if we do generate productsales, we may never achieve or sustain profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the market priceof our common stock and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations.We will require substantial additional funding, 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 additional funds to continue our development programs and to fulfill our planned operating goals. In particular, ourcurrently planned operating and capital requirements include the need for substantial working capital to support development and commercializationactivities for tivozanib beyond our cash runway. For example, we estimate that the aggregate remaining costs for the TIVO-3 trial, including drug supply anddistribution, could be in the range of $9 million to $12 million through 2019. We estimate that the overall cost for the TIVO-3 trial, including drug supplyand distribution, could be in the range of $44 million to $47 million. Our aggregate remaining costs for the TiNivo trial in collaboration with BMS andEUSA, including tivozanib drug supply and distribution, could be in the range of $1.5 million to $2.0 million through 2019. We estimate that the overallcost for the TiNivo trial, including drug supply and distribution, could be in the range of $4.0 million to $4.5 million, of which EUSA is responsible forapproximately 50% of these costs up to a maximum of $2.0 million. BMS is providing nivolumab for the study. 37Moreover, we have future payment obligations and cost-sharing arrangements under certain of our collaboration and license agreements. For example,under our 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 portion of sublicense revenue in certain instances.We believe that our approximately $33.5 million in cash, cash equivalents and marketable securities at December 31, 2017, along with the additionalapproximately $1.9 million in net funding raised in the first quarter of 2018 to-date, as described above, would allow us to fund our planned operations intothe first quarter of 2019. This estimate assumes no receipt of additional milestone payments from our partners or additional related payments of potentiallicensing milestones to third parties, no funding from new partnership agreements, no equity financings, no debt financings, no sales of equity under our at-the-market-sales agreement with Leerink, which we refer to as the Leerink Sales Agreement, and no additional sales of equity through the exercise of our PIPEWarrants. Accordingly, the timing and nature of activities contemplated for the remainder of 2018 and thereafter will be conducted subject to the availabilityof sufficient financial resources.Furthermore, there are numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products.Accordingly, our future capital requirements may vary from our current expectations and 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 of conducting preclinical and clinicaltrials; •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 andthe outcome of such litigation; •the absence of any breach, acceleration event or event of default under our loan agreement with Hercules, which we refer to as theHercules Loan Agreement, or under any other agreements with third parties; •the outcome of legal actions against us, including the current lawsuits described in Part II, Item 1 of this report under the heading “LegalProceedings”; •the cost of commercialization activities if any of our product candidates are approved for sale, including marketing, sales anddistribution costs; •the cost of manufacturing our product candidates and any products we successfully commercialize; •the timing, receipt and amount of sales of, or royalties on, our future products, if any; and •our ability to continue as a going concern.We will require additional funding to extend our planned operations. We may seek to sell additional equity or debt securities or obtain additionalcredit facilities. The sale of additional equity or convertible debt securities may result in additional dilution to our stockholders. If we raise additional fundsthrough the issuance of debt securities or preferred stock or through additional credit facilities, these securities and/or the loans under credit facilities couldprovide for rights senior to those of our common stock and could contain covenants that would restrict our operations. Additional funds may not be availablewhen 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 orother third parties. These arrangements would generally require us to relinquish or encumber rights to some of our technologies or drug candidates, and wemay not be able to enter into such arrangements on acceptable terms, if at all.If we are unable to raise substantial additional capital in the near term, whether on terms that are acceptable to us, or at all, Hercules may acceleratepayments if we were to default under the Hercules Loan Agreement and 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. 38We are a development stage company, which may make it difficult for you to evaluate the success of our business to date and to assess our future viability.Other than the European marketing approval for tivozanib (FOTIVDA) received by our partner EUSA in August 2017, all of our product candidates arein the development stage. We have not yet demonstrated our ability to obtain marketing approvals, manufacture a commercial scale medicine, or arrange for athird party to do so on our behalf, or conduct sales and marketing activities necessary for successful commercialization. Typically, it takes about 10 to 15years to develop one new medicine from the time it is discovered to when it is available for treating patients. Preclinical studies and clinical trials mayinvolve highly uncertain results and a high risk of failure. Moreover, positive data from preclinical studies and clinical trials of our product candidates maynot be predictive of results in ongoing or subsequent preclinical studies and clinical trials. Consequently, any predictions you make about our future successor viability may not be as accurate as they could be if we had a longer operating history.In addition, as a development stage business, we may encounter unforeseen expenses, difficulties, complications, delays and other known andunknown factors. To be profitable, we will need to transition from a company with a research and development focus to a company capable of supportingcommercial activities. We may not be successful in such a transition.Risks Related to our LitigationWe and certain of our former officers were defendants in a lawsuit that has been settled, subject to the court’s final approval.We and certain of our former officers were named as defendants in a consolidated class action lawsuit initiated in 2013 that generally alleged that weand those individuals violated federal securities laws by making allegedly false and/or misleading statements in 2012 and 2013, concerning the developmentof our drug tivozanib and its prospects for FDA approval at that time. The lawsuit sought unspecified damages, interest, attorneys’ fees, and other costs. Theconsolidated amended complaint was dismissed without prejudice on March 20, 2015, and the lead plaintiffs then filed a second amended complaintbringing similar allegations. This second amended complaint was dismissed with prejudice on November 18, 2015. The lead plaintiffs appealed the DistrictCourt’s decision to the United States Court of Appeals for the First Circuit and also filed a motion to vacate and reconsider the District Court’s judgment,which we opposed. On January 3, 2017, the District Court granted the plaintiffs’ motion to vacate the dismissal and judgment and the plaintiffs filed a motionto dismiss their appeal on February 8, 2017. On February 2, 2017, the plaintiffs filed a third amended complaint alleging claims similar to those alleged in theprior complaints, namely that we and certain of our former officers violated Sections 10(b) and/or 20(a) of the Exchange Act and Rule 10b-5 promulgatedthereunder by making allegedly false and/or misleading statements concerning the phase 3 trial design and results for our TIVO-1 clinical trial in an effort tolead investors to believe that the drug would receive approval from the FDA. On March 2, 2017, we filed an answer to the third amended complaint, and theparties initiated discovery. On June 29, 2017, the plaintiffs filed a motion for class certification and on July 27, 2017, we filed our response. On July 18,2017, the District Court entered an order referring the case to alternative dispute resolution. The parties mediated on September 12 and 13, 2017, and againon October 23, 2017. On December 26, 2017, the parties entered into a binding memorandum of understanding, or MOU, regarding the settlement of thelawsuit. On January 29, 2018, the parties entered into a Stipulation of Settlement, or the Stipulation, which was filed with District Court on February 2,2018. Under the terms of the MOU and Stipulation, we agreed with counsel for the lead plaintiffs to cause certain of our and the individual defendants’insurance carriers to provide the class with a cash payment of $15,000,000, which includes the cash amount of any attorneys’ fees or litigation expenses thatthe District Court may award lead plaintiffs’ counsel and costs lead plaintiffs incur in administering and providing notice of the settlement. Additionally, weagreed to issue to the class warrants for the purchase of 2,000,000 shares of our common stock exercisable from the date of issue until the expiration of a one-year period after the date of issue at an exercise price equal to the closing price on December 22, 2017, the trading day prior to the execution of the MOU,which was $3.00 per share. On February 8, 2018, the District Court issued an order preliminarily approving the terms of the Stipulation. The Stipulation issubject to final approval by the District Court. The District Court set a final approval hearing for May 30, 2018. There can be no guarantee that the DistrictCourt will grant final approval. We have concluded a settlement with the SEC, but the SEC is still pursuing an action against our former officer.We paid $4.0 million to settle a lawsuit filed by the SEC in federal court alleging that we violated federal securities laws by omitting to disclose therecommendation of the staff of the FDA, on May 11, 2012, that we conduct an additional clinical trial with respect to tivozanib. See Part I, Item 3 of thisAnnual Report on Form 10-K under the heading “Legal Proceedings” for a further discussion of these claims. The SEC also named three of our former officersas defendants in the same lawsuit. The SEC and two of our former officers have settled. The lawsuit against the remaining officer is still pending. We are nota party to the continuing litigation between the SEC and the former officer. However, that individual has and may continue to seek advancement of legalexpenses or indemnification for any losses, either of which could be material to the extent not covered by our director and officer liability insurance. 39Risks Related to Development and Commercialization of Our Drug CandidatesIn the near term, we are substantially dependent on the success of tivozanib. If we are unable to complete the clinical development of, obtain and maintainmarketing approval for or successfully commercialize tivozanib, either alone or with our collaborators, or if we experience significant delays in doing so,our business could be substantially harmed.Other than the European marketing approval for tivozanib received by our partner EUSA in August 2017, we currently have no products approved forsale and are investing a significant portion of our efforts and financial resources in the development of tivozanib for marketing approval in North America.Our prospects are substantially dependent on our ability to develop, obtain marketing approval for and successfully commercialize tivozanib in NorthAmerica in one or more disease indications.The success of tivozanib will depend on a number of factors, including the following: •our ability to secure the substantial additional capital required to complete our clinical trials of tivozanib, including the TIVO-3 trialand the TiNivo trial; •successful enrollment and completion of clinical trials; •a safety, tolerability and efficacy profile that is satisfactory to the FDA, EMA or any other comparable foreign regulatory authority formarketing approval; •timely receipt of marketing approvals from applicable regulatory authorities; •the performance of our collaborators and third-party contractors; •the extent of any required post-marketing approval commitments to applicable regulatory authorities; •maintenance of existing or establishment of new supply arrangements with third-party raw materials suppliers and manufacturersincluding with respect to the supply of active pharmaceutical ingredient for tivozanib and finished drug product that is appropriatelypackaged 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,including our ability to maintain our license agreement with KHK; •protection of our rights in our intellectual property portfolio, including our ability to maintain our license agreement with KHK; •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 trial results, the regulatory approval process, potential threats to our intellectualproperty rights and the development, manufacturing, marketing and sales efforts of our collaborators. If we are unable to develop, receive marketing approvalfor and successfully commercialize tivozanib on our own or with our collaborators, or experience delays as a result of any of these factors or otherwise, ourbusiness could be substantially harmed.If we fail to develop and commercialize other product candidates, we may be unable to grow our business.Although the development and commercialization of tivozanib is our primary focus, as part of our growth strategy, we are developing a pipeline ofproduct candidates. These other product candidates will require additional, time-consuming and costly development efforts, by us or by our collaborators,prior to commercial sale, including preclinical studies, clinical trials and approval by the FDA and/or applicable foreign regulatory authorities. All productcandidates are prone to the risks of failure that are inherent in pharmaceutical product development, including the possibility that the product candidate willnot be shown to be sufficiently safe and effective for approval by regulatory authorities. In addition, we cannot assure you that any such products that areapproved will be manufactured or produced economically. Successfully commercialized or widely accepted in the marketplace or be more effective thanother commercially available alternatives. 40If preclinical or clinical trials of any product candidates that we or our collaborators may develop fail to demonstrate satisfactory safety and efficacy tothe FDA and other regulators, we or our collaborators may incur additional costs or delays, or may be unable to complete, the development andcommercialization of these product candidates.We, and any collaborators, including our partners and sublicensees, are not permitted to commercialize, market, promote or sell any product candidatein the United States without obtaining marketing approval from the FDA. Foreign regulatory authorities, such as the EMA, impose similar requirements. Weand our collaborators must complete extensive preclinical development and clinical trials that demonstrate the safety and efficacy of our product candidatesin humans before we can obtain these approvals.Preclinical and clinical testing is expensive, is difficult to design and implement, and can take many years to complete. It is inherently uncertain as tooutcome. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. The preclinical and clinicaldevelopment of our product candidates is susceptible to the risk of failure inherent at any stage of product development, as well as failure to demonstrateefficacy at all in a clinical trial or across a broad population of patients, the occurrence of adverse events that are medically severe or commerciallyunacceptable, failure to comply with protocols or regulatory requirements and determination by the applicable regulatory authority that a product candidatemay not continue development or is not approvable. Even if a product candidate has a beneficial effect, that effect may not be detected during preclinical orclinical evaluation due to a variety of factors, including the size, duration, design, measurements, conduct or analysis of our preclinical and clinical trials.Conversely, as a result of the same factors, our preclinical or clinical trials may indicate an apparent positive effect of a product candidate that is greater thanthe actual positive effect, if any. Similarly, in our preclinical or clinical trials we may fail to detect toxicity or intolerability of our product candidates, ormistakenly believe that our product candidates are toxic or not well tolerated when that is not in fact the case.Any inability to timely or successfully complete preclinical and clinical development could result in additional unplanned costs 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 those planned, or if the results of these trials or tests are unfavorable,uncertain, only modestly favorable or indicate safety concerns, we or our collaborators, may: •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 boxedwarnings; •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 complete clinical trials of our product candidates and to demonstrate the efficacy and safety necessary to obtain regulatoryapproval would significantly harm our business.Adverse events or undesirable side effects caused by, or other unexpected properties of, tivozanib or our other product candidates may be identified duringdevelopment 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 our other product candidates could cause us, anycollaborators, an institutional review board or regulatory authorities to interrupt, delay or halt preclinical or clinical trials of one or more of our productcandidates and could result in a more restrictive label or the delay or denial of marketing approval by the FDA or comparable foreign regulatory authorities. Ifany of our product candidates is associated with adverse events or undesirable side effects or has properties that are unexpected, we, or any collaborators, mayneed to abandon development or limit development of that product candidate to certain uses or subpopulations in which the undesirable side effects or othercharacteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in clinical orearlier stage testing have later been found to cause side effects that prevented further development of the compound. 41If we or our collaborators experience any of a number of possible complications in connection with preclinical or clinical trials of our product candidates,potential clinical development, marketing approval or commercialization of our product candidates could be delayed or prevented.We or our collaborators may experience numerous complications in connection with preclinical or clinical trials that could delay or prevent clinicaldevelopment, marketing approval or commercialization of our product candidates including: •regulators or institutional review boards may not authorize us, any collaborators or our or their investigators to commence a clinical trialor conduct a clinical trial at a prospective trial site; •delay or failure to reach agreement on clinical trial contracts or clinical trial protocols with prospective trial sites; •unfavorable or inconclusive clinical trial results; •our decision or a regulatory order to conduct additional clinical trials or abandon product development programs; •the number of patients required for our clinical trials may be larger than anticipated, patient enrollment may be slower than anticipatedor participants may drop out of these clinical trials at a higher rate than anticipated; •the costs of our clinical trials may be greater than we anticipate; •our third-party contractors, including those manufacturing our product candidates, or conducting clinical trials on our behalf, may failto successfully comply with regulatory requirements or meet their contractual obligations 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 trialprotocol, resulting in the need to drop the patients from the clinical trial, increase the needed enrollment size for the clinical trial orextend the clinical trial’s duration; •We may decide, or regulators or institutional review boards may require that we suspend or terminate clinical research for variousreasons, including noncompliance with regulatory requirements or their standards of conduct, a finding that the participants are beingexposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of the product candidate or findings ofundesirable effects caused by a chemically or mechanistically similar product or product candidate; •the FDA or comparable foreign regulatory authorities may disagree with our or our collaborators’ clinical trial designs or interpretationof 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 ourproduct candidates 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 mannerrendering our clinical data insufficient to obtain marketing approval.Product development costs for us and our collaborators will increase if we experience delays in testing or pursuing marketing approvals, and we maybe required to obtain additional funds to complete clinical trials and prepare for possible commercialization. We do not know whether any trials will begin asplanned, will need to be restructured, or will be completed on schedule or at all. Significant clinical trial delays also could shorten any periods during whichwe may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do could impair ourability to successfully commercialize our product candidates and may harm our business and results of operations. In addition, many of the factors that leadto clinical trial delays may ultimately lead to the denial of marketing approval of any of our product candidates.If we or our collaborators experience delays or difficulties in the enrollment of patients in clinical trials, receipt of necessary regulatory approvals couldbe delayed or prevented.We or our collaborators may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll asufficient number of eligible patients to participate in clinical trials. Patient enrollment is a significant factor in the timing of clinical trials, and is affected bymany factors, including: •the size and nature of the patient population; 42 •the severity of the disease under investigation; •the availability of approved therapeutics for the relevant disease; •the proximity of patients to clinical sites; •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 and the drug being provided as acontrol in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating.Our inability to enroll a sufficient number of patients for our clinical trials could result in significant delays or may require us to abandon one or moreclinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product candidates, delay or halt thedevelopment of and approval processes for our product candidates and jeopardize our ability to commence sales of and generate revenues from our productcandidates, which could cause the value of our company to decline and limit our ability to obtain additional financing, if needed.We are conducting, and intend in the future to conduct, clinical trials for certain of our product candidates at sites outside the United States. The FDAmay not accept data from trials conducted in such locations and the conduct of trials outside the United States could subject us to additional delays andexpense.We are conducting, and intend in the future to conduct, one or more of our clinical trials with one or more trial sites that are located outside the UnitedStates. Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of these data is subject to certain conditionsimposed by the FDA. For example, the clinical trial must be well designed and conducted and performed by qualified investigators in accordance with goodclinical practice. The FDA must be able to validate the data from the trial through an onsite inspection if necessary. The trial population must also have asimilar profile to the U.S. population, and the data must be applicable to the U.S. population and U.S. medical practice in ways that the FDA deems clinicallymeaningful, except to the extent the disease being studied does not typically occur in the United States. In addition, while these clinical trials are subject tothe applicable local laws, FDA acceptance of the data will be dependent upon its determination that the trials also complied with all applicable U.S. laws andregulations. There can be no assurance that the FDA will accept data from trials conducted outside of the United States. If the FDA does not accept the datafrom any trial that we conduct outside the United States, it would likely result in the need for additional trials, which would be costly and time-consumingand delay or permanently halt our development of our product candidates.In addition, the conduct of clinical trials outside the United States could have a significant adverse impact on us. Risks inherent in conductinginternational clinical trials include: •clinical practice patterns and standards of care that vary widely among countries; •non-U.S. regulatory authority requirements that could restrict or limit our ability to conduct our clinical trials; •administrative burdens of conducting clinical trials under multiple non-U.S. regulatory authority schema; •foreign exchange fluctuations; and •diminished protection of intellectual property in some countries.Results of early clinical trials may not be predictive of results of later clinical trials.The outcome of early clinical trials, such as our phase 1b/2 TiNivo trial, may not be predictive of the success of later clinical trials. In addition,interim results and analyses of clinical trials, such as the analysis performed in our TIVO-3 trial, do not necessarily predict success once the trial is complete.Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positiveresults in earlier development, and we have, and could, in the future, face similar setbacks.The design of a clinical trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may notbecome apparent until the clinical trial is well advanced. We have limited experience in designing clinical trials and may be unable to design and execute aclinical trial to support marketing approval. In addition, preclinical and clinical data are 43often susceptible to varying interpretations and analyses. Many companies that believed their product candidates performed satisfactorily in preclinicalstudies and clinical trials have nonetheless failed to obtain marketing approval for the product candidates. Even if we, or any collaborators, believe that theresults of clinical trials for our product candidates warrant marketing approval, the FDA or comparable foreign regulatory authorities may disagree and maynot grant marketing approval of our product candidates. For example, in June 2013, the FDA issued a complete response letter informing us that it would notapprove tivozanib for the first-line treatment of aRCC based solely on the data from the TIVO-1 trial, and recommended that we perform an additionalclinical trial adequately sized to assure the FDA that tivozanib does not adversely affect OS. Our current TIVO-3 clinical trial was designed to address theFDA’s concern about the negative OS trend expressed in the complete response letter from June 2013. However, the TIVO-3 trial could fail to achieve itsendpoints, or could otherwise be rejected by the FDA as a basis for marketing approval for another reason.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 may not obtain marketing approvals for our product candidates.We may not obtain marketing approval for our product candidates. It is possible that the FDA or comparable foreign regulatory agencies may refuse toaccept for substantive review any future application that we or a collaborator may submit to market and sell our product candidates, or that any such agencymay conclude after review of our or our collaborator’s data that such application is insufficient to obtain marketing approval of our product candidate. InJune 2013, for example, the FDA issued a complete response letter informing us that it would not approve tivozanib for the first-line treatment of aRCC basedsolely on the data from the TIVO-1 trial, and recommended that we perform an additional clinical trial adequately sized to assure the FDA that tivozanib doesnot adversely affect OS. Our current TIVO-3 clinical trial was designed to address the FDA’s concern about the negative OS trend expressed in the completeresponse letter from June 2013. However, the TIVO-3 trial could fail to achieve its endpoints, or could otherwise be rejected by the FDA as a basis formarketing approval for another reason.If the FDA or other comparable foreign regulatory agency does not accept or approve any application to market and sell any of our product candidates,such regulators may require that we conduct additional clinical trials, preclinical studies or manufacturing validation studies and submit that data before itwill reconsider our application. Depending on the extent of these or any other required trials or studies, approval of any application that we submit may bedelayed by several years, or may require us or our collaborator to expend more resources than we or they have available. It is also possible that additionaltrials or studies, if performed and completed, may not be considered sufficient by the FDA or other Foreign regulatory agency to approve our applications formarketing and commercialization. Any delay in obtaining, or an inability to obtain, marketing approvals would prevent us or our collaborators from commercializing our productcandidates and generating revenues. If any of these outcomes occur, we would not be eligible for certain milestone and royalty revenue under our partnershipagreements, our collaborators could terminate our partnership agreements, and we may be forced to abandon our development efforts for our productcandidates, any of which could significantly harm our business.Even if a product candidate receives marketing approval, we or others may later discover that the product is less effective than previously believed orcauses undesirable side effects that were not previously identified, which could compromise our ability, or that of any collaborators, to market the product.Clinical trials of our product candidates will be conducted in carefully defined subsets of patients who have agreed to participate in these.Consequently, it is possible that our clinical trials may indicate an apparent positive effect of a product candidate that is greater than the actual positiveeffect, if any, or alternatively fail to identify undesirable side effects. If, following approval of a product candidate, we, or others, discover that the product isless effective than previously believed or causes undesirable side effects that were not 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 of our collaborators, may be required to recall the product, change the way the product is administered or conduct additionalclinical trials; •additional restrictions may be imposed on the marketing of, or the manufacturing processes for, the particular product; 44 •we, or any of our collaborators, 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 of our collaborators, may be required to create a Medication Guide outlining the risks of the previously unidentified sideeffects for distribution to patients; •we could be sued and held liable for harm caused to patients; •physicians and patients may stop using our product; 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 product candidates receive marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, third-partypayors and others in the medical community necessary for commercial success, in which case we may not generate significant revenues or becomeprofitable.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. There are already a number ofcompetitive therapies on the market to tivozanib, as well as our other product candidates, in indications we intend to target.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 advantages of the product compared to competitive therapies; •the number of competitors approved for similar uses; •the relative promotional effort of us as compared with our competitors; •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 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; •the timing of market introduction of our approved products as well as competitive products; •adverse publicity about the product or favorable publicity about competitive products; •potential product liability claims; •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. 45We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indicationsthat may be more profitable or for which there is a greater likelihood of success.Because we have limited financial and managerial resources, we intend to focus on developing product candidates for specific indications that weidentify as most likely to succeed, in terms of both their potential for marketing approval and commercialization. As a result, we may forego or delay pursuitof opportunities with other product candidates or for other indications that may prove to have greater commercial potential.Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending oncurrent and future research and development programs and product candidates for specific indications may not yield any commercially viable productcandidates. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights tothat product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us toretain sole development and commercialization rights to the product candidate.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 sales, marketing or distribution infrastructure and have limited experience as an organization in the sales, marketing, and distributionof pharmaceutical products. Our licensee EUSA has been responsible for the sales, marketing, and distribution efforts associated with the commercial launchof tivozanib in certain European countries. To achieve commercial success for any approved product, we must either develop a sales and marketingorganization or outsource these functions to third parties. The development of sales, marketing and distribution capabilities will require substantial resources,will be time consuming and, if not initiated sufficiently in advance of marketing approval, could delay any product launch. Conversely, the commerciallaunch of a product candidate for which we recruit a sales force and establish marketing and distribution capabilities is delayed or does not occur for anyreason, we could incur substantial costs and our investment could be lost if we cannot retain or reposition our sales and marketing personnel. In addition, wemay not be able to hire or retain a sales force in the United States that is sufficient in size or has adequate expertise in the medical markets that we plan totarget. If we are unable to establish or retain a sales force and marketing and distribution capabilities, our operating results may be adversely affected.If we enter into arrangements with third parties to perform sales, marketing and distribution services such as our collaboration with EUSA, our productrevenues or the profitability of these products may be substantially lower than if we were to directly market and sell products in those markets. Furthermore,we may be unsuccessful in entering 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 no control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market ourproducts effectively.We may seek to enter into collaborations that we believe may contribute to our ability to advance development and ultimately commercialize ourproduct candidates. We also seek to enter into collaborations where we believe that realizing the full commercial value of our development programs willrequire access to broader geographic markets or the pursuit of broader patient populations or indications. If a potential partner has development orcommercialization expertise that we believe is particularly relevant to one of our products, then we may seek to collaborate with that potential partner even ifwe believe we could otherwise develop and commercialize the product independently.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, we or our collaborators willneed to address a number of scientific, technical, regulatory and logistical challenges. We have limited experience in the development of diagnostics andmay not be successful in developing appropriate diagnostics to pair with any of our therapeutic product candidates. The FDA and similarregulatory authorities outside the United States are generally expected to regulate companion diagnostics as medical devices. In each case, companiondiagnostics require separate regulatory approval prior to commercialization. We expect to rely in part on third parties for the design, development andmanufacture of any companion diagnostic. If we, or any third parties that we engage to assist us, are unable to successfully develop companion diagnosticsfor our therapeutic product candidates, or experience delays in doing so, the development of our therapeutic product candidates may be adversely affected,our therapeutic product candidates may not receive marketing approval and we may not realize the full commercial potential of any therapeutics that receivemarketing approval. As a result, our business would be harmed, possibly materially. 46We face substantial competition from existing approved products. Our competitors may also discover, develop or commercialize new competing productsbefore, or more successfully, than we do.The biotechnology and pharmaceutical industries are highly competitive. Our future success depends on our ability to demonstrate and maintain acompetitive advantage with respect to the design, development and commercialization of product candidates. Our objective is to design, develop andcommercialize new products with superior efficacy, convenience, tolerability and safety. We expect any product candidate that we commercialize with ourstrategic partners will compete with existing, market-leading products.There are many pharmaceutical companies, biotechnology companies, public and private universities and research organizations actively engaged inthe research and development of products that may be similar to our products. A number of multinational pharmaceutical companies, as well as largebiotechnology companies, including, but not limited to, Actelion Pharmaceuticals Ltd., Amgen, Inc., Arqule, Inc., AstraZeneca, Bayer HealthCare AG,Bristol-Myers Squibb, Eisai Co., Ltd., Eli Lilly and Company, Exelixis, Inc., Gilead Sciences, Inc., GlaxoSmithKline plc, GTx, Inc., Helsinn and XBiotech,Incyte Corporation, Janssen Pharmaceuticals, Inc. (a division of Johnson and Johnson), Jazz Pharmaceuticals plc, Merck, Merrimack Pharmaceuticals, Inc.,Novartis, OncoMed Pharmaceuticals, Inc., Pfizer Inc. and Roche Laboratories, Inc. are pursuing development in diseases we focus on or are currentlydeveloping or marketing pharmaceuticals that target VEGFR, HGF, ErbB3, Notch 3 or other pathways on which we may focus. It is probable that the numberof companies seeking to develop competing products and therapies 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 product discovery and development, obtaining FDA and other regulatory approvals, and commercialization. Many are already marketingproducts to treat the same indications, and having the same biological targets, as the product candidates we are developing, including with respect to renalcell carcinoma. 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, develop and commercialize products that are superior to other products in the market in terms of, among other things, safety,efficacy, convenience, or price; •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 our products.Established competitors may invest heavily to discover and develop novel compounds that could make our product candidates obsolete. In addition,any new product that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in orderto obtain approval, to overcome price competition and to be commercially successful. If we are not able to compete effectively, our business will not growand our financial condition and operations will suffer.There are currently 11 FDA-approved drugs in oncology which, like tivozanib, target the VEGFR pathway as a part or all of their inhibitorymechanism. Eight of the FDA-approved VEGFR pathway inhibitors are oral small molecule receptor TKIs. Many of the approved VEGFR pathway inhibitorsare in ongoing development in additional cancer indications including RCC. Additionally, we are aware of a number of companies that have ongoingprograms to develop both small molecules and biologics that target the VEGFR pathway. The emergence of PD-1/PD-L1 inhibitor and other immune system-targeted therapies, both alone and in combination, present additional competition for tivozanib in aRCC. We are aware of several phase 3 registration studiesevaluating PD-1/PD-L1 inhibitors in combination with VEGFR TKIs in RCC, as well as combinations of PD-1 agents with other immune therapies for RCC.Positive phase 3 study results have recently been announced from CheckMate-214, a Bristol-Myers Squibb study combining nivolumab and ipilimumab vssunitinib in first line RCC, and also for the phase 3 IMmotion151 combination study of bevacizumab and atezolizumab vs sunitinib in first line RCC. Ifapproved, these products could present additional competition for tivozanib.We believe the products that are considered competitive with ficlatuzumab include those agents targeting the HGF/c-Met pathway. We believe themost direct competitors to our AV-203 program are monoclonal antibodies that specifically target the ErbB3 receptor. There are also other agents that targetErbB3 as a part or all of their inhibitory mechanism. Only a limited number of agents have been approved for the treatment or prevention of cachexia causedby any disease. A number of agents with different mechanisms of action, however, have completed or are currently being studied in phase 2 trials in cachexiaor muscle wasting. Currently, there are no ongoing clinical trials of Notch 3-specific inhibitors or any approved Notch 3-specific inhibitors in PAH patients;however, there are multiple treatments approved for PAH through various mechanisms. 47Even if we or our collaborators are able to commercialize any product candidate, the product may become subject to unfavorable 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. For example, our Europeanlicensee for tivozanib, EUSA Pharma, is currently in the process of seeking reimbursement approval for tivozanib in the countries in which tivozanib hasbeen approved. If coverage is not available, or reimbursement is limited, we, or any collaborators, may not be able to successfully commercialize our productcandidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us or our collaborators to establish ormaintain pricing sufficient to realize a sufficient return on our investments. In the United States, no uniform policy of coverage and reimbursement forproducts exists among third-party payors, and coverage and reimbursement levels for products can differ significantly from payor to payor. As a result, thecoverage determination process is often time consuming and costly and may require us to provide scientific and clinical support for the use of our products toeach payor separately, with no assurance that coverage and adequate reimbursement will be obtained or applied consistently.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 our 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 to recoup our or their investment in one or more product candidates, even if our product candidates obtain marketingapproval.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 cost containment,both in the United States and elsewhere. Government authorities and other third-party payors have attempted to control costs by limiting coverage and theamount of reimbursement for particular medications, which could affect our ability to sell our product candidates profitably. These payors may not view ourproducts, even if approved, as cost-effective, and coverage and reimbursement may not be available to our customers or may not be sufficient to allow ourproducts to be marketed on a competitive basis. Cost-control initiatives could cause us or our collaborators to decrease the price we might establish forproducts, which could result in lower than anticipated product revenues. If the prices for our products, if any, decrease or if governmental and other third-party payors do not provide coverage or adequate reimbursement, our prospects for revenue 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, for 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 obtain marketing approvalcould significantly harm our operating results, our ability to raise capital needed to commercialize products and our overall financial condition. 48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 duringclinical 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; •withdrawal of clinical trial participants; •delay or termination of our clinical trial; •significant 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; •injury to our reputation and negative media attention; and •a decline in our stock price.Our inability to maintain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could preventor 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. We will need to increase our insurance coverage if we commercialize any product that receives marketing approval. Althoughwe maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, inwhole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we maybe subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement thatexceed 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. The cost of any such product liability litigation or other proceeding, even if resolved in our favor, could be substantial. In addition, insurance coverage isbecoming increasingly expensive. If we are unable to maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potentialproduct liability claims, it could prevent or inhibit the development and commercial production and sale of our product candidates, which could harm ourbusiness, financial condition, results of operations and prospects.Risks Related to Our Dependence on Third PartiesWe rely on third parties, such as contract 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 rely on contract researchorganizations and other third parties to assist us in managing, monitoring and otherwise carrying out many of these trials. We compete with larger companiesfor the resources of these third parties.Although we plan to continue to rely on these third parties to conduct our ongoing and any future clinical trials, we are responsible for ensuring thateach of 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. 49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 product candidates or to 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. Other risks of our reliance on third-partymanufacturers include the possible mislabeling of clinical supplies, potentially resulting in the wrong dose amounts being supplied or active drug or placebonot being properly identified; the possibility of clinical supplies not being delivered to clinical sites on time, leading to clinical trial interruptions, or of drugsupplies not being distributed to commercial vendors in a timely manner, resulting in lost sales; and the possible misappropriation of our proprietaryinformation, including our trade secrets and know-how. In addition, the FDA and other regulatory authorities require that our product candidates bemanufactured according to cGMPs. Any failure by our third-party manufacturers to comply with cGMP or failure to scale-up manufacturing processes asneeded, including any failure to deliver sufficient quantities of product candidates 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 failure could be the basis for action by the FDA to withdraw approvals for productcandidates previously granted to us and for other regulatory action, including recall or seizure, fines, imposition of operating restrictions, total or partialsuspension 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 studiesand potential commercial manufacturing. There are a small number of suppliers raw and starting materials that we use to manufacture our product candidates.Such suppliers may not sell these materials to our manufacturers at the times we need them or on commercially reasonable terms. We do not have any controlover the process or timing of the acquisition of these materials by our manufacturers. Any significant delay in the supply of a product candidate or the rawmaterial components thereof for an ongoing clinical trial or potential commercial launch due to the need to replace a third-party manufacturer couldconsiderably delay completion of our clinical studies, product testing and potential regulatory approval of our product candidates. If our manufacturers or weare unable to purchase these raw materials after regulatory approval has been obtained for our product candidates there could be a shortage in supply, whichwould impair our ability to generate revenues from the sale of our product candidates. 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, quantity or timeframe necessary to develop and commercialize related products. If we successfullycommercialize any of our drugs, we may be required to establish or access large-scale commercial manufacturing capabilities. In addition, as our drugdevelopment pipeline matures, we will have a greater need for commercial manufacturing capacity. We do not own or operate manufacturing facilities for theproduction of clinical or commercial quantities of our product candidates and we currently have no plans to build our own clinical or commercial scalemanufacturing capabilities. To meet our projected needs for commercial manufacturing in the event that one or more of our product candidates gainsmarketing approval, third parties with whom we currently work may need to increase their scale of production or we may need to secure alternate suppliers.We may not be successful in establishing or maintaining strategic partnerships to further the development of our therapeutic programs. Additionally, ifany of our current or future strategic partners fails to perform its obligations or terminates the 50partnership, the development and commercialization of the product candidates under such agreement could be delayed or terminated. Such failures couldhave a material adverse effect on our operations and business.Our success will depend in significant part on our ability to attract and maintain strategic partners and strategic relationships with majorbiotechnology or pharmaceutical companies to support the development and commercialization of our product candidates. In these partnerships, we wouldexpect our strategic partner to provide capabilities in research, development, marketing and sales, in addition to funding.We 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 ourproduct candidates 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 ashaving the requisite potential.Any delay in entering into new strategic partnership agreements related to our product candidates could have an adverse effect on our business,including delaying the development and commercialization of our product candidates. If we are not able to establish and maintain strategic partnerships: •we will have fewer resources with which to continue to operate our business; •the development of certain of our product candidates may be terminated or delayed; and •our cash expenditures needed to develop such product candidates would increase significantly and we do not have the cash resources todevelop our product candidates on our own.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. Furthermore,we may not be able to maintain such strategic partnerships if, for example, development or approval of a product candidate is delayed, sales of an approvedproduct are disappointing or the partner experiences its own financial or operational constraints or a change in business strategy. If any current or futurestrategic partners do not devote sufficient time and resources to their arrangements with us, we may not realize the potential commercial benefits of thearrangement, and our results of operations may be adversely affected. In addition, if any strategic partner were to breach or terminate its arrangements with us,the development and commercialization of the affected product candidate could be delayed, curtailed or terminated because we may not have sufficientfinancial resources or capabilities to continue development and commercialization of the product candidate on our own. Our current partners and licenseescan terminate their agreements with us under various conditions, including without cause, at which point they would no longer continue to develop ourproducts.Much of the potential revenue from any of our strategic partnerships will likely consist of contingent payments, such as development milestones androyalties 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 are not involved in these processes, and we depend entirely on our strategicpartners. Any of our 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 scientificexpertise, limited cash resources or specialized equipment limitations, or the belief that other product candidates may have a higherlikelihood of obtaining 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 or maintaining adequate patent protection for one or more of our product candidates, or the scope of our patientprotection could be insufficiently broad, which could result in competition and a decrease 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 51companies is generally uncertain because it involves complex legal and factual considerations. The standards applied by the United States Patent andTrademark Office, or USPTO, and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, there is no uniformworldwide policy regarding patentable subject matter or the scope of claims allowable in biotechnology and pharmaceutical patents. Consequently, patentsmay not issue from our pending patent applications. As such, we do not know the degree of future protection that we will have on our proprietary productsand technology. The scope of patent protection that the USPTO will grant with respect to the antibodies in our antibody product pipeline is uncertain. It ispossible that the USPTO will not allow broad antibody claims that cover closely related antibodies as well as the specific antibody. Upon receipt of FDAapproval, competitors would be free to market antibodies almost identical to ours, including biosimilar antibodies, thereby decreasing our market share.If we do not obtain patent term extensions under the Hatch-Waxman Act and similar non-U.S. legislation to extend the term of patents covering each ofour product candidates, our business may be materially harmed.Patents have a limited duration. The term of a U.S. patent, if granted from an application filed on or after June 8, 1995, is generally 20 years from itsearliest U.S. non-provisional filing date. Even if patents covering our product candidates are obtained, once the patents expire, we may be open tocompetition from competitive medications. Given the amount of time required for the development, testing and regulatory review of new product candidates,patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned or in-licensed patent rightsmay not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.Depending upon the circumstances, the term of our owned and in-licensed patent rights that cover our product candidates may be extended in the U.S.under the Hatch-Waxman Act, by Supplementary Protection Certificates, or SPCs, in certain European countries, and by similar legislation in other countriesfor delays incurred when seeking marketing approval for a drug candidate. For example, the Hatch-Waxman Act permits a patent term extension of up to fiveyears for a patent covering an approved product as compensation for effective patent term lost during product development and the FDA regulatory reviewprocess. However, we may not receive an extension if we fail to apply within the applicable deadline, fail to apply prior to expiration of relevant patents orotherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. If we are unable to obtain patent termextension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will beshortened and our competitors may obtain approval to market competing products sooner. As a result, our revenue from applicable products could bematerially reduced.The U.S. patent rights that we exclusively license covering tivozanib are scheduled to expire from 2018 to 2023. The U.S. patent covering themolecule and its therapeutic use is scheduled to expire in 2022. In view of the length of time tivozanib has been under regulatory review at the FDA,however, a patent term extension of up to 5 years may be available, which, if granted, could extend the term of this patent until 2027. However, the length ofthe extension could be less than we request, or no extension may be granted at all. In addition, SPCs have been filed in over 15 European countries for thecorresponding patents covering the tivozanib molecule, which, if granted, could extend the term of the such patents in each of those European countries until2027. If we are unable to obtain a patent term extension or the term of any such extension is less than we request, the period of time during which the patentrights covering tivozanib or its use can be enforced will be shortened, and our competitors may obtain approval to market a competing product sooner. As aresult, our potential revenue from tivozanib could be materially reduced, causing material harm to our business.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 strategic 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 Office, 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 USPTO, or made a misleadingstatement, during prosecution. Additionally, third parties are able to challenge the validity of issued patents through administrative proceedings in the patentoffices of certain countries, including the USPTO and the European Patent Office. Although we have conducted due diligence on patents we have exclusivelyin-licensed, and we believe that we have conducted our patent prosecution in accordance with the duty of candor and in good faith, the outcome followinglegal assertions of invalidity and unenforceability during patent litigation is unpredictable. With respect to the validity question, for example, we cannot becertain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to 52prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on one of our products.Such a loss of patent protection could have a material adverse impact 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 that contains broad claims related to the use of a tyrosine kinase inhibitorin combination with a DNA damaging agent such as chemotherapy or radiation, and we have received written notice from the patent owners indicating thatthey believe we may need a license from them in order to avoid infringing their patent rights. With regard to ficlatuzumab, we are aware of two separatefamilies of United States patents and foreign counterparts, with each of the two families being owned by a different third party, that contain broad claimsrelated to anti-HGF antibodies having certain binding properties and their use. In the event that an owner of one or more of these patents were to bring aninfringement action against us, we may have to argue that our product, its manufacture or use does not infringe a valid 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 to overcome a statutory presumption of validitythat attaches to every United States patent. This means that in order to prevail, we would have to present clear and convincing evidence as to the invalidity ofthe patent’s claims. There is no assurance 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 oncommercially acceptable 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 resultin our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to ceasesome aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptableterms. This could harm our business significantly.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, in-license needed technology, or enter into strategic partnerships that would help us bring our productcandidates to market. 53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 which we have licensed and on which our business depends or may prosecute them in a mannernot in the best interests of our business. Even if patents issue from these applications, our licensors may fail to maintain these patents, may decide not topursue litigation against third-party infringers, may fail to prove infringement, or may fail to defend against counterclaims of patent invalidity orunenforceability. In addition, in spite of our best efforts, a licensor could claim that we have materially breached a license agreement and terminate thelicense, thereby removing our or our licensees’ ability to obtain regulatory approval 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 intended market exclusivity, competitors would have the freedom to seek regulatoryapproval of, and to market, identical products. In addition, the partners to which we have sublicensed certain rights under these licenses, including Novartisand EUSA, would likely have grounds for terminating our partnerships if these licenses are terminated or the underlying patents are not maintained orenforced. This could have a material adverse effect on our results of operations, our competitive business position and our business prospects.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 course of our research, development and business activities, we often rely on confidentiality agreements to protect ourproprietary information. Such confidentiality agreements are used, for example, when we talk to potential strategic partners. In addition, each of ouremployees is required to sign a confidentiality agreement upon joining our company. We take steps to protect our proprietary information, and we seek tocarefully draft our confidentiality agreements to protect our proprietary interests. Nevertheless, there can be no guarantee that an employee or an outsideparty will not make an unauthorized disclosure of our proprietary confidential information. This might happen intentionally or inadvertently. It is possiblethat a competitor will make use of such information, and that our competitive position will be compromised, in spite of any legal action we might takeagainst 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. 54Intellectual property rights may not 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 patentsthat we own 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 pendingpatent application 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 ourintellectual property rights. •Our pending patent applications might 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 issuedpatents may not be broad enough to prevent the commercialization of competitive antibodies that are biosimilar to one or more of ourantibody products, or may 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.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 biopharmaceutical industry involves both technological complexity and legal complexity. Therefore, obtaining and enforcingbiopharmaceutical patents is costly, time-consuming and inherently uncertain. In addition, several recent events have increased uncertainty with regard toour ability to obtain patents in the future and the value of patents once obtained. Among these, in September 2011, patent reform legislation passed byCongress was signed into law in the U.S. The new patent law introduces changes including a first-to-file system for determining which inventors may beentitled to receive patents, and a new post-grant review process that allows third parties to challenge newly issued patents. It remains to be seen how thebiopharmaceutical industry will be affected by such changes in the patent system. In addition, the U.S. Supreme Court has ruled on several patent cases inrecent years, either narrowing the scope of patent protection available in specified circumstances or weakening the rights of patent owners in specifiedsituations. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change inunpredictable ways that could 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 regulatory 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 will not be able to commercialize our product candidates, and our ability togenerate 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 EMA and comparable regulatory authorities in other countries. Failureto obtain marketing approval for a product candidate will prevent us from commercializing the product candidate. We have only limited experience in filingand supporting the applications necessary to gain marketing approvals and expect to rely on third-party contract research organizations to assist us in thisprocess. 55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. The FDAand comparable authorities in other countries have substantial discretion in the approval process and may refuse to accept any application or may decide thatour data is insufficient for approval and require additional preclinical, clinical or other studies. For example, in June 2013, the FDA issued a completeresponse letter informing us that it would not approve tivozanib for the first-line treatment of aRCC based solely on the data from the TIVO-1 trial. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of aproduct candidate. Any marketing approval we or our collaborators ultimately obtain may be limited or subject to restrictions or post-approval commitmentsthat render the approved product not commercially viable.Accordingly, if we or our collaborators experience delays in obtaining approval or if we 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 collaborators must obtain marketingapprovals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additionaltesting. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside theUnited States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, a productmust be approved for reimbursement before the product can be approved for sale in that country. We or our collaborators may not obtain approvals fromregulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in othercountries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in othercountries or jurisdictions or by the FDA. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize ourproducts in any market.Additionally, on June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the European Union, commonly referred to as Brexit.On March 29, 2017, the country formally notified the European Union of its intention to withdraw pursuant to Article 50 of the Lisbon Treaty. Since asignificant proportion of the regulatory framework in the United Kingdom is derived from European Union directives and regulations, the referendum couldmaterially impact the regulatory regime with respect to the approval of our product candidates in the United Kingdom or the European Union. Any delay inobtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, would prevent us from commercializing our productcandidates in the United Kingdom and/or the European Union and restrict our ability to generate revenue and achieve and sustain profitability. If any ofthese outcomes occur, we may be forced to restrict or delay efforts to seek regulatory approval in the United Kingdom and/or European Union for our productcandidates, which could significantly and materially harm our business.We may not be able to obtain orphan drug designation or orphan drug exclusivity for our product candidates, and, even if we do, that exclusivity may notprevent 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 our collaborators mayseek orphan drug designations for other product candidates and may be unable to obtain such designations.Even if we obtain orphan drug designation for a product candidate, we may not be able to obtain orphan drug exclusivity for that candidate.Generally, a product with orphan drug designation only becomes entitled to orphan drug exclusivity if it receives the first marketing approval for theindication for which it has such designation, in which case the FDA or the EMA will be precluded from 56approving another marketing application for the same product for that indication for the applicable exclusivity period. The applicable exclusivity period isseven years in the United States and ten years in Europe. The European exclusivity period can be reduced to six years if a product no longer meets the criteriafor orphan drug designation or if the product is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost ifthe FDA or the EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of theproduct to meet the needs of patients with the rare disease or condition.Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because differentproducts can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug or biologic for thesame condition if the FDA concludes that the later product is clinically superior in that it is shown to be safer, to be more effective or to make a majorcontribution to patient care.On August 3, 2017, the Congress passed the FDA Reauthorization Act of 2017, or FDARA. FDARA, among other things, codified the FDA’s pre-existing regulatory interpretation, to require that a drug sponsor demonstrate the clinical superiority of an orphan drug that is otherwise the same as apreviously approved drug for the same rare disease in order to receive orphan drug exclusivity. The new legislation reverses prior precedent holding that theOrphan Drug Act unambiguously requires that the FDA recognize the orphan exclusivity period regardless of a showing of clinical superiority. The FDA mayfurther reevaluate the Orphan Drug Act and its regulations and policies. We do not know if, when, or how the FDA may change the orphan drug regulationsand policies in the future, and it is uncertain how any changes might affect our business. Depending on what changes the FDA may make to its orphan drugregulations and policies, our business could be adversely impacted.Even if we or our collaborators obtain marketing approvals for our product candidates, the terms of approvals and ongoing regulation of our productsmay limit how we 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 our collaborators must therefore comply with requirements concerning advertising and promotion for any of our product candidates forwhich we obtain marketing approval. Promotional communications with respect to prescription products are subject to a variety of legal and regulatoryrestrictions and must be consistent with the information in the product’s approved labeling. Thus, we will not be able to promote any products we develop forindications 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 and our collaborators and our contractmanufacturers could be subject to periodic unannounced inspections by the FDA to monitor and ensure compliance with cGMPs.Accordingly, assuming we receive marketing approval for one or more of our product candidates, we will continue to expend time, money and effort inall areas of regulatory compliance, including manufacturing, production, product surveillance and quality control.If we and our collaborators are not able to comply with post-approval regulatory requirements, we could have the marketing approvals for our productswithdrawn by regulatory authorities and our ability to market any products could be limited, which could adversely affect our ability to achieve or sustainprofitability. Further, the cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.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. 57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 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.The efforts of the Trump Administration to pursue regulatory reform may limit the FDA’s ability to engage in oversight and implementation activities inthe normal course, and that could negatively impact our business.The Trump Administration has taken several executive actions, including the issuance of a number of executive orders, that could impose significantburdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes throughrulemaking, issuance of guidance, and review and approval of marketing applications. On January 30, 2017, President Trump issued an executive order,applicable to all executive agencies, including the FDA, that requires that for each notice of proposed rulemaking or final regulation to be issued in fiscalyear 2017, the agency shall identify at least two existing regulations to be repealed, unless prohibited by law. These requirements are referred to as the “two-for-one” provisions. This executive order includes a budget neutrality provision that requires the total incremental cost of all new regulations in the 2017fiscal year, including repealed regulations, to be no greater than zero, except in limited circumstances. For fiscal years 2018 and beyond, the executive orderrequires agencies to identify regulations to offset any incremental cost of a new regulation. In interim guidance issued by the Office of Information andRegulatory Affairs within the Office of Management and on February 2, 2017, the administration indicates that the “two-for-one” provisions may apply notonly to agency regulations, but also to significant agency guidance documents. It is difficult to predict how these requirements will be implemented, and theextent to which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on FDA’s ability toengage in oversight and implementation activities in the normal course, our business may be negatively impacted. 58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 individualfor, or the purchase, order or recommendation or arranging of, any good or service, for which payment may be made under a federalhealthcare program such as Medicare and Medicaid; •the federal False Claims Act imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, againstindividuals or entities for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for paymentby a federal healthcare program or making a false statement or record material to payment of a false claim or avoiding, decreasing orconcealing an obligation to pay money to the federal government, with potential liability including mandatory treble damages andsignificant per-claim penalties, currently set at $10,781 to $21,563 per false claim; •the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing ascheme to defraud 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 imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission ofindividually identifiable health information; •the federal Physician Payments Sunshine Act requires applicable manufacturers of covered products to annually report to Centers forMedicare and Medicaid Services, or CMS, (i) payments and other transfers of value to physicians and teaching hospitals, and (ii) certainphysician ownership or investment interests; and •analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and transparency statutes, may applyto sales or marketing arrangements and claims involving healthcare items or services reimbursed by 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 manufacturers to report information related to payments and other transfers ofvalue to other healthcare providers and healthcare entities, or marketing expenditures. State and foreign laws also govern the privacy and security of healthinformation in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicatingcompliance 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, individual imprisonment, integrity obligations, exclusion from funded healthcareprograms and the curtailment or restructuring of our operations. Any such penalties could adversely affect our financial results. We are developing andimplementing a corporate compliance program designed to ensure that we will market and sell any future products that we successfully develop from ourproduct candidates in compliance with all applicable laws and regulations, but we cannot guarantee that this program will protect us from governmentalinvestigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted againstus and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including theimposition of significant fines or other sanctions.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, individualimprisonment, integrity obligations, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment orrestructuring of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not incompliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusion from government funded healthcareprograms. 59Current and future legislation may increase the difficulty and cost for us and any collaborators to obtain marketing approval of and commercialize ourproduct candidates and affect the prices we, or they, may obtain.In the United States and foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding thehealthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our abilityto profitably sell any product candidates for which we obtain marketing approval. We expect that current laws, as well as other healthcare reform measuresthat may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we, or anycollaborators, may receive for any approved products.In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and EducationAffordability Reconciliation Act, or collectively the ACA. Among the provisions of the ACA of potential importance to our business and our productcandidates 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 thatare inhaled, infused, instilled, implanted or injected; •expansion of healthcare fraud and abuse laws, including the civil False Claims Act and the federal Anti-Kickback Statute, newgovernment investigative 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 offnegotiated prices of applicable brand products to eligible beneficiaries during their coverage gap period, as a condition for themanufacturer’s outpatient products 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 effectivenessresearch, 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 toreduce expenditures 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.In addition, other legislative changes have been proposed and adopted since the ACA was enacted. In August 2011, the Budget Control Act of 2011,among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending atargeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’sautomatic reduction to several government programs. These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscalyear, which went into effect in April 2013 and will remain in effect through 2024 unless additional Congressional action is taken. The American TaxpayerRelief Act of 2012, among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the government torecover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding andotherwise affect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with which anysuch product candidate is prescribed or used.With the new Administration and Congress, there will likely be additional administrative or legislative changes, including modification, repeal, orreplacement of all, or certain provisions of, the ACA. For example, with enactment of the Tax Cuts and Jobs Act of 2017, which was signed by the Presidenton December 22, 2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level ofhealth insurance, will become effective in 2019. According 60to the Congressional Budget Office, the repeal of the individual mandate will cause 13 million fewer Americans to be insured in 2027 and premiums ininsurance markets may rise. Further, each chamber of the Congress has put forth multiple bills designed to repeal or repeal and replace portions of the ACA. Although none of these measures has been enacted by Congress to date, Congress may consider other legislation to repeal and replace elements of the ACA.The Congress will likely consider other legislation to replace elements of the ACA, during the next Congressional session.The Trump Administration has also taken executive actions to undermine or delay implementation of the ACA. In January 2017, President Trumpsigned an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay theimplementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, ormanufacturers of pharmaceuticals or medical devices. In October 2017, the President signed a second Executive Order allowing for the use of associationhealth plans and short-term health insurance, which may provide fewer health benefits than the plans sold through the ACA exchanges. At the same time, theTrump Administration announced that it will discontinue the payment of cost-sharing reduction, or CSR, payments to insurance companies until Congressapproves the appropriation of funds for such CSR payments. The loss of the CSR payments is expected to increase premiums on certain policies issued byqualified health plans under the ACA. A bipartisan bill to appropriate funds for CSR payments was introduced in the Senate, but the future of that bill isuncertain.The costs of prescription pharmaceuticals in the United States has also been the subject of considerable discussion in the United States, and membersof Congress and the Trump Administration have stated that they will address such costs through new legislative and administrative measures. To date, therehave been several recent U.S. congressional inquiries and proposed state and federal legislation designed to, among other things, bring more transparency todrug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform governmentprogram reimbursement methodologies for drug products. The pricing of prescription pharmaceuticals is also subject to governmental control outside theUnited States. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for aproduct. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost effectiveness ofour product candidates to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set atunsatisfactory levels, our ability to generate revenues and become profitable could be impaired.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. 61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 couldhave 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 our collaborators may be required to conduct a clinical trial that compares the cost-effectiveness of our product to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set atunsatisfactory levels, our business could 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, our competition position could be harmed, and our product development and commercialization efforts could bedelayed.Risks Related to Employee Matters and Managing Potential 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. We have completed several reductions in force related to restructurings we havecompleted in the past, which could make it more difficult to retain or attract employees in the future. The loss of services of employees, and in particular, of amember of management could delay or prevent our ability to successfully maintain or enter into new licensing arrangements or collaborations, the successfuldevelopment of our product candidates, the completion of our planned clinical trials or the commercialization of our product candidates. We do not carry“key person” insurance covering any members of our senior management. Our employment arrangements with all of these individuals are “at will,” meaningthey or we can terminate their service at any time. 62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.Risks Related to Ownership of Our Common StockIf we fail to meet the requirements for continued listing on the Nasdaq Capital Market, our common stock could be delisted from trading, which woulddecrease the liquidity of our common stock and our ability to raise additional capital.Our common stock is currently listed for quotation on the Nasdaq Capital Market. We are required to meet specified requirements to maintain ourlisting on the Nasdaq Capital Market, including, among other things, a minimum bid price of $1.00 per share. If we fail to satisfy the Nasdaq Capital Market’scontinued listing requirements, we may transfer to the OTC Bulletin Board. Having our common stock trade on the OTC Bulletin Board could adverselyaffect the liquidity of our common stock. Any such transfer could make it more difficult to dispose of, or obtain accurate quotations for the price of, ourcommon stock, and there also would likely be a reduction in our coverage by securities analysts and the news media, which could cause the price of ourcommon stock to decline further. We may also face other material adverse consequences in such event, such as negative publicity, a decreased ability toobtain additional financing, diminished investor and/or employee confidence, and the loss of business development opportunities, some or all of which maycontribute to a further decline in our stock price.The market price of our common stock has been, and is likely to be, highly volatile, and could fall below the price you paid. A significant decline in thevalue 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 ourcompetitors, and the timing of these introductions or announcements; •actual or anticipated results from and any delays in our clinical trials; •results of regulatory reviews relating to our product candidates; •the results of our efforts to develop, acquire or in-license additional product candidates or products; 63 •disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patentprotection for our 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 operatingperformance of our 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 in Part I, Item 3 of this report under the heading “Legal Proceedings”. Theseproceedings and other similar litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources,which could materially and adversely affect our business and financial condition.We and our collaborators may not achieve development and commercialization goals in the time frames that we publicly estimate, which could have anadverse impact on our business and could cause our stock price to decline.We set goals, and make public statements regarding our expected timing for certain accomplishments, such as statements we have made about theinitiation and completion of clinical trials, filing and approval of regulatory applications and other developments and milestones under our research anddevelopment programs and those of our partners and collaborators for tivozanib, ficlatuzumab, AV-203, AV-380 and the AV-353 platform. The actual timingof these events can vary significantly due to a number of factors, including, without limitation, delays or failures in our preclinical studies or clinical trials,the amount of time, effort and resources committed to our programs and the uncertainties inherent in the regulatory approval process. As a result, there can beno assurance that our preclinical studies and clinical trials will advance or be completed in the time frames we expect or announce, that we will makeregulatory submissions or receive regulatory approvals as planned or that we will be able to adhere to our current schedule for the achievement of keymilestones under any of our programs. If we fail to achieve one or more of the milestones described above as planned, our business could be materiallyadversely affected and the price of our common stock could 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 and 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. 64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 clinical development programs; •the level of expenses incurred in connection with our clinical development programs, including development and manufacturing costsrelating to our clinical development candidates; •the implementation of restructuring and cost-savings strategies; •the implementation or termination of collaboration, licensing, manufacturing or other material agreements with third parties, and non-recurring revenue or expenses under any such agreement; •costs associated with lawsuits against us or other litigation in which we may become involved, including the current class actiondescribed in Part I, Item 3 of this report under the heading “Legal Proceedings”; •changes in our Hercules Loan Agreement, including the existence of any event of default that may accelerate payments due thereunder; •non-cash changes in fair value related to re-valuations of our PIPE Warrant liability and warrants we intend to issue in connection withthe proposed settlement of the current class action, which we refer to as the Settlement Warrants, as a result of fluctuations in our stockprice; 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. Although certain of these trends have recently showed signs of reversing, there can be no assurance that rapid or extended periods ofdeterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affectedby external economic conditions and a volatile business environment or unpredictable and unstable market conditions. If the equity and credit markets arenot 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, 2017, we had approximately $33.5 million of cash, cash equivalents and marketable securities consisting of cash on deposit withbanks, a U. S. government money market fund, corporate debt securities, including commercial paper, and U.S. government agency securities. As of the dateof this report, we are not aware of any downgrades, material losses, or other significant deterioration in the fair value of our cash equivalents. However, noassurance can be given that deterioration in conditions of the global credit and financial markets would not negatively impact our current portfolio of cashequivalents or our ability to meet our financing objectives. Dislocations in the credit market may adversely impact the value and/or liquidity of cashequivalents 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 and warrants, could negativelyaffect our stock price.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 and warrants. The exercise of these options or warrants and thesubsequent sale of the underlying common stock could cause a further decline in our stock price. These sales also might make it difficult for us to sell equitysecurities in the future at a time and at a price that we deem appropriate. 65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; •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, whichcould be used to institute a rights plan, or a poison pill, that would work to dilute the stock ownership of a potential hostile acquirer,likely preventing 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 stockholders.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 stockholders may be costly and time-consuming, and may disrupt ouroperations and divert 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 potentialacquisitions, collaborations or in-licensing opportunities and may make it more difficult to attract and retain qualified personnel andbusiness 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 toour board as a result of any proxy contest, such an election may adversely affect our ability to effectively and timely implement ourstrategic plan and create additional value for our stockholders. 66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 conclude within the prescribed timeframethat our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in the financial markets dueto a loss of confidence in the reliability of our financial statements.If we are unable to successfully remediate any material weaknesses in our internal control, the accuracy and timing of our financial reporting may beadversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition toapplicable stock exchange listing requirements, investors may lose confidence in our financial reporting, and our stock price may decline as a result. We alsocould become subject to investigations by Nasdaq, the SEC, or other regulatory authorities.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.We might not be able to utilize a significant portion of our net operating loss carryforwards and research and development tax credit carryforwards.We have incurred significant net losses since our inception and cannot guarantee when, if ever, we will become profitable. To the extent that wecontinue to generate federal and state taxable losses, unused net operating loss and tax credit carryforwards will carry forward to offset future taxable income,subject to applicable limitations on the use of those losses. Losses incurred in taxable years ending on or before December 31, 2017, are eligible to be carriedforward for up to 20 years, and to be deducted in full against income for the years to which they may be carried. Losses incurred in taxable years ending afterDecember 31, 2017, are eligible to be carried forward indefinitely, but may offset no more than 80% of the taxable income for the years to which they arecarried (computed without regard to the deduction for carryovers of net operating losses). Net operating loss carryovers from periods ending on or beforeDecember 31, 2017, and tax credit carryovers from all periods could expire unused and be unavailable to offset future income tax liabilities.In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporationundergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, thecorporation’s ability to use its pre-change net operating loss and credit carryovers to reduce its tax liability for post-change periods may be limited. We mayexperience ownership changes as a result of shifts in our stock ownership, some of which may be outside of our control. In addition, we have not conducted adetailed study to document whether our historical activities qualify to support the research and development credits currently claimed as a carryover. Adetailed study could result in adjustment to our research and development credit carryovers. If we determine that an ownership change has occurred and ourability to use our historical net operating loss and tax credit carryovers is materially limited, or if our research and development carryforwards are adjusted,our use of those attributes to offset future income tax liabilities would be limited. 67The recently passed comprehensive tax reform bill could adversely affect our business and financial condition.On December 22, 2017, President Trump signed into law new legislation that significantly revised the Internal Revenue Code of 1986, as amended.The newly enacted federal income tax law, among other things, contains significant changes to corporate taxation, including reduction of the corporate taxrate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certainsmall businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks,one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject tocertain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying orrepealing many business deductions and credits. Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new federal tax lawis uncertain and our business and financial condition could be adversely affected. In addition, it is uncertain how various states will respond to the newlyenacted federal tax law. The impact of this tax reform on holders of our common stock is also uncertain and could be adverse. We urge our stockholders toconsult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our common stock. ITEM 1B.Unresolved Staff CommentsNone.ITEM 2.PropertiesWe sublease our principal facilities, which consist of approximately 3,000 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 and for the foreseeable future.ITEM 3.Legal ProceedingsTwo class action lawsuits have been filed against us and certain of our former officers and directors, (Tuan Ha-Ngoc, David N. Johnston, WilliamSlichenmyer, and Ronald DePinho), in the United States District Court for the District of Massachusetts, or the District Court, 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 a class of stockholders who purchased our common stock between January 3, 2012 and May 1, 2013, or the Class. This consolidatedamended complaint was dismissed without prejudice on March 20, 2015, and the lead plaintiffs then filed a second amended complaint bringing similarallegations, and which no longer named Mr. DePinho as a defendant. We moved to dismiss again, and after a second round of briefing and oral argument, theDistrict Court ruled in our favor and dismissed the second amended complaint with prejudice on November 18, 2015. The lead plaintiffs appealed the DistrictCourt’s decision to the United States Court of Appeals for the First Circuit. They also filed a motion to vacate and reconsider the District Court’s judgment,which we opposed. On January 3, 2017, the District Court granted the plaintiffs’ motion to vacate the dismissal and judgment, and the plaintiffs filed amotion to dismiss their appeal on February 8, 2017. On February 2, 2017, the plaintiffs filed a third amended complaint, on behalf of stockholders whopurchased common stock between May 16, 2012 and May 1, 2013, alleging claims similar to those alleged in the prior complaints, namely that we andcertain of our former officers and directors violated Sections 10(b) and/or 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder by makingallegedly false and/or misleading statements concerning the phase 3 trial design and results for our TIVO-1 clinical trial in an effort to lead investors tobelieve that the drug would receive approval from the FDA. On March 2, 2017, we filed an answer to the third amended complaint, and the parties initiateddiscovery. On June 29, 2017, the plaintiffs filed a motion for class certification and on July 27, 2017, we fled our response. On July 18, 2017, the DistrictCourt entered an order referring the case to alternative dispute resolution. The parties mediated on September 12 and 13, 2017. On December 26, 2017, theparties entered into a binding MOU regarding the settlement of the lawsuit. On January 29, 2018, the parties entered into a Stipulation of Settlement whichwas filed with District Court on February 2, 2018. Under the terms of the MOU and Stipulation, we agreed with counsel for the lead plaintiffs to cause certainof our and the individual defendants’ insurance carriers to provide the Class with a cash payment of $15.0 million, which includes the cash amount of anyattorneys’ fees or litigation expenses that the District Court may award lead plaintiffs’ counsel and costs lead plaintiffs incur in administering and providingnotice of the settlement. Additionally, we agreed to issue to the Class warrants for the purchase of 2.0 million shares of our common stock exercisable fromthe date of issue until the expiration of a one-year period after the date of issue at an exercise price equal to the closing price on December 22, 2017, thetrading day prior to the execution of the MOU, which was $3.00 per share. On February 8, 2018, the District Court issued an order preliminarily approving theterms of the Stipulation. The Stipulation is subject to final approval by the District Court. The District Court set a final approval hearing for May 30, 2018.We have agreed to use our best efforts to issue and deliver the Settlement Warrants within ten business days following the effective date of the final approvalof the Stipulation. On July 3, 2013, the staff, or SEC Staff, of the SEC served a subpoena on us for documents and information concerning tivozanib, including relatedcommunications with the FDA, investors and others. In September 2015, the SEC Staff invited us to 68discuss the settlement of potential claims asserting that we violated federal securities laws by omitting to disclose to investors the recommendation by thestaff of the FDA on May 11, 2012, that we conduct an additional clinical trial with respect to tivozanib. On March 29, 2016, the SEC filed a complaintagainst us and three of our former officers in the U.S. District Court for the District of Massachusetts alleging that we misled investors about our efforts toobtain FDA approval for tivozanib. Without admitting or denying the allegations in the SEC’s complaint, we consented to the entry of a final judgmentpursuant to which we paid the SEC a $4.0 million civil penalty to settle the SEC’s claims against us. On March 31, 2016, the District Court entered a finaljudgment which (i) approved the settlement; (ii) permanently enjoined us from violating Section 17(a) of the Securities Act of 1933, as amended, or theSecurities Act, Sections 10(b) and 13(a) of the Exchange Act and rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 promulgated thereunder; and (iii) ordered usto pay the agreed-to civil penalty. On September 15, 2017 and October 31, 2017, respectively, two of our former officers consented to entry of final judgmentto settle the SEC’s claims against them. We are not a party to the litigation between the SEC and the remaining former officer, and we can make no assuranceregarding the outcome of that action or the SEC’s claims against that individual. ITEM 4.Mine Safety DisclosuresNot applicable. 69PART IIITEM 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 Capital Market under the symbol “AVEO”. The following table sets forth the high and low sale prices pershare for our common stock for the periods indicated: High Low 2016 First Quarter $1.27 $0.82 Second Quarter $1.15 $0.84 Third Quarter $1.09 $0.81 Fourth Quarter $0.89 $0.54 High Low 2017 First Quarter $0.98 $0.50 Second Quarter $2.42 $0.55 Third Quarter $4.24 $2.12 Fourth Quarter $4.15 $2.56 HoldersAs of March 8, 2018, there were approximately 50 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.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 SecuritiesNone. 70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, “filed” for purposes of Section 18 of the Exchange Act, or otherwisesubject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act.The graph below matches AVEO Pharmaceuticals, Inc.’s cumulative 5-Year total shareholder return on common stock with the cumulative total returnsof the Nasdaq Composite index and the Nasdaq Biotechnology index. The graph tracks the performance of a $100 investment in our common stock and ineach index (with the reinvestment of all dividends) from 12/31/2012 to 12/31/2017. The stock price performance included in this graph is not necessarily indicative of future stock price performance. 12/12 12/13 12/14 12/15 12/16 12/17AVEO Pharmaceuticals, Inc. 100.00 22.73 10.44 15.65 6.71 34.66Nasdaq Composite 100.00 141.63 162.09 173.33 187.19 242.29Nasdaq Biotechnology 100.00 174.05 230.33 244.29 194.95 228.29 71ITEM 6.Selected Financial DataThe following selected consolidated financial data should be read in conjunction with our Consolidated Financial Statements and the Notes theretoand Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Annual Report on Form 10-K. TheBalance Sheet Data at December 31, 2017 and 2016 and the Statement of Operations Data for each of the three years in the period ended December 31, 2017have been derived from our audited Consolidated Financial Statements for such years, included elsewhere in this Annual Report on Form 10-K. The BalanceSheet Data at December 31, 2015, 2014 and 2013, and the Statement of Operations Data for each of the two years in the period ended December 31, 2014have been derived from the audited Consolidated Financial Statements for such years not included in this Annual Report on Form 10-K.Our historical results for any prior period are not necessarily indicative of results to be expected in any future period. Years Ended December 31, Statement of Operations data: 2017 2016 2015 2014 2013 (in thousands, except per share data) Revenue $7,579 $2,515 $19,024 $18,123 $1,293 Operating expenses: Research and development 25,179 23,703 12,875 38,254 68,468 General and administrative 9,138 8,205 10,217 18,589 28,712 Settlement costs 2,073 — 4,000 — — Restructuring and lease exit — — 4,358 11,729 8,017 Total operating expenses 36,390 31,908 31,450 68,572 105,197 Loss from operations (28,811) (29,393) (12,426) (50,449) (103,904)Interest expense, net (2,373) (1,949) (2,286) (2,356) (3,002)Change in fair value of warrant liability (33,740) 4,751 — — — Other (expense) income — (195) (289) 66 (123)Net loss before income taxes (64,924) (26,786) (15,001) (52,739) (107,029)Provision for income taxes (101) (101) — — — Net loss $(65,025) $(26,887) $(15,001) $(52,739) $(107,029)Basic and diluted net loss per share $(0.61) $(0.39) $(0.27) $(1.01) $(2.10)Weighted average number of common shares outstanding 105,930 69,268 55,701 52,289 50,928 Years Ended December 31, Balance sheet data: 2017 2016 2015 2014 2013 (in thousands) Cash, cash equivalent, and marketable securities $33,525 $23,348 $34,135 $52,306 $118,506 Working capital 18,059 15,966 27,978 18,773 97,511 Total assets 50,198 27,285 40,542 70,662 146,346 Loans payable, including current portion, net of discount 18,477 14,003 9,471 20,652 19,205 Accumulated deficit (586,969) (521,916) (495,029) (480,028) (427,289)Total stockholders' (deficit) equity (40,763) (1,923) 17,227 20,606 69,938 72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 medicines for oncology and other areas of unmet medicalneed. Our strategy is to retain North American rights to our oncology portfolio while securing partners in development and commercialization outside ofNorth America. We are working to develop and commercialize our lead candidate tivozanib in North America as a treatment for renal cell carcinoma, or RCC.We have entered into partnerships to fund the development and commercialization of our preclinical and clinical stage assets, including AV-203 andficlatuzumab in oncology and AV-380 in cachexia. Tivozanib (FOTIVDA®), which we have outlicensed outside of North America, is approved in theEuropean Union, as well as Norway and Iceland, for the first-line treatment of adult patients with advanced RCC, or aRCC, and for adult patients who arevascular endothelial growth factor receptor, or VEGFR, and mTOR pathway inhibitor-naïve following disease progression after one prior treatment withcytokine therapy for aRCC. We are currently seeking a partner to develop our AV-353 platform, a preclinical asset, worldwide for the potential treatment ofpulmonary arterial hypertension, or PAH.Going ConcernWe have identified conditions and events that raise substantial doubt about our ability to continue as a going concern. To continue as a goingconcern, we must secure additional funding to support our current operating plan. As of December 31, 2017, we had approximately $33.5 million in existingcash, cash equivalents and marketable securities. In the first quarter of 2018 to-date, we have raised an additional approximate $1.9 million in net funding,including approximately $0.5 million received in January 2018 related to the exercise of 0.5 million PIPE Warrants and $1.4 million in net partnership-related funding in connection with the $2.0 million milestone payment by EUSA for the February 2018 reimbursement approval by the NICE, for RCC in theUK that was received in March 2018, net of the corresponding 30% sub-license fee due to KHK. Based on these available cash resources, we do not havesufficient cash on hand to support current operations for at least the next twelve months from the date of filing this Annual Report on Form 10-K. Thiscondition raises substantial doubt about our ability to continue as a going concern. We expect that, in order to obtain additional funding, we will need toreceive additional milestone payments from our partners and / or complete public or private financings of debt or equity. We may also seek to procureadditional funds through future arrangements with collaborators, licensees or other third parties, and these arrangements would generally require us torelinquish or encumber rights to some of our technologies or drug candidates. Moreover, we may not be able receive milestone payments or completefinancings or enter into such arrangements on acceptable terms, if at all. For more information, refer to “—Liquidity and Capital Resources—OperatingCapital Requirements and Going Concern” below and Note 1 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.Recent DevelopmentsIn December 2017, we entered into a binding Memorandum of Understanding with class representatives Bob Levine and William Windham, orPlaintiffs, regarding the settlement of a securities class action lawsuit, or Class Action, filed in 2013 and pending in the United States District Court for theDistrict of Massachusetts against us and certain of our former officers (Tuan Ha-Ngoc, David Johnston, and William Slichenmyer, who are collectivelyreferred to as the Individual Defendants), In re AVEO Pharmaceuticals, Inc. Securities Litigation et al. , No. 1:13-cv-11157-DJC. As previously disclosed, theClass Action was brought on behalf of stockholders who purchased our common stock between May 16, 2012 and May 1, 2013.In January 2018, we entered into a Stipulation of Settlement with the Plaintiffs that was preliminarily approved by the District Court in February 2018.Under the terms of the MOU and the Stipulation, we agreed to cause certain of our and the Individual Defendants’ insurance carriers to provide the Class witha cash payment of $15.0 million, which includes the cash amount of any attorneys’ fees or litigation expenses that the District Court may award Plaintiff’scounsel and costs Plaintiffs incur in administering and providing notice of the settlement. Additionally, we agreed to issue to the Class warrants for thepurchase of 2.0 million shares of our common stock, which we refer to as the Settlement Warrants, exercisable from the date of issue until the expiration of aone-year period after the date of issue at an exercise price equal to the closing price on December 22, 2017, the trading day prior to the execution of theMOU, which was $3.00 per share. The settlement is subject to notice to the Class and final approval of the District Court. The settlement shall be effective onthe date, or the Effective Date, on which all of the following circumstances have occurred: (a) a final judgment containing the requisite release of claims hasbeen entered by the District Court; (b) no appeal is pending with 73respect to the final judgment; (c) the final judgment has not been reversed, modified, vacated or amended; (d) the time to file any appeal from the finaljudgment has expired without the filing of an appeal or an order dismissing the appeal or affirming the final judgment has been entered, and any time to file afurther appeal (including a writ of certiorari or for reconsideration of the appeal) has expired; and (e) the MOU and any settlement agreement with respect tothe claims released in the final judgment have not expired or been terminated. We have agreed to use our best efforts to issue and deliver the SettlementWarrants within ten business days following the Effective Date. A hearing by the District Court for final approval of the Stipulation has been scheduled forMay 30, 2018.Strategic PartnershipsCANbridgeIn March 2016, we entered into a collaboration and license agreement with CANbridge, or the CANbridge Agreement, under which we grantedCANbridge the exclusive right to develop, manufacture and commercialize AV-203, our proprietary ErbB3 (HER3) inhibitory antibody, for the diagnosis,treatment and prevention of disease in humans and animals in all countries other than the United States, Canada and Mexico. Under the terms of theCANbridge Agreement, if we determine to grant a license to any ErbB3 inhibitory antibody in the United States, Canada or Mexico, we are obligated to firstnegotiate with CANbridge for the grant to CANbridge of a license to such rights. The parties have both agreed not to directly or indirectly develop orcommercialize any other ErbB3 inhibitory antibody product during the term of the CANbridge Agreement other than pursuant to the CANbridge Agreement.CANbridge has responsibility for all activities and costs associated with the further development, manufacture, regulatory filings andcommercialization of AV-203 throughout its licensed territory. CANbridge is obligated to use commercially reasonable efforts to develop and obtainregulatory approval for AV-203 in each of China, Japan, the United Kingdom, France, Italy, Spain, and Germany. CANbridge will bear all costs fordevelopment of AV-203 through proof-of-concept in esophageal squamous cell carcinoma, after which we would expect to contribute to certain worldwidedevelopment costs.Pursuant to the CANbridge Agreement, CANbridge paid us an upfront fee of $1.0 million in April 2016. CANbridge also agreed to reimburse us$1.0 million for certain manufacturing costs and expenses that we previously incurred. CANbridge paid this manufacturing reimbursement in twoinstallments of $0.5 million each, including one in March 2017 and one in September 2017, net of foreign withholding taxes. We are also eligible to receiveup to $42.0 million in potential development and regulatory milestone payments and up to $90.0 million in potential sales based milestone payments basedon annual net sales of licensed products. In December 2017, CANbridge filed an IND with the China Food and Drug Administration for a Phase 1b / IIIclinical study of AV-203 in esophageal squamous cell cancer. Upon commercialization, we are eligible to receive a tiered royalty, with a percentage range inthe low double-digits, on net sales of approved licensed products. CANbridge’s obligation to pay royalties for each licensed product expires on a country-by-country basis on the later of the expiration of patent rights covering such licensed product in such country, the expiration of regulatory data exclusivity insuch country and ten years after the first commercial sale of such licensed product in such country. A percentage of any milestone and royalty paymentsreceived by us, excluding upfront and reimbursement payments, are due to Biogen Idec International GmbH, or Biogen Idec, as a sublicensing fee under ouroption and license agreement with Biogen dated March 18, 2009, as amended.The term of the CANbridge Agreement commenced on the effective date and will continue until the last to expire royalty term applicable to licensedproducts. Either party may terminate the CANbridge Agreement in the event of a material breach of the CANbridge Agreement by the other party that remainsuncured for a period of 45 days, in the case of a material breach of a payment obligation, and 90 days in the case of any other material breach. CANbridgemay terminate the CANbridge Agreement without cause at any time upon 180 days’ prior written notice to us. We may terminate the CANbridge Agreementupon thirty days’ prior written notice if CANbridge challenges any of the patent rights licensed to CANbridge under the CANbridge Agreement.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 eye conditions. EUSAis obligated to use commercially reasonable efforts to seek regulatory approval for and commercialize tivozanib throughout its licensed territories for RCC.With the exception of certain support to be provided by us 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 its licensed territories. 74Under the license agreement, EUSA made research and development reimbursement payments to us of $2.5 million upon the execution of the licenseagreement in 2015 and $4.0 million in September 2017 upon its receipt of marketing approval from the EMA for tivozanib (FOTIVDA) for the treatment ofRCC. In September 2017, EUSA elected to opt-in to co-develop the TiNivo trial. As a result of EUSA’s exercise of its opt-in right, it became an activeparticipant in the ongoing conduct of the TiNivo trial and is able to utilize the resulting data from the TiNivo trial for regulatory and commercial purposes inits territories. EUSA made an additional research and development reimbursement payment to us of $2.0 million upon its exercise of its opt-in right. Thispayment was received in October 2017, in advance of the completion of the TiNivo trial, and represents EUSA’s approximate 50% share of the total estimatedcosts of the TiNivo trial. We are also eligible to receive an additional research and development reimbursement payment from EUSA of fifty percent (50%) ofour total costs for our TIVO-3 trial, up to $20.0 million, if EUSA elects to opt-in to that study.We are entitled to receive milestone payments of $2.0 million per country upon reimbursement approval, if any, for RCC in each of France, Germany,Italy, Spain and the United Kingdom, and an additional $2.0 million for the grant of marketing approval, if any, in three of the following five countries:Argentina, Australia, Brazil, South Africa and Venezuela. In February 2018, EUSA obtained reimbursement approval from the NICE in the UK in first lineRCC. Accordingly, we earned a $2.0 million milestone payment that was received from EUSA in March 2018. We are also eligible to receive a payment of$2.0 million in connection with a filing by EUSA with the EMA for marketing approval, if any, for tivozanib for the treatment of each of up to threeadditional indications and $5.0 million per indication in connection with the EMA’s grant of marketing approval for each of up to three additionalindications, as well as up to $335.0 million upon EUSA’s achievement of certain sales thresholds. Upon commercialization, we are eligible to receive tiereddouble-digit royalties on net sales, if any, of licensed products in its licensed territories ranging from a low double digit up to mid-twenty percent dependingon the level of annual net sales. In November 2017, we began earning sales royalties upon EUSA’s commencement of the first commercial launch oftivozanib (FOTIVDA) with the initiation of product sales in Germany.The research and development reimbursement payments under the EUSA license agreement are not subject to the 30% sublicensing payment to KHK,subject to certain limitations. We would, however, owe KHK 30% of other, non-research and development payments we may receive from EUSA pursuant toour license agreement, including EU reimbursement approval milestones in up to five specified EU countries, EU marketing approvals for up to threeadditional indications beyond RCC, marketing approvals in up to three specified licensed territories outside of the EU, sales-based milestones and royalties,as set forth above. The $2.0 million milestone we earned in February 2018 upon EUSA’s reimbursement approval from the NICE in the UK in first line RCC issubject to the 30% KHK sub-license fee, or $0.6 million.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 breach for nonpayment of any amount due under the license agreement, and (b) ninety (90) days in the case of any othermaterial breach. EUSA may terminate the license agreement at any time upon one hundred eighty (180) days’ prior written notice. In addition, we mayterminate 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, under which we granted Novartis the exclusive right to develop and commercializeAV-380 and our related antibodies that bind to GDF15 worldwide. Under this agreement, Novartis is responsible for all activities and costs associated withthe further development, regulatory filing and commercialization of AV-380 worldwide.Novartis made an upfront payment to us of $15.0 million in September 2015. We are also eligible to receive (a) up to $51.2 million in potentialclinical milestone payments and up to $105.0 million in potential regulatory milestone payments tied to the commencement of clinical trials and toregulatory approvals of products developed under the license agreement in the United States, the European Union and Japan; and (b) up to $150.0 million inpotential sales based milestone payments based on annual net sales of such products. If the product is commercialized, we would be eligible to receive tieredroyalties on net sales of approved products ranging from the high single digits to the low double-digits. Novartis has responsibility under the licenseagreement for the development, manufacture and commercialization of the licensed antibodies and any resulting approved therapeutic products. In December2015, Novartis also exercised its right under the license agreement to acquire our inventory of clinical quality drug substance, reimbursing us approximately$3.5 million for such existing inventory. Certain milestones achieved by Novartis would trigger milestone payment obligations from us to St. Vincent’s,under our amended and restated license agreement with St. Vincent’s. In addition, royalties on approved products, if any, will be payable to St. Vincent’s, andwe and Novartis will share that obligation equally. 75In February 2017, Novartis paid $1.8 million out of its future payment obligations to us under the license agreement. The funds were used to satisfy a$1.8 million time-based milestone obligation that we owed to St. Vincent’s on March 2, 2017. Novartis will reduce any subsequent payment obligations tous, if any, by the $1.8 million. We recognized the $1.8 million of consideration as revenue during the three months ended March 31, 2017, as the amount wasfixed and determinable and non-refundable, and we do not have any further performance obligations to Novartis in connection with the license agreement.This payment reduces the aggregate future amounts potentially payable by Novartis to us under the license agreement, if any, by the $1.8 million, but doesnot amend any other terms of the Novartis license agreement.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.BiodesixIn April 2014, we and Biodesix entered into the Biodesix Agreement to develop and commercialize ficlatuzumab. Under the Biodesix Agreement,we granted Biodesix perpetual, non-exclusive rights to certain intellectual property, including all clinical and biomarker data related to ficlatuzumab, todevelop and commercialize VeriStrat®, Biodesix’s proprietary companion diagnostic test. Biodesix granted us perpetual, non-exclusive rights to certainintellectual property, including diagnostic data related to VeriStrat, with respect to the development and commercialization of ficlatuzumab; each licenseincludes the right to sublicense, subject to certain exceptions. Pursuant to a joint development plan, we retain primary responsibility for clinical developmentof ficlatuzumab. In September 2016, we and Biodesix announced the termination of the FOCAL trial, a phase 2 proof-of-concept clinical study officlatuzumab in which VeriStrat was used to select clinical trial subjects.Under the Biodesix Agreement, with the exception of the costs incurred for the FOCAL trial, we and Biodesix are each required to contribute 50% ofall clinical, regulatory, manufacturing and other costs to develop ficlatuzumab. Pursuant to the Biodesix Agreement, Biodesix was obligated to fund all costsof the FOCAL trial up to a cap of $15 million, following which all costs of the FOCAL trial would be shared equally. In connection with the discontinuationof the FOCAL trial on October 14, 2016, we and Biodesix amended the Biodesix Agreement. Under the amendment, we agreed to share 50% of all theprogram costs from August 1, 2016 forward. In return for bearing 50% of the FOCAL shutdown costs after August 1, 2016, we will be entitled to recover anagreed multiple of the additional costs borne by us out of any income Biodesix receives from the partnership in connection with the licensing, developmentor commercialization of ficlatuzumab. Following such recovery, the payment structure under the original Biodesix Agreement, which generally provides thatthe parties share equally in any costs and revenue, will resume without such modification. Pending marketing approval or the sublicense of ficlatuzumab, andsubject to the negotiation of a commercialization agreement, each party would share equally in commercialization profits and losses, subject to our right tobe the lead commercialization party.In addition, we and Biodesix are funding investigator-sponsored clinical trials, including ficlatuzumab in combination with ERBITUX® (cetuximab)in squamous cell carcinoma of the head and neck, ficlatuzumab in combination with Cytosar (cytarabine) in acute myeloid leukemia and ficlatuzumab incombination with nab-paclitaxel and gemcitabine in pancreatic cancer. We continue to evaluate additional opportunities for the further clinical development of ficlatuzumab.Prior to the first commercial sale of ficlatuzumab, each party has the right to elect to discontinue participating in further development orcommercialization efforts with respect to ficlatuzumab, which is referred to as an “Opt-Out”. If either we or Biodesix elects to Opt-Out, with such partyreferred to as the “Opting-Out Party,” then the Opting-Out Party shall not be responsible for any future costs associated with developing and commercializingficlatuzumab other than any ongoing clinical trials. If we elect to Opt-Out, we will continue to make the existing supply of ficlatuzumab available toBiodesix for the purposes of enabling Biodesix to complete the development of ficlatuzumab, and Biodesix will have the right to commercializeficlatuzumab. After election of an Opt-Out, the non-opting out party shall have sole decision-making authority with respect to further development andcommercialization of ficlatuzumab. Additionally, the Opting-Out Party shall be entitled to receive, if ficlatuzumab is successfully developed andcommercialized, a royalty equal to 10% of net sales of ficlatuzumab throughout the world, if any, subject to offsets under certain circumstances. Prior to anyOpt-Out, the parties shall share equally in any payments received from a third-party licensee; provided, however, after any Opt-Out, the Opting-Out Partyshall be entitled to receive only a reduced portion of such third-party payments. The agreement remains in effect until the expiration of all paymentobligations between the parties related to development and commercialization of ficlatuzumab, unless earlier terminated. 76St. Vincent’s HospitalIn July 2012, we entered into a license agreement with St. Vincent’s, under which we obtained an exclusive, worldwide license to develop,manufacture and commercialize products for therapeutic applications that benefit from inhibition or decreased expression or activity of MIC-1, which is alsoknown as GDF15. We believe GDF15 is a novel target for cachexia, and we are exploiting this license in our AV-380 program for cachexia. Under theagreement, we have the right to grant sublicenses subject to certain restrictions. We have a right of first negotiation to obtain an exclusive license to certainimprovements that St. Vincent’s or third parties may make to licensed therapeutic products. Under the license agreement, St. Vincent’s also granted us non-exclusive rights for certain related diagnostic products and research tools.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$0.7 million. In August 2015, in connection with the execution of our license agreement with Novartis, we entered into an amended and restated agreementwith St. Vincent’s pursuant to which we made a $1.5 million upfront payment to St. Vincent’s. Under our license agreement with St. Vincent’s, we areobligated to use diligent efforts to conduct research and clinical development and commercially launch at least one licensed therapeutic product. We arerequired to make milestone payments, up to an aggregate total of $16.7 million, upon the earlier of achievement of specified development and regulatorymilestones or a specified date for the first indication, and upon the achievement of specified development and regulatory milestones for the second and thirdindications, for licensed therapeutic products, some of which payments may be increased by a mid to high double-digit percentage rate for milestonespayments made after we grant any sublicense under the license agreement, depending on the sublicensed territory. In February 2017, Novartis paid$1.8 million out of its future payment obligations to us under the license agreement. The funds were used to satisfy a $1.8 million time-based milestoneobligation that we owed to St. Vincent’s on March 2, 2017.In addition, we will be required to pay tiered royalty payments equal to a low-single-digit percentage of any net sales we or our sublicensees makefrom licensed therapeutic products, an obligation we share with Novartis equally. The royalty rate escalates within the low-single-digit range during eachcalendar year based 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 such country orexpiration of the last-to-expire valid claim of the licensed patents covering such licensed therapeutic product in such country, and are subject to offsets undercertain circumstances.The license agreement remains 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.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 preclinical 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.Astellas PharmaIn February 2011, we and our wholly-owned subsidiary AVEO Pharma Limited entered into a collaboration and license agreement with AstellasPharma Inc. and certain of its subsidiaries pursuant to which we and Astellas intended to develop and commercialize tivozanib for the treatment of a broadrange of cancers. Astellas elected to terminate the agreement effective August 2014, at which time the tivozanib rights were returned to us. In accordance withthe Astellas Agreement, committed development costs, including the costs of completing certain tivozanib clinical development activities, continue to beshared equally.Biogen IdecIn March 2009, we entered into an exclusive option and license agreement with Biogen Idec regarding the development and commercialization of ourdiscovery-stage ErbB3-targeted antibodies for the potential treatment and diagnosis of cancer and other diseases in humans outside of North America. InMarch 2014, we amended our agreement with Biogen Idec, and regained worldwide rights to AV-203. Pursuant to the amendment, we were obligated to ingood faith use reasonable efforts to seek a collaboration partner to fund further development and commercialization of ErbB3-targeted antibodies. Wesatisfied this obligation in March 2016 upon entering into our license agreement with CANbridge. We are obligated to pay Biogen Idec a percentage ofmilestone payments we receive under the CANbridge agreement and single-digit royalty payments on net sales related to the sale of AV-203, up tocumulative maximum amount of $50.0 million. 77Kyowa Hakko KirinIn December 2006, we entered into a license agreement with KHK under which we obtained an exclusive license, with the right to grant sublicensessubject to certain restrictions, to research, develop, manufacture and commercialize tivozanib, pharmaceutical compositions thereof and associatedbiomarkers in all potential indications. Our exclusive license covers all territories in the world except for Asia and the Middle East, where KHK has retainedthe rights to tivozanib. 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 ofany and all human diseases and conditions. We and KHK each have access to and can benefit from the other party’s clinical data and regulatory filings withrespect 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. Prior tothe first anniversary of the first post-marketing approval sale of tivozanib in our territory, neither we nor any of our subsidiaries has the right to conductcertain clinical trials of, seek marketing approval for or commercialize any other cancer product that also works by inhibiting the activity of a VEGF receptor.We have upfront, milestone and royalty payment obligations to KHK under our license agreement. Upon entering into the license agreement withKHK, we made an upfront payment in the amount of $5.0 million. In March 2010, we made a milestone payment to KHK in the amount of $10.0 million inconnection with the dosing of the first patient in our first phase 3 clinical trial of tivozanib (TIVO-1). In December 2012, we made a $12.0 million milestonepayment to KHK in connection with the acceptance by the FDA of our 2012 new drug application, or NDA, filing for tivozanib. Each milestone under theKHK agreement is a one-time only payment obligation. Accordingly, we did not owe KHK another milestone payment in connection with the dosing of thefirst patient in our TIVO-3 trial, and would not owe a milestone payment to KHK if we file an NDA with the FDA following the completion of our TIVO-3clinical trial. If we obtain approval for tivozanib in the U.S., we would owe KHK a one-time milestone payment of $18.0 million, provided that we do notsublicense U.S. rights for tivozanib prior to obtaining a U.S. regulatory approval. If we were to sublicense the U.S. rights, the associated U.S. regulatorymilestone would be replaced by a specified percentage of sublicensing revenue, as set forth below.If we sublicense any of our rights to tivozanib to a third party, as we have done with EUSA pursuant to our license agreement, the sublicense definesthe payment obligations of the sublicensee, which may vary from the milestone and royalty payment obligations under our KHK license relating to rights weretain. We are required to pay KHK a fixed 30% of amounts we receive from our sublicensees, including upfront license fees, milestone payments androyalties, but excluding amounts we receive in respect of research and development reimbursement payments or equity investments, subject to certainlimitations. Certain research and development reimbursement payments by EUSA, including the $2.5 million upfront payment in December 2015, the $4.0 millionin September 2017 upon the approval from the EMA of tivozanib (FOTIVDA) and the $2.0 million upon EUSA’s election in September 2017 to opt-in to co-develop the TiNivo trial were not subject to sublicense revenue payments to KHK. In addition, if EUSA elects to opt-in to the TIVO-3 trial, the additionalresearch and development reimbursement payment from EUSA of fifty percent (50%) of the total trial costs, up to $20.0 million, would also not be subject toa sublicense revenue payment to KHK, subject to certain limitations. We would, however, owe KHK 30% of other, non-research and development paymentswe may receive from EUSA pursuant to our license agreement, including EU reimbursement approval milestones in up to five specified EU countries, EUmarketing approvals for up to three additional indications beyond RCC, marketing approvals in up to three specified licensed territories outside of the EU,sales-based milestones and royalties, as set forth above. The $2.0 million milestone we earned in February 2018 upon EUSA’s reimbursement approval fromthe NICE in the UK in first line RCC is subject to the 30% KHK sub-license fee, or $0.6 million.We are also required to pay tiered royalty payments on net sales we make of tivozanib in our North American territory, which range from the low tomid-teens as a percentage of net sales. The royalty rate escalates within this range based on increasing tivozanib sales. Our royalty payment obligations in aparticular country 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 offirst commercial 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.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. 78Financial OverviewWe do not have a history of being profitable and, as of December 31, 2017, we had an accumulated deficit of $587.0 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 funding to support our operating activities, and the timing and nature of activities contemplated for 2018 andthereafter will be conducted subject to the availability of sufficient financial resources. Refer to the “—Going Concern” and “Liquidity and CapitalResources—Operating Capital Requirements and Going Concern” sections for a further discussion of our funding requirements.RevenueTo date, we have not generated any revenue from our product sales. All of our revenue to date has been principally derived from license fees,milestone payments, premium over the fair value of convertible preferred shares sold to our strategic partners, and research and development paymentsreceived from our strategic partners. In November 2017, we began earning royalties under our license agreement with EUSA upon their initiation of productsales in Germany.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 quarter to quarter as a result of the timing and amount of license fees, research and developmentreimbursements, milestones, royalties and other payments received under our strategic partnerships, and the 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. We recognize research and development expenses as they are incurred. 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 drug development related materials; •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 affairsResearch and development expenses are net of amounts reimbursed under our agreements with EUSA, Biodesix, and Astellas for their respective sharesof development costs incurred by us under our joint development plans with each respective partner.We anticipate that research and development expenses in 2018 will decrease as we seek to complete the TIVO-3 trial and TiNivo trials. This estimateexcludes possible additional Company-sponsored clinical trials and any related drug manufacturing and drug supply distribution, regulatory costs associatedwith a possible NDA submission for tivozanib in RCC and pre-commercialization activities that we may undertake if the topline data results from our TIVO-3trial support an NDA submission to the FDA for tivozanib in RCC. We expect to receive and report topline data from the TIVO-3 trial in the second quarter of2018, 79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. Below is a summary of our research and development expenses for the years ended December 31, 2017, 2016 and 2015, respectively: Years Ended December 31, 2017 / 2016Comparison 2016 / 2015Comparison 2017 2016 2015 $ % $ % ($ in thousands) Tivozanib $21,594 $21,231 $8,513 $363 2% $12,718 149%AV-380 Program in Cachexia 1,850 464 2,408 1,386 299% (1,944) (81)%Ficlatuzumab 587 746 80 (159) (21)% 666 833%AV-203 — 76 532 (76) (100)% (456) (86)%Other pipeline programs 156 — 11 156 100% (11) (100)%Other research and development — — 10 — -% (10) (100)%Overhead 992 1,186 1,321 (194) (16)% (135) (10)%Total research and development expenses $25,179 $23,703 $12,875 $1,476 6% $10,828 84%TivozanibWe have pursued partnering options to fund further tivozanib development in appropriate clinical settings outside of our strategic focus of developingoncology therapeutics in the U.S. Our licensee, EUSA, obtained EMA approval in August 2017 for tivozanib (FOTIVDA) in RCC and commencedcommercialization in November 2017 with the initiation of product sales in Germany. EUSA is responsible for all activities and costs associated with thefurther development and commercialization of tivozanib within its licensed territories, excluding non-oncologic eye conditions.The TIVO-3 trial was initiated in May 2016 and reached its enrollment target of 322 patients in June 2017. We enrolled an additional 29 patients inJuly 2017 and August 2017 for a total of 351 patients. We expect the total estimated remaining costs of this trial, including drug supply and distribution, tobe approximately $9 million to $12 million through completion. In March 2017, we initiated the TiNivo trial in collaboration with BMS, which is providingnivolumab for the study. In addition, in September 2017, EUSA elected to opt-in to co-develop the TiNivo trial and to share in approximately 50% of thetotal trial costs up to a maximum of $2.0 million. We expect the total estimated remaining costs of this trial, including tivozanib drug supply anddistribution, could be in the range of $1.5 million to $2.0 million.AV-380 Program in CachexiaIn 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 GDF15 worldwide. Under this agreement, Novartis is responsible for all activities and costs associated withthe further development, regulatory filing and commercialization of AV-380 worldwide. We do not expect to incur any significant costs related to AV-380 infuture periods beyond any milestone fees and royalties payable to St.Vincent’s pursuant to our in-licensing agreement, which comprised substantially all ofthe costs incurred during the year ended December 31, 2017.FiclatuzumabIn April 2014, we entered into the Biodesix Agreement to develop and commercialize ficlatuzumab, our potent HGF inhibitory antibody. Pursuant tothe agreement, Biodesix was to provide up to $15.0 million for the phase 2 FOCAL trial of ficlatuzumab in combination with erlotinib in first-line advancednon-small cell lung cancer patients selected using Biodesix’s proprietary companion diagnostic VeriStrat. In connection with the discontinuation of theFOCAL trial on October 14, 2016, we and Biodesix amended the Biodesix Agreement. Under the amendment, we agreed to fund 50% of the shutdown costsof the FOCAL trial after August 1, 2016. In return, we would be entitled to reimbursement at a multiple of such shutdown expenses out of any future revenuesBiodesix receives from ficlatuzumab. All manufacturing and all non-FOCAL development, regulatory or commercial expenses for ficlatuzumab, includinginvestigator-sponsored clinical trials, will continue to be equally shared, as provided in the original Biodesix Agreement. Due to the unpredictable nature ofclinical development, we are unable to estimate with any certainty the costs we will incur in the future development of ficlatuzumab. 80AV-203In March 2014, we regained our worldwide rights from Biogen Idec to develop, manufacture and commercialize AV-203. In March 2016, we enteredinto a collaboration and license agreement with CANbridge, under which we granted CANbridge the exclusive right to develop and commercialize AV-203in all countries other than the United States, Canada and Mexico. CANbridge is responsible for all costs of developing and commercializing AV-203 withinits licensed territory. For a period of time following the completion of certain proof-of-concept clinical studies by CANbridge involving the use of AV-203for the treatment of squamous cell esophagus cancer, we agreed to negotiate exclusively with CANbridge for (a) the right to co-develop ErbB3 inhibitoryantibody products for the treatment of squamous cell esophagus cancer or (b) the right to include the United States, Canada and Mexico as part of thelicensed territories. We do not expect to incur any significant costs related to AV-203 prior to CANbridge’s completion of a proof-of-concept clinical study.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 exact 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,information technology, legal and human resource functions. Other general and administrative expenses include facility costs not otherwise included inresearch and development expenses, patent filing, prosecution and defense costs and professional fees for legal, consulting, auditing and tax services. Weanticipate that our general and administrative expenses in 2018 will remain at current levels, excluding pre-commercialization activities that we mayundertake if the topline data results from our TIVO-3 trial support an NDA submission for tivozanib in RCC. We expect to receive and report topline datafrom the TIVO-3 trial in the second quarter of 2018,Interest Expense, NetInterest 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 ourloans payable. 81Income TaxesWe recorded a loss for the years ended December 31, 2017, 2016, and 2015, and since we maintain a full valuation allowance on all of our deferred taxassets, we have recorded no income tax provision or benefit during the years ended December 31, 2017, 2016, and 2015, except for a $0.1 million provisionrecorded in each of the years ended December 31, 2016 and 2017 related to withholding taxes incurred in a foreign jurisdiction.On December 22, 2017, President Trump signed into law The Tax Cuts and Jobs Act, or the Act. The Act, among other things, contains significantchanges to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the taxdeduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% ofcurrent year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whetherthey are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investmentsinstead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits. On December 22, 2017, the SEC issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts andJobs Act directing taxpayers to consider the impact of the U.S. legislation as “provisional” when it does not have the necessary information available,prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law.We are still in the process of evaluating the new law and therefore have not determined the full effect it will have on our business, including ourfinancial statements.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 and the notesthereto included elsewhere in this Annual Report on Form 10-K, which have been prepared in accordance with accounting principles generally accepted inthe United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate ourestimates and judgments, including those related to revenue recognition, accrued clinical expenses, and stock-based compensation. We base our estimates onhistorical experience, known trends and events and various other factors that we and our management believe to be reasonable under the circumstances, theresults of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actualresults may differ from these estimates under different assumptions or conditions.Revenue Recognition Our 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,upfront license fees; option exercise fees; funding of research and/or development efforts; milestone payments; and royalties on future product sales.We analyze our collaboration arrangements to assess whether they are within the scope of ASC 808 to determine whether such arrangements involvejoint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on thecommercial success of such activities. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of allparties in the arrangement. For collaboration arrangements that are deemed to be within the scope of ASC 808, we first determine which elements of thecollaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and therefore within thescope of ASC 605. The Company’s policy is to recognized amounts received from collaborators in connection with joint operating activities that are withinthe scope of ASC 808 as a reduction to research and development expense.When evaluating multiple element arrangements, under ASC 605,we consider whether the deliverables under the arrangement represent separate unitsof accounting. This evaluation requires subjective determinations and requires management to make judgments about the individual deliverables andwhether such deliverables are separable from the other aspects of the contractual relationship. In determining the units of accounting, management evaluatescertain criteria, including whether the deliverables have standalone value, based on the relevant facts and circumstances for each arrangement. Theconsideration received is allocated among the separate units of accounting using the relative selling price method, and the applicable revenue recognitioncriteria are applied to each of the separate units. 82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 estimates 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 the 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 and 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 among multiple deliverables.We typically receive non-refundable, upfront 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.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 resulting fromthe entity’s performance to achieve the milestone, (b) the consideration relates solely to past performance, and (c) the consideration is reasonable relative toall of the deliverables and payment terms within the arrangement. We evaluate factors such as the scientific, regulatory, commercial and other risks that mustbe overcome to achieve the respective milestone, the level of effort and investment required to achieve the respective milestone and whether the milestoneconsideration is reasonable relative to all deliverables and payment terms in the arrangement in making this assessment.We aggregate our milestones into four categories: (i) clinical and development milestones, (ii) regulatory milestones, (iii) commercial milestones, and(iv) patent-related milestones. Clinical and development milestones are typically achieved when a product candidate advances into a defined phase ofclinical 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 global regulatoryauthorities. Regulatory milestones are typically achieved upon acceptance of the submission for marketing approval of a product candidate or upon approvalto market the product candidate by the FDA or other global regulatory authorities. For example, a milestone payment may be due to us upon the FDA’sacceptance of a New Drug Application, or NDA. Commercial milestones are typically achieved when an approved pharmaceutical product reaches certaindefined levels of net sales by the licensee, such as when a product first achieves global sales or annual sales of a specified amount. Patent-related milestonesare typically achieved when a patent application is filed or a patent is issued with respect to certain intellectual property related to the applicablecollaboration.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. 83Adoption of ASU 2014-09 (Topic 606)In May 2014, the Financial Accounting Standard Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-09, Revenue fromContracts with Customers (Topic 606), or ASU 2014-09, which stipulates that an entity should recognize revenue to depict the transfer of promised goods orservices to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Thisupdate will be effective for us beginning in the first quarter of 2018. For additional details regarding our adoption of this authoritative guidance, see Note 3in the accompanying consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.Accrued Expenses and Accrued Clinical Trial Costs and Contract Research LiabilitiesAs part of the process of preparing our financial statements, we are required to estimate accrued expenses. This process involves identifying serviceswhich have been performed on our behalf, and estimating the level of service performed and the associated cost incurred for such service as of each balancesheet date in our financial statements. Given our current business, the primary area of uncertainty concerning accruals which could have a material effect onour operating results is with respect to service fees paid to contract manufacturers in conjunction with the production of clinical drug supplies and to contractresearch organizations in connection with our clinical trials. In connection with all of the foregoing service fees, our estimates are most affected by ourunderstanding of the status and timing of services provided. The majority of our service providers, including contract research organizations, invoice us inarrears for services performed. In the event that we do not identify some costs which have begun to be incurred, or we under or overestimate the level ofservices performed or the costs of such services in a given period, our reported expenses for such period would be understated or overstated. We currentlyreflect the effects of any changes in estimates based on changes in facts and circumstances directly in our operations in the period such change becomesknown.Our arrangements with contract research organizations in connection with clinical trials often provide for payment prior to commencing the project orbased upon predetermined milestones throughout the period during which services are expected to be performed. We recognize expense relating to thesearrangements based on the various services provided over the estimated time to completion. The date on which services commence, the level of servicesperformed on or before a given date, and the cost of such services are often determined based on subjective judgments. We make these judgments based uponthe facts and circumstances known to us based on the terms of the contract and our ongoing monitoring of service performance. During the years endedDecember 31, 2017, 2016 and 2015, we had arrangements with multiple contract research organizations whereby these organizations commit to performingservices for us over multiple reporting periods. We recognize the expenses associated with these arrangements based on our expectation of the timing of theperformance of components under these arrangements by these organizations. Generally, these components consist of the costs of setting up the trial,monitoring the trial, closing the trial and preparing the resulting data. Costs related to patient enrollment in clinical trials are accrued as patients are enrolledin the trial.With respect to financial reporting periods presented in this Annual Report on Form 10-K, the timing of our actual costs incurred have not differedmaterially from our estimated timing of such costs. In light of the foregoing, we do not believe our practices for estimating future expenses and makingjudgments concerning the accrual of expenses are reasonably likely to change in the future.Stock-Based Compensation Under 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 service period. Other awards, such asperformance-based awards that vest upon the achievement of specified goals, are expensed using the accelerated attribution method if achievement of thespecified goals is considered probable. We have also granted awards that vest upon the achievement of market conditions. Per Accounting StandardsCodification, or ASC, 718 Share-Based Payments, market conditions must be considered in determining the estimated grant-date fair value of share-basedpayments and the market conditions must be considered in determining the requisite service period over which compensation cost is recognized. We estimatethe fair value of the awards with market conditions using a Monte Carlo simulation, which utilizes several assumptions including the risk-free interest rate,the volatility of our stock and the exercise behavior of award recipients. The grant-date fair value of the awards is then recognized over the requisite serviceperiod, which represents the derived service period for the awards as determined by the Monte Carlo simulation. 84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. In 2016, we began calculating volatility using our historical data. Previously, we did not have sufficient history tosupport a calculation of volatility using only our historical data. As such, prior to 2016, we used a weighted-average volatility considering our own volatilitysince March 2010 and the volatilities of several peer companies. For purposes of identifying similar entities, we considered characteristics such as industry,length of trading history, similar vesting terms and in-the-money option status. Due to a lack of our own historical data, we elected to use the “simplified”method for “plain vanilla” options to estimate the expected term of our stock option grants. Under this approach, the weighted-average expected life ispresumed to be the average of the vesting term and the contractual term of the option. The risk-free interest rate used for each 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 of zero based on the fact that wehave never paid cash dividends and have no present intention to pay cash dividends.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.During the years ended December 31, 2017, 2016 and 2015, respectively, the assumptions used in the Black-Scholes pricing model for new grantswere as follows: Years Ended December 31, 2017 2016 2015 Volatility factor 71.82% - 80.15% 72.18% - 74.47% 73.04% - 78.70% Expected term (in years) 5.50 - 6.25 3.00 - 6.25 5.50 - 6.25 Risk-free interest rates 1.84% - 2.22% 1.07% - 2.01% 1.54% - 1.93% Dividend yield — — — On January 1, 2017, we adopted ASU No. 2016-09, Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-BasedPayment Accounting and elected to account for forfeitures as they occur. Prior to 2017, we included an estimate of the value of the awards that would beforfeited in calculating compensation costs, which we estimated based upon actual historical forfeitures. The forfeiture estimates were recognized over therequisite service period of the awards on a straight-line basis. We used forfeiture rates of 0%, 76% and 71% during the years ended December 31, 2017, 2016and 2015, respectively.We recognized stock-based compensation expense of approximately $1.1 million, $1.0 million and $1.1 million for the years ended December 31,2017, 2016, and 2015, respectively. As of December 31, 2017, we had approximately $3.4 million of total unrecognized stock-based compensation expensefor stock options, which we expect to recognize over a weighted-average period of approximately 2.6 years.For years prior to 2017, we recorded compensation expense only for those awards that we ultimately expect will vest. We have performed an historicalanalysis of option awards that were forfeited prior to vesting and recorded total stock option expense that reflected this estimated forfeiture rate. Forfeituresestimated each period were adjusted if actual forfeitures differed from those estimates.We have historically granted stock options at exercise prices that are not less than the fair market value of our common stock.Warrants Issued in Connection with Private PlacementWe account for warrant instruments that either conditionally or unconditionally obligate the issuer to transfer assets as liabilities regardless of thetiming of the redemption feature or price, even though the underlying shares may be classified as permanent or temporary equity. In May 2016, we issuedwarrants to purchase an aggregate of 17,642,482 shares of our common stock in connection with a private placement financing, which we refer to herein asthe PIPE Warrants. See “—Liquidity and Capital Resources—Private Placement/PIPE Warrants” below. The PIPE Warrants contain a provision giving thewarrant holder the option to receive cash, equal to the fair value of the remaining unexercised portion of the warrant, as cash settlement in the event that thereis a fundamental transaction (contractually defined to include various merger, acquisition or stock transfer activities). Due to this provision, ASC 480,Distinguishing Liabilities from Equity requires that the PIPE Warrants be classified as a liability and not as equity. Accordingly, we recorded a warrantliability in the amount of approximately $9.3 million. The fair value of the PIPE Warrants has been determined using the Black-Scholes pricing model. ThePIPE Warrants are subject to revaluation at each balance sheet date, and any changes in fair value are recorded as a non-cash gain or (loss) in the Statement ofOperations as a component of other income (expense), net until the earlier of their exercise or expiration or upon the completion of a liquidation event. Uponexercise, the PIPE Warrants are subject 85to revaluation just prior to the date of exercise and any changes in fair value are recorded as a non-cash gain or (loss) in the Statement of Operations as acomponent of other income (expense), net and the corresponding reduction in the warrant liability is recorded as additional paid-in capital in the BalanceSheet as a component of stockholder’s equity. As of December 31, 2017, PIPE Warrants exercisable for 259,067 of the shares of common stock had beenexercised and PIPE Warrants exercisable for 17,383,415 shares of common stock were outstanding. In January 2018, PIPE Warrants with respect to 518,134shares of common stock underlying such PIPE Warrants were exercised, and we issued 518,134 shares of our common stock and received approximately$0.5 million in cash proceeds.We recorded non-cash losses of approximately $33.7 million in the year ended December 31, 2017 and a non-cash gain of approximately $4.8 millionin the year ended December 31, 2016 in our Statement of Operations attributable to the increases and decreases in the fair value of the warrant liability thatresulted from higher stock prices as of December 31, 2017 and lower stock prices as of December 31, 2016, relative to prior periods. In the year endedDecember 31, 2017, we recorded a reduction in the warrant liability, with a corresponding increase to additional paid-in capital, of approximately $0.6million attributable to warrant exercises in the third quarter of 2017.The key assumptions used to value the PIPE Warrants were as follows: Original Issuance December 31, 2016 December 31, 2017 Expected price volatility 76.25% 78.18% 84.86% Expected term (in years) 5.00 4.50 3.50 Risk-free interest rates 1.22% 1.93% 2.09% Stock price $0.89 $0.54 $2.79 Dividend yield — — — Potential Class Action SettlementIn December 2017, upon entering into the MOU, this settlement became estimable and probable. Accordingly, we recorded an estimated $17.1 millioncontingent liability, including $15.0 million for the cash portion of the settlement with a corresponding insurance recovery for the 100% portion to be paiddirectly by certain of our insurance carriers, and an approximate $2.1 million estimate for the fair value on December 31, 2017 of 2.0 million warrants topurchase shares of our common stock exercisable from the date of issue until the expiration of a one-year period after the date of issue at an exercise priceequal to the closing price on December 22, 2017, the trading day prior to the execution of the MOU, which was $3.00 per share, which we refer to as theSettlement Warrants, with a corresponding non-cash charge to the Statement of Operations as a component of operating expenses. In February 2018, theinsurance carriers funded the settlement escrow account related to the $15.0 million cash portion of the settlement.The settlement is subject to the execution of a definitive settlement agreement, notice to the Class, and final approval of the District Court and shall beeffective on the date, or the Effective Date, on which all of the following circumstances have occurred: (a) a final judgment containing the requisite release ofclaims has been entered by the District Court; (b) no appeal is pending with respect to the final judgment; (c) the final judgment has not been reversed,modified, vacated or amended; (d) the time to file any appeal from the final judgment has expired without the filing of an appeal or an order dismissing theappeal or affirming the final judgment has been entered, and any time to file a further appeal (including a writ of certiorari or for reconsideration of theappeal) has expired; and (e) the MOU and any settlement agreement with respect to the claims released in the final judgment have not expired or beenterminated. We have agreed to use our best efforts to issue and deliver the Settlement Warrants within ten business days following the Effective Date. InJanuary 2018, we entered into the Stipulation, which was preliminarily approved by the District Court in February 2018. A hearing by the District Court forfinal approval of the Stipulation has been scheduled for May 30, 2018.The estimated fair value of the Settlement Warrants expected to be issued on the Effective Date has been determined using the Black-Scholes pricingmodel. The estimated fair value of the Settlement Warrants expected to be issued on the Effective Date are subject to revaluation at each balance sheet dateand any changes in fair value are recorded as a non-cash gain or (loss) in the Statement of Operations as a component of operating expenses until theSettlement Warrants are issued, at which point they would be recorded as equity or as a liability based upon the issuance terms. 86The key assumptions used to estimate the fair value the Settlement Warrants were as follows: December 31, 2017Expected price volatility 101.52%Expected term (in years) 1.00Risk-free interest rates 1.76%Stock price $2.79Dividend yield — Results of OperationsComparison of Years Ended December 31, 2017, 2016 and 2015Revenues Years Ended December 31, 2017 / 2016Comparison 2016 / 2015Comparison 2017 2016 2015 $ % $ % Strategic Partner: ($ in thousands) EUSA $4,414 $395 $14 $4,019 1017% $381 2721%CANbridge 1,000 1,028 — (28) (3)% 1,028 100%Novartis 1,800 — 18,450 1,800 100% (18,450) (100)%Biogen Idec — 38 268 (38) (100)% (230) (86)%Pharmstandard — 939 61 (939) (100)% 878 1439%Ophthotech 115 115 231 0 0% (116) (50)%Other 250 — — 250 100% — -% Total revenues $7,579 $2,515 $19,024 $5,064 201% $(16,509) (87)% In 2017 as compared to 2016, revenue increased by $5.1 million, principally due to a $4.0 million research and development reimbursement paymentby EUSA upon the EMA approval of tivozanib (FOTIVDA) in RCC and a $1.8 million milestone payment by Novartis related to AV-380, partially offset by$0.8 million related to the acceleration of deferred revenue that was recognized upon the effective termination of our licensing agreement withPharmstandard in September 2016.In 2016 as compared to 2015, revenue decreased by $16.5 million principally due to $18.5 million in revenue that was recognized in 2015 related toNovartis for the $15.0 million upfront payment received in connection with our licensing agreement entered into in August 2015 and $3.5 million for thepurchase of our inventory of clinical material in the fourth quarter of 2015. This decrease was partially offset by the $1.0 million upfront payment received inconnection with our collaboration and license agreement with CANbridge entered into in March 2016 and $0.8 million in the acceleration of deferredrevenue that was recognized upon the effective termination of our licensing agreement with Pharmstandard in September 2016 that otherwise would havebeen recognized over the performance period through April 2022.Research and Development Expenses Years Ended December 31, 2017 / 2016Comparison 2016 / 2015Comparison 2017 2016 2015 $ % $ % ($ in thousands) Tivozanib $21,594 $21,231 $8,513 $363 2% $12,718 149%AV-380 Program in Cachexia 1,850 464 2,408 1,386 299% (1,944) (81)%Ficlatuzumab 587 746 80 (159) (21)% 666 833%AV-203 — 76 532 (76) (100)% (456) (86)%Other pipeline programs 156 — 11 156 100% (11) (100)%Other research and development — — 10 — -% (10) (100)%Overhead 992 1,186 1,321 (194) (16)% (135) (10)%Total research and development expenses $25,179 $23,703 $12,875 $1,476 6% $10,828 84% In 2017 as compared to 2016, research and development expenses increased by $1.5 million principally due to a $0.4 million net increase in tivozanibexpenses, primarily related to the advancement of the TIVO-3 and TiNivo trials, and a $1.4 million increase in 87AV-380 expense, primarily related to the net increase in milestone payments due to St. Vincent’s under our in-licensing agreement. These increases werepartially offset by $0.2 million in lower ficlatuzumab expenses, primarily related to the discontinuation of the FOCAL trial in October 2016. The $0.4 million net increase in tivozanib expenses included an increase of $1.3 million, primarily related to the advancement of the TIVO-3 andTiNivo trials, partially offset by a $0.9 million reduction related to cost sharing provided by EUSA in connection with the TiNivo trial. In September 2017,EUSA elected to opt-in to co-develop the ongoing TiNivo trial and made a research and development reimbursement payment to us of $2.0 million that wasreceived in October 2017, in advance of the completion of the TiNivo trial, and represents EUSA’s approximate 50% share of the total estimated costs of theTiNivo trial. In 2017, we recognized an approximate $0.9 million reduction in research and development expenses related to EUSA’s approximate 50% shareof the cumulative study-to-date costs incurred as of December 31, 2017 as the TiNivo trial was ongoing at the time EUSA made its opt-in election and EUSApaid the $2.0 million maximum amount of cost sharing per the license agreement in advance. The remaining $1.1 million in prepaid cost sharing wasclassified as deferred research and development reimbursements as of December 31, 2017 and will continue to be recognized as a reduction in research anddevelopment expenses as the related TiNivo trial costs are incurred over the duration of the trial. The $1.4 million increase in AV-380 expense is principally due to $1.8 million in research and development expense that was recognized in the firstquarter of 2017 in connection with a time-based milestone obligation due to St. Vincent’s. In the first quarter of 2016, w.e recognized approximately$0.4 million in research and development expense in connection with a milestone obligation due to St. Vincent’s related to the selection of a developmentcandidate.We anticipate that research and development expenses in 2018 will decrease as we seek to complete the TIVO-3 trial and TiNivo trials. This estimateexcludes possible additional Company-sponsored clinical trials and any related drug manufacturing and drug supply distribution, regulatory costs associatedwith a possible NDA submission for tivozanib in RCC and pre-commercialization activities that we may undertake if the topline data results from our TIVO-3trial support an NDA submission for tivozanib in RCC. We expect to receive and report topline data from the TIVO-3 trial in the second quarter of 2018,In 2016 as compared to 2015, research and development expenses increased by $10.8 million due to a $12.7 million increase in tivozanib-relatedexpenses, principally related to the advancement of the TIVO-3 trial that commenced patient enrollment and treatment in May 2016. This increase waspartially offset by a $1.5 million decrease related to the upfront fee incurred under the amended St. Vincent’s license agreement entered into in August 2015.Included in research and development expenses were stock-based compensation expenses of approximately $0.3 million in each of 2017, 2016 and2015.General and Administrative Expenses Years Ended December 31, 2017 / 2016Comparison 2016 / 2015Comparison 2017 2016 2015 $ % $ % ($ in thousands) General and administrative $9,138 $8,205 $10,217 $933 11% $(2,012) (20)% In 2017 as compared to 2016, general and administrative expenses increased by $0.9 million, principally due to an increase of $0.8 million inprofessional fees, including legal fees, investor relations and audit fees.We anticipate that general and administrative expenses in 2018 will remain at current levels, excluding pre-commercialization activities that we mayundertake if the topline data results from our TIVO-3 trial support an NDA submission for tivozanib in RCC. We expect to receive and report topline datafrom the TIVO-3 trial in the second quarter of 2018, In 2016 as compared to 2015, general and administrative expenses decreased by $2.0 million, principally the result of a $0.8 million decrease inexternal costs associated with various ongoing legal matters as well as a $0.7 million decrease in employee compensation following our decreased headcountand the reduction of our utilized facility space following our 2015 restructuring.Included in general and administrative expenses were stock-based compensation expenses of approximately $0.8 million, $0.7 million and $0.8million in 2017, 2016 and 2015, respectively. 88Settlement Costs Years Ended December 31, 2017 / 2016Comparison 2016 / 2015Comparison 2017 2016 2015 $ % $ % ($ in thousands) Settlement costs 2,073 — 4,000 2,073 100% (4,000) (100)% In 2017 as compared to 2016, settlement costs increased by $2.1 million as a result of a non-cash charge in connection with the Settlement Warrants topurchase 2.0 million shares of our common stock that are expected to be issued in 2018 upon final approval by the District Court of the Stipulation. Refer toNote 15, “Legal Proceedings” in the financial statements included elsewhere in this Annual Report on Form 10-K for further discussion of the class actionsettlement.In 2016 as compared to 2015, settlement costs decreased by $4.0 million as a result of $4.0 million in expense recognized in 2015 related to thesettlement of certain SEC claims.Restructuring and Lease Exit Years Ended December 31, 2017 / 2016Comparison 2016 / 2015Comparison 2017 2016 2015 $ % $ % ($ in thousands) Restructuring and lease exit — — 4,358 — -% (4,358) (100)% In 2016 as compared to 2015, restructuring and lease exit expenses decreased by $4.4 million as a result of the January 2015 restructuring that wassubstantially completed in March 2015. As part of this restructuring, we eliminated our internal research function, reducing our headcount by approximately40 positions. Change in Fair Value of PIPE Warrant Liability Years Ended December 31, 2017 / 2016Comparison 2016 / 2015Comparison 2017 2016 2015 $ % $ % ($ in thousands) Change in fair value of warrant liability (33,740) 4,751 — (38,491) (810)% 4,751 100% In May 2016, we issued the PIPE Warrants in connection with a private placement financing and recorded the warrants as a liability. The PIPEWarrants are subject to revaluation at each balance sheet date. In 2017 as compared to 2016, the change in fair value of the PIPE Warrant liability increased by $38.5 million, principally due to higher revaluationsresulting from higher stock prices. For the year ended December 31, 2017, we recorded an approximate $33.7 million non-cash loss in our Statement ofOperations attributable to the increase in the fair value of the warrant liability that principally resulted from a higher stock price of $2.79 on December 31,2017 as compared to the stock price of $0.54 on December 31, 2016. For the year ended December 31, 2016, we recorded an approximate $4.8 million non-cash gain in our Statement of Operations attributable to the decrease in the fair value of the warrant liability that principally resulted from a lower stock priceof $0.54 on December 31, 2016 as compared to the stock price of $0.89 on the date of issuance of the PIPE warrants in May 2016.Interest Expense, net Years Ended December 31, 2017 / 2016Comparison 2016 / 2015Comparison 2017 2016 2015 $ % $ % ($ in thousands) Interest expense, net (2,373) (1,949) (2,286) $(424) 22% $337 (15)% In 2017 as compared to 2016, interest expense, net increased by $0.4 million principally attributable to the increase in the balance under the loanagreement with Hercules Technology II, L.P. and Hercules Technology III, L.P., affiliates of Hercules Technology Growth, which we collectively refer to asHercules Loan Agreement, that resulted from the $5.0 million in loan proceeds borrowed under the 2016 Amendment in each of May 2016 and June 2017. 89 In December 2017, we refinanced the Hercules loan, the terms of which include a reduction in the current interest rate from 11.9% to 9.45%, anextension in the interest-only period by no less than 12 months, which could be extended up to a maximum of 24 months, assuming the achievement ofspecified milestones relating to the development of tivozanib, and an extension in the loan maturity from December 2019 to July 2021. As a consequence, weanticipate that interest expense in 2018 will decrease. In 2016 as compared to 2015, interest expense, net decreased by $0.3 million principally attributable to the declining average outstanding balance onour loan with Hercules.Provision for Income Taxes Years Ended December 31, 2017 / 2016Comparison 2016 / 2015Comparison 2017 2016 2015 $ % $ % ($ in thousands) Provision for Income Taxes 101 101 — — -% 101 100% We recorded a $0.1 million tax provision for foreign withholding taxes in each of the years ended December 31, 2017 and 2016 in connection withpartnership payments from CANbridge. In March 2016, we received the $1.0 million upfront payment upon the execution of the collaboration and licenseagreement. In 2017, we received a total of $1.0 million in reimbursement payments related to manufacturing development activities conducted by us prior tothe Effective Date of the collaboration and license agreement.Contractual Obligations and CommitmentsThe following table summarizes our non-cancellable contractual obligations at December 31, 2017 (in thousands): Total Less than 1 Year 1 to 3 Years 3 to 5 Years More than 5 Years Hercules loan agreement (1) $26,318 $2,493 $17,738 $6,087 $— Clinical trial costs and contract research (2) $20,802 $19,287 $1,515 — — Operating leases (3) 66 66 — — — Total contractual obligations $47,186 $21,846 $19,253 $6,087 $— (1)Includes scheduled interest payments and end of term payments totaling $1.6 million due in connection with the 2014 Amendment, 2016 Amendmentand 2017 Loan Agreement. (2)Clinical trial costs and contract research principally include contracts for human clinical trials and clinical drug manufacturing and distribution. In theevent a contract is terminated prior to the planned completion, the amount paid under such contracts may be less than the amounts presented. (3)We sublease our principal office facility at One Broadway in Cambridge, MA. Our lease arrangement is cancellable within 30 days’ notice to ourlandlord. As a result, our operating lease obligation as of December 31, 2017 is the January 2018 rent payable to our landlord (4)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 upfront 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, we are required to make certain milestone payments upon the earlier ofachievement of specified development and regulatory milestones or a specified date for the first indication, and upon the achievement of specifieddevelopment and regulatory milestones for the second and third indications. At this time, we cannot reasonably estimate when or if we may berequired to make other additional payments to Kyowa Hakko Kirin or St. Vincent’s and have not included any additional amounts in the table above.For example, we would owe KHK a one-time milestone payment of $18.0 million, provided that we do not sublicense U.S. rights for tivozanib prior toobtaining a U.S. regulatory approval. In addition, we are required to make milestone payments to St. Vincent’s Hospital, up to an aggregate total of$16.7 million, upon the earlier of achievement of specified development and regulatory milestones or a specified date for the first indication, andupon the achievement of specified development and regulatory milestones for the second and third 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 we grant any sublicenseunder the license agreement, depending on the sublicensed territory. 90(5)As discussed in Note 4 to our consolidated financial statements included elsewhere in this Annual Report on Form 10K, we have executed licenseagreements for patented technology and other technology related to research projects, including technology to humanize ficlatuzumab and otherantibody product candidates. The license agreements required us to pay non-refundable license fees upon execution, and in certain cases, requiremilestone 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, three of the 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, and one agreement includes a $1.0 million license payment per product. Liquidity and Capital ResourcesWe have financed our operations to date primarily through private placements and public offerings of our common stock and preferred stock, licensefees, milestone payments and research and development funding from strategic partners, and loan proceeds. As of December 31, 2017, we had cash, cashequivalents and marketable securities of approximately $33.5 million. See “Operating Capital Requirements and Going Concern” below and Note 1 to theconsolidated financial statements included elsewhere in this Annual Report on Form 10-K for a further discussion of our liquidity and the conditions andevents which raise substantial doubt regarding our ability to continue as a going concern. Currently, our funds are invested in a U.S. government moneymarket fund, and corporate debt securities, including commercial paper. The following table sets forth the primary sources and uses of cash for each of theperiods set forth below: Years Ended December 31, 2017 2016 2015 (in thousands) Net cash used in operating activities $(19,164) $(31,066) $(18,230)Net cash used in investing activities (10,402) (764) (6,316)Net cash provided by (used in) financing activities 29,419 20,292 (1,126)Net decrease in cash and cash equivalents $(147) $(11,538) $(25,672) Our operating activities used cash of $19.2 million, $31.1 million and $18.2 million in 2017, 2016 and 2015, respectively. Cash used in operationswas due principally to our net loss adjusted for non-cash items and changes in working capital. Our investing activities used cash of $10.4 million, $0.8 million and $6.3 million in 2017, 2016 and 2015, respectively. Cash used in investingactivities was the net result of purchases of marketable securities, partially offset by the maturities of marketable securities. Our financing activities provided cash of $29.4 million and $20.3 million in 2017 and 2016, respectively, and used cash of $1.1 million in 2015. In2017, we raised approximately $29.5 million in net cash proceeds, including $15.4 million from an underwritten public offering of 34.5 million shares of ourcommon stock, $8.8 million from sales of 6.5 million shares of our common stock under our at-the-market, or ATM, facility with FBR & Co., or FBR,(formerly MLV & Co. LLC), $5.0 million from additional borrowings under our Hercules Loan Agreement and $0.3 million from the issuance of 0.3 millionshares of our common stock upon the exercise of 0.3 million PIPE warrants, offset by $0.1 million in debt issuance costs related to the 2017 Loan Agreementwith Hercules. In 2016, we raised approximately $20.3 million in net cash proceeds, including $15.4 million in net proceeds from a private placement of17,642,842 units, each including one share of our common stock and a warrant to purchase one share of our common stock, and $4.9 million in net proceedsfrom additional borrowings under our Hercules Loan Agreement. In 2015, we raised approximately $10.5 million in net proceeds from the sale of ourcommon stock, including $10.2 million under our Sales Agreement with FBR and $0.3 million from the issuance of stock for stock-based compensationarrangements, offset by $11.6 million in principal payments under our Hercules Loan Agreement.At-The-Market Issuance Sales Agreement with LeerinkOn November 30, 2017, we filed a shelf registration statement on Form S-3 with the SEC, which we refer to as the 2017 Shelf. The 2017 Shelf (file No.333-221873) was declared effective by the SEC on December 15, 2017 and covers the offering, issuance and sale from time to time of up to $200 million ofour common stock, preferred stock, debt securities, warrants and/or units. The 2017 Shelf was filed to replace our then existing 2015 Shelf, which wasterminated upon the 2017 Shelf being declared effective by the SEC on December 15, 2017.In February 2018, we entered into an at-the-market issuance sales agreement, which we refer to as the Leerink Sales Agreement, with Leerink PartnersLLC, or Leerink, pursuant to which we may issue and sell shares of our common stock from time to time up to 91an aggregate amount of $50 million, at our option, through Leerink as our sales agent, with any sales of common stock through Leerink being made by anymethod that is deemed an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act. Any such shares of common stock will besold pursuant to a prospectus supplement filed under the 2017 Shelf. We agreed to pay Leerink a commission of up to 3% of the gross proceeds of any salesof common stock pursuant to the Leerink Sales Agreement. At the time of filing this Annual Report on Form 10-K, no shares of our common stock have beensold under the Leerink Sales Agreement.Public OfferingOn March 31, 2017, we closed an underwritten public offering of 34.5 million shares of our common stock, including the exercise in full by theunderwriter of its option to purchase 4.5 million shares, at the public offering price of $0.50 per share for gross proceeds of approximately $17.3 million.Certain of our executive officers and a director purchased an aggregate of 420,000 shares and an entity affiliated with New Enterprise Associates, a greaterthan 5% stockholder, purchased 6.0 million shares in this offering at the same public offering price per share as the other investors. The net offering proceedsto us were approximately $15.4 million after deducting underwriting discounts and estimated offering expenses payable by us. We sold these shares pursuantto the 2015 Shelf (as defined below).Private Placement / PIPE WarrantsIn May 2016, we entered into a securities purchase agreement with a select group of qualified institutional buyers, institutional accredited investorsand accredited investors pursuant to which we sold 17,642,482 units, at a price of $0.965 per unit, for gross proceeds of approximately $17.0 million. Eachunit consisted of one share of our common stock and a warrant to purchase one share of our common stock, which we refer to as the PIPE Warrants. The PIPEWarrants have an exercise price of $1.00 per share and are exercisable in any manner at any time for a period of five years from the date of issuance. Certain ofour directors and executive officers purchased an aggregate of 544,039 units in this offering at the same price as the other investors. The net offering proceedsto us were approximately $15.4 million after deducting placement agent fees and other offering expenses payable by us. In July 2017, we issued to Hercules259,067 shares of common stock upon its exercise of all of its PIPE Warrants, and we received approximately $0.3 million in cash proceeds. As of December31, 2017, there were PIPE Warrants outstanding and exercisable for 17,383,415 shares of common stock. In January 2018, we issued 518,134 shares of ourcommon stock upon exercise of PIPE Warrants and received approximately $0.5 million in cash proceeds.At-The-Market Issuance Sales Agreement with FBRIn February 2015, we entered into an at-the-market issuance sales agreement, which we refer to as the FBR Sales Agreement, with FBR & Co. andMLV & Co. LLC, or together FBR, pursuant to which we issued and sold shares of our common stock from time to time up to an aggregate amount of$17.9 million, at our option, through FBR as our sales agent, with any sales of common stock through FBR being made by any method that is deemed an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act, pursuant to an effective shelf registration statement on Form S-3. Weagreed to pay FBR a commission of up to 3% of the gross proceeds of any sales of common stock pursuant to the FBR Sales Agreement.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 covered theoffering, issuance and sale of up to $100 million of our common stock, preferred stock, debt securities, warrants and/or units. The 2015 Shelf was filed toreplace our then existing $250 million shelf registration statement, which expired at the end of May 2015, and which we refer to as the 2012 Shelf. On May 7,2015, we also amended the FBR Sales Agreement to provide for the offering, issuance and sale of up to $15.0 million of our common stock under the 2015Shelf. The prior at-the-market offering initiated under the original FBR Sales Agreement expired along with the 2012 Shelf. Through August 2015, we hadsold approximately 5.9 million shares pursuant to the FBR Sales Agreement, as amended, resulting in proceeds of approximately $10.2 million, net ofcommissions and issuance costs. In June 2017, we sold approximately 6.5 million shares pursuant to the FBR Sales Agreement, as amended, resulting inproceeds of approximately $8.8 million, net of commissions and issuance costs. The FBR Sales Agreement has expired.Credit FacilitiesOn May 28, 2010, we entered into a loan and security agreement, or the First Loan Agreement, with Hercules. The First Loan Agreement wassubsequently amended in March 2012, or the 2012 Amendment; September 2014, or the 2014 Amendment; May 2016, or the 2016 Amendment; andDecember 2017, or the 2017 Loan Agreement. Amounts borrowed under the 2012 Amendment were repaid in full in 2015.Pursuant to the 2014 Amendment, we received additional loan proceeds from Hercules in the amount of $10.0 million and were not required tocommence principal payments until May 1, 2016. An end-of-term payment of approximately $0.5 million continued to be due on January 1, 2018. Thispayment was made on the first business day of 2018. 92Pursuant to the 2016 Amendment, we received additional loan proceeds from Hercules in May 2016, in the amount of $5.0 million, which increasedthe aggregate outstanding principal balance under the First Loan Agreement to $15.0 million. We were not required to commence principal payments on the$15.0 million loan until July 1, 2017, at which time we would have been required to make 30 equal monthly payments of principal and interest throughDecember 2019. An end-of-term payment of approximately $0.2 million is due on December 1, 2019. The 2016 Amendment included a financial covenantthat required us to maintain an unrestricted cash position greater than or equal to $10.0 million through the date of completion of our TIVO-3 trial withresults that were satisfactory to Hercules.Under the 2016 Amendment, from March 1, 2017 through June 30, 2017, we could draw down an additional $5.0 million in funding uponconfirmation by Hercules, in its reasonable discretion, that we achieved the following conditions: (i) satisfactory developmental progression on a minimumof two (2) clinical programs (other than the TIVO-3 trial) that are either managed directly by us or funded, in whole or in part, by us and (ii) having anunrestricted cash position greater than or equal to $25.0 million on the date of the draw down request. If we drew down the additional $5.0 million infunding, the commencement of principal payments on the aggregate $20.0 million loan balance would be deferred by six months from July 1, 2017 untilJanuary 1, 2018.In June 2017, pursuant to the 2016 Amendment, we received the additional $5.0 million in loan proceeds from Hercules, which increased theaggregate outstanding principal balance under the First Loan Agreement to $20.0 million and a six-month deferral in the commencement of principalpayments. There was no change in the loan maturity date of December 2019. We were not required to commence principal payments on the $20.0 millionloan until January 1, 2018, at which time we would have been required to make 23 equal monthly payments of principal and interest, in the approximateamount of $0.8 million, through November 2019 and an approximate $5.3 million payment of principal and interest in December 2019, which representedapproximately 26% of the entire $20.0 million loan. An additional end-of-term payment of approximately $0.1 million is due on December 1, 2019, whichincreased the total end-of-term payments under the 2016 Amendment to $0.3 million.In December 2017, we entered into an amended and restated loan and security agreement with Hercules to refinance the First Loan Agreement, whichwe refer to as the 2017 Loan Agreement. The proceeds of the new loan facility were used to retire the existing $20.0 million in secured debt outstandingunder the First Loan Agreement. Per the terms of the 2017 Loan Agreement, the new loan facility has a 42-month maturity from closing, no financialcovenants, a lower interest rate and an interest-only period of no less than 12 months, which could be extended up to a maximum of 24 months, assuming theachievement of specified milestones relating to the development of tivozanib. Per the 2017 Loan Agreement, Hercules did not receive any additionalwarrants to purchase shares of our common stock and no longer has the option, subject to our written consent, to participate in our future equity financings upto $2.0 million through the purchase of our common stock either with cash or through the conversion of outstanding principal under the loan.Pursuant to the 2017 Loan Agreement, the loan maturity date has been revised from December 2019 to July 2021. We are not required to makeprincipal payments until February 1, 2019, at which time we will be required to make 29 equal monthly payments of principal and interest, in theapproximate amount of $0.8 million through July 2021. An additional end-of-term payment of approximately $0.8 million is due on July 1, 2021, whichincreases the total end-of-term payments under the 2014 Amendment, 2016 Amendment and 2017 Loan Agreement to approximately $1.6 million. The end-of-term payments under the 2014 Amendment, in the approximate amount of $0.5 million, and the 2016 Amendment, in the amount of $0.3 million, continueto be due on their original due dates of January 1, 2018 and December 1, 2019, respectively. The financial covenant per the 2016 Amendment to maintain anunrestricted cash position greater than or equal to $10.0 million through the date of completion of our TIVO-3 trial with results that are satisfactory toHercules has been removed. Per the 2017 Loan Agreement, the current interest rate has been decreased from 11.9% to 9.45%.The interest-only period could be extended by two 6-month deferrals upon the achievement of specified milestones relating to the development oftivozanib, including (i) on or prior to September 30, 2018, we have received positive data with respect to our TIVO-3 trial for the treatment of RCC forpatients in the third-line setting which positive data supports the filing for a new drug application with the Food and Drug Administration, or FDA, subject toconfirmation by Hercules at its reasonable discretion, and (ii) on or prior to June 28, 2019, we have received approval from the FDA for our tivozanib productfor the treatment of RCC for patients in the third-line setting, subject to confirmation by Hercules at its reasonable discretion.We must make interest payments on the principal balance of the loan each month it remains outstanding. Per annum interest is payable on the loanbalance at the greater of 9.45% and an amount equal to 9.45% plus the prime rate minus 4.75%, as determined daily, provided however, that the per annuminterest rate shall not exceed 15.0%. Our annual interest rate as of December 31, 2017 was 9.45%.We have determined that the risk of subjective acceleration under the material adverse events clause included in the 2017 Loan Agreement is remoteand, therefore, have classified the outstanding principal amount in current and long-term liabilities based on the timing of scheduled principal payments. Asof December 31, 2017, we are in compliance with all of the loan covenants and, through 93the date of this filing, the lenders have not asserted any events of default under the loan. We do not believe that there has been a material adverse change asdefined in the 2017 Loan Agreement. 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 the First Loan Agreement.Operating Capital Requirements and Going ConcernWe have devoted substantially all of our resources to our drug development efforts, comprised of research and development, manufacturing,conducting clinical trials for our product candidates, protecting our intellectual property and general and administrative functions relating to theseoperations. Our future success is dependent on our ability to develop our product candidates and ultimately upon our ability to attain profitable operations.We anticipate that we will continue to incur significant operating losses for the next several years as we incur expenses to continue to execute on our clinicaldevelopment strategy to advance our preclinical and clinical stage assets. We will require substantial additional funds to continue our development programsand to fulfill our planned operating goals. In particular, our currently planned operating and capital requirements include the need for substantial workingcapital to support our development activities for tivozanib. For example, we estimate that the aggregate remaining costs for the TIVO-3 trial, including drugsupply and distribution, could be in the range of $9.0 million to $12.0 million through 2019. We estimate that the overall cost for the TIVO-3 trial, includingdrug supply and distribution, could be in the range of $44.0 million to $47.0 million. Our aggregate remaining costs for the TiNivo trial, including tivozanibdrug supply and distribution, could be in the range of $1.5 million to $2.0 million through 2019. We estimate that the overall cost for the TiNivo trial,including drug supply and distribution, could be in the range of $4.0 million to $4.5 million, of which EUSA is responsible for approximately 50% of thesecosts up to a maximum of $2.0 million. BMS is providing nivolumab for the study. Moreover, we have future payment obligations and cost-sharingarrangements under certain of our collaboration and license agreements. For example, under our agreements with KHK and St. Vincent’s, we are required tomake certain clinical and regulatory milestone payments, have royalty obligations with respect to product sales and are required to pay a specifiedpercentage of sublicense revenue in certain instances.During the year ended December 31, 2017, we have raised approximately $29.5 million in net cash proceeds, including $15.4 million from anunderwritten public offering of 34.5 million shares of our common stock in March 2017, $8.8 million from sales of 6.5 million shares of our common stockunder our Sales Agreement with FBR and $5.0 million from additional borrowings under our First Loan Agreement with Hercules in June 2017 and $0.3million in July 2017 from the issuance of 0.3 million shares of our common stock upon the exercise of 0.3 million PIPE Warrants issued in connection withthe May 2016 private placement.As of December 31, 2017, we had approximately $33.5 million in existing cash, cash equivalents and marketable securities, working capital of$18.1 million and an accumulated deficit of $587.0 million. In the first quarter of 2018 to-date, we have raised an additional approximate $1.9 million in netfunding, including approximately $0.5 million received in January 2018 related to the exercise of 0.5 million PIPE Warrants and $1.4 million in netpartnership-related funding in connection with the $2.0 million milestone payment by EUSA for the February 2018 reimbursement approval by the NICE forRCC in the UK that was received in March 2018, net of the corresponding 30% sub-license fee due to KHK. Based on these available cash resources, webelieve that we do not have sufficient cash on hand to support current operations for at least the next twelve months from the date of filing this AnnualReport on Form 10-K. This condition raises substantial doubt about our ability to continue as a going concern.Our plans to address this condition include pursuing one or more of the following options to secure additional funding, none of which can beguaranteed or are entirely within our control: •Earn royalty payments pursuant to our license agreement with EUSA. In August 2017, EUSA obtained marketing approval from the EMA fortivozanib (FOTIVDA) for the treatment of RCC. •Earn milestone payments pursuant to our collaboration and license agreements or restructure / monetize existing potential milestone and/orroyalty payments under those collaboration and license agreements.For example, pursuant to our license agreement with EUSA, we are entitled to receive up to an additional $8.0 million in milestone payments of$2.0 million per country upon reimbursement approval for RCC, if any, in each of France, Germany, Italy and Spain, and an additional $2.0 million milestonepayment for the grant of marketing approval, if any, in three of the five following countries: Argentina, Australia, Brazil, South Africa and Venezuela. We arealso eligible to receive an additional research and development reimbursement payment from EUSA of fifty percent 50% of the total costs for our TIVO-3trial, up to $20.0 million, if EUSA elects to opt-in to that study. •Raise funding through the possible additional sales of our common stock, including public or private equity financings and / or sales of ourcommon stock under our Leerink Sales Agreement. •Partner our AV-353 platform to secure potential additional non-dilutive funds and advance development of the AV-353 platform for thepotential treatment of PAH. 94There can be no assurance, however, that we will receive cash proceeds from any of these potential resources or to the extent cash proceeds arereceived those proceeds would be sufficient to support our current operating plan for at least the next twelve months from the date of filing this AnnualReport on Form 10-K.Pursuant to the requirements of Accounting Standards Codification (ASC) 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continueas a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about ourability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take intoconsideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued.When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantialdoubt about our ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probablethat the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, whenimplemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within oneyear after the date that the financial statements are issued. Under ASC 205-40, the future receipt of potential funding from our collaborators and other resources cannot be considered probable at this timebecause none of our current plans have been finalized at the time of filing this Annual Report on Form 10-K and the implementation of any such plan is notprobable of being effectively implemented as none of the plans are entirely within our control. Accordingly, substantial doubt is deemed to exist about ourability to continue as a going concern within one year after the date these financial statements are issued.We believe that our approximate $33.5 million in cash, cash equivalents and marketable securities at December 31, 2017, along with the additionalapproximate $1.9 million in net funding raised in the first quarter of 2018 to-date, as described above, would allow us to fund our planned operations into thefirst quarter of 2019. This estimate assumes no receipt of additional milestone payments from our partners or additional related payments of potentiallicensing milestones to third parties, no funding from new partnership agreements, no equity financings, no debt financings, no sales of equity under ourLeerink Sales Agreement and no additional sales of equity through the exercise of our PIPE Warrants. Accordingly, the timing and nature of activitiescontemplated for the remainder of 2018 and thereafter will be conducted subject to the availability of sufficient financial resources.There are numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products. Accordingly,our future funding requirements may vary from our current expectations and 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 of 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 Hercules Loan Agreement or under any other agreements with thirdparties; •the outcome of legal actions against us, including the current lawsuits described in Part II, Item 1 of this report under the heading “LegalProceedings”; •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; •the timing, receipt and amount of sales of, or royalties on, our future products, if any; and •our ability to continue as a going concern. 95We will require additional funding to extend our planned operations. We may seek to sell additional equity or debt securities or obtain additionalcredit facilities. The sale of additional equity or convertible debt securities may result in additional dilution to our stockholders. If we raise additional fundsthrough the issuance of debt securities or preferred stock or through additional credit facilities, these securities and/or the loans under credit facilities couldprovide for rights senior to those of our common stock and could contain covenants that would restrict our operations. Additional funds may not be availablewhen 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 orother third parties. These arrangements would generally require us to relinquish or encumber rights to some of our technologies or drug candidates, and wemay not be able to enter into such arrangements on acceptable terms, if at all. If we are unable to raise substantial additional capital in the near term, whetheron terms that are acceptable to us, or at all then 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.ITEM 7A.Quantitative and Qualitative Disclosures About Market Risk.We are exposed to market risk related to changes in interest rates. As of December 31, 2017, we had cash, cash equivalents and marketable securities of$33.5 million. Currently, our funds are invested in a U.S. government money market fund, corporate debt securities, including commercial paper, and U. S.government agency securities. We do not hold any of these instruments for trading or speculative purposes. Our funds are invested in accordance withinvestment guidelines as approved by our Board of Directors.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 and marketable securities are subject to interest rate risk and could fall invalue if market interest rates increase. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate10% change in interest rates would not have a material effect on the fair market value of our portfolio. We have the ability to hold our cash equivalents untilmaturity, and therefore we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a change in marketinterest rates on our investments. We do not currently have any auction rate securities.Our loans payable are subject to interest rate risk. As of December 31, 2017, our aggregate principal balance outstanding on our Hercules LoanAgreement was $20.0 million. Per annum interest is payable on the principal balance of the loan each month it remains outstanding at the greater of 9.45%and an amount equal to 9.45% plus the prime rate minus 4.75% as determined daily, provided however, that the per annum interest rate shall not exceed15.0%. As of December 31, 2017, the interest rate was 9.45%. For every 1% increase in the prime rate over 4.75%, given the amount of debt outstandingunder the Hercules Loan Agreement as of December 31, 2017, we would have an increase in future annual cash outflows of approximately $0.2 million overthe 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. 96ITEM 8.Financial Statements and Supplementary Data AVEO PHARMACEUTICALS, INC.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm98 Consolidated Balance Sheets as of December 31, 2017 and 201699 Consolidated Statements of Operations for the Years Ended December 31, 2017, 2016 and 2015100 Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2017, 2016 and 2015101 Consolidated Statements of Stockholders’ (Deficit) Equity for the Years Ended December 31, 2017, 2016 and 2015102 Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015103 Notes to Consolidated Financial Statements104 97REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of AVEO Pharmaceuticals, Inc. Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of AVEO Pharmaceuticals, Inc. (the “Company“) as of December 31, 2017 and 2016,the related consolidated statements of operations, comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the three years in the periodended December 31, 2017, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidatedfinancial statements present fairly, in all material respects, the financial position of the Company at December 31, 2017 and 2016, and the results of itsoperations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with U.S. generally accepted accountingprinciples. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’sinternal control over financial reporting as of December 31, 2017, 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 13, 2018 expressed an unqualifiedopinion thereon. The Company’s Ability to Continue as a Going ConcernThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note1 to the financial statements, the Company will require additional capital to fund its current operating plan, and has stated that substantial doubt exists aboutthe Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding thesematters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of thisuncertainty. Basis for OpinionThese financial statements are the responsibility of the Company‘s management. Our responsibility is to express an opinion on the Company‘s financialstatements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Companyin accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing proceduresto assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financialstatements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company's auditor since 2003.Boston, MassachusettsMarch 13, 2018 98AVEO PHARMACEUTICALS, INC.Consolidated Balance Sheets(In thousands, except par value amounts) December 31,2017 December 31,2016 Assets Current assets: Cash and cash equivalents $14,949 $15,096 Marketable securities 18,576 8,252 Accounts receivable 402 1,027 Insurance recovery (Note 15) 15,000 — Clinical trial retainers 1,027 1,702 Other prepaid expenses and other current assets 229 238 Total current assets 50,183 26,315 Clinical trial retainers — 940 Other assets 15 30 Total assets $50,198 $27,285 Liabilities and stockholders’ deficit Current liabilities: Accounts payable $2,436 $2,186 Accrued clinical trial costs and contract research 8,321 3,998 Other accrued liabilities 2,458 1,531 Loans payable, net of discount — 2,124 Deferred revenue 395 510 Deferred research and development reimbursements 901 — Estimated settlement liability (Note 15) 17,073 — Other liabilities (Note 6) 540 — Total current liabilities 32,124 10,349 Loans payable, net of current portion and discount 18,477 11,879 Deferred revenue 1,302 1,697 Deferred research and development reimbursements 222 — PIPE warrant liability (Note 7) 37,746 4,593 Other liabilities (Note 6) 1,090 690 Total liabilities 90,961 29,208 Stockholders' deficit: Preferred stock, $.001 par value: 5,000 shares authorized at each of December 31, 2017 and 2016; noshares issued and outstanding at each of December 31, 2017 and 2016 — — Common stock, $.001 par value: 250,000 shares authorized and 118,325 shares issued andoutstanding at December 31, 2017; 200,000 shares authorized and 75,863 shares issued andoutstanding at December 31, 2016 118 76 Additional paid-in capital 546,092 519,911 Accumulated other comprehensive income (loss) (4) 6 Accumulated deficit (586,969) (521,916)Total stockholders’ deficit (40,763) (1,923)Total liabilities and stockholders’ deficit $50,198 $27,285 See accompanying notes. 99AVEO PHARMACEUTICALS, INC.Consolidated Statements of Operations(In thousands, except per share amounts) Year Ended December 31, 2017 2016 2015 Collaboration and licensing revenue $7,579 $2,515 $19,024 Operating expenses: Research and development 25,179 23,703 12,875 General and administrative 9,138 8,205 10,217 Settlement costs (Note 15) 2,073 — 4,000 Restructuring and lease exit — — 4,358 36,390 31,908 31,450 Loss from operations (28,811) (29,393) (12,426)Other income (expense), net: Interest expense, net (2,373) (1,949) (2,286)Change in fair value of warrant liability (33,740) 4,751 — Other (expense) income — (195) (289)Other income (expense), net (36,113) 2,607 (2,575)Net loss before provision for income taxes (64,924) (26,786) (15,001)Provision for income taxes (101) (101) — Net loss $(65,025) $(26,887) $(15,001)Basic and diluted net loss per share: Net loss per share $(0.61) $(0.39) $(0.27)Weighted average number of common shares outstanding 105,930 69,268 55,701 See accompanying notes. 100AVEO PHARMACEUTICALS, INC.Consolidated Statements of Comprehensive Loss(In thousands) Year Ended December 31, 2017 2016 2015 Net loss $(65,025) $(26,887) $(15,001)Other comprehensive income (loss): Unrealized gain (loss) on available-for-sale securities (10) 9 (3)Comprehensive loss $(65,035) $(26,878) $(15,004) See accompanying notes. 101AVEO PHARMACEUTICALS, INC.Consolidated Statements of Stockholders’ (Deficit) Equity(In thousands) Common Shares Shares Par Value AdditionalPaid-inCapital AccumulatedOtherComprehensiveIncome (Loss) AccumulatedDeficit TotalStockholders'(Deficit)Equity Balance at December 31, 2014 52,289 $52 $500,582 $- $(480,028) $20,606 Stock-based compensation expense related to equity-classifiedawards — — 1,132 — — 1,132 Exercise of stock options 166 — 241 — — 241 Issuance of common stock to settle liability-classified shareawards granted to directors 8 — 7 — — 7 Issuance of common stock under employee stock purchaseplan 7 — 27 — — 27 Issuance of common stock from at-the-market sales agreement(net of issuance costs 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 Issuance of common stock and warrants in a private placement,excluding to related parties (net of issuance costs of $1.6million) 17,098 17 14,829 — — 14,846 Issuance of common stock and warrants to related parties 544 1 524 — — 525 Stock-based compensation expense related to equity-classifiedawards — — 999 — — 999 Issuance of warrants in connection with a private placement — — (9,344) — — (9,344)Issuance of warrants in connection with loans payable — — 667 — — 667 Exercise of stock options 39 — 33 — — 33 Issuance of common stock under employee stock purchaseplan — — 2 — — 2 Change in unrealized gain (loss) on investments — — — 9 — 9 Net loss — — — — (26,887) (26,887)Balance at December 31, 2016 75,863 $76 $519,911 $6 $(521,916) $(1,923)Retrospective adjustment related to adoption of new stockoption forfeiture standard — — 28 — (28) — Issuance of common stock in a public offering, excluding torelated parties (net of issuance costs of $1.8 million) 28,080 28 12,191 — — 12,219 Issuance of common stock to related parties 6,420 6 3,204 — — 3,210 Issuance of common stock from at-the-market sales agreement(net of issuance costs of $180) 6,470 6 8,810 — — 8,816 Stock-based compensation expense related to equity-classifiedawards — — 1,089 — — 1,089 Issuance of common stock in connection with warrantexercises 1,475 2 257 — — 259 Reduction in PIPE warrant liability in connection with warrantexercises — — 587 — — 587 Exercise of stock options 17 — 15 — — 15 Change in unrealized gain (loss) on investments — — — (10) — (10)Net loss — — — — (65,025) (65,025)Balance at December 31, 2017 118,325 $118 $546,092 $(4) $(586,969) $(40,763) See accompanying notes. 102AVEO PHARMACEUTICALS, INC.Consolidated Statements of Cash Flows(In thousands) Year Ended December 31, 2017 2016 2015 Operating activities Net loss $(65,025) $(26,887) $(15,001)Adjustments to reconcile net loss to net cash used in operating activities: Impairment of property and equipment — — 232 Depreciation and amortization — 30 9,567 Net loss (gain) on disposal of fixed assets — — 253 Stock-based compensation 1,089 999 1,132 Non-cash interest expense 514 465 655 Non-cash change in fair value of PIPE warrant liability 33,740 (4,751) — Non-cash charge for settlement warrants (Note 15) 2,073 — — Amortization of premium and discount on investments 68 14 34 Changes in operating assets and liabilities: Restricted Cash — — 2,997 Accounts receivable 625 3,614 (2,300)Insurance recovery (Note 15) (15,000) — — Prepaid expenses and other current assets 684 (340) (116)Other noncurrent assets 955 (827) 96 Accounts payable 250 760 (1,820)Accrued clinical trial costs and contract research 4,323 2,032 (3,562)Other accrued liabilities 927 (609) (1,627)Settlement liability (Note 15) 15,000 (4,000) 4,000 Deferred revenue (510) (1,488) 2,927 Deferred research and development reimbursements 1,123 — — Lease exit obligation — — (5,206)Deferred rent — — (10,569)Other liabilities — (78) 78 Net cash used in operating activities (19,164) (31,066) (18,230)Investing activities Purchases of marketable securities (34,852) (29,421) (19,085)Proceeds from maturities and sales of marketable securities 24,450 28,664 11,550 Purchases of property and equipment — (7) (22)Proceeds from sale of property and equipment — — 1,241 Net cash used in investing activities (10,402) (764) (6,316)Financing activities Proceeds from issuance of common stock and warrants, net of issuance costs 21,294 14,846 10,218 Proceeds from issuance of common stock and warrants to related parties 3,210 525 — Proceeds from issuance of loan payable and warrants 5,000 5,000 — Proceeds from issuance of stock for stock-based compensation arrangements 15 36 268 Payments of debt issuance costs (100) (115) — Principal payments on loans payable — — (11,612)Net cash provided by (used in) financing activities 29,419 20,292 (1,126)Net decrease in cash and cash equivalents (147) (11,538) (25,672)Cash and cash equivalents at beginning of period 15,096 26,634 52,306 Cash and cash equivalents at end of period $14,949 $15,096 $26,634 Supplemental cash flow information Cash paid for interest $2,069 $1,539 $1,983 Non-cash financing activity Fair value of warrants issued in connection with long term debt $— $667 $— Fair value of warrants issued in connection with private placement $— $9,344 $—See accompanying notes. 103AVEO Pharmaceuticals, Inc.Notes to Consolidated Financial StatementsDecember 31, 2017 (1) Organization AVEO Pharmaceuticals, Inc. (the “Company”) is a biopharmaceutical company dedicated to advancing a broad portfolio of targeted medicines foroncology and other areas of unmet medical need. The Company’s strategy is to retain North American rights to its oncology portfolio while securing partnersin development and commercialization outside of North America. The Company is working to develop and commercialize its lead candidate tivozanib inNorth America as a treatment for renal cell carcinoma (“RCC”). The Company has entered into partnerships to fund the development and commercializationof its preclinical and clinical stage assets, including AV-203 and ficlatuzumab in oncology, AV-380 in cachexia, and tivozanib in oncology outside of NorthAmerica. Tivozanib (FOTIVDA®) is approved in the European Union, as well as Norway and Iceland, for the first-line treatment of adult patients withadvanced RCC (“aRCC”) and for adult patients who are vascular endothelial growth factor receptor (“VEGFR”) and mTOR pathway inhibitor-naïvefollowing disease progression after one prior treatment with cytokine therapy for aRCC. The Company is currently seeking a partner to develop the AV-353platform, a preclinical asset, worldwide for the potential treatment of pulmonary arterial hypertension (“PAH”).As used throughout these condensed consolidated financial statements, the terms “AVEO,” and the “Company” refer to the business of AVEOPharmaceuticals, Inc. and its two wholly-owned subsidiaries, AVEO Pharma Limited and AVEO Securities Corporation. Liquidity and Going Concern The Company has financed its operations to date primarily through private placements and public offerings of its common stock and preferred stock,license fees, milestone payments and research and development funding from strategic partners, and loan proceeds. The Company has devoted substantiallyall of its resources to its drug development efforts, comprising research and development, manufacturing, conducting clinical trials for its product candidates,protecting its intellectual property and general and administrative functions relating to these operations. The future success of the Company is dependent onits ability to develop its product candidates and ultimately upon its ability to attain profitable operations. As of December 31, 2017, the Company had cash,cash equivalents and marketable securities totaling approximately $33.5 million, working capital of $18.1 million and an accumulated deficit of$587.0 million.During the year ended December, 2017, the Company raised approximately $29.5 million in net cash proceeds, including $15.4 million from anunderwritten public offering of 34.5 million shares of its common stock in March 2017, $8.8 million from sales of 6.5 million shares of its common stockunder an at-the-market issuance sales agreement (the “Sales Agreement”) with FBR & Co. and MLV & Co. LLC (together “FBR”) and $5.0 million inadditional borrowings under its loan and security agreement (the “Loan Agreement”) with Hercules Technology II, L.P. and Hercules Technology III, L.P.,affiliates of Hercules Technology Growth (collectively, “Hercules”) in June 2017, and $0.3 million in July 2017 from the issuance of 0.3 million shares of itscommon stock upon the exercise of 0.3 million warrants issued in connection with the May 2016 private placement (the “PIPE Warrants”). Refer to Notes 6and 7.The Company is subject to a number of risks, including the need for substantial additional capital for clinical research and product development. As ofDecember 31, 2017, the Company had approximately $33.5 million in existing cash, cash equivalents and marketable securities. In the first quarter of 2018to-date, the Company has raised an additional approximate $1.9 million in net funding, including approximately $0.5 million received in January 2018related to the exercise of 0.5 million PIPE Warrants and $1.4 million in net partnership-related funding in connection with the $2.0 million milestonepayment by EUSA Pharma (UK) Limited (“EUSA”) for the February 2018 reimbursement approval by the National Institute for Health and Care Excellence(the “NICE”) for RCC in the United Kingdom that was received in March 2018, net of the corresponding 30% sub-license fee due to Kyowa Hakko Kirin Co.,Ltd. (formerly Kirin Brewery Co., Ltd.) (“KHK”). Refer to Note 4. Based on these available cash resources, the Company does not have sufficient cash onhand to support current operations for at least the next twelve months from the date of filing this Annual Report on Form 10-K. This condition raisessubstantial doubt about the Company’s ability to continue as a going concern. 104The Company’s plans to address this condition include pursuing one or more of the following options to secure additional funding, none of which canbe guaranteed or are entirely within our control: •Earn royalty payments pursuant to the license agreement with EUSA. In August 2017, EUSA obtained marketing approval from the EuropeanMedicines Agency (the “EMA”) for tivozanib (FOTIVDA) for the treatment of RCC. •Earn milestone payments pursuant to the collaboration and license agreements described in Note 4 or restructure / monetize existing potentialmilestone and/or royalty payments under those collaboration and license agreements.Pursuant to the Company’s license agreement with EUSA, the Company is entitled to receive up to an additional $8.0 million in milestone paymentsof $2.0 million per country upon reimbursement approval for RCC, if any, in each of France, Germany, Italy and Spain, and an additional $2.0 millionmilestone payment for the grant of marketing approval, if any, in three of the five following countries: Argentina, Australia, Brazil, South Africa andVenezuela. The Company is also eligible to receive an additional research and development reimbursement payment from EUSA of fifty percent (50%) of thetotal costs for the Company’s TIVO-3 phase 3 study in third-line RCC, up to $20.0 million, if EUSA elects to opt-in to that study •Raise funding through the possible additional sales of the Company’s common stock, including public or private equity financings and / orsales of the Company’s common stock under the at-the-market-issuance sales agreement (the “Leerink Sales Agreement”) with Leerink PartnersLLC (“Leerink”), as discussed in Note 7. •Partner AV-353 to secure potential additional non-dilutive funds and advance development of the AV-353 platform for the potential treatmentof PAH.There can be no assurance, however, that the Company will receive cash proceeds from any of these potential resources or to the extent cash proceedsare received those proceeds would be sufficient to support its current operating plan for at least the next twelve months from the date of filing this AnnualReport on Form 10-K.Pursuant to the requirements of Accounting Standards Codification (ASC) 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continueas a Going Concern management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about theCompany’s ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does nottake into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements areissued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficientlyalleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is onlyconsidered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and(2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability tocontinue as a going concern within one year after the date that the financial statements are issued. Under ASC 2015-40, the future receipt of potential funding from the Company’s collaborators and other resources cannot be considered probable atthis time because none of the Company’s current plans have been finalized at the time of filing this Annual Report on Form 10-K and the implementation ofany such plan is not probable of being effectively implemented as none of the plans are entirely within the Company’s control. Accordingly, substantialdoubt is deemed to exist about the Company’s ability to continue as a going concern within one year after the date these financial statements are issued.The Company believes that its approximate $33.5 million in cash, cash equivalents and marketable securities at December 31, 2017, along with theadditional approximate $1.9 million in net funding raised in the first quarter of 2018 to-date, as described above, would allow it to fund its plannedoperations into the first quarter of 2019. This estimate assumes no receipt of additional milestone payments from its partners or additional related payments ofpotential licensing milestones to third parties, no funding from new partnership agreements, no equity financings, no debt financings, no sales of equityunder its Leerink Sales Agreement and no additional sales of equity through the exercise of the PIPE Warrants. Accordingly, the timing and nature ofactivities contemplated for the remainder of 2018 and thereafter will be conducted subject to the availability of sufficient financial resources. If the Company is unable to obtain sufficient capital to continue to advance its programs, the Company would be forced to delay, reduce or eliminateits research and development programs and any future commercialization efforts.The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction ofliabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification ofrecorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above. 105(2) Basis of PresentationThese consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, AVEO Pharma Limited and AVEOSecurities Corporation. The Company has eliminated all significant intercompany accounts and transactions in consolidation. Certain reclassifications have been made to prior periods to conform to current period presentation. Reclassification of prior year amounts havebeen made to separately present settlement costs from general and administrative expenses in the consolidated statements of operations. There was no impacton total operating expenses or net income (loss) resulting from these reclassifications. (3) Significant Accounting PoliciesRevenue RecognitionThe Company’s revenues are generated primarily through collaborative research, development and commercialization agreements. The terms of theseagreements generally contain multiple elements, or deliverables, which may include (i) licenses, or options to obtain licenses, to the Company’s 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 the Company under these arrangements typically include one or more of the following: non-refundable, upfront license fees; option exercise fees; funding of research and/or development efforts; milestone payments; and royalties on future productsales.The Company analyzes its collaboration arrangements to assess whether they are within the scope of ASC 808 to determine whether sucharrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks andrewards dependent on the commercial success of such activities. This assessment is performed throughout the life of the arrangement based on changes in theresponsibilities of all parties in the arrangement. For collaboration arrangements that are deemed to be within the scope of ASC 808, the Company firstdetermines which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customerrelationship and therefore within the scope of ASC 605. The Company’s policy is to recognized amounts received from collaborators in connection with jointoperating activities that are within the scope of ASC 808 as a reduction to research and development expense.When evaluating multiple element arrangements under ASC 605, the Company considers whether the deliverables under the arrangement representseparate units of accounting. This evaluation requires subjective determinations and requires management to make judgments about the individualdeliverables and whether such deliverables are separable from the other aspects of the contractual relationship. In determining the units of accounting,management evaluates certain criteria, including whether the deliverables have standalone value, based on the relevant facts and circumstances for eacharrangement. The consideration received is allocated among the separate units of accounting using the relative selling price method, and the applicablerevenue recognition criteria are applied to each of the separate units.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, upfront 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. 106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 FDA or other globalregulatory authorities. Regulatory milestones are typically achieved upon acceptance of the submission for marketing approval of a product candidate orupon approval to market the product candidate by the FDA or other global regulatory authorities. For example, a milestone payment may be due to theCompany upon the FDA’s acceptance of a New Drug Application (“NDA”). Commercial milestones are typically achieved when an approved pharmaceuticalproduct reaches certain defined levels of net sales by the licensee, such as when a product first achieves global sales or annual sales of a specified amount.Patent-related milestones are typically achieved when a patent application is filed or a patent is issued with respect to certain intellectual property related tothe 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.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 internal costs for salaries, bonuses, benefits, stock-based compensation, facilities, and research-relatedoverhead, and external costs for clinical trials, drug manufacturing and distribution, license fees, consultants and other contracted services. Warrants Issued in Connection with Private Placement In May 2016, the Company issued PIPE warrants to purchase an aggregate of 17,642,482 shares of common stock in connection with a privateplacement financing and recorded the warrants as a liability (the “PIPE Warrants”). The Company accounts for warrant instruments that either conditionallyor unconditionally obligate the issuer to transfer assets as liabilities regardless of the timing of the redemption feature or price, even though the underlyingshares may be classified as permanent or temporary equity. As of December 31, 2017, PIPE Warrants exercisable for 259,067 shares of common stock hadbeen exercised and PIPE Warrants exercisable for 17,383,415 shares of common stock were outstanding. In January 2018, PIPE Warrants with respect to518,134 shares of common stock underlying such PIPE Warrants were exercised, and the Company issued 518,134 shares of its common stock and receivedapproximately $0.5 million in cash proceeds. Refer to Note 7, “Common Stock—Private Placement / PIPE Warrants” for further discussion of the privateplacement financing. 107The PIPE Warrants contain a provision giving the warrant holder the option to receive cash, equal to the fair value of the remaining unexercisedportion of the warrant, as cash settlement in the event that there is a fundamental transaction (contractually defined to include various merger, acquisition orstock transfer activities). Due to this provision, ASC 480, Distinguishing Liabilities from Equity requires that these warrants be classified as a liability and notas equity. Accordingly, the Company recorded a warrant liability in the amount of approximately $9.3 million upon issuance of the PIPE Warrants. The fairvalue of these warrants has been determined using the Black-Scholes pricing model. These warrants are subject to revaluation at each balance sheet date andany changes in fair value are recorded as a non-cash gain or (loss) in the Statement of Operations as a component of other income (expense), net until theearlier of their exercise or expiration or upon the completion of a liquidation event. Upon exercise, the PIPE Warrants are subject to revaluation just prior tothe date of the warrant exercise and any changes in fair value are recorded as a non-cash gain or (loss) in the Statement of Operations as a component of otherincome (expense), net and the corresponding reduction in the warrant liability is recorded as additional paid-in capital in the Balance Sheet as a componentof stockholder’s equity. The Company recorded a non-cash loss of approximately $33.7 million in the year ended December 31, 2017 and a non-cash gain ofapproximately $4.8 million in the year ended December 31, 2016 in its Statement of Operations attributable to the increases and decreases in the fair value ofthe warrant liability that resulted from higher stock prices as of December 31, 2017 and lower stock prices as of December 31, 2016 relative to prior periods.In the year ended December 31, 2017, the Company recorded a reduction in the warrant liability, with a corresponding increase to additional paid-in capital,of approximately $0.6 million attributable to warrant exercises in the third quarter of 2017. The following table rolls forward the fair value of the Company’s PIPE warrant liability, the fair value of which is determined by Level 3 inputs for theyear ended December 31, 2017 (in thousands): Issuance of warrants on May 13, 2016 $9,344 Decrease in fair value (4,751)Fair value at December 31, 2016 $4,593 Increase in fair value 33,740 Reduction in warrant liability for PIPE Warrant exercises (587)Fair value at December 31, 2017 $37,746 The key assumptions used to value the PIPE Warrants were as follows: Original Issuance December 31, 2016 December 31, 2017 Expected price volatility 76.25% 78.18% 84.86% Expected term (in years) 5.00 4.50 3.50 Risk-free interest rates 1.22% 1.93% 2.09% Stock price $0.89 $0.54 $2.79 Dividend yield — — — Potential Class Action SettlementIn December 2017, the Company entered into a binding memorandum of understanding (the “MOU”) with class representatives Bob Levine andWilliam Windham (the “Plaintiffs”), regarding the settlement of a securities class action lawsuit (the “Class Action”) filed in 2013 and pending in the UnitedStates District Court for the District of Massachusetts (the “District Court”) against us and certain of our former officers (Tuan Ha-Ngoc, David Johnston, andWilliam Slichenmyer, together, the “Individual Defendants”), In re AVEO Pharmaceuticals, Inc. Securities Litigation et al. , No. 1:13-cv-11157-DJC. Aspreviously disclosed, the Class Action was purportedly brought on behalf of stockholders who purchased our common stock between May 16, 2012 andMay 1, 2013 (the “Class”). In December 2017, upon entering into the MOU, this settlement became estimable and probable. Accordingly, the Company recorded an estimated$17.1 million contingent liability, including $15.0 million for the cash portion of the settlement with a corresponding insurance recovery for the 100%portion to be paid directly by certain of the Company’s insurance carriers, and an approximate $2.1 million estimate for the fair value on December 31, 2017of 2.0 million warrants to purchase shares of its common stock exercisable from the date of issue until the expiration of a one-year period after the date ofissue at an exercise price equal to the closing price on December 22, 2017, the trading day prior to the execution of the MOU, which was $3.00 per share (“theSettlement Warrants”) with a corresponding non-cash charge to the Statement of Operations as a component of operating expenses. In February 2018, theinsurance carriers funded the settlement escrow account related to the $15.0 million cash portion of the settlement.The settlement is subject to the execution of a definitive settlement agreement, notice to the Class, and final approval of the District Court and shall beeffective on the date (the “Effective Date”) on which all of the following circumstances have occurred: 108(a) a final judgment containing the requisite release of claims has been entered by the District Court (“Final Judgment”); (b) no appeal is pending with respectto the Final Judgment; (c) the Final Judgment has not been reversed, modified, vacated or amended; (d) the time to file any appeal from the Final Judgmenthas expired without the filing of an appeal or an order dismissing the appeal or affirming the Final Judgment has been entered, and any time to file a furtherappeal (including a writ of certiorari or for reconsideration of the appeal) has expired; and (e) the MOU and any settlement agreement with respect to theclaims released in the Final Judgment have not expired or been terminated. The Company as agreed to use its best efforts to issue and deliver the SettlementWarrants within ten business days following the Effective Date. In January 2018, the Company entered into a stipulation of settlement agreement (the“Stipulation”) that was preliminarily approved by the District Court in February 2018. A hearing by the District Court for final approval of the Stipulationhas been scheduled for May 30, 2018. Refer to Note 15, “Legal Proceedings” for further discussion of this class action settlement.The estimated fair value of the Settlement Warrants to be issued on the Effective Date has been determined using the Black-Scholes pricing model.The estimated fair value of the Settlement Warrants to be issued on the Effective Date are subject to revaluation at each balance sheet date and any changes infair value are recorded as a non-cash gain or (loss) in the Statement of Operations as a component of operating expenses until the Settlement Warrants areissued, at which point they will be recorded as equity or as a liability based upon the issuance terms The key assumptions used to estimate the fair value the Settlement Warrants were as follows: December 31, 2017Expected price volatility 101.52%Expected term (in years) 1.00Risk-free interest rates 1.76%Stock price $2.79Dividend yield — Cash and Cash EquivalentsThe Company considers all highly liquid investments with original maturities of three months or less at the date of purchase and an investment in aU.S. government money market fund to be cash equivalents. Changes in the balance of cash and cash equivalents may be affected by changes in investmentportfolio maturities, as well as actual cash disbursements to fund operations.The Company’s cash is deposited in highly-rated financial institutions in the United States. The Company invests in U.S. government money marketfunds, high-grade, short-term commercial paper, corporate bonds and other U.S. government agency securities, which management believes are subject tominimal credit and market risk. The carrying values of the Company’s cash and cash equivalents approximate fair value due to their short-term maturities.Marketable SecuritiesMarketable securities consist primarily of investments which have expected average maturity dates in excess of three months, but not longer than 24months. The Company invests in high-grade corporate obligations, including commercial paper, and U. S. government and government agency obligationsthat are classified as available-for-sale. Since these securities are available to fund current operations they are classified as current assets on the consolidatedbalance sheets. Marketable securities are stated at fair value, including accrued interest, with their unrealized gains and losses included as a component ofaccumulated other comprehensive income or loss, which is a separate component of stockholders’ equity. The fair value of these securities is based on quotedprices and observable inputs on a recurring basis. The cost of marketable securities is adjusted for amortization of premiums and accretion of discounts tomaturity, with such amortization and accretion recorded as a component of interest expense, net. Realized gains and losses are determined on the specificidentification method. Unrealized gains and losses are included in other comprehensive loss until realized, at which point they would be recorded as acomponent of interest expense, net. 109Below is a summary of cash, cash equivalents and marketable securities at December 31, 2017 and December 31, 2016: AmortizedCost UnrealizedGains UnrealizedLosses FairValue December 31, 2017 Cash and cash equivalents: Cash and money market funds $14,949 $— $— $14,949 Corporate debt securities — — — — Total cash and cash equivalents 14,949 — — 14,949 Marketable securities: Corporate debt securities due within 1 year $17,074 $1 $(5) $17,070 US government agency securities due within 1 year 1,506 — — 1,506 Total marketable securities 18,580 1 (5) 18,576 Total cash, cash equivalents and marketable securities $33,529 $1 $(5) $33,525 December 31, 2016 Cash and cash equivalents: Cash and money market funds $14,091 $— $— $14,091 Corporate debt securities 1,005 — — 1,005 Total cash and cash equivalents 15,096 — — 15,096 Marketable securities: Corporate debt securities due within 1 year 8,246 6 — 8,252 Total marketable securities 8,246 6 — 8,252 Total cash, cash equivalents and marketable securities $23,342 $6 $— $23,348 Concentrations of Credit RiskFinancial instruments that potentially subject the Company to credit risk primarily consist of cash and cash equivalents, marketable securities andaccounts receivable. The Company maintains deposits in highly-rated, federally-insured financial institutions in excess of federally insured limits. TheCompany’s investment strategy is focused on capital preservation. The Company invests in instruments that meet the high credit quality standards outlinedin the Company’s investment policy. This policy also limits the amount of credit exposure to any one issue or type of instrument. The Company’s accounts receivable primarily consists of amounts due to the Company from licensees and collaborators. The Company has notexperienced any material losses related to accounts receivable from individual licensees or collaborators.Fair Value Measurements The fair value of the Company’s financial assets and liabilities reflects the Company’s estimate of amounts that it would have received in connectionwith the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurementdate. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market dataobtained from sources independent from the Company) and to minimize the use of unobservable inputs (the Company’s assumptions about how marketparticipants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs andunobservable inputs used in order to value the assets and liabilities: Level 1:Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in whichtransactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoingbasis. Level 2:Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assetsor liabilities and quoted prices for identical assets or liabilities in markets that are not active. Level 3:Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the assetor liability. 110Financial assets and liabilities are classified in their entirety within the fair value hierarchy based on the lowest level of input that is significant to thefair value measurement. The Company measures the fair value of its marketable securities by taking into consideration valuations obtained from third-partypricing sources. The pricing services utilize industry standard valuation models, including both income and market based approaches, for which allsignificant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker-dealer quotes on thesame or similar securities, issuer credit spreads, benchmark securities and other observable inputs.As of December 31, 2017, the Company’s financial assets valued based on Level 1 inputs consisted of cash and cash equivalents in a U.S. governmentmoney market fund and in addition, for 2016, high-grade corporate debt securities, including commercial paper, and its financial assets valued based onLevel 2 inputs consisted of high-grade corporate debt securities, including commercial paper, and in addition, for 2017, U.S. government agency securities.During the years ended December 31, 2017 and 2016, the Company did not have any transfers of financial assets between Levels 1 and 2. As of December 31, 2017, the Company’s financial liabilities that were recorded at fair value consisted of warrant liabilities, including the PIPEwarrant liability and the estimated fair value of the Settlement Warrants. The fair value of the Company’s loans payable at December 31, 2017 approximates its carrying value, computed pursuant to a discounted cash flowtechnique using a market interest rate and is considered a Level 3 fair value measurement. The effective interest rate, which reflects the current market rate,considers the fair value of the warrants issued in connection with the loan, loan issuance costs and the deferred financing charge.The following table summarizes the assets and liabilities measured at fair value on a recurring basis at December 31, 2017 and December 31, 2016: Fair Value Measurements as of December 31, 2017 Level 1 Level 2 Level 3 Total (in thousands) Financial assets carried at fair value: Cash and money market funds $14,949 $— $— $14,949 Corporate debt securities — — — — Total cash and cash equivalents $14,949 $— $— $14,949 Marketable securities: Corporate debt securities due within 1 year $— $17,070 $— $17,070 US government agency securities due within 1 year — 1,506 — 1,506 Total marketable securities $— $18,576 $— $18,576 Total cash, cash equivalents and marketable securities $14,949 $18,576 $— $33,525 Financial liabilities carried at fair value: PIPE warrant liability $— $— $37,746 $37,746 Settlement warrant liability — — 2,073 2,073 Total warrant liabilities $— $— $39,819 $39,819 Fair Value Measurements as of December 31, 2016 Level 1 Level 2 Level 3 Total (in thousands) Financial assets carried at fair value: Cash and money market funds $14,091 $— $— $14,091 Corporate debt securities — 1,005 — 1,005 Total cash and cash equivalents $14,091 $1,005 $— $15,096 Marketable securities: Corporate debt securities due within 1 year — $8,252 — $8,252 Total marketable securities $— $8,252 $— $8,252 Total cash, cash equivalents and marketable securities $14,091 $9,257 $— $23,348 Financial liabilities carried at fair value: PIPE warrant liability $— $— $4,593 $4,593 Total warrant liability $— $— $4,593 $4,593 111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. Depreciation expense for the years ended December 31, 2017, 2016 and 2015 was $0, $30thousand and $9.6 million, respectively. In September 2014, the Company entered into a Lease Termination Agreement (refer to Note 12). As a result, theCompany revised the estimated useful life of its leasehold improvements related to this space. In February 2015, the Company provided notice that it wouldsurrender the remaining space on May 29, 2015. Accordingly, the Company again revised the estimated useful life of its leasehold improvements related tothis office space and amortized such assets through May 2015, resulting in an additional $2.9 million of depreciation expense during the year endedDecember 31, 2015. 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, $0 and $0.2 million of impairment losses during the years endedDecember 31, 2017, 2016 and 2015, respectively, primarily related to leasehold improvements.Basic and Diluted Loss per Common ShareBasic net loss per share is computed using the weighted average number of common shares outstanding during the period, excluding restricted stockthat has been issued but is not yet vested. Diluted net loss per common share is computed using the weighted average number of common shares outstandingand the weighted average dilutive potential common shares outstanding using the treasury stock method. However, for the years ended December 31, 2017,2016 and 2015, diluted net loss per share is the same as basic net loss per share as the inclusion of weighted average shares of unvested restricted commonstock and common stock issuable upon the exercise of stock options and warrants would be anti-dilutive.The following table summarizes outstanding securities not included in the computation of diluted net loss per common share as their inclusion wouldbe anti-dilutive for the years ended December 31, 2017, 2016 and 2015, respectively: Years Ended December 31, 2017 2016 2015 Outstanding stock options 7,537,958 4,858,678 4,796,005 Outstanding warrants 17,383,415 19,453,295 608,696 Unvested restricted stock — — 42,750 Total 24,921,373 24,311,973 5,447,451Stock-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 a straight-line basis over the requisite service period. Other awards, such asperformance-based awards that vest upon the achievement of specified goals, are expensed using the accelerated attribution method if achievement of thespecified goals is considered probable. The Company has also granted awards that vest upon the achievement of market conditions. Per AccountingStandards Codification (“ASC”) 718 Share-Based Payments, market conditions must be considered in determining the estimated grant-date fair value ofshare-based payments and the market conditions must be considered in determining the requisite service period over which compensation cost is recognized.The Company estimates the fair value of the awards with market conditions using a Monte Carlo simulation, which utilizes several assumptions including therisk-free interest rate, the volatility of the Company’s stock and the exercise behavior of award recipients. The grant-date fair value of the awards is thenrecognized over the requisite service period, which represents the derived service period for the awards as determined by the Monte Carlo simulation. 112The Company uses the Black-Scholes option pricing model to value its stock option awards without market conditions, which require the Company tomake certain assumptions regarding the expected volatility its common stock price, the expected term of the option grants, the risk-free interest rate and thedividend yield with respect to its common stock. In 2016, the Company began calculating volatility using its historical data. Previously, the Company didnot have sufficient history to support a calculation of volatility using only its historical data. As such, prior to 2016, the Company used a weighted-averagevolatility considering the Company’s own volatility since March 2010 and the volatilities of several peer companies. For purposes of identifying similarentities, the Company considered characteristics such as industry, length of trading history, similar vesting terms and in-the-money option status. Due to thelack of the Company’s own historical data, the Company elected to use the “simplified” method for “plain vanilla” options to estimate the expected term ofthe Company’s stock option grants. Under this approach, the weighted-average expected life is presumed to be the average of the vesting term and thecontractual term of the option. The risk-free interest rate used for each grant is based on the U.S. Treasury yield curve in effect at the time of grant forinstruments with a similar expected life. The Company utilizes a dividend yield of zero based on the fact that the Company has never paid cash dividendsand has no present intention to pay cash dividends.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, 2017, 2016 and 2015, the Company recorded the following stock-based compensation expense: Years Ended December 31, 2017 2016 2015 (in thousands) Research and development $290 $293 $298 General and administrative 799 706 765 Restructuring — — 69 Total stock-based compensation expense $1,089 $999 $1,132 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. Expenses recognized in connection with the modification of awards in connection with the Company’sstrategic restructurings are allocated to restructuring expense. No related tax benefits of the stock-based compensation expense have been recognized. 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. The Company calculates its provision for income taxes on ordinary income based on its projected annual taxrate for the year. Uncertain tax positions are recognized if the position is more-likely-than-not to be sustained upon examination by a tax authority.Unrecognized tax benefits represent tax positions for which reserves have been established. 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, 2017 and 2016, the Company has $0 and$0.8 million, respectively, of net assets located in the United Kingdom.Use of EstimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reportedamounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenuesand expenses during the reporting periods. Significant items subject to such estimates and assumptions include revenue recognition, contract researchaccruals, measurement of the PIPE warrant liability, estimated settlement liabilities and measurement of stock-based compensation. The Company bases itsestimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances. Changes in estimatesare recorded in the period in which they become known. Actual results could differ from those estimates. 113Recent Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASU 2014-09”) that will supersede nearly allexisting revenue recognition guidance under GAAP. The standard was originally scheduled to be effective for public entities for annual and interim periodsbeginning after December 15, 2016. In July 2015, the standard was deferred by one year and will now be effective for annual and interim periods beginningafter December 15, 2017. ASU 2014-09 also permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospectivemethod), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modifiedretrospective method). The Company will adopt ASU 2014-09 on January 1, 2018 using the modified retrospective method. The Company is in the process ofcompleting its analysis with respect to its active revenue arrangements, including those with CANbridge Life Sciences Ltd. (“CANbridge”), EUSA, andNovartis, as well as identifying any appropriate changes to its revenue recognition policies and internal controls.Under ASU 2014-09, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects theconsideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entitydetermines are within the scope of ASU 2014-09, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify theperformance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract;and (v) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 also impacts certain other areas, such as the accounting forcosts to obtain or fulfill a contract. The standard also requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising fromcontracts with customers. To date, the Company has identified the following differences in accounting treatment for its collaboration agreements under ASU2014-09: •The Company expects the accounting for contingent milestone payments under its collaboration agreements to change under ASU 2014-09. Under ASC 605, the Company generally considers non-refundable preclinical research and development, clinical development andregulatory milestones that the Company expects to be achieved as a result of the Company’s efforts during the period of the Company’sperformance obligations under its collaboration and license agreements to be substantive and recognizes them as revenue upon theachievement of the milestone, assuming all other revenue recognition criteria are met. ASU 2014-09 does not contain guidance specific tomilestone payments, thereby requiring contingent milestone payments to be considered in accordance with the overall model of ASU 2014-09.Revenue from contingent milestone payments may be recognized earlier under ASU 2014-09 than under ASC 605, based on an assessment ofthe probability of achievement of the milestone event and the likelihood of a significant reversal of such milestone revenue at each reportingdate. This assessment may result in the recognition of revenue related to a contingent milestone payment before the milestone event has beenachieved. •ASU 2014-09 requires more robust disclosures than required by previous guidance, including disclosures related to disaggregation of revenueinto appropriate categories, performance obligations, the judgments made in revenue recognition determinations, adjustments to revenuewhich relate to activities from previous quarters or years, any significant reversals of revenue, and costs to obtain or fulfill contracts.The Company has not yet completed its assessment of the impact the adoption of this standard may have on its consolidated financial statements andinternal control. With regard to the arrangements with CANbridge and Novartis, the Company currently does not expect the impact of adoption of thisstandard to be material. The Company is continuing to evaluate the effects of the adoption of the standard on its arrangement with EUSA. Expected impactsfrom the adoption of this standard could differ upon the final adoption and implementation of the standard. In connection with the adoption of this standard,the Company is implementing several new internal controls, including controls to monitor the probability of achievement of contingent milestone payments.In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize a right-of-use asset and lease liability formost lease arrangements. The new standard is effective for annual reporting periods beginning after December 15, 2018 with early adoption permitted. TheCompany will not early adopt this standard and is currently evaluating the potential changes from this ASU.In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.The new standard clarifies certain aspects of the statement of cash flows, including the classification of debt prepayment or debt extinguishment costs,settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rateof the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from thesettlement of corporate-owned life insurance policies, distributions received from equity method investees and beneficial interests in securitizationtransactions. The new standard also clarifies that an entity should determine each separately identifiable source or use within the cash receipts and cashpayments on the basis of the nature of the underlying cash flows. In situations in which cash receipts and payments have aspects of more than one class ofcash flows and cannot be separated by source or use, the appropriate classification should depend on the activity that is likely to be the predominant sourceor use of cash flows for the item. The new standard will be effective for the Company on January 1, 2018. The adoption of this standard is not expected tohave a material impact on the Company’s consolidated statements of cash flows. 114In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifieswhen to account for a change to the terms or conditions of a share-based payment award as a modification. The new standard does not change the accountingfor modifications but clarifies that modification accounting guidance should only be applied if the fair value, vesting conditions, or classification of theaward changes as a result of the change in terms or conditions. The new standard is effective for fiscal years, and interim periods within, beginning afterDecember 15, 2017. Early adoption is permitted. A reporting entity must apply the amendments in the ASU prospectively to an award modified on or after theadoption date. The adoption of ASU 2017-09 is not expected to have a material effect on the Company’s consolidated financial statements or disclosures. Recently Adopted Accounting Pronouncements In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-BasedPayment Accounting. The standard revised the accounting for share-based compensation arrangements, including the accounting for income taxes,forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The adoption of ASU 2016-09 did not have amaterial impact in the Company’s financial statements. (4) Collaborations and License AgreementsOut-License AgreementsCANbridgeIn March 2016, the Company entered into a collaboration and license agreement (the “CANbridge Agreement”) with CANbridge Life Sciences Ltd.(“CANbridge”). Under the terms of the CANbridge Agreement, the Company granted CANbridge the exclusive right to develop, manufacture andcommercialize AV-203, the Company’s proprietary ErbB3 (HER3) inhibitory antibody, for the diagnosis, treatment and prevention of disease in humans andanimals in all countries other than the United States, Canada and Mexico (the “CANbridge Licensed Territory”). The effective date of the CANbridgeAgreement is March 16, 2016 (the “Effective Date”).Pursuant to the CANbridge Agreement, CANbridge made an upfront payment to the Company of $1.0 million in April 2016, net of $0.1 million inforeign withholding taxes. CANbridge agreed to reimburse the Company $1.0 million for certain manufacturing costs and expenses incurred by the Companyprior to the Effective Date with respect to AV-203. CANbridge paid this manufacturing reimbursement in two installments of $0.5 million each, includingone in March 2017 and one in September 2017, net of $0.1 million in foreign withholding taxes. The Company is also eligible to receive up to $42.0 millionin potential development and regulatory milestone payments and up to $90.0 million in potential sales based milestone payments based on annual net salesof licensed products. In December 2017, CANbridge filed an IND with the China Food and Drug Administration for a Phase 1b / III clinical study of AV-203in esophageal squamous cell cancer. Upon commercialization, the Company is eligible to receive a tiered royalty, with a percentage range in the low double-digits, on net sales of approved licensed products. CANbridge’s obligation to pay royalties for each licensed product expires on a country-by-country basison the later of the expiration of patent rights covering such licensed product in such country, the expiration of regulatory data exclusivity in such countryand ten years after the first commercial sale of such licensed product in such country. No development and regulatory milestone payments have been earnedas of December 31, 2017.CANbridge is obligated to use commercially reasonable efforts to develop and commercialize AV-203 in each of China, Japan, the United Kingdom,France, Italy, Spain, and Germany. CANbridge has responsibility for all activities and costs associated with the further development, manufacture, regulatoryfilings and commercialization of AV-203 in the CANbridge Licensed Territory.A percentage of any milestone and royalty payments received by the Company, excluding upfront and reimbursement payments, are due to BiogenIdec International GmbH (“Biogen”) as a sublicensing fee under the option and license agreement between the Company and Biogen dated March 18, 2009,as amended.Activities under the CANbridge Agreement were evaluated under ASC 605-25 Revenue Recognition—Multiple Element Arrangements (“ASC 605-25”) to determine whether such activities represented a multiple element revenue arrangement. The CANbridge Agreement includes the following non-contingent deliverables: (i) the Company’s grant of an exclusive license to develop and commercialize AV-203 in the CANbridge Licensed Territory, (ii) theCompany’s obligation to transfer all technical knowledge and data useful in the development and manufacture of AV-203 and (iii) the Company’s obligationto participate on a joint steering committee during the proof-of-concept development period. The relative selling price of the Company’s joint steeringcommittee participation had de minimis value. The Company determined that the delivered license and know-how did have stand-alone value from theundelivered element and have accounted for these items as separate deliverables. The Company allocated the upfront consideration of $1.0 million to theunits of accounting and recognized the $1.0 million attributed to the delivered license and know how as revenue during the year ended December 31, 2016. 115The Company believes the development and regulatory milestones that may be achieved under the CANbridge Agreement are consistent with thedefinition of a milestone included in ASC 605-28, Revenue Recognition—Milestone Method, and, accordingly, the Company will recognize paymentsrelated to the achievement of such milestones, if any, when each such milestone is achieved. Factors considered in this determination included scientific andregulatory risks that must be overcome to achieve each milestone, the level of effort and investment required to achieve each milestone, and the monetaryvalue attributed to each milestone.The Company recognized the two $0.5 million payments by CANbridge for the reimbursement of manufacturing development activities conducted bythe Company prior to the Effective Date as revenue during each of the three months ended March 31, 2017 and September 30, 2017, respectively, as theamounts were fixed and determinable and non-refundable. In addition, the Company has no further performance obligations.EUSAIn December 2015, the Company entered into a license agreement with EUSA Pharma (UK) Limited (“EUSA”) under which the Company granted toEUSA the exclusive, sublicensable right to develop, manufacture and commercialize tivozanib in the territories of Europe (excluding Russia, Ukraine and theCommonwealth of Independent States), Latin America (excluding Mexico), Africa, Australasia and New Zealand (the “EUSA Licensed Territories”) for alldiseases and conditions in humans, excluding non-oncologic diseases or conditions of the eye.Under the license agreement, EUSA made research and development reimbursement payments to the Company of $2.5 million upon the execution ofthe license agreement during the year ended December 31, 2015 and $4.0 million in September 2017 upon its receipt of marketing approval from the EMAfor tivozanib (FOTIVDA) for the treatment of RCC. In September 2017, EUSA elected to opt-in to co-develop the ongoing TiNivo trial. As a result ofexercising its opt-in right, EUSA made an additional research and development reimbursement payment to the Company of $2.0 million. This $2.0 millionpayment was received in October 2017, in advance of the completion of the TiNivo trial, and represents EUSA’s approximate 50% share of the total estimatedcosts of the TiNivo trial. The Company is also eligible to receive an additional research and development reimbursement payment from EUSA of fifty percent(50%) of the total costs for the Company’s TIVO-3 phase 3 study in third-line RCC, up to $20.0 million, if EUSA elects to opt-in to that study.The Company is entitled to receive milestone payments of $2.0 million per country upon reimbursement approval for RCC, if any, in each of France,Germany, Italy, Spain and the United Kingdom, and an additional $2.0 million for the grant of marketing approval, if any, in three of the five followingcountries: Argentina, Australia, Brazil, South Africa and Venezuela. In February 2018, EUSA obtained reimbursement approval from the NICE in the UK infirst line RCC. Accordingly, the Company earned a $2.0 million milestone payment that was received in March 2018. The Company is also eligible toreceive a payment of $2.0 million in connection with a filing by EUSA with the EMA for marketing approval, if any, for tivozanib for the treatment of each ofup 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 is also eligible toreceive tiered double-digit royalties on net sales, if any, of licensed products in the EUSA Licensed Territories ranging from a low double digit up to mid-twenty percent depending on the level of annual net sales.The research and development reimbursement payments under the EUSA license agreement are not subject to the 30% sublicensing payment to KHK,subject to certain limitations. The Company, however, would owe KHK 30% of other, non-research and development payments it may receive from EUSApursuant to the EUSA license agreement, including EU reimbursement approval milestones in up to five specified EU countries, EU marketing approvals forup to three additional indications beyond RCC, marketing approvals in up to three specified licensed territories outside of the EU, sales-based milestones androyalties, as set forth above. The $2.0 million milestone the Company earned in February 2018 upon EUSA’s reimbursement approval from the NICE in theUK in first line RCC is subject to the 30% KHK sub-license fee, or $0.6 million.EUSA is obligated to use commercially reasonable efforts to seek regulatory approval for and commercialize tivozanib throughout the EUSA LicensedTerritories in RCC. With the exception of certain support provided by the Company in connection with the application for marketing approval by the EMA,EUSA has responsibility for all activities and costs associated with the further development, manufacture, regulatory filings and commercialization oftivozanib in the EUSA Licensed Territories.Activities under the agreement were evaluated under ASC 605-25 to determine whether such activities represented a multiple element revenuearrangement. The agreement with EUSA includes the following non-contingent deliverables: (i) the Company’s grant of an exclusive license to develop andcommercialize tivozanib in the EUSA Licensed Territories; (ii) the Company’s obligation to transfer all technical knowledge and data useful in thedevelopment and manufacture of tivozanib; (iii) the Company’s obligation to cooperate with EUSA and support its efforts to file for marketing approval inthe EUSA Licensed Territories, (iv) the Company’s obligation to provide access to certain regulatory information resulting from the Company’s ongoingdevelopment activities outside of the EUSA Licensed Territories and (v) the Company’s participation in a joint steering committee. The Companydetermined that the 116delivered license did not have stand-alone value from the undelivered elements and have accounted for these items as a single bundled deliverable. TheCompany allocated the upfront consideration of $2.5 million to the bundled unit of accounting and is recognizing it over the Company’s performance periodthrough April 2022, the remaining patent life of tivozanib. The Company recognized approximately $0.4 million, $0.4 million and $14 thousand as revenueduring each of the years ended December 31, 2017, 2016 and 2015, respectively, related to the previously deferred upfront consideration.The Company believes the regulatory milestones that may be achieved under the EUSA agreement are consistent with the definition of a milestoneincluded in ASC 605-28, 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.In August 2017, the European Commission (“EC”) approved tivozanib (FOTIVDA) for the treatment of adult patients with aRCC, as described above.Accordingly, the Company earned a $4.0 million research and development reimbursement payment upon the EMA approval in RCC that was paid by EUSAin September 2017. In accordance with ASC 605-28, Revenue Recognition—Milestone Method, the Company recognized the $4.0 million received fromEUSA upon achievement of EMA approval as revenue as the underlying milestone was considered to be substantive. In November 2017, EUSA commencedthe first commercial launch of tivozanib (FOTIVDA) with the initiation of product sales in Germany. Accordingly, the Company began earning sales royaltiesand recognized approximately $19 thousand in revenue in the three months ended December 31, 2017.In September 2017, EUSA elected to opt-in to co-develop the TiNivo trial. As a result of EUSA’s exercise of its opt-in right, it became an activeparticipant in the ongoing conduct of the TiNivo trial and is able to utilize the resulting data from the TiNivo trial for regulatory and commercial purposes inits Licensed Territories. Upon exercise of its opt-in right, EUSA became responsible for funding 50% of the total estimated costs of the TiNivo trial, up to$2.0 million. EUSA’s opt-in rights were identified as a contingent deliverable at the inception of the arrangement and, because they did not contain asignificant incremental discount, were not considered as a deliverable in connection with the Company’s initial accounting for the EUSA arrangement.Accordingly, the Company evaluated EUSA’s exercise of its opt-in rights as a separate arrangement. The Company is accounting for the joint developmentactivities relative to the TiNivo trial as a joint risk-sharing collaboration in accordance with ASC 808, Collaborative Arrangements because EUSA is anactive participant in the ongoing TiNivo trial and is exposed to significant risk and rewards in connection with the activity. Payments from EUSA withrespect to its share of TiNivo trial development costs incurred by the Company pursuant to a joint development plan are recorded as a reduction in researchand development expenses due to the joint risk-sharing nature of the activities. In the year ended December 31, 2017, the Company recognized anapproximate $0.9 million reduction in research and development expenses related to EUSA’s approximate 50% share of the cumulative study-to-date costsincurred through that date as the TiNivo trial was ongoing at the time EUSA made its opt-in election and EUSA paid the $2.0 million maximum amount ofcost sharing per the license agreement in advance. The remaining $1.1 million in prepaid cost sharing was classified as deferred research and developmentreimbursements as of December 31, 2017 and will continue to be recognized as a reduction in research and development expenses as the related TiNivo trialcosts are incurred over the duration of the trial. .NovartisIn August 2015, the Company entered into a license agreement with Novartis. Under the license agreement, the Company 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 in September 2015. Novartis also acquired theCompany’s inventory of clinical quality, AV-380 biological drug substance and reimbursed the Company for approximately $3.5 million for such existinginventory. As of December 31, 2017, the Company is eligible to receive up to $51.2 million in potential clinical and development milestone payments, up to$105.0 million in potential regulatory milestone payments tied to the commencement of clinical trials and to regulatory approvals of products developedunder the license agreement in the United States, the European Union and Japan, and up to $150.0 million in potential commercial milestone payments basedon annual net sales of such products. If the product is commercialized, the Company would be eligible to receive tiered royalties on net sales of approvedproducts ranging from the high single digits to the low double-digits.Certain milestones achieved by Novartis or timelines associated with the development plan would trigger milestone payment obligations from theCompany to St. Vincent’s Hospital Sydney Limited (“St. Vincent’s”) under the Company’s amended and restated license agreement with St. Vincent’s. Inaddition, specified royalties on approved products, if any, will be payable to St. Vincent’s, and the Company and Novartis will share that obligation equally. 117Novartis has responsibility under the license agreement for the development, manufacture and commercialization of the Company’s antibodies andany resulting approved therapeutic products. The Company has agreed that it will not directly or indirectly develop, manufacture or commercialize anyGDF15 modulator as a human therapeutic during the term of the license agreement.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) the Company’s grant of an exclusive, worldwidelicense 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 the upfront consideration of $15.0 million to the delivered license and technical knowledge and recognized thisamount as revenue during the year ended December 31, 2015. The relative selling price of the undelivered cooperation had de minimis value.The Company received a cash payment of $3.5 million related to the delivery of its inventory of clinical quality drug substance to Novartis during thethree months ended March 31, 2016.In February 2017, Novartis paid the Company $1.8 million out of its future payment obligations under the license agreement. The funds were used tosatisfy a $1.8 million time-based milestone obligation that the Company owed to St. Vincent’s in March 2017. Novartis will reduce any subsequent paymentobligations to the Company, if any, by the $1.8 million. The Company recognized the $1.8 million of consideration as revenue during the three monthsended March 31, 2017, as the amount was fixed and determinable and non-refundable, and the Company does not have any further performance obligationsto Novartis in connection with the license agreement. This payment reduces the aggregate future amounts potentially payable by Novartis to the Company, ifany, under the license agreement by the $1.8 million, but does not amend any other terms of the Novartis license agreement. No milestone payments havebeen earned as of December 31, 2017.PharmstandardIn 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 grantedto Pharmstandard the right to develop, manufacture and commercialize tivozanib in the territories of Russia, Ukraine and the Commonwealth of IndependentStates for all diseases and conditions in humans, excluding non-oncologic ocular conditions.In June 2016, following unsuccessful efforts to renegotiate certain terms of the Pharmstandard license agreement, Pharmstandard notified theCompany that due to economic and market changes in Russia it was exercising its right to terminate the license agreement effective September 9, 2016.Upon the effective date of the termination, the remaining deferred revenue of approximately $0.9 million was recognized. The Company recognizedapproximately $0, $0.9 million and $61 thousand as revenue during the years ended December 31, 2017, 2016 and 2015, respectively.OphthotechIn November 2014, the Company entered into a research and exclusive option agreement (the “Option Agreement”), with Ophthotech Corporation(“Ophthotech”) pursuant to which the Company provided Ophthotech an exclusive option to enter into a definitive license agreement whereby the Companywould grant Ophthotech the right to develop and commercialize tivozanib outside of Asia and the Middle East for the potential diagnosis, prevention andtreatment of non-oncologic diseases or conditions of the eye in humans. Ophthotech paid the Company $0.5 million in consideration for the grant of theoption. In January 2017, Ophthotech formally notified the Company that it would not be able to develop tivozanib and exercised its right to terminate theOption Agreement effective April 3, 2017. Under the Option Agreement, the Company received a cash payment of $0.5 million during the year ended December 31, 2014. The Companydeferred the payment and was recording the deferred revenue over the Company’s period of performance, which was estimated to be through December 2017.Upon the effective date of the termination, the remaining deferred revenue of approximately $0.1 million was recognized. The Company recordedapproximately $0.1 million, $0.1 million and $0.2 million of revenue during the years ended December 31, 2017, 2016 and 2015, respectively. 118BiodesixIn April 2014, the Company entered into a worldwide co-development and collaboration agreement with Biodesix (the “Biodesix Agreement”) todevelop and commercialize ficlatuzumab, the Company’s HGF inhibitory antibody. Under the Biodesix Agreement, the Company granted Biodesixperpetual, non-exclusive rights to certain intellectual property, including all clinical and biomarker data related to ficlatuzumab, to develop andcommercialize VeriStrat®, Biodesix’s proprietary companion diagnostic test. Biodesix granted the Company perpetual, non-exclusive rights to certainintellectual property, including diagnostic data related to VeriStrat, with respect to the development and commercialization of ficlatuzumab; each licenseincludes the right to sublicense, subject to certain exceptions. Pursuant to a joint development plan, the Company retains primary responsibility for clinicaldevelopment of ficlatuzumab. In September 2016, the Company and Biodesix announced the termination of a phase 2 proof-of-concept clinical study officlatuzumab in which VeriStrat® was used to select clinical trial subjects (the “FOCAL” trial).Under the Biodesix Agreement, with the exception of the costs incurred for the FOCAL trial, the Company and Biodesix are each required tocontribute 50% of all clinical, regulatory, manufacturing and other costs to develop ficlatuzumab. Pursuant to the Biodesix Agreement, Biodesix wasobligated to fund all costs of the FOCAL trial up to a cap of $15 million, following which all costs of the FOCAL trial would be shared equally. In connectionwith the discontinuation of the FOCAL trial on October 14, 2016, the Company and Biodesix amended the Biodesix Agreement. Under the amendment, theCompany agreed to share 50% of the shutdown costs for the FOCAL trial after August 1, 2016. In return for bearing these shutdown costs, the Company willbe entitled to recover an agreed multiple of the additional costs borne by the Company out of any income Biodesix receives from the partnership inconnection with the licensing or commercialization of ficlatuzumab. Following such recovery, the payment structure under the original Biodesix Agreement,which generally provides that the parties share equally in any costs and revenue, will resume without such modification.In addition, the Company and Biodesix are funding investigator-sponsored clinical trials, including ficlatuzumab in combination with ERBITUX®(cetuximab) in squamous cell carcinoma of the head and neck, ficlatuzumab in combination with Cytosar (cytarabine) in acute myeloid leukemia andficlatuzumab in combination with nab-paclitaxel and gemcitabine in pancreatic cancer. Pending marketing approval or the sublicense of ficlatuzumab, and subject to the negotiation of a commercialization agreement, each party wouldshare equally in commercialization profits and losses, subject to the Company’s right to be the lead commercialization party.Prior to the first commercial sale of ficlatuzumab, each party has the right to elect to discontinue participating in further development orcommercialization efforts with respect to ficlatuzumab, which is referred to as an “Opt-Out”. If either AVEO or Biodesix elects to Opt-Out, with such partyreferred to as the “Opting-Out Party”, then the Opting-Out Party shall not be responsible for any future costs associated with developing and commercializingficlatuzumab other than any ongoing clinical trials. If AVEO elects to Opt-Out, it will continue to make the existing supply of ficlatuzumab available toBiodesix for the purposes of enabling Biodesix to complete the development of ficlatuzumab, and Biodesix will have the right to commercializeficlatuzumab. After election of an Opt-Out, the non-opting out party shall have sole decision-making authority with respect to further development andcommercialization of ficlatuzumab. Additionally, the Opting-Out Party shall be entitled to receive, if ficlatuzumab is successfully developed andcommercialized, a royalty equal to 10% of net sales of ficlatuzumab throughout the world, if any, subject to offsets under certain circumstances.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 Biodesix Agreement were evaluated under ASC 605-25 to determine whether such activities represented a multiple elementrevenue arrangement. The Biodesix Agreement includes the following non-contingent deliverables: (i) the Company’s obligation to deliver perpetual, non-exclusive rights to certain intellectual property including clinical and biomarker data related to ficlatuzumab for use in developing and commercializingVeriStrat; (ii) the Company’s obligation to participate in the joint steering committee; and (iii) the Company’s obligation to provide its existing supply officlatuzumab for development purposes. The Company concluded that any deliverables that would be delivered after the FOCAL trial is complete werecontingent deliverables because these services are contingent upon the results of the FOCAL trial. As these deliverables were contingent, and are not at anincremental discount, they are not evaluated as deliverables at the inception of the arrangement. These contingent deliverables will be evaluated andaccounted for separately as each related contingency is resolved. As of December 31, 2017, no contingent deliverables had been provided by the Company.The Company determined that the perpetual, non-exclusive rights to certain intellectual property for use in developing and commercializing VeriStratdid not have standalone value from the remaining deliverables since Biodesix could not obtain the intended benefit of the license without the remainingdeliverables. Since the remaining deliverables will be performed over the same period of 119performance, there is no difference in accounting for the deliverables as one unit or multiple units of accounting, and therefore, the Company is accountingfor the deliverables as one unit of accounting.The Company recorded the consideration earned in connection with the FOCAL trial, which consisted of reimbursements from Biodesix for expensesrelated to the trial, as a reduction to research and development expense during the period that reimbursable expenses were incurred. As a result of the costsharing provisions in the Biodesix Agreement, the Company reduced research and development expenses by approximately $0.1 million, $2.5 million and$3.5 million during the years ended December 31, 2017, 2016 and 2015, respectively. The amount due to the Company from Biodesix pursuant to the cost-sharing provision was approximately $0.1 million and $0.8 million at December 31, 2017 and 2016, respectively. The Company received cash paymentsrelated to cost reimbursements of approximately $0.8 million and $2.8 million during the years ended December 31, 2017 and 2016, respectively.Astellas PharmaIn February 2011, the Company, together with its wholly-owned subsidiary AVEO Pharma Limited, entered into a collaboration and license agreement(the “Astellas Agreement”) with Astellas Pharma Inc. and certain of its subsidiaries (together, “Astellas”), pursuant to which the Company and Astellasintended to develop and commercialize tivozanib for the treatment of a broad range of cancers. Astellas elected to terminate the agreement effective onAugust 11, 2014, at which time the tivozanib rights were returned to the Company. In accordance with the Astellas Agreement, committed developmentcosts, including the costs of completing certain tivozanib clinical development activities, continue to be shared equally.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. Payments from Astellas with respect to Astellas’ share of tivozanib developmentand commercialization costs incurred by the Company pursuant to the joint development plan were recorded as a reduction to research and developmentexpense and general and administrative expense in the accompanying consolidated financial statements due to the joint risk-sharing nature of the activitiesin North America and Europe. As a result of the cost-sharing provisions in the Astellas Agreement, the Company decreased research and developmentexpenses by $0.2 million, $0.3 million and $0.7 million during the years ended December 31, 2017, 2016 and 2015, respectively. The net amount due to theCompany from Astellas pursuant to the cost-sharing provisions was $0.2 million and $0.1 million at December 31, 2017 and 2016, respectively.Under the agreement, the Company received cash payments related to reimbursable payments and milestone payments of $0 and $0.3 million duringthe years ended December 31, 2017 and 2016, respectively.Biogen Idec International GmbHIn March 2009, the Company entered into an exclusive option and license agreement with Biogen regarding the development and commercializationof the Company’s discovery-stage ErbB3-targeted antibodies, AV-203, for the potential treatment and diagnosis of cancer and other diseases outside of NorthAmerica. Under the agreement, the Company was responsible for developing ErbB3 antibodies through completion of the first phase 2 clinical trial designedin a manner that, if successful, will generate data sufficient to support advancement to a phase 3 clinical trial.In March 2014, the Company and Biogen 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, the Company was obligated to usereasonable efforts to seek a collaboration partner for the purpose of funding further development and commercialization of ErbB3 targeted antibodies. TheCompany is also obligated to pay Biogen a percentage of milestone payments received by AVEO from future partnerships after March 28, 2016 and singledigit royalty payments on net sales related to the sale of ErbB3 products, if any, up to cumulative maximum amount of $50 million.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 agreement, as amended. The Company 120allocated a portion of the remaining deferred revenue to the undelivered unit of accounting based upon the Company’s best estimate of the selling price, asthe Company determined that neither VSOE nor TPE were available. The Company determined the best estimate of selling price to be approximately $0.6million and recognized the remaining $14.1 million as collaboration revenue in March 2014. The deferred revenue associated with the undelivered unit ofaccounting was recognized on a straight-line basis over the period of performance, or through March 2016, when the Company executed its agreement withCANbridge.Under the agreement, the Company recorded revenue of $0, $38 thousand and $0.3 million during the years ended December 31, 2017, 2016 and2015, respectively. In March 2016, the Company entered into a collaboration and license agreement for AV-203 with CANbridge. See “—CANbridge” herein for a furtherdescription of that arrangement.In-License AgreementsSt. Vincent’sIn July 2012, the Company entered into a license agreement with St. Vincent’s, under which the Company obtained an exclusive, worldwide license toresearch, develop, manufacture and commercialize products for human therapeutic, preventative and palliative applications that benefit from inhibition ordecreased expression or activity of GDF15, which is also referred to as MIC-1. Under the agreement, the Company has the right to grant sublicenses subject tocertain restrictions. Under the license agreement, St. Vincent’s also granted the Company non-exclusive rights for certain related diagnostic products andresearch tools.In order to sublicense certain necessary intellectual property rights to Novartis in August 2015, the Company and St. Vincent’s amended and restatedthe license agreement (the “Amended St. Vincent’s Agreement”). Under the Amended St. Vincent’s Agreement, the Company was required to make an upfrontpayment to St. Vincent’s of $1.5 million. St. Vincent’s is also eligible to receive up to approximately $16.7 million in connection with development andregulatory milestones and /or defined timelines under the Amended St. Vincent’s Agreement. Royalties for approved products resulting from the Amended St.Vincent’s Agreement will also be payable to St. Vincent’s, and the Company and Novartis will share that obligation equally. Under the license agreementwith Novartis, the Company is required to maintain the Amended St. Vincent’s Agreement in effect, and not enter into any amendment that would adverselyaffect Novartis’ rights during the term of the license agreement with Novartis.During the year ended December 31, 2016, the Company recognized approximately $0.4 million in research and development expense in connectionwith a milestone obligation due to St. Vincent’s related to the selection of a development candidate.During the year ended December 31, 2017, the Company recognized $1.8 million in research and development expense in connection with a time-based milestone obligation due to St. Vincent’s. Kyowa Hakko Kirin (KHK)In December 2006, the Company entered into a license agreement with KHK under which it obtained an exclusive license, with the right to grantsublicenses subject to certain restrictions, to research, develop, manufacture and commercialize tivozanib, pharmaceutical compositions thereof andassociated biomarkers in all potential indications. Its exclusive license covers all territories in the world except for Asia and the Middle East, where KHK hasretained the rights to tivozanib. Under the license agreement, the Company obtained exclusive rights in its territory under certain KHK patents, patentapplications 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. The Company and KHK each have access to and can benefit from the other party’sclinical data and regulatory filings with respect to tivozanib and biomarkers identified in the conduct of activities under the license agreement. Under the license agreement, the Company is obligated to use commercially reasonable efforts to develop and commercialize tivozanib in its territory.Prior to the first anniversary of the first post-marketing approval sale of tivozanib in its territory, neither the Company nor any of its subsidiaries has the rightto conduct certain clinical trials of, seek marketing approval for or commercialize any other cancer product that also works by inhibiting the activity of aVEGF receptor.The Company has upfront, milestone and royalty payment obligations to KHK under the license agreement. Upon entering into the license agreementwith KHK, the Company made an upfront payment in the amount of $5.0 million. In March 2010, the Company made a milestone payment to KHK in theamount of $10.0 million in connection with the dosing of the first patient in the Company’s first phase 3 clinical trial of tivozanib (TIVO-1). In December2012, the Company made a $12.0 million milestone payment to KHK in connection with the acceptance by the US Food and Drug Administration (“FDA”) ofthe Company’s 2012 New Drug Application (“NDA”) filing for tivozanib. Each milestone under the KHK agreement is a one-time only payment obligation,accordingly, the Company did not owe KHK another milestone payment in connection with the dosing of the first patient in the Company’s TIVO-3 trial, andwould not owe a milestone payment to KHK if the Company files an NDA with the FDA following the completion of the 121TIVO-3 clinical trial. If the Company obtains approval for tivozanib in the U.S., the Company would owe KHK a one-time milestone payment of$18.0 million, provided that the Company does not sublicense U.S. rights for tivozanib prior to obtaining a U.S. regulatory approval. If the Company were tosublicense the U.S. rights, the associated U.S. regulatory milestone would be replaced by a specified percentage of sublicensing revenue, as set forth below.If the Company sublicenses any of its rights to tivozanib to a third party, as it has done with EUSA, the sublicense defines the payment obligations ofthe sublicensee, which may vary from the milestone and royalty payment obligations under the KHK license relating to rights the Company retains. TheCompany is required to pay KHK a fixed 30% of amounts the Company receives from its sublicensees, including upfront license fees, milestone paymentsand royalties, but excluding amounts the Company receives in respect of research and development reimbursement payments or equity investments, subjectto certain limitations. Certain research and development reimbursement payments by EUSA, including the $2.5 million upfront payment in December 2015,the $4.0 million payment in September 2017 upon the approval from the EMA of tivozanib (FOTIVDA) and the $2.0 million payment upon EUSA’s electionin September 2017 to opt-in to co-develop the TiNivo trial were not subject to sublicense revenue payments to KHK. In addition, if EUSA elects to opt-in tothe TIVO-3 trial, the additional research and development reimbursement payment from EUSA of fifty percent (50%) of the total trial costs, up to$20.0 million, would also not be subject to a sublicense revenue payment to KHK, subject to certain limitations. The Company would, however, owe KHK30% of other, non-R&D reimbursement payments the Company may receive from EUSA pursuant to the EUSA agreement, including EU reimbursementapproval milestones in up to five specified EU countries, EU marketing approvals for up to three additional indications beyond RCC, marketing approvals inup to three specified licensed territories outside of the EU, sales-based milestones and royalties. The $2.0 million milestone the Company earned in February2018 upon EUSA’s reimbursement approval from the NICE in the UK in first line RCC is subject to the 30% KHK sub-license fee, or $0.6 million.The Company is also required to pay tiered royalty payments on net sales it makes of tivozanib in its North American territory, which range from thelow to mid-teens as a percentage of net sales. The royalty rate escalates within this range based on increasing tivozanib sales. The Company’s royaltypayment obligations in a particular country in its territory begin on the date of the first commercial sale of tivozanib in that country, and end on the later of12 years after the date of first commercial sale of tivozanib in that country or the date of the last to expire of the patents covering tivozanib that have beenissued in that country.The license agreement will remain in effect until the expiration of all of the Company’s royalty and sublicense revenue obligations to KHK,determined on a product-by-product and country-by-country basis, unless the Company elects to terminate the license agreement earlier. If the Company failsto meet its obligations under the agreement and is unable to cure such failure within specified time periods, KHK can terminate the agreement, resulting in aloss of our rights to tivozanib and an obligation to assign or license to KHK any intellectual property or other rights the Company may have in tivozanib,including its regulatory filings, regulatory approvals, patents and trademarks for tivozanib.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, 2017, 2016 and 2015. The Company has not paid anyroyalties to date. (5) Other Accrued LiabilitiesOther accrued expenses consisted of the following: December 31,2017 December 31,2016 (in thousands) Professional fees $844 $464 Compensation and benefits 1,325 891 Other 289 176 Total $2,458 $1,531 122 (6) Loans PayableOn May 28, 2010, the Company entered into a loan and security agreement with Hercules (the “First Loan Agreement”). The First Loan Agreementwas subsequently amended in March 2012 (the “2012 Amendment”), September 2014 (the “2014 Amendment”), May 2016 (the “2016 Amendment”) andDecember 2017 (the “2017 Loan Agreement”). Amounts borrowed under the 2012 Amendment were repaid in full in 2015.Pursuant to the 2014 Amendment, the Company received additional loan proceeds from Hercules in the amount of $10.0 million and was not requiredto commence principal payments until May 1, 2016, with the last principal payment due on January 1, 2018. An end-of-term payment of approximately$0.5 million continued to be due on January 1, 2018 and was paid on the first business day of 2018. The Company incurred approximately $0.2 million inloan issuance costs paid directly to Hercules, which were offset against the loan proceeds and are accounted for as a loan discount. The 2014 Amendment wasaccounted for as a loan modification in accordance with ASC 470-50, Debt—Modifications and Extinguishments (“ASC 470-50”).In connection with the 2014 Amendment, the Company issued warrants to the lenders to purchase up to 608,696 shares of the Company’s commonstock at an exercise price equal to $1.15 per share. The Company recorded the fair value of the warrants of approximately $0.4 million as stockholders’ equityand as a discount to the related loan outstanding and is amortizing the value of the discount to interest expense over the term of the loan using the effectiveinterest method. In July 2017, Hercules exercised all 608,696 warrants. Pursuant to the terms of the warrant, Hercules, at their election, exercised the warrantsvia a non-cash “net share issuance.” The Company issued Hercules 369,297 shares of its common stock and did not receive any cash proceeds in connectionwith the warrant exercise.In May 2016, pursuant to the 2016 Amendment, the Company received additional loan proceeds from Hercules in the amount of $5.0 million, whichincreased the aggregate outstanding principal balance under the First Loan Agreement to $15.0 million. The Company was not required to commenceprincipal payments on the $15 million loan until July 1, 2017, at which time the Company would have been required to make 30 equal monthly payments ofprincipal and interest through December 2019. An end-of-term payment of approximately $0.2 million is due on December 1, 2019. The Company incurredapproximately $0.1 million in loan issuance costs paid directly to Hercules, which were offset against the loan proceeds and are accounted for as a loandiscount. The 2016 Amendment was accounted for as a loan modification in accordance with ASC 470-50. The 2016 Amendment included a financialcovenant that required the Company to maintain an unrestricted cash position (defined as cash and liquid cash, including marketable securities) greater thanor equal to $10.0 million through the date of completion of the Company’s TIVO-3 trial, with results that were satisfactory to Hercules.Under the 2016 Amendment, from March 1, 2017 through June 30, 2017, the Company could draw down an additional $5.0 million in funding uponconfirmation by Hercules, in its reasonable discretion, that the Company had achieved the following conditions: (i) satisfactory developmental progressionon a minimum of two (2) clinical programs (other than the TIVO-3 trial) that are either managed directly by the Company or funded, in whole or in part, bythe Company and (ii) having an unrestricted cash position greater than or equal to $25.0 million on the date of the draw down request. If the Company drewdown the additional $5.0 million in funding, the commencement of principal payments on the aggregate $20.0 million loan balance would be deferred by sixmonths from July 1, 2017 until January 1, 2018.In June 2017, pursuant to the 2016 Amendment, the Company received the additional $5.0 million in loan proceeds from Hercules, which increasedthe aggregate outstanding principal balance under the First Loan Agreement to $20.0 million and resulted in a six-month deferral in the commencement ofprincipal payments. There was no change in the loan maturity date of December 2019. The Company was not required to commence principal payments onthe $20.0 million loan until January 1, 2018, at which time the Company would have been required to make 23 equal monthly payments of principal andinterest, in the approximate amount of $0.8 million, through November 2019 and an approximate $5.3 million payment of principal and interest in December2019, which represented approximately 26% of the entire $20.0 million loan. An additional end-of-term payment of approximately $0.1 million is due onDecember 1, 2019, which increased the total end-of-term payments under the 2016 Amendment to $0.3 million.In connection with the 2016 Amendment, the Company issued warrants to Hercules to purchase up to 1,202,117 shares of the Company’s commonstock at an exercise price equal to $0.87 per share. The Company recorded the fair value of the warrants of approximately $0.7 million as a component ofstockholders’ equity and as a discount to the related loan outstanding and is amortizing the value of the discount to interest expense over the term of the loanusing the effective interest method. In July 2017, Hercules exercised all 1,202,117 warrants. Pursuant to the terms of the warrant, Hercules, at their election,exercised the warrants via a non-cash “net share issuance.” The Company issued Hercules 846,496 shares of its common stock and did not receive any cashproceeds in connection with the warrant exercise. 123As part of the 2016 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.In connection with the Company’s May 2016 private placement (refer to Note 7), Hercules purchased 259,067 units for cash proceeds of $0.2 millionto the Company. This purchase was separate from the $2.0 million equity purchase option under the 2016 Amendment. Each unit in the May 2016 privateplacement included one share of the Company’s common stock and a PIPE Warrant to purchase one share of the Company’s common stock at an exerciseprice of $1.00 per share. In July 2017, Hercules exercised its PIPE Warrants with respect to all 259,067 shares of common stock underlying such PIPEWarrants. The Company issued Hercules 259,067 shares of its common stock and received approximately $0.3 million in cash proceeds.In December 2017, the Company entered into an amended and restated loan and security agreement with Hercules to refinance the $20.0 million FirstLoan Agreement (the “2017 Loan Agreement). The proceeds of the new loan facility were used to retire the existing $20.0 million in secured debtoutstanding under the First Loan Agreement. Per the terms of the 2017 Loan Agreement, the new loan facility has a 42-month maturity from closing, nofinancial covenants, a lower interest rate and an interest-only period of no less than 12 months, which could be extended up to a maximum of 24 months,assuming the achievement of specified milestones relating to the development of tivozanib. Per the 2017 Loan Agreement, Hercules did not receive anyadditional warrants to purchase shares of the Company’s common stock and no longer has the option, subject to the Company’s written consent, toparticipate in its future equity financings up to $2.0 million through the purchase of the Company’s common stock either with cash or through theconversion of outstanding principal under the loan.The loan maturity date has been revised from December 2019 to July 2021. The Company is not required to make principal payments until February 1,2019, at which time the Company will be required to make 29 equal monthly payments of principal and interest, in the approximate amount of $0.8 million,through July 2021. An additional end-of-term payment of approximately $0.8 million is due on July 1, 2021, which increases the total end-of-term paymentsunder the 2014 Amendment, 2016 Amendment and 2017 Loan Agreement to approximately $1.6 million. The end-of-term payments under the 2014Amendment, in the approximate amount of $0.5 million, and the 2016 Amendment, in the amount of $0.3 million, continue to be due on their original duedates of January 1, 2018 and December 1, 2019, respectively. The financial covenant per the 2016 Amendment to maintain an unrestricted cash positiongreater than or equal to $10.0 million through the date of completion of our TIVO-3 trial with results that are satisfactory to Hercules has been removed. Perthe 2017 Loan Agreement, the current interest rate has been decreased from 11.9% to 9.45%. The Company incurred approximately $0.1 million in loanissuance costs paid directly to Hercules, which are accounted for as a loan discount. The 2017 Loan Agreement was accounted for as a loan modification inaccordance with ASC 470-50.The interest-only period could be extended by two 6-month deferrals upon the achievement of specified milestones relating to the development oftizozanib, including (i) on or prior to September 30, 2018, the Company has received positive data with respect to its TIVO-3 trial for the treatment of RCCfor patients in the third-line setting which positive data supports the filing for a new drug application with the FDA, subject to confirmation by Hercules at itsreasonable discretion, and (ii) on or prior to June 28, 2019, the Company has received approval from the FDA for its tivozanib product for the treatment ofRCC for patients in the third-line setting, subject to confirmation by Hercules at its reasonable discretion.The unamortized discount to be recognized over the remainder of the loan period was approximately $1.5 million and $1.0 million as of December 31,2017 and 2016, respectively.The Company must make interest payments on the loan balance each month it remains outstanding. Per annum interest is payable on the principalbalance of the loan each month it remains outstanding at the greater of 9.45% and an amount equal to 9.45% plus the prime rate minus 4.75% as determineddaily, provided however, that the per annum interest rate shall not exceed 15.0% (9.45% as of December 31, 2017).The loans are secured by a lien on all the Company’s personal property (other than intellectual property), whether owned or acquired after the date ofthe First Loan Agreement. The 2017 Loan Agreement define events of default, including the occurrence of an event that results in a material adverse effectupon the Company’s business operations, properties, assets or condition (financial or otherwise), its ability to perform its obligations or upon the ability ofthe lenders to enforce any of their rights or remedies with respect to such obligations, or upon the collateral under the 2017 Loan Agreement, the related liensor the priority thereof. As of December 31, 2017, the Company was in compliance with all loan covenants, Hercules has not asserted any events of default andthe Company does not believe that there has been a material adverse change as defined in the 2017 Loan Agreement. 124The Company has determined that the risk of subjective acceleration under the material adverse events clause is remote and therefore has classified theoutstanding principal in current and long-term liabilities based on the timing of scheduled principal payments.Future minimum payments under the loans payable outstanding as of December 31, 2017 are as follows (amounts in thousands): Year Ending December 31: 2018 $2,493 2019 8,725 2020 9,013 2021 6,087 26,318 Less amount representing interest (4,688)Less unamortized discount (1,523)Less deferred charges (1,630)Less loans payable current, net of discount — Loans payable, net of current portion and discount $18,477 (7) Common Stock As of December 31, 2017, the Company had 250,000,000 authorized shares of common stock, $0.001 par value, of which 118,325,396 shares wereissued and outstanding. In June 2017, the Company amended its certificate of incorporation, which increased the number of authorized shares of common stock, $0.001 parvalue, by 50,000,000 from 200,000,000 shares to 250,000,000 shares. The amendment was adopted by the Board of Directors in April 2017 and approved bystockholders at the Annual Meeting of Stockholders held on June 21, 2017 ATM Sales Agreement with LeerinkIn February 2018, the Company entered into an at-the-market issuance sales agreement (the “Leerink Sales Agreement”), with Leerink Partners LLC(“Leerink”) pursuant to which the Company could issue and sell shares of its common stock from time to time up to an aggregate amount of $50 million, atits option, through Leerink as its sales agent, with any sales of common stock through Leerink being made by any method that is deemed an “at-the-market”offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities Act”) pursuant to an effective shelf registrationstatement on Form S-3. The Company agreed to pay Leerink a commission of up to 3% of the gross proceeds of any sales of common stock pursuant to theLeerink Sales Agreement. At the time of issuance of these financial statements, no shares of our common stock have been sold under the Leerink SalesAgreement. On November 30, 2017, the Company filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (the “SEC”),which covers the offering, issuance and sale of up to $200.0 million of its common stock, preferred stock, debt securities, warrants and/or units (the “2017Shelf”). The 2017 Shelf (file No. 333-221873) was declared effective by the SEC on December 15, 2017 and was filed to replace the Company’s then existing2015 Shelf, which was terminated. Public OfferingOn March 31, 2017, the Company closed an underwritten public offering of 34,500,000 shares of its common stock, including the exercise in full bythe underwriter of its option to purchase 4,500,000 shares, at the public offering price of $0.50 per share for gross proceeds of approximately $17.3 million.Certain of the Company’s executive officers and a director purchased an aggregate of 420,000 shares and an entity affiliated with New Enterprise Associates,a greater than 5% stockholder of the Company, purchased 6,000,000 shares in this offering at the same public offering price per share as the other investors.The net offering proceeds to the Company were approximately $15.4 million after deducting underwriting discounts and estimated offering expenses payableby the Company. The Company sold these shares pursuant to the 2015 Shelf (as defined below). 125Private Placement / PIPE Warrants In May 2016, the Company entered into a securities purchase agreement with a select group of qualified institutional buyers, institutional accreditedinvestors and accredited investors pursuant to which the Company sold 17,642,482 units, at a price of $0.965 per unit, for gross proceeds of approximately$17.0 million. Each unit consisted of one share of the Company’s common stock and a warrant to purchase one share of the Company’s common stock (the“PIPE Warrants”). The PIPE Warrants have an exercise price of $1.00 per share and are exercisable for a period of five years from the date of issuance. Certainof the Company’s directors and executive officers purchased an aggregate of 544,039 units in this offering at the same price as the other investors. The netoffering proceeds to the Company were approximately $15.4 million after deducting placement agent fees and other offering expenses payable by theCompany. In July 2017, Hercules exercised its PIPE Warrants with respect to all 259,067 shares of common stock underlying such PIPE Warrants, and theCompany issued Hercules 259,067 shares of its common stock and received approximately $0.3 million in cash proceeds. As of December 31, 2017, therewere PIPE Warrants outstanding and exercisable for 17,383,415 shares of common stock. ATM Sales Agreement with FBRIn February 2015, the Company entered into an at-the-market issuance sales agreement (the “FBR Sales Agreement”) with FBR & Co. and MLV & Co.(together “FBR”), pursuant to 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’s option, through FBR as its sales agent, with any sales of common stock through FBR being made by any method that isdeemed an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act pursuant to an effective shelf registration statement onForm S-3. The Company agreed to pay FBR a commission of up to 3% of the gross proceeds of any sales of common stock pursuant to the FBR SalesAgreement.On May 7, 2015, the Company filed a shelf registration statement on Form S-3 with the SEC, which covered 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 also amended its FBR SalesAgreement 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 replacedthe Company’s existing $17.9 million offering that expired along with the expired 2012 Shelf. Through August 2015, the Company sold approximately5.9 million shares pursuant to the FBR Sales Agreement, as amended, resulting in proceeds of approximately $10.2 million, net of commissions and issuancecosts. In June 2017, the Company sold approximately 6.5 million shares pursuant to the FBR Sales Agreement, as amended, resulting in proceeds ofapproximately $8.8 million, net of commissions and issuance costs. No shares were sold between August 2015 and June 2017, and between July 2017 andDecember 15, 2017 under the FBR Sales Agreement. The FBR Sales Agreement has expired. (8) Stock-based CompensationStock Incentive PlanThe Company maintains the 2010 Stock Incentive Plan (the “Plan”) for employees, consultants, advisors, and directors, as amended in March 2013,June 2014 and June 2017. The Plan provides for the grant of equity awards such as stock options and restricted stock. In June 2017, the Company amendedthe Plan to increase the total number of shares reserved under the Plan by 3,500,000 from 8,500,000 shares to 12,000,000 shares. The amendment wasadopted by the Board of Directors in February 2017 and approved by stockholders at the Annual Meeting of Stockholders held on June 21, 2017. The Planprovides that the exercise 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 forparticipants who own less than 10% of the total combined voting power of stock of the Company and not less than 110% for participants who own more than10% of the total combined voting power of the stock of the Company. Options and restricted stock granted under the Plan vest over periods as determined bythe Board, which generally are equal to four years. Options generally expire ten years from the date of grant. As of December 31, 2017, there were 3,549,657shares of common stock available for future issuance under the Plan. 126The following table summarizes stock option activity during the year ended December 31, 2017: Options Weighted-AverageExercise Price Weighted-AverageRemainingContractualTerm AggregateIntrinsicValue Outstanding at January 1, 2017 4,858,678 $2.31 Granted 3,455,135 $1.40 Exercised (17,576) $0.87 Forfeited (758,279) $1.03 Outstanding at December 31, 2017 7,537,958 $2.00 7.49 $10,709,000 Exercisable at December 31, 2017 3,582,756 $2.67 6.06 $5,075,000 Stock options to purchase 178,564 shares of common stock contain performance-based milestone conditions, which were not deemed probable ofvesting at December 31, 2017.The aggregate intrinsic value is based upon the Company’s closing stock price of $2.79 on December 29, 2017, the last trading day of the year.The fair value of stock options subject only to service or performance conditions that are granted to employees is estimated on the date of grant usingthe Black-Scholes option-pricing model using the assumptions noted in the following table: Years Ended December 31, 2017 2016 2015 Volatility factor 71.82% - 80.15% 72.18% - 74.47% 73.04% - 78.70% Expected term (in years) 5.50 - 6.25 3.00 - 6.25 5.50 - 6.25 Risk-free interest rates 1.84% - 2.22% 1.07% - 2.01% 1.54% - 1.93% 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. In July 2016, the Company began calculating volatility using its historical data. Previously, the Company did not have sufficient history to support acalculation of volatility using only its historical data. As such, prior to July 2016, the Company used a weighted-average volatility considering theCompany’s own volatility since March 2010 and the volatilities of several peer companies. For purposes of identifying similar entities, the Companyconsidered characteristics such as industry, length of trading history, similar vesting terms and in-the-money option status. Due to lack of available optionactivity data, the Company elected to use the “simplified” method for “plain vanilla” options to estimate the expected term of the stock option grants. Underthis approach, the weighted-average expected life is presumed to be the average of the vesting term and the contractual term of the option. Based upon theseassumptions, the weighted-average grant date fair value of stock options granted during the years ended December 31, 2017, 2016 and 2015 was $0.97, $0.65and $0.75, respectively. On January 1, 2017, the Company adopted ASU No. 2016-09, Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting and elected to account for forfeitures as they occur. Prior to 2017, the Company included an estimate of the value of the awardsthat would be forfeited in calculating compensation costs, which the Company estimated based upon actual historical forfeitures. The forfeiture estimateswere recognized over the requisite service period of the awards on a straight-line basis. The Company used a forfeiture rate of 0%, 76% and 71% during yearsended December 31, 2017, 2016 and 2015, respectively.As of December 31, 2017, there was $3.4 million of total unrecognized stock-based compensation expense related to stock options granted toemployees under the Plan. The expense is expected to be recognized over a weighted-average period of 2.6 years. The intrinsic value of options exercisedduring the years ended December 31, 2017, 2016 and 2015 was $46,000, $6,000 and $58,000, respectively. 127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 fair value of restricted stock awards that vested was $0 in the year ended December 31, 2017, and $0.1 million in each of the years endedDecember 31, 2016 and 2015.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, as amended in March 2013. The ESPP allows eligible employees to purchase common stock at a priceper share equal to 85% of the lower of the fair market value of the common stock at the beginning or end of each six-month period during the term of theESPP. The Company has reserved 764,000 shares of common stock under the ESPP. As of December 31, 2017, there were 307,282 shares available for futureissuance under the ESPP. Pursuant to the ESPP, the Company did not sell any shares of common stock during the years ended December 31, 2017 and December 31, 2016. Forthe year ended December 31, 2015, the Company sold a total of 7,138 shares of common stock at purchase prices of $0.75 and $1.07, respectively, whichrepresent 85% of the closing price of the Company’s common stock on June 30, 2015 and December 31, 2015, respectively. The total stock-basedcompensation expense recorded as a result of the ESPP was approximately $3 thousand, $2 thousand and $27 thousand during the years ended December 31,2017, 2016 and 2015, respectively. (9) 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 $0.6 million, $0.6 million and $(9.1) million for the years ended December 31, 2017, 2016 and 2015, respectively. The net rent credit forthe year ended December 31, 2015 was recorded within operating expenses and allocated to research and development and general and administrativeexpense based upon the use of the underlying facility space. Refer to the following paragraphs and Note 12 for further discussion of the net rent creditrecognized in 2015.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 Note 12 for further discussion regarding thetermination of this lease. The Company recognized rent expense of approximately ($9.5) and $4.3 million related to the lease during the years endedDecember 31, 2015 and 2014, respectively. The expense recognized during the years ended December 31, 2015 and 2014 included the recognition ofdeferred 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 severance and other benefits under certain qualifying termination events upon a change in control for a period oftime ranging from 6 months to 18 months, depending upon the position of the key employee. 128Refer to Note 15 for further discussion of legal contingencies. (10) Income TaxesThe Company accounts for income taxes under the provisions of ASC 740. The Company recorded a $0.1 million tax provision for foreignwithholding taxes in each of the years ended December 31, 2017 and 2016 in connection with the $1.0 million in reimbursement payments in 2017 related tomanufacturing development activities conducted by the Company prior to the Effective Date and the $1.0 million upfront payment by CANbridge in March2016 upon the execution of the collaboration and license agreement. For the year ended December 31, 2015, the Company did not have any federal, state, orforeign 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, 2017, 2016 and 2015: Years Ended December 31, 2017 2016 2015 Income tax computed at federal statutory tax rate 34.0% 34.0% 34.0% State taxes, net of federal benefit 5.3% 5.2% 5.3% Research and development credits 0.4% 1.4% 2.0% Other permanent differences (20.8)% 6.1% (2.0)% Foreign rate differential 0.0% (0.1)% (0.1)% Foreign withholding taxes (0.2)% (0.4)% — SEC settlement liability 0.0% — (9.1)% Excess benefit stock compensation 0.0% — — Tax reform - rate change (97.5)% — — Other 0.1% (6.6)% (3.8)% Change in valuation allowance 78.7% (39.6)% (26.3)% Total — — — With limited exceptions, the Company has incurred net operating losses from inception. At December 31, 2017, the Company had domestic federal,state, and United Kingdom (UK) net operating loss carryforwards of approximately $503.6 million, $394.3 million, and $6.0 million respectively, availableto reduce future taxable income. The federal net operating loss carryforwards expire beginning in 2022 through 2037 and the state loss carryforwards begin toexpire in 2030 and continue through 2037 The foreign net operating loss carryforwards in the UK do not expire. The Company also had federal and stateresearch and development tax credit carryforwards of approximately $10.5 million and $4.3 million, respectively, available to reduce future tax liabilitiesand which expire at various dates. The federal credits expire beginning in 2022 through 2037 and the state credits expire beginning in 2019 through 2032.The net operating loss and research and development carryforwards are subject to review and possible adjustment by the Internal Revenue Service and maybe limited in the event of certain changes in the ownership interest of significant stockholders.The Company’s net deferred tax assets as of December 31, 2017 and 2016 are as follows (in thousands): 2017 2016 Deferred tax assets: NOL carryforwards $131,683 $182,433 Research and development credits 13,913 13,060 Deferred revenue and R&D reimbursements 770 867 Estimated settlement liability 4,664 — Other temporary differences 4,420 4,570 Total deferred tax assets: 155,450 200,930 Deferred tax liabilities: Insurance recovery (4,098) — Total deferred tax liabilities: (4,098) — Valuation allowance (151,352) (200,930)Total $— $— 129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 decreased by $49.6 million as ofDecember 31, 2017 which was primarily related to the “Tax Cuts and Jobs Act”, which reduced the federal tax rate from 35% to 21%. The valuationallowance increased $10.6 million and $3.9 million during the years ended December 31, 2016 and 2015, respectively, primarily due to the generation of netoperating loss carryforwards.As of December 31, 2016, the Company had federal and state net operating losses of approximately $4.1 million related to excess tax deductions thathad been excluded from the above table. The benefit of these net operating losses would have been recognized as an increase in additional paid in capitalwhen it resulted in a reduction of taxes payable. In January 2017, the Company adopted ASU 2016-09, Improvements to Employee Share-Based PaymentAccounting. As part of the adoption, the Company recorded through retained earnings these additional deferred tax assets of $4.1 million related topreviously unrecognized tax losses with an equal and offsetting adjustment to the Company's valuation allowance. The net impact of the adoption on theCompany's deferred tax assets was $0. On December 22, 2017, President Trump signed into law The Tax Cuts and Jobs Act (“the Act”). The Act, among other things, contains significantchanges to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the taxdeduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% ofcurrent year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whetherthey are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investmentsinstead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits. On December 22, 2017, the SEC issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts andJobs Act directing taxpayers to consider the impact of the U.S. legislation as “provisional” when it does not have the necessary information available,prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. The Company recognizes the changes in tax law, including the Act, in the period the law is enacted. Accordingly, the effects of the Act have beenrecognized in the financial statements for the year ended December 31, 2017. As a result of the change in law, the Company recorded a reduction to itsdeferred tax assets of $63.3 million and a corresponding reduction to its valuation allowance. As a result, there was no impact to the Company’s incomestatement due to the reduction in the U.S. corporate tax rate.At December 31, 2017, the Company has not completed its accounting for the tax effects of enactment of the Act; however in certain cases theCompany has made a reasonable estimate of the effects of the Act. For the items for which we were able to determine a reasonable estimate and thus areconsidered provisional, we recorded a $63.3 million reduction to deferred tax assets. The Company’s preliminary estimate of the effects Act, including theremeasurement of deferred tax assets and liabilities, is subject to the finalization of management’s analysis related to certain matters, such as developinginterpretations of the provisions of the Act and the filing of the Company’s tax returns. U.S. Treasury regulations, administrative interpretations or courtdecisions interpreting the Act may require further adjustments and changes in estimates. The final determination of the effects of the Act will be completed asadditional information becomes available, but no later than one year from the enactment of the Act. In all cases, the Company will continue to make andrefine its calculations as additional analysis is completed. In addition, the Company’s estimates may also be affected as it gains a more thoroughunderstanding of the tax law. 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 2014 through 2017. 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. 130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, 2017, 2016 and 2015: Years Ended December 31, 2017 2016 2015 (in thousands) Amount established upon adoption $1,200 $1,200 $1,200 Additions for current year tax provisions — — — Additions for prior year tax provisions — — — Reductions of prior year tax provisions — — — Balance as of end of year $1,200 $1,200 $1,200 (11) Strategic RestructuringOn January 6, 2015, the Board of the Company approved a strategic restructuring of the Company that eliminated the Company’s internal researchfunction 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 accruedatDecember 31,2016 Restructuringexpenseincurredduring the year endedDecember 31,2017 Restructuringamountspaidduring the year endedDecember 31,2017 Restructuringamountsaccrued atDecember 31,2017 Employee severance, benefits and related costs. $— $— $— $— Restructuringamounts accruedatDecember 31,2015 Restructuringexpenseincurredduring the year endedDecember 31,2016 Restructuringamountspaidduring the year endedDecember 31,2016 Restructuringamountsaccrued atDecember 31,2016 Employee severance, benefits and related costs. $357 $— $(357) $— (12) Facility Lease Exit 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 had 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. 131In 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. In February 2015, the Company provided notice that it would surrender the remaining spaceon May 29, 2015. Accordingly, the Company revised the estimated useful life of its leasehold improvements related to this office space and amortized suchassets through May 2015, resulting in an additional $2.9 million of depreciation expense during the six months ended June 30, 2015. Similarly, theCompany accelerated the amortization of its deferred rent and leasehold improvement allowance associated with this office space through May 2015,resulting in an additional $3.5 million of amortization during the six months ended June 30, 2015. Upon the surrender of the remaining space, the Companyhad no further rights or obligations with respect to the lease. The Company secured office space appropriate for its current needs under a cancellablearrangement that began in May 2015. The Company recognized rent expense of approximately ($9.5) million and $4.3 million related to the lease during theyears ended December 31, 2015 and 2014, respectively. The net rent credit for the year ended December 31, 2015 and December 31, 2014 were recordedwithin operating expenses and allocated to research and development and general and administrative expense based upon the use of the underlying facilityspace. The expense recognized during the years ended December 31, 2015 and 2014 include the recognition of deferred rent credits totaling $10.6 millionand $3.8 million, respectively, following the termination of the lease agreement.The following table summarizes the components of the Company’s lease exit activity recorded in current liabilities at December 31, 2015: Lease Exitamountsaccrued atDecember 31,2014 AccretionExpenseincurred duringthe year endedDecember 31,2015 Amounts paidduring the yearended December31, 2015 Additionalexpenseincurred duringthe year endedDecember 31,2015 Amountsaccrued atDecember 31,2015 Lease exit costs $4,981 224 $(5,477) $272 $—No costs were incurred during the year ended December 31, 2016 or 2017. (13) 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 millionfor each of the years ended December 31, 2017, 2016 and 2015. 132(14) Quarterly Results (Unaudited) Three Month Ended March 31, 2017 June 30, 2017 September 30,2017 December 31,2017 (in thousands, expect per share data) (unaudited) Collaboration and licensing revenue $2,532 $351 $4,614 $82 Operating expenses 10,287 9,183 6,767 10,153 Loss from operations (7,755) (8,832) (2,153) (10,071)Change in fair value of PIPE warrant liability (484) (23,925) (23,538) 14,207 Other expense, net (551) (530) (655) (637)Provision for income taxes (50) — (51) — Net income (loss) $(8,840) $(33,287) $(26,397) $3,499 Basic net income (loss) per share Net income (loss) per share $(0.12) $(0.30) $(0.22) $0.03 Weighted average number of common shares outstanding 76,246 110,550 118,006 118,323 Dilutive net income (loss) per share Net income (loss) per share $(0.12) $(0.30) $(0.22) $(0.08)Weighted average number of common shares and dilutive common share equivalents outstanding 76,246 110,550 118,006 130,108 Three Month Ended March 31, 2016 June 30, 2016 September 30,2016 December 31,2016 (in thousands, expect per share data) (unaudited) Collaboration and licensing revenue $1,203 $193 $992 $127 Operating expenses 8,435 7,335 6,585 9,553 Loss from operations (7,232) (7,142) (5,593) (9,426)Change in fair value of PIPE warrant liability — (996) 1,178 4,569 Other expense, net (377) (468) (551) (748)Provision for income taxes (101) — — — Net loss $(7,710) $(8,606) $(4,966) $(5,605)Net loss per share - basic and diluted $(0.13) $(0.13) $(0.07) $(0.07) Weighted average number of common shares outstanding 58,166 66,917 75,861 75,863 (15) Legal ProceedingsTwo class action lawsuits have been filed against the Company and certain of its former officers and 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. AveoPharmaceuticals, Inc., et al., No. 1:13-cv-11157-JLT, filed on May 9, 2013, and the other captioned Christine Krause v. AVEO Pharmaceuticals, 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 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 stockholders who purchased the Company’s common stock between January 3, 2012 and May 1, 2013 (the “Class”). This consolidatedamended complaint was dismissed without prejudice on March 20, 2015, and the lead plaintiffs then filed a second amended complaint bringing similarallegations, and which no longer named Mr. DePinho as a defendant. The Company moved to dismiss again, and after a second round of briefing and oralargument, the District Court ruled in the Company’s favor and dismissed the second amended complaint with prejudice on November 18, 2015. The leadplaintiffs appealed the District Court’s decision to the United States Court of Appeals for the First Circuit. They also filed a motion to vacate and reconsiderthe District Court’s judgment, which the Company opposed. On January 3, 2017, the District Court granted the plaintiffs’ motion to vacate the dismissal andjudgment, and the plaintiffs filed a motion to dismiss their appeal on February 8, 2017. On February 2, 2017, the plaintiffs filed a third amended complaint,on behalf of stockholders who purchased common stock between May 16, 2012 and May 1, 2013, alleging claims similar to those alleged in the priorcomplaints, namely that the Company and certain of the Company’s former officers and directors 133violated Sections 10(b) and/or 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated thereunder bymaking allegedly false and/or misleading statements concerning the phase 3 trial design and results for the Company’s TIVO-1 clinical trial in an effort tolead investors to believe that the drug would receive approval from the FDA. On March 2, 2017, the Company filed an answer to the third amendedcomplaint, and the parties initiated discovery. On June 29, 2017, the plaintiffs filed a motion for class certification and on July 27, 2017, the Company filedits response. On July 18, 2017, the District Court entered an order referring the case to alternative dispute resolution. The parties mediated on September 12and 13, 2017. On December 26, 2017, the parties entered into a binding Memorandum of Understanding (the “MOU”) regarding the settlement of thelawsuit. On January 29, 2018, the parties entered into a Stipulation of Settlement (the “Stipulation”), which was filed with District Court on February 2,2018. Under the terms of the MOU and Stipulation, AVEO agreed with counsel for the lead plaintiffs to cause certain of AVEO’s and the IndividualDefendants’ insurance carriers to provide the Class with a cash payment of $15.0 million, which includes the cash amount of any attorneys’ fees or litigationexpenses that the District Court may award lead plaintiffs’ counsel and costs lead plaintiffs incur in administering and providing notice of thesettlement. Additionally, AVEO agreed to issue to the Class the Settlement Warrants for the purchase of 2.0 million shares of AVEO common stockexercisable from the date of issue until the expiration of a one-year period after the date of issue at an exercise price equal to the closing price on December22, 2017, the trading day prior to the execution of the MOU, which was $3.00 (“the “Settlement Warrants”). On February 8, 2018, the District Court issued anorder preliminarily approving the terms of the Stipulation. The Stipulation is subject to final approval by the District Court. The District Court set a FinalApproval Hearing for May 30, 2018. The Company has agreed to use its best efforts to issue and deliver the Settlement Warrants within ten business daysfollowing the effective date of the final approval of the Stipulation. The Company evaluates developments in legal proceedings on a quarterly basis. The Company records an accrual for loss contingencies to the extentthat the Company concludes that it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated. In December2017, upon entering into the MOU, this settlement became estimable and probable. Accordingly, the Company recorded an estimated $17.1 millioncontingent liability, including $15.0 million for the cash portion of the settlement with a corresponding insurance recovery for the 100% portion to be paiddirectly by certain of the Company’s insurance carriers, and an approximate $2.1 million estimate for the warrant portion of the settlement with acorresponding non-cash charge to the Statement of Operations as a component of operating expenses. In February 2018, the insurance carriers funded thesettlement escrow account for the $15.0 million cash settlement. Refer to Note 3, “Potential Class Action Settlement” for further discussion of the warrants. On July 3, 2013, the staff, or SEC Staff, of the SEC served a subpoena on the Company for documents and information concerning tivozanib,including related communications with the FDA, investors and others. In September 2015, the SEC Staff invited the Company to discuss the settlement ofpotential claims asserting that the Company violated federal securities laws by omitting to disclose to investors the recommendation by the staff of the FDAon May 11, 2012, that the Company conduct an additional clinical trial with respect to tivozanib. On March 29, 2016, the SEC filed a complaint against theCompany and three of its former officers in the U.S. District Court for the District of Massachusetts alleging that the Company misled investors about itsefforts to obtain FDA approval for tivozanib. Without admitting or denying the allegations in the SEC’s complaint, the Company consented to the entry of afinal judgment pursuant to which the Company paid the SEC a $4.0 million civil penalty to settle the SEC’s claims against it. As this settlement wasprobable and estimable as of December 31, 2015, the Company recorded an estimated settlement liability of $4.0 million and recorded a corresponding lossin the Statement of Operations as a component of operating expenses. On March 31, 2016, the District Court entered a final judgment which (i) approved thesettlement; (ii) permanently enjoined the Company from violating Section 17(a) of the Securities Act of 1933, as amended, Sections 10(b) and 13(a) of theSecurities Exchange Act of 1934, as amended, and rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 promulgated thereunder; and (iii) ordered the Company topay the agreed-to civil penalty. On September 15, 2017 and October 31, 2017, respectively, two of the Company’s former officers consented to entry of finaljudgment to settle the SEC’s claims against them. The Company is not a party to the litigation between the SEC and the remaining former officer, and theCompany can make no assurance regarding the outcome of that action or the SEC’s claims against that individual. 134ITEM 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone. ITEM 9A.Controls and ProceduresEvaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosurecontrols and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of December 31, 2017. In designing andevaluating our disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, canprovide only reasonable assurance of achieving their objectives and our management necessarily applied its judgment in evaluating the cost-benefitrelationship of possible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that ourdisclosure controls and procedures were (1) designed to ensure that material information relating to us is made known to our management including ourprincipal executive officer and principal financial officer by others, particularly during the period in which this report was prepared and (2) effective, in thatthey provide reasonable assurance that information required to be disclosed by us in the reports the Company files or submit under the Exchange Act isrecorded, processed, summarized and reported within the time periods 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 Reporting Our 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, 2017. 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, 2017, 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. 135(b) Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting To the Stockholders and the Board of Directors of AVEO Pharmaceuticals, Inc. Opinion on Internal Control over Financial ReportingWe have audited AVEO Pharmaceuticals, Inc.’s internal control over financial reporting as of December 31, 2017, based on criteria established in InternalControl—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).In our opinion, AVEO Pharmaceuticals, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as ofDecember 31, 2017, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedbalance sheets of the Company as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive loss, stockholders’equity (deficit), and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and our report dated March 13, 2018expressed an unqualified opinion thereon that included an explanatory paragraph regarding the Company’s ability to continue as a going concern. Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing andevaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that 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. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate. /s/ Ernst & Young LLP Boston, MassachusettsMarch 13, 2018 136 Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgatedunder the Securities Exchange Act of 1934, during the fourth quarter of 2017 that have materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting. ITEM 9B.Other InformationNone. 137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 2018 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 of the Registrant” 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 2018 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 2018 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 2018 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 2018 Annual Meeting of Stockholders and is incorporated by reference herein. 138PART IV ITEM 15.Exhibits, 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’ (Deficit) 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. ITEM 16.Form 10-K SummaryNone. 139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 Certificate of Amendment of Restated Certificate of Incorporation of theRegistrant 10-Q 001-34655 08/09/2017 3.1 3.4 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 4.2 Registration Rights Agreement, dated May 13, 2016, by and among theCompany and the Investors named therein 8-K 001-34655 05/13/2016 10.3 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 Second Amended and Restated 2010 Stock Incentive Plan 8-K 001-34655 06/27/2017 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 Offer Letter by the Registrant to Michael Needle, dated January 8, 2015 10-Q 001-34655 05/07/2015 10.4 10.15 Severance Agreement, dated September 13, 2010, by and between theRegistrant and Michael Bailey 10-Q 001-34655 11/05/2010 10.1 10.16 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 10.22 140 Incorporated by Reference FiledHerewithExhibitNumber Description of Exhibit Form File Number Date ofFiling ExhibitNumber 10.17 Offer Letter by and between the Registrant and Keith Ehrlich, datedApril 21, 2015 10-K 001-34655 03/15/2016 10.19 10.18 Transition Retirement and Release of Claims Agreement, dated as ofMay 3, 2017, by and between the Registrant and Keith Ehrlich 10-Q 001-34655 08/09/2017 10.1 10.19 Offer Letter by and between the Registrant and Matthew Dallas, datedMay 8, 2017 8-K 001-34655 05/17/2017 10.1 10.20 Severance and Change in Control Agreement, dated November 20,2017, by and between the Registrant and Matthew Dallas 8-K 001-34655 11/20/2017 10.1 10.21 Offer Letter by and between the Registrant and Nikhil Mehta, datedNovember 10, 2017 X 10.22 Severance and Change in Control Agreement, dated November 20,2017, by and between the Registrant and Nikhil Mehta X Material Contracts—Financing Agreements 10.23 Securities Purchase Agreement, dated May 13, 2016, by and among theCompany and the Investors named therein 8-K 001-34655 05/13/2016 10.1 10.24 Form of Warrant to Purchase Common Stock 8-K 001-34655 05/13/2016 10.2 10.25 Amended and Restated Loan and Security Agreement, dated December28, 2017, by and among the Registrant and the parties named therein. 8-K 001-34655 01/02/2018 10.1 10.26 Sales Agreement dated February 16, 2018, by and between the Companyand Leerink Partners LLC 8-K 001-34655 02/16/2018 1.1 Material Contracts—License and Strategic Partnership Agreements 10.27† 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 10.28† 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 10.29† 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 10.30† Co-Development and Collaboration Agreement, dated as of April 9,2014 by and between the Registrant and Biodesix Inc. 10-Q 001-34655 05/07/2014 10.2 10.31 ATM Sales Agreement, dated February 27, 2015 by and between theCompany and MLV & Co. LLC 8-K 001-34655 2/27/2015 1.1 10.32 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 10.33† License Agreement, dated August 13, 2015, by and between theRegistrant and Novartis International Pharmaceutical Ltd. 10-Q 001-34655 11/09/2015 10.2 10.34† 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 10.35† License Agreement, dated December 18, 2015, by and between theRegistrant and EUSA Pharma (UK) Limited 10-K 001-34655 03/15/2016 10.42 141 Incorporated by Reference FiledHerewithExhibitNumber Description of Exhibit Form File Number Date ofFiling ExhibitNumber 10.36† Collaboration and License Agreement, dated March 17, 2016, by andbetween the Registrant and CANbridge Life Sciences Ltd. 10-Q 001-34655 05/10/2016 10.1 10.37† First Amendment, dated October 14, 2016, to Co-Development andCollaboration Agreement, dated April 9, 2014, by and between theCompany and Biodesix, Inc. 10-Q 001-34655 11/04/2016 10.1 Additional Exhibits 10.38 Memorandum of Understanding, dated December 26, 2017, by andamong the Company and the parties named therein 8-K 001-34655 12/26/2017 10.1 21.1 Subsidiaries of the Registrant 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,as adopted 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 X †Confidential treatment has been granted as to certain portions, which portions have been omitted and separately filed with the Securities andExchange Commission. 142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 13, 2018By:/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 13, 2018Michael Bailey Principal Executive Officer /s/ MATTHEW DALLAS Chief Financial Officer March 13, 2018Matthew Dallas Principal Financial and Accounting Officer /s/ Kenneth M. Bate Director March 13, 2018Kenneth M. Bate /s/ Anthony B. Evnin Director March 13, 2018Anthony B. Evnin /s/ ROBERT C. YOUNG Director March 13, 2018Robert C. Young /s/ JOHN H. JOHNSON Director March 13, 2018John H. Johnson 143 Exhibit 10.21November 10, 2017Nikhil Mehta20 Sarah WayConcord, MA 01742 Dear Nikhil:It is with great pleasure that we extend you this offer of employment to join AVEO Pharmaceuticals. The following letter sets forth theproposed terms and conditions of your offer of employment.Position. Your position will be Senior Vice President, Regulatory Affairsand Quality Assurance, and you will be designated a “Section 16 officer” (with the meaning of Rule 16a-1(f) under the SecuritiesExchange Act of 1934). If you accept this offer, your employment with the Company shall commence on a mutually agreed upondate.Compensation:•Base Salary. Your annual salary will be at the annualized rate of $419,999 paid semi-monthly. You will be eligible for a salaryreview in our 2018 common review cycle at the beginning of 2019. •Incentive Bonus. 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 annualbonus requires approval by the AVEO Board of Directors and is pro-rated based on your effective date of employment. •Stock Options. Subject to approval of the Company’s Compensation Committee, the Company shall grant you stock options topurchase 500,000 shares of common stock pursuant to the Company’s 2010 Equity Incentive Plan. The options will vest over 4years from your hire date with 25% of the options vesting after 12 months and the remainder on a monthly basis thereafter. 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 dateof employment. The renewal options will vest on a monthly basis over 4 years from the grant date. All options shall be subject to all terms, vesting schedules and other provisions set forth in the respective option plan and in aseparate option agreement. Benefits. The Company offers a competitive benefits program. As an employee, you will be able eligible to participate in the familyhealth, dental, individual life, and disability insurance; a 401(k) savings plan; three weeks of paid vacation per year accrued on per payperiod basis,  twelve paid holidays a year; flexible spending accounts for eligible medical and dependent care expenses; and a commuter assistanceprogram. For more details, please refer to the enclosed Benefits Summary. You may participate in the aforementioned bonus and benefit programs that the Company establishes and makes available to itsemployees from time to time, provided you are eligible under (and subject to all provisions of) the plan documents governing thoseprograms. The bonus and benefits made available by the Company, and the rules, terms and conditions for participation in such plansand programs, may be changed by the Company at any time without advance notice. Severance and Change in Control. Please refer to the document included with this offer of employment entitled Severance andChange in Control Agreement which is attached hereto with Exhibit A outlining specific Change in Control policies and incorporatedherein by reference. Contingencies. Your offer of employment is contingent upon AVEO’s review and determination of a successful completion of abackground investigation, which may include an evaluation of both your credit and criminal history; and the outcome of the interviewsscheduled for November 8, 2017. Prior to your start date you will be required to sign a standard employee Invention and Non-Disclosure Agreement attached hereto asExhibit B.Further, the Federal government requires you to provide proper identification verifying your eligibility to work in the UnitedStates. Please bring documents necessary to complete the Employment Eligibility Verification Form I-9 on your first date ofemployment. Refer to the enclosed Form I-9 for a list of acceptable documents. Other. As a full-time employee we expect that you will devote your full time professional efforts to the business and affairs of AVEOand, accordingly, will not pursue any other employment or business opportunities outside of the Company unless approved by yourmanagement and Human Resources. Miscellaneous. This offer of employment is intended to outline the terms of compensation and benefits available to you should youchoose to accept this position. It is not intended to imply any contract or contractual rights. Your employment will be at-will.Accordingly, you or the Company may end the employment relationship for any reason, at any time. This letter, together with the Severance and Change in Control Agreement and the Invention and Non-Disclosure Agreement to beexecuted by you and the Company, constitutes our entire offer regarding the terms and conditions of your prospective employment bythe Company. It supersedes any prior agreements, or other promises or statements (whether oral or written) regarding the offered termsof 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: HumanResources.) This offer of employment is valid until November 15, 2017. Nikhil, we are very excited about having you join AVEO and have every expectation of a productive and rewarding relationshiptogether. If you have any questions regarding this offer, please call Colleen Gallagher at 617-803-4780.Very truly yours, /s/ Michael Bailey Michael BaileyPresident and Chief Executive Officer The foregoing correctly sets forth the terms and conditions of my employment by AVEO. I am not relying on any other oral or writtenrepresentations other than as set forth above in this letter. /s/ Nikhil Mehta By: Nikhil Mehta Date  EXHIBIT 10.22SEVERANCE AND CHANGE IN CONTROL AGREEMENTTHIS SEVERANCE AND CHANGE IN CONTROL AGREEMENT (the “Agreement”), made this ____day of November 2017(the “Effective Date”), is entered into by AVEO Pharmaceuticals, Inc., a Delaware corporation with its principal place of business at 1Broadway 14th Floor, Cambridge, MA 02142 (the “Company”), and Nikhil Mehta (the “Employee”).WHEREAS, the Company has determined that appropriate steps should be taken to reinforce and encourage the employmentand dedication of the Employee and the Employee’s efforts to maximize the Company’s value.NOW, THEREFORE, as an inducement for and in consideration of the Employee’s employment with the Company and asconsideration for the Employee’s agreement to enter into and be bound by the provisions of Section 4 hereof, the Company agrees thatthe Employee shall receive the severance benefits set forth in this Agreement in the event the Employee’s employment with theCompany is terminated under the circumstances described below.1. Key Definitions.As used herein, the following terms shall have the following respective meanings:1.1 “Cause” means conduct involving one or more of the following: (i) the conviction of the Employee of, or, plea of guilty ornolo contendere to, any crime involving dishonesty or any felony; (ii) the willful misconduct by the Employee resulting in materialharm to the Company; (iii) fraud, embezzlement, theft or dishonesty by the Employee against the Company resulting in material harmto the Company; (iv) the repeated and continuing failure of the Employee to follow the proper and lawful directions of the Company’sChief Executive Officer or the Board after a written demand is delivered to the Employee that specifically identifies the manner inwhich the Chief Executive Officer or the Board believes that the Employee has failed to follow such instructions; (v) the Employee’scurrent alcohol or prescription drug abuse affecting work performance, or current illegal use of drugs regardless of the effect on workperformance; (vi) material violation of the Company’s code of conduct by the Employee that causes harm to the Company; or (vii) theEmployee’s material breach of any term of the Agreement, or any other applicable confidentiality and/or non-competition agreementswith the Company.1.2 “Good Reason” means the occurrence, without the Employee’s written consent, of any of the following events: (A) anymaterial diminution in the Employee’s duties, responsibilities or authority, or (B) a material reduction in the Employee’s base salary(unless such reduction is effected in connection with a general and proportionate reduction of compensation for all employees of his orher level), provided, however, that Good Reason can only occur if (i) the Employee has given the Company a written notice oftermination indicating the existence of a condition giving rise to Good Reason and the Company has not cured the condition giving riseto Good Reason within thirty (30) days after receipt of such notice of termination, and (ii) such notice of termination is given withinninety (90) days after the initial occurrence of the condition giving rise to Good Reason and further provided that a termination forGood Reason shall occur no more than one hundred eighty (180) days after the initial occurrence of the condition giving rise to GoodReason.1.3 “Disability” means (i) the Employee is unable to engage in any substantial gainful activity by reason of any medicallydeterminable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period ofnot less than twelve (12) months or (ii) the Employee is, by reason of any medically determinable physical or mental impairment thatcan be expected to result in death or can be expected to last for a continuous period of not less than twelve  (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plancovering employees of the Company; provided that in each case, the Employee’s physical or mental impairment shall be determined byan independent qualified physician mutually acceptable to the Company and the Employee (or his personal representative) or, if theCompany and the Employee (or such representative) are unable to agree on an independent qualified physician, as determined by apanel of three physicians, one designated by the Company, one designated by the Employee (or his personal representative) and onedesignated by the two physicians so designated.2. Termination Without Cause or for Good Reason.2.1 Other than as set forth in Section 3 below, if the Employee’s employment with the Company is terminated by the Companywithout Cause or due to the Employee’s Disability, or by the Employee for Good Reason, then the Company shall:(a) continue to pay the Employee his base salary in effect on the date of termination, to be paid in accordance with theCompany’s customary payroll practices as are established or modified from time to time as follows for the period of time setforth below (the “Severance Period”):(i) if the termination occurs prior to June 30, 2018, then Company shall pay the Employee his base salaryuntil the earlier of (x) the date six (6) months following the date of termination, or (y) the date on which theEmployee commences employment or a consulting relationship with substantially equivalent compensation;(ii) if the termination occurs on or after June 30, 2018, then the Company shall pay the Employee his basesalary until the earlier of (x) the date twelve (12) months following the date of termination, or (y) the date onwhich the Employee commences employment or a consulting relationship with substantially equivalentcompensation;(b) pay to the Employee (i) on the date of termination, any base salary earned but not paid and any vacation accrued butnot used through the date of termination, and (ii) within thirty (30) days after the date of termination, any reimbursable businessexpenses incurred by the Employee through the date of termination pursuant to any expense reimbursement policies of theCompany then in effect; and (c) to the extent the Employee and any qualified beneficiary with respect to such Employee elects continuation of healthbenefit coverage under Section 4980B (“COBRA”) of the Internal Revenue Code of 1986, as amended (the “Code”), andcontinues to be eligible for such benefits, the Company shall provide payments to the Employee for such benefits equal to theamount contributed for active employees with similar benefits and similar participating beneficiaries until the earlier of (x) theSeverance Period, or (y) the date the Employee becomes eligible for group health coverage through another employer.2.2 Except for the payments under Section 2(b) (which are not contingent upon the Employee’s execution of a release ofclaims), the payments and benefits to the Employee under this Section 2 shall (i) be contingent upon the execution and non-revocationby the Employee of a general release of claims in favor of the Company, in the form provided by the Company at the time of theEmployee’s termination (the “Release”) within sixty (60) days following the date of termination (the “Release Period”); provided that ifthe Release does not become effective during the Release Period, the payments and benefits described in Sections 2.1(a) and 2.1(c) ofthis Agreement that commenced following the date of termination shall cease following the Release Period and (ii) constitute the soleremedy of the Employee in the event of a termination of the Employee’s employment in the circumstances set forth in this Section 2.  2.3 Notwithstanding anything herein to the contrary, all benefits under this Section 2 shall terminate immediately if theEmployee, at any time, violates any proprietary information, assignment of inventions agreement, confidentiality, non-competition ornon-solicitation obligation to the Company, or any other continuing obligation to the Company.3. Termination upon a Change in Control.If the Employee is an “Eligible Employee” as defined in the Key Employee Change in Control Benefits Plan adopted by theCompany in December 2007, as amended and as may be amended in the future (the current terms of which are attached hereto asExhibit A) (the “Change in Control Plan”) at the time of a Change in Control, as defined in said Change in Control Plan, then anytermination of the Employee’s employment following such Change in Control shall be governed by the terms of the Change inControl Plan and no benefits shall be provided under the terms of this Agreement. 4. Non-Competition and Non-Solicitation.4.1 Restricted Activities. While the Employee is employed by the Company and for a period of one (1) year after the terminationor cessation of such employment for any reason, the Employee will not:(a) directly engage in the development or commercialization of a Competitive Product for another business or enterprise.For purposes of this provision, a “Competitive Product” means any therapeutic or diagnostic product that competes with anyproduct that the Company (i) has, as of the date of cessation of the Employee’s employment with the Company, developed to thestage of readiness for a phase 2 clinical trial or later; or (ii) has sold at any time during the Employee’s employment with theCompany or plans to commence selling during the one year period after the cessation of the Employee’s employment;(b) directly or indirectly either alone or in association with others (i) solicit, or permit any organization directly orindirectly controlled by the Employee to solicit, any employee of the Company to leave the employ of the Company, or(ii) solicit for employment, hire as an employee or engage as an independent contractor, or permit any organization directly orindirectly controlled by the Employee to solicit for employment, hire as an employee or engage as an independent contractor,any person who was employed or engaged by the Company at the time of the termination or cessation of the Employee’semployment with the Company or within six months preceding such termination or cessation; provided, that this clause (ii) shallnot apply to the solicitation, hiring or engagement of any individual whose employment with the Company has been terminatedfor a period of six months or longer; or(c) directly or indirectly make any statements that are professionally or personally disparaging about, or adverse to, theinterests of the Company (including its officers, directors, employees and consultants) including, but not limited to, anystatements that disparage any person, product, service, finances, financial condition, capability or any other aspect of theCompany’s business, or engage in any conduct which could reasonably be expected to harm professionally or personally theCompany’s business or reputation (including its officers, directors, employees and consultants); provided that these obligationsin Section 4.1(c) will not prevent the Employee from engaging in ordinary business competition with the Company after theprovisions of Section 4.1(a) have expired, providing truthful information to any regulatory agency or providing truthfultestimony in any litigation involving the Company or its officers, directors, employees and consultants.If the Employee violates or breaches any of the provisions of this Section 4.1, then the provisions of this Section 4 shall beapplicable to the Employee until a period of one year has expired without any violation or breach of such provisions.  4.2 Interpretation. If any restriction set forth in Section 4.1 is found by any court of competent jurisdiction to be unenforceablebecause it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall beinterpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.4.3 Equitable Remedies. The restrictions contained in this Section 4 are necessary for the protection of the business and goodwillof the Company and are considered by the Employee to be reasonable for such purpose. The Employee agrees that any breach of thisSection 4 is likely to cause the Company substantial and irrevocable damage which is difficult to measure. Therefore, in the event ofany such breach or threatened breach, the Employee agrees that the Company, in addition to such other remedies which may beavailable, shall have the right to obtain an injunction from a court restraining such a breach or threatened breach and the right tospecific performance of the provisions of this Section 4 and the Employee hereby waives the adequacy of a remedy at law as a defenseto such relief.5. Taxes.5.1 The payments set forth in Sections 2 and 3 above shall be subject to the withholding of such amounts, if any, relating to taxand other payroll deductions as the Company determines are reasonably required pursuant to any applicable law or regulation. Neitherthe Employee nor the Company shall have the right to accelerate or to defer the delivery of the payments to be made under Sections 2and 3 of this Agreement. 5.2 Subject to this Section 5.2, payments or benefits under this Agreement shall begin only upon the date of a “separation fromservice” of the Employee (determined as set forth below) which occurs on or after the termination of the Employee’s employment. Thefollowing rules shall apply with respect to distribution of the payments and benefits, if any, to be provided to the Employee under thisAgreement:(a) It is intended that each installment of the payments and benefits provided under this Agreement shall be treated as aseparate “payment” for purposes of Section 409A of the Code and the guidance issued thereunder (“Section 409A”). Neither theCompany nor the Employee shall have the right to accelerate or defer the delivery of any such payments or benefits except tothe extent specifically permitted or required by Section 409A;(b) If, as of the date of the “separation from service” of the Employee from the Company, the Employee is not a“specified employee” (each within the meaning of Section 409A), then each installment of the payments and benefits shall bemade on the dates and terms set forth in this Agreement;(c) If, as of the date of the “separation from service” of the Employee from the Company, the 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 this Agreement that, in accordance with the dates andterms set forth herein, will in all circumstances, regardless of when the separation from service occurs, be paid within theshort-term deferral period (as defined in Section 409A) shall be treated as a short-term deferral within the meaning ofTreasury Regulation Section 1.409A-1(b)(4) to the maximum extent permissible under Section 409A; and(y) Each installment of the payments and benefits due under this Agreement that is not described in Section 5(c)(x)and that would, absent this subsection, be paid within the six-month period following the “separation from service” of theEmployee of the Company shall not be paid until the date that is six months and one day after such separation fromservice (or, if earlier, the death of the Employee), with any such installments that are required to be delayed beingaccumulated during the six-month period and paid in a lump sum on the date  that is six months and one day following the Employee’s separation from service and any subsequent installments, if any,being paid in accordance with the dates and terms set forth herein; provided, however, that the preceding provisions ofthis sentence shall not apply to any installment of payments and benefits if and to the maximum extent that that suchinstallment is deemed to be paid under a separation pay plan that does not provide for a deferral of compensation byreason of the application of Treasury Regulation 1.409A-1(b)(9)(iii) (relating to separation pay upon an involuntaryseparation from service). Such payments shall bear interest at an annual rate equal to the prime rate as set forth in theEastern 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 Treasury Regulation Section 1.409A-1(b)(9)(iii) must bepaid no later than the last day of the second taxable year of the Employee following the taxable year of the Employee inwhich the separation from service occurs.(d) The determination of whether and when a separation from service of the Employee from the Company has occurredshall be made and in a manner consistent with, and based on the presumptions set forth in, Treasury Regulation Section 1.409A-1(h). Solely for purposes of this Section 5(d), “Company” shall include all persons with whom the Company would beconsidered a single employer as determined under Treasury Regulation Section 1.409A-1(h)(3).(e) All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance withthe requirements of Section 409A to the extent that such reimbursements or in-kind benefits are subject to Section 409A,including, where applicable, the requirements that (i) any reimbursement is for expenses incurred during the Executive’s lifetime(or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement during acalendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of aneligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurredand (iv) the right to reimbursement is not subject to set off or liquidation or exchange for any other benefit.(f) Notwithstanding anything herein to the contrary, the Company shall have no liability to the Employee or to any otherperson if the payments and benefits provided in this Agreement that are intended to be exempt from or compliant withSection 409A are not so exempt or compliant.6. Other Employment Termination. If the Employee’s employment terminates for any reason other than as described inSections 2 and 3, the Employee shall only receive any compensation owed to such Employee as of the termination date and any otherpost-termination benefits which the Employee is eligible to receive under any plan or program of the Company.7. Successors.7.1 Successor to Company. The Company shall require any successor (whether direct or indirect, by purchase, merger,consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to performthis Agreement to the same extent that the Company would be required to perform it if no such succession had taken place. Allcovenants and agreements hereunder shall inure to the benefit of and be enforceable by such successors or assigns without thenecessity that this Agreement be re-signed at the time of such assignment. As used in this Agreement, “Company” shall mean theCompany as defined above and any successor to its business or assets as aforesaid which assumes and agrees to perform thisAgreement, by operation of law or otherwise. 7.2 Successor to Employee. This Agreement shall inure to the benefit of and be enforceable by the Employee’s personal or legalrepresentatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Employee should die while anyamount would still be payable to the Employee or the Employee’s family hereunder if the Employee had continued to live, all suchamounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personalrepresentatives or administrators of the Employee’s estate.  8. Notices. All notices, instructions and other communications given hereunder or in connection herewith shall be in writing.Any such notice, instruction or communication shall be sent either (i) by registered or certified mail, return receipt requested, postageprepaid, or (ii) prepaid via a reputable nationwide overnight courier service, in each case addressed to the Company, at 1 Broadway14th Floor, Cambridge, MA 02142, ATTN: Michael Bailey, Chief Executive Officer, and to the Employee at the Employee’s addressindicated in the introduction to this Agreement (or to such other address as either the Company or the Employee may have furnished tothe other in writing in accordance herewith). Any such notice, instruction or communication shall be deemed to have been deliveredfive business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it issent via a reputable nationwide overnight courier service. Either party may give any notice, instruction or other communicationhereunder using any other means, but no such notice, instruction or other communication shall be deemed to have been duly deliveredunless and until it actually is received by the party for whom it is intended.9. Miscellaneous.9.1 Employment by Subsidiary. For purposes of this Agreement, the Employee’s employment with the Company shall not bedeemed to have terminated solely as a result of the Employee continuing to be employed by a wholly-owned subsidiary of theCompany.9.2 Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity orenforceability of any other provision of this Agreement, which shall remain in full force and effect.9.3 Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by theinternal laws of the Commonwealth of Massachusetts, without regard to conflicts of law principles. The Employee hereby irrevocablysubmits to and acknowledges and recognizes the jurisdiction of the courts of the Commonwealth of Massachusetts, or if appropriate, afederal court located in Massachusetts (which courts, for purposes of this Agreement, are the only courts of competent jurisdiction),over any suit, action or other proceeding arising out of, under or in connection with this Agreement or the subject matter hereof. 9.4 Waiver of Right to Jury Trial. Both the Company and the Employee expressly waive any right that any party either has ormay have to a jury trial of any dispute arising out of or in any way related to the matters covered by this Agreement.9.5 Waivers. No waiver by the Employee at any time of any breach of, or compliance with, any provision of this Agreement tobe performed by the Company shall be deemed a waiver of that or any other provision at any subsequent time.9.6 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but both ofwhich together shall constitute one and the same instrument.9.7 Entire Agreement. Except to the extent provided herein, this Agreement, together with the offer letter and the Invention andNon-Disclosure Agreement, each to be executed by you and the Company, sets forth the entire agreement of the parties hereto inrespect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements,communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party heretoin respect of the subject matter contained herein.  9.8 Not an Employment Contract. The Employee acknowledges that this Agreement does not constitute a contract ofemployment or impose on the Company any obligation to retain the Employee as an employee and that this Agreement does notprevent the Employee from terminating employment at any time.9.9 Amendments. This Agreement may be amended or modified only by a written instrument executed by both the Companyand the Employee, and, notwithstanding the provisions of the Change in Control Plan, the language of such Change in Control Planmay not be amended as it applies to the Employee except to the extent subject to a written instrument executed by both parties.9.10 Employee’s Acknowledgements. The Employee acknowledges that he: (a) has read this Agreement; (b) has beenrepresented in the preparation, negotiation and execution of this Agreement by legal counsel of the Employee’s own choice or hasvoluntarily declined to seek such counsel; and (c) understands the terms and consequences of this Agreement.9.11 Representations Regarding Prior Work. You represent that you have no agreement or other legal obligation with any prioremployer or any other person or entity that restricts your ability to engage in employment discussion with, employment with or toperform function for, the Company. You represent that you have been advised by the Company that at no time should you divulge toor use for the benefit of the Company, any trade secret or proprietary information of any previous employer. You acknowledge that youhave not divulged or used any such information for the benefit of the Company. You acknowledge that the Company is basingimportant business decision on these representations, affirm that all of the statements included herein are true and that any breach of thisSection 9.11 would be considered an material breach of this Agreement. [Remainder of page intentionally left blank]  IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above. AVEO Pharmaceuticals, Inc. Nikhil Mehta By: /s/ Michael Bailey /s/ Nikhil Mehta Title: President & CEO  EXHIBIT AAVEO PHARMACEUTICALS, INC.KEY EMPLOYEE CHANGE IN CONTROL BENEFITS PLANSECTION 1. INTRODUCTIONThe Key Employee Change in Control Benefits Plan (the “Plan”) is designed to provide separation pay and benefits to certaineligible employees of AVEO Pharmaceuticals, Inc. (“the “Company”) whose employment is involuntarily terminated without cause orvoluntarily terminated for good reason as set forth in this Plan.SECTION 2. DEFINITIONSFor 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 asincreased thereafter.(b) “BOARD” means the Board of Directors of the Company.(c) “CAUSE” means conduct involving one or more of the following: (i) the conviction of the Eligible Employee of, or, plea ofguilty or nolo contendere to, any crime involving dishonesty or any felony; (ii) the willful misconduct by the Eligible Employeeresulting in material harm to the Company; (iii) fraud, embezzlement, theft or dishonesty by the Eligible Employee against theCompany resulting in material harm to the Company; (iv) the repeated and continuing failure of the Eligible Employee to follow theproper and lawful directions of the Company’s Chief Executive Officer or the Board after a written demand is delivered to the EligibleEmployee that specifically identifies the manner in which the Chief Executive Officer or the Board believes that the Employee hasfailed to follow such instructions; (v) the Eligible Employee’s current alcohol or prescription drug abuse affecting work performance, orcurrent illegal use of drugs regardless of the effect on work performance; (vi) material violation of the Company’s code of conduct bythe Eligible Employee that causes harm to the Company; or (vii) the Eligible Employee’s material breach of any term of the Plan or anyapplicable written proprietary information, confidentiality, non-competition and/or non-solicitation agreements with the Company.(d) “CHANGE IN CONTROL” means the occurrence of any of the events set forth in subsections (A) or (B) below, providedthat 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 the Company (as defined in Treasury Regulation Section 1.409A-3(i)(5)(vi)), or (iii) a changein the ownership of a substantial portion of the assets of the Company (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 of1934, 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 common stock (the “Outstanding Company Common Stock”) or (Y) the combined votingpower of the Company’s then-outstanding securities entitled to vote generally in the election of directors (the “OutstandingCompany Voting Securities”) provided, however, that for purposes of this subsection (A), the following acquisitions of securitiesshall not constitute a Change in Control: (1) any acquisition of securities directly from the Company (excluding an acquisition ofsecurities pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable forcommon stock or voting securities of the Company, unless the Person exercising,  converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of theCompany) 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 asale or other disposition of all or substantially all of the assets of the Company in one or a series of transactions (a “BusinessCombination”), provided that, in each case, the persons who were the Company’s beneficial owners of the OutstandingCompany Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination do notbeneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combinedvoting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resultingor acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a resultof such transaction owns the Company or substantially all of the Company’s assets either directly or through one or moresubsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of theOutstanding Company Common Stock and Outstanding Company Voting Securities, respectively; or(C) such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable,the Board of Directors of a successor corporation to the Company), where the term “Continuing Director” means at any date amember of the Board (i) who was a member of the Board on the effective date of this Plan, or (ii) who was nominated or electedsubsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination orelection or whose election to the Board was recommended or endorsed by at least a majority of the directors who wereContinuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause(ii) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respectto the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of aperson other than the Board.(e) “CHANGE IN CONTROL DATE” means the first date on which a Change in Control occurs.(f) “DISABILITY” means (i) the Eligible Employee is unable to engage in any substantial gainful activity by reason of anymedically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuousperiod of not less than twelve (12) months or (ii) the Eligible Employee is, by reason of any medically determinable physical or mentalimpairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve(12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plancovering employees of the Company; provided that in each case, the Eligible Employee’s physical or mental impairment shall bedetermined by an independent qualified physician mutually acceptable to the Company and the Eligible Employee (or his personalrepresentative) or, if the Company and the Eligible Employee (or such representative) are unable to agree on an independent qualifiedphysician, as determined by a panel of three physicians, one designated by the Company, one designated by the Eligible Employee (orhis personal representative) and one designated by the two physicians so designated.(g) “INVOLUNTARY TERMINATION WITHOUT CAUSE” means an Eligible Employee’s dismissal or discharge by theCompany (or, if applicable, by any successor entity) for a reason other than Cause. The termination of employment will not be deemedto be an “Involuntary Termination Without Cause” if such termination occurs as a result of the Eligible Employee’s voluntaryresignation without Good Reason, death or Disability.  (i) “MANAGEMENT TEAM” shall include any executive officer, senior vice-president and vice-president of the Company andother employees of the Company nominated by the Chief Executive Officer and ratified by the Compensation Committee.(j) “QUALIFYING TERMINATION” means that an Eligible Employee’s employment terminates due to an InvoluntaryTermination Without Cause or a Voluntary Termination for Good Reason, in either case, within eighteen (18) months following aChange in Control Date.(k) “SECTION 16 OFFICER” means an executive officer of the Company, other than the Chief Executive Officer, ChiefFinancial Officer, Chief Business Officer and Chief Medical Officer, who is considered to be an “officer” of the Company within themeaning of Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended and “executive Officer” of the Company within themeaning of Rule 3b-7 under the Securities Exchange Act of 1934, as amended.(l) “VOLUNTARY TERMINATION FOR GOOD REASON” means any action by the Company without the Eligible Employee’sprior consent which results in he or she voluntarily terminating his or her employment with the Company (or, if applicable, with anysuccessor entity) after any of the following are undertaken by the Company (or, if applicable, by any successor entity) without suchEligible Employee’s express consent, provided, however, that a termination for Good Reason can only occur if (i) the EligibleEmployee has given the Company a written notice of termination indicating the existence of a condition giving rise to Good Reasonand the Company has not cured the condition giving rise to Good Reason within thirty (30) days after receipt of such notice oftermination, and (ii) such notice of termination is given within ninety (90) days after the initial occurrence of the condition giving rise toGood Reason and further provided that a termination for Good Reason shall occur no more than one hundred eighty (180) days afterthe initial occurrence of the condition giving rise to Good Reason: (A) any requirement by the Company that the Eligible Employeeperform his or her principal duties outside a radius of 50 miles from the Company’s Cambridge, Massachusetts location, (B) anymaterial diminution in the Eligible duties, responsibilities or authority; or (C) a material reduction in the Eligible Employee’s base salary(unless such reduction is effected in connection with a general and proportionate reduction of compensation for all employees of his orher level).SECTION 3. ELIGIBILITY AND PARTICIPATIONAn individual is deemed an “Eligible Employee” and, therefore, eligible to participate in the Plan if he or she is a member of theCompany’s Management Team at the time of such individual’s termination of employment with the Company, and such employmentterminates due to an event which constitutes a Qualifying Termination.SECTION 4. BENEFITSEligible 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 theRelease set forth in Section (f) below becoming binding on the Eligible Employee, Eligible Employee will be paid in periodicinstallments consistent with the Company’s payroll procedures as then in effect and continuing for a number of months equal to theproduct of the Eligible Employee’s “Severance Multiple” (as set forth below) times twelve (12), a total sum equal to: (i) SeveranceMultiple times the Eligible Employee’s Base Salary; (ii) the Eligible Employee’s Severance Multiple times his/her target bonus on thedate of the Qualifying Termination; and (iii) the Eligible Employee’s target bonus on the date of termination multiplied by a fraction, thenumerator of which shall equal the number of days the Eligible Employee was employed by the Company during the Company fiscalyear 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, Section 16Officer, and any other Eligible Employee nominated by the CEO and ratified by theCompensation Committee — 1.0 Senior Vice Presidents, Vice Presidents and other Eligible Employees nominated by CEOand ratified by Compensation Committee, other than those considered Section 16 Officers — 0.5 (b) HEALTH BENEFITS. Provided the Eligible Employee timely elects continued coverage under federal COBRA law, theCompany 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 eligible dependents, that the Company paid prior to his or her termination of employment for a periodfollowing his or her Qualifying Termination based on the Eligible Employee’s level as follows: Chief Executive Officer — 18 months Chief Financial Officer, Chief Business Officer, Chief Medical Officer, Section 16Officer, and any other Eligible Employee nominated by the CEO and ratified by theCompensation Committee — 12 months Senior Vice Presidents, Vice Presidents and other Eligible Employees nominated by CEOand ratified by Compensation Committee, other than those considered Section 16 Officers — 6 monthsprovided, however, that the Company will pay such premiums for the Eligible Employee and his/her eligible dependents only forcoverage for which such individual and those dependents were enrolled immediately prior to the Qualifying Termination. The EligibleEmployee shall continue to be required to pay that portion of the premium of such group health insurance coverage, including coveragefor his/her eligible dependents that he/she had been required to pay as an active employee immediately prior to the QualifyingTermination of employment (subject to change). For the balance of the period that an Eligible Employee is eligible to receive coverageunder federal COBRA law, the Eligible Employee shall be eligible to maintain coverage for himself/herself and his/her eligibledependents 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 accelerationof the vesting of any stock options or restricted stock awards (“Awards”) granted to such Eligible Employees pursuant to theCompany’s 2002 Stock Incentive Plan, as amended (the “2002 Stock Incentive Plan”), or any successor plan, including withoutlimitation those certain change in control related acceleration rights (upon a termination without cause) approved by the Board onDecember 11, 2007, and notwithstanding any provision to the contrary contained in the 2002 Stock Incentive Plan, the instrumentevidencing any Award or any other agreement between an Eligible Employee and the Company, each such Award shall be immediatelyexercisable in full and/or free of all restrictions on repurchase, as the case may be, if the Eligible Employee’s employment with theCompany 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 toreceive any earned but unpaid benefits including salary earned but unpaid, the annual bonus for the most recently completed financialyear and payment for unused accrued vacation.(e) RELEASE. To receive benefits under this Plan, an Eligible Employee must execute a general release of claims in favor of theCompany within thirty (30) days following the Eligible Employee’s Qualifying Termination, in a form provided by the Company at thetime of the Employee’s Qualifying Termination, and such release must become effective in accordance with its terms (the “Release”).Notwithstanding the foregoing, if the 30th day following the Eligible Employee’s Qualifying Termination occurs in the calendar yearfollowing the Eligible Employee’s Qualifying Termination, then the payments and benefits will commence no earlier than January 1 ofsuch subsequent calendar year.(f) TERMINATION OF BENEFITS. Benefits under this Plan shall terminate immediately if an Eligible Employee, at any time,violates any proprietary information, confidentiality, non-competition or non-solicitation obligation to the Company, or any othercontinuing obligation to the Company.(g) NON-DUPLICATION OF BENEFITS. Eligible Employees are not eligible to receive benefits under this Plan more than onetime and are not eligible to receive benefits under any other Company change in 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 taxwithholding.(i) DISTRIBUTIONS. The following rules shall apply with respect to distribution of the payments and benefits, if any, to beprovided to the Eligible 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 aseparate “payment” for purposes of Section 409A of the U.S. Internal Revenue Code of 1986, as amended, and the guidanceissued thereunder (“Section 409A”). Neither the Company nor the Eligible Employee shall have the right to accelerate or deferthe delivery of any such payments or benefits except to the extent specifically permitted 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 Employeeis not a “specified employee” (each within the meaning of Section 409A), then each installment of the payments and benefitsshall be made on the dates and terms set forth in Section 4; and(C) If, as of the date of the “separation from service” of the Eligible Employee from the Company, the Eligible Employeeis a “specified employee” (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 termsset forth herein, will in all circumstances, regardless of when the separation from service occurs, be paid within the Short-Term Deferral Period (as hereinafter defined) shall be treated as a short-term deferral within the meaning of TreasuryRegulation Section 1.409A-1(b)(4) to the maximum extent permissible under Section 409A. For purposes of thisAgreement, the “Short-Term Deferral Period” means the period ending on the later of the 15th day of the third monthfollowing the end of the Eligible Employee’s tax year in which the Eligible Employee’s separation from service occursand the 15th day of the third month following the end of the Company’s tax year in which the Eligible Employee’sseparation from service occurs; and  (y) Each installment of the payments and benefits due under Section 4 that is not paid within the Short-TermDeferral Period and that would, absent this subsection, be paid within the six-month period following the “separationfrom service” of the Eligible Employee of the Company shall not be paid until the date that is six months and one dayafter such separation from service (or, if earlier, the death of the Eligible Employee), with any such installments that arerequired 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 the dates and terms set forth herein; provided, however, that the preceding provisions ofthis sentence shall not apply to any installment of payments and benefits if and to the maximum extent that that suchinstallment is deemed to be paid under a separation pay plan that does not provide for a deferral of compensation byreason of the application of Treasury Regulation 1.409A-1(b)(9)(iii) (relating to separation pay upon an involuntaryseparation from service) or Treasury Regulation 1.409A-1(b)(9)(v) (relating to reimbursements and certain otherseparation payments). Such payments shall bear interest at an annual rate equal to the prime rate as set forth in the Easternedition of the Wall Street Journal on the Date of Termination, from the Date of Termination to the date of payment. Anyinstallments that qualify for the exception under Treasury Regulation Section 1.409A-1(b)(9)(iii) must be paid no laterthan the last day of the second taxable year of the Eligible Employee following the taxable year of the Eligible Employeein 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’semployment terminates due to death, Disability or any other reason other than a Qualifying Termination; or (ii) an Eligible Employee’semployment is terminated within thirty (30) days of his or her refusal to accept an offer of comparable employment by any successor tothe Company (provided that “comparable employment” shall mean employment at a business office the location of which is notviolative of Section 2(g)(i), with duties and responsibilities not violative of Section 2(g)(ii) and with a reduction in such EligibleEmployee’s base salary not violative of 2(g)(iii)).SECTION 6. CLAIMS PROCEDUREOrdinarily, severance benefits will be paid to an Eligible Employee without to having to file a claim or take any action other thansigning the Release as provided in Section 4(f) of this Plan and, where applicable, not revoking the Release during the applicablerevocation period. If an Eligible Employee 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 to the Company. Any claim for benefits shall be in writing, addressed to theCompany and must be sufficient to notify the Company of the benefit claimed. If such claim is denied, the Company shall within areasonable period of time provide a written notice of denial. The notice will include the specific reasons for denial, the provisions of thePlan 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 materialor information is necessary. Eligible Employees may request in writing a review of a claim denied by the Company and may reviewpertinent documents and submit issues and comments in writing to the Company. The Company shall provide a written decision uponsuch request for review of a denied claim. The decision of the Company upon such review shall be final.  SECTION 7. MISCELLANEOUSThe Company reserves the right to amend or terminate this Plan at any time; provided however, that this Plan may not beamended or terminated following the Change in Control Date; and further provided that Section 4(c) of this Plan shall not be amendedwithout the Eligible Employee’s consent unless the Board determines that the amendment, taking into account any other related action,would not materially adversely affect the Eligible Employee. This Plan shall be binding upon any surviving entity resulting from aChange in Control and upon any other person who is a successor by merger, acquisition, consolidation or otherwise to the businessformerly carried on by the Company without regard to whether or not such person actively adopts or formally continues the Plan. ThePlan shall be interpreted in accordance with the laws of the Commonwealth of Massachusetts. The Eligible Employee herebyirrevocably submits to and acknowledges and recognizes the jurisdiction of the courts of the Commonwealth of Massachusetts, or ifappropriate, a federal court located in Massachusetts (which courts, for purposes of the Plan, are the only courts of competentjurisdiction), over any suit, action or other proceeding arising out of, under or in connection with the Plan or the subject matter hereof. 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, 333-189565 and 333-221838 andForm S-3 No. 333-221837) of AVEO Pharmaceuticals, Inc. of our reports dated March 13, 2018, with respect to the consolidated financial statements ofAVEO Pharmaceuticals, Inc. and the effectiveness of internal control over financial reporting of AVEO Pharmaceuticals, Inc., included in this Annual Report(Form 10-K) for the year ended December 31, 2017./s/ Ernst & Young LLPBoston, MassachusettsMarch 13, 2018  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 13, 2018 /s/ Michael Bailey Michael BaileyChief Executive Officer (Principal Executive Officer)  Exhibit 31.2CERTIFICATIONI, Matthew Dallas, 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 13, 2018 /s/ Matthew Dallas Matthew DallasChief 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, 2017 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 13, 2018 /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, 2017 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 13, 2018 /s/ Matthew Dallas Matthew DallasChief Financial Officer (Principal Financial Officer) 

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