Here's Why AVEO Pharmaceuticals Dropped as Much as 16.3% Today

What happened

Shares of surprise biopharma AVEO Pharmaceuticals (NASDAQ: AVEO) dropped over 16% today on nearly twice the daily average trading volume without any major news story breaking. What's going on? Unfortunately, this is simply what stocks do. Sometimes they go up (a lot), sometimes they go down (a lot).

Of course, daily market movements caused by day traders reading technical charts shouldn't influence your opinion of the company. If you liked AVEO Pharmaceuticals yesterday or last week, then today's move shouldn't do anything to change your thinking. As of 3:31 p.m. EDT, the stock had settled to a 12.9% loss.

Two polished metal spheres balancing on a seesaw, with one side touching the ground and the other in the air.

So what

AVEO Pharmaceuticals has been one of the best -- and most surprising -- stocks of 2017. No one gave it a chance at gaining marketing approval for Fotivda. Given the drug candidate's poor track record of failed clinical trials, that was a reasonable bet. But when European regulators took a favorable view of the therapeutic earlier this summer, the stock jumped from the depths of obscurity at $0.75 per share to become the "must own momo" stock. It recently hit new highs near $4 per share, but has since pulled back to around $3 per share.

The stock's recent past also has an unhappy side effect for shareholders: AVEO Pharmaceuticals stock will continue to be heavily traded and shorted as Mr. Market sorts out his emotions. Today's move is a reminder that volatility will remain for the foreseeable future.

Now what

While existing shareholders should mostly ignore the noise of daily volatility, it's still very important to remain updated on the company's progress. How Fotivda will fare once available to patients in Europe is still a relative unknown and success is hardly guaranteed. Also, the upcoming data readout expected in the first quarter of 2018 from a large U.S. phase 3 trial is a binary catalyst with huge implications for the future of AVEO Pharmaceuticals. With additional early and mid-stage pipeline studies thrown in, there are quite a few moving pieces to keep track of.

Then again, often times staying informed is easier for individual investors than controlling emotions, but it's definitely worth it in the end.

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