Clovis Oncology (NASDAQ: CLVS) 3Q20 Earnings Call Transcript

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Clovis Oncology Third Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask your question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Anna Sussman, Vice President, Investor Relations. Thank you. Please go ahead.

Anna Sussman

Thank you, Tamia. Good morning, everyone, and welcome to the Clovis Oncology third quarter 2020 conference call. Thank you for joining us. You’ve likely seen this morning’s news releases. If not, they’re available on our website at clovisoncology.com.

As a reminder, this conference call is being recorded and webcast. Remarks may be accessed live on our website during the call and will be available in our archive for the next several weeks. Today’s agenda includes the following: Pat Mahaffy, our President and CEO, will review the highlights of today’s corporate update. Then Dan Muehl, Clovis’ Chief Financial Officer, will cover the quarter’s financial results in greater detail. Patrick will make a few closing remarks, and then we’ll open the call for Q&A. During which time, Lindsey Rolfe, our Chief Medical Officer, will also be available to answer questions.

Some of our analysts have alerted us that today is a heavy reporting day for Q3 results. If you’re unable to stay for Q&A and haven’t already let us know, please send us an e-mail, and we’ll set up the time to speak post-call.

Before we begin, please note that during today’s conference call, we may make forward-looking statements within the meaning of the federal securities laws, including statements concerning our financial outlook and expected business plans. All these statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in forward-looking statements. Our actual results could differ materially due to a number of factors, including the extent and duration of the effects of the COVID-19 pandemic. Please refer to our recent filings with the SEC for a full review of the risks and uncertainties associated with our business. Forward-looking statements speak only as of the date on which they are made, and Clovis undertakes no obligation to update or revise any forward-looking statements.

Additionally, we will be discussing cash burn and non-GAAP financial measures during today’s conference call. Required disclosures related to this are in today’s news release, which can be found on our website.

Now I’ll turn the call over to Patrick Mahaffy.

Patrick Mahaffy

Thanks, Anna. Good morning, and welcome, everybody. We appreciate your time on what I understand is a pretty busy earnings day. Despite the ongoing effects of COVID-19 on oncology practices, we achieved $38.8 million in Q3 revenues and achieved year-over-year sales growth. Today, we are also providing fourth quarter guidance of $38 million to $40 million, in line with third quarter revenues as we anticipate the ongoing impact of COVID-19 on patient diagnosis, patient visits and access to oncology practices to continue. Reflecting particularly any issues related to in-person access by sales reps and significant changes in how physicians increasingly prefer to access information related to promotional products, I’ll discuss some changes we are making to our U.S. commercial strategy, with the goal of returning to growth as rapidly as possible, especially as the ongoing impact of COVID-19 is resolved over time.

I’ll begin with the quarter’s commercial update for Rubraca. Our global net revenue for the third quarter of 2020 was $38.8 million. Dan will describe these results in greater detail. Broadly, we saw year-over-year growth, and on a sequential basis, softening in U.S. revenues and growth in ex U.S. revenues compared to the prior quarter. Importantly, about half of the U.S. sequential decline from Q2 to Q3 was increased gross to net adjustments, and the other half was due to lower volume primarily due to increased free goods. Of course, in each of Q2 and Q3, revenues were impacted by COVID-19 due to fewer diagnoses and fewer patients going to in-person office visits as oncology practices and patients continue to adapt to the impact of the virus.

Commercial patient starts in Q3 were consistent with what was observed in Q2. An additional effect of COVID-19 is that it substantially accelerated what was already a trend toward reduced in-person access by sales reps. We believe this reduced access to oncology practices will continue even once the pandemic is ultimately controlled as practices increasingly prefer digital programming and communication that can be accessed on their own time. Accordingly, we have adopted a new commercial strategy to meet these preferences. Our new strategy embraces a hybrid approach that elevates easily accessible digital programming, virtual communication and peer-to-peer interactions. In-person promotion will be reduced, and those remaining in person activities will be much more targeted. This hyper strategy does not require a larger U.S. commercial organization, so we’ve made the difficult decision to reduce the size of our organization by approximately 45 employees. As a result, our U.S. commercial team now numbers approximately 85 people.

For those of you who may wonder if this reflects a reduced commitment to Rubraca, it is in fact the opposite. We are energized about this new strategy and believe that we are in fact an early adopter of a trend that will be increasingly common for oncology marketers. While we do anticipate a net cost savings of approximately $10 million on an annual basis due to this reduction, including the effect of an increased investment in digital promotion, that was not the primary driver of these changes. We are adopting this hybrid strategy in order to better reach physicians the way they want to be reached, utilizing resources customized to their practices with the goal of returning to growth, in particular the ongoing impact of the virus resolves over time.

Turning to Europe, we did see our best sales performance ever during the third quarter. While we are pleased with our progress in Europe, as you’ve all read, like in the United States, COVID-19 has made a significant return to Europe, and clinics that had reopened to in-person promotion are again shut down. It is hard to predict the impact of the second lockdown on cancer patient visits and diagnoses.

With regard to about being a similar hybrid model in Europe, we already have a smaller commercial organization and have been utilizing virtual communication in each of our primary territories as regulations allow. National regulations vary among European countries and as compared to the United States. So it would also be much more complicated to adopt exactly the same hybrid model in Europe as we are doing in the United States.

In late August, Foundation Medicine was granted FDA approval for the FoundationOne Liquid CDx, their companion plasma-based diagnostic for multiple indications, including Rubraca. Prior to this, other diagnostics were available, but we could not actively promote them. In early October, the FDA-approved companion diagnostic was added to the Rubraca U.S. label. So as of about a month ago, we can now direct clinicians to an FDA-approved companion diagnostic for use with Rubraca in prostate cancer.

Also during the quarter, data from the TRITON2 study of Rubraca for the treatment of metastatic CRPC harboring BRCA 1 or 2 mutations were published in the Journal of Clinical Oncology. These data supported the accelerated approval and provide additional details about the study and about Rubraca as a treatment option for eligible patients. While still a modest contributor to U.S. revenues, sales in this prostate indication more than doubled in Q3 compared to Q2.

Let me turn to our pipeline for Rubraca and lucitanib as well as our clinical plan for FAP-2286. As usual, we hope to provide a more detailed update on milestones in January at the JPMorgan Virtual Conference. I’m pleased to report that on the development front, the effect of COVID-19 on our clinical trials enrollment remains minimal. We continue to adhere to the regulatory guidance that FDA and other agencies have provided regarding clinical trial conduct or in COVID-19, and we are grateful to our clinical teams and investigators who work tirelessly to assure the safety of trial participants and investigators while maintaining compliance with good clinical practice and minimize risk to the integrity of our trials.

At the virtual ESMO Conference in September, we were pleased to present data for each of our 3 compounds: Rubraca, lucitanib and FAP-2286. This included initial data from the Phase 1b part of the LIO-1 trial of lucitanib, combined with Opdivo in advanced metastatic solid tumors as both identified a recommended Phase 2 dose of lucitanib for the combo and showed promising signs of anti-tumor activity. Phase 2 part of the study is now enrolling, and the trials in progress e-poster presented at ESMO characterizes the safety-based dose titration approach utilized in Phase 2 to manage tolerability and optimize dose intensity of the lucitanib and Opdivo combination. It also included our first presentation of preclinical data for FAP-2286, our novel peptide targeted radionuclide therapy.

Data presented show that the compound potently and selectively bind fibroblast activating protein and FAP expressing tumor models for compelling anti-tumor activity. I’ll discuss the planning for clinical development program for this compound shortly.

Initial Phase 1b data from the SEASTAR evaluating Rubraca in combination of Trodelvy suggests encouraging initial activity for the combination. Obviously, with the acquisition of Immunomedics by Gilead, we don’t know presently where this combination may fit into Gilead’s priorities. We’re glad to hold the first major conference presence of our increasing pipeline activities and we anticipate multiple clinical development and regulatory milestones for our pipeline compounds in 2021. I’ll highlight some of them here.

For Rubraca, we anticipate clinical data from the ATHENA monotherapy arm in the second half of 2021, following the successful completion of enrollment in the Phase 3 1,000-patient study in frontline newly diagnosed advanced ovarian cancer earlier this year. With ATHENA, we believe we are uniquely positioned to evaluate Rubraca in terms of 2 outcomes. First, as monotherapy versus placebo in the frontline maintenance setting in the HRD population, inclusive of BRCA, and in the all-comers or intent-to-treat population. As well as any potential advantage of the combination of Rubraca and Opdivo, secondly, in the same patient population. ATHENA is the first frontline maintenance study designed to show both PARP monotherapy and PARP PD-1 combination therapy from one study design.

I’ll take a moment to review the analysis plan for ATHENA. First, as expected in the second half of 2021, we’ll see the results of Rubraca monotherapy versus placebo in all study populations. And then probably about a year later, we will see the results of Rubraca plus Opdivo versus Rubraca in all study populations. In each of these analyses, we will evaluate first the outcomes in the HRD population, which includes BRCA and then step down to the entire intent-to-treat population. We believe this study offers an opportunity to truly differentiate Rubraca in the firstline maintenance setting.

Continuing with potential 2021 milestone for Rubraca, the LODESTAR study, our Phase 2 pan-tumor study to evaluate Rubraca in homologous recombination with [pyridine], including BRCA1 and BRCA2 across tumor type, continues to enroll patients. The study will evaluate Rubraca in patients with recurrent solid tumors associated with deleterious homologous recombination repair, or HRR, gene mutation. Based on our interaction with FDA, the study may be registration-enabling for a targeted gene and tumor-agnostic label. Pending data would be potentially viable for approval in United States for this indication in the second half of 2021.

And the newest Phase 3 clinical trial for Rubraca is the CASPER study being sponsored by the Alliance for Clinical Trials in Oncology, which is part of the National Cancer Institute. CASPER is a Phase 3 study comparing enzalutamide in Rubraca to monotherapy enzalutamide and placebo as a novel therapy topline CRPC in an all-comer population. Approximately 1,000-patient study is expected to commence enrollment soon.

Let me turn to lucitanib, which of course is our investigational angiogenesis inhibitor, which inhibits vascular endothelial growth factor receptors 1 through 3, platelet derived growth factor receptors alpha and beta, and fibroblast growth factor receptors 1 through 3. In addition to the Rubraca and Opdivo combos being evaluated, our clinical collaboration with Bristol-Myers Squibb includes both ongoing and in combination of Opdivo with lucitanib. The Clovis-sponsored LIO-1 study is a Phase 1b/2 study evaluating lucitanib in combination with Opdivo. As discussed, the Phase 2 portion of the LIO-1 study in gynecological cancers is enrolling patients, and we anticipate presenting interim updates from this study at medical meetings into 2021.

Let me turn to FAP-2286 and our radionuclide therapy development program. We remain very enthusiastic about this program and in particular our lead compound FAP-2286. FAP is highly expressed in cancer-associated fibroblasts or CAFs which are found in the majority of cancer types, potentially making it a suitable target across a wide array of solid tumors. It is highly expressed in many epithelial cancers, including more than 90% of breast, lung, colorectal and pancreatic carcinomas. We are very encouraged by the recent preclinical data for FAP-2286 in animal models presented in the e-poster at ESMO and we look forward to sharing additional preclinical and clinical data at future medical meetings.

In addition, we and 3BP are collaborating on a discovery program directed to 3 additional targets for radionuclide therapy, to which we have global rights. We regarded this program for many reasons, including of course the opportunity to be a leader in the emerging field of targeted radiotherapy for the treatment of solid tumors. In this case, we have the opportunity to be the first to clinically develop an FAP-targeted radionuclide, and we are also enthusiastic about the targets that are the subject of our planned discovery collaboration.

Both have currently planned to submit to investigational new drug applications for FAP-2286 in relatively close succession during this quarter to evaluate FAP-2286 for use both in imaging and treatment agents. Overall for the INDs by the FDA, we intend to initiate a Phase 1 clinical study to determine the dose and tolerability of the FAP-targeting therapeutic agent, with the expansion cohorts planned in multiple tumor types as part of a broad development program. The FAP targeting imaging agent will be utilized to identify tumors that contain FAP for treatment in the Phase 1 clinical study.

In addition to our own science studies, a leading U.S. academic institution is sponsoring a separate imaging-only study with FAP-2286 to evaluate FAP expression in multiple tumor types, and I’m pleased to say that their IND has already been authorized by the FDA, and they are expected to initiate their study in the next several weeks. Results from this study, along with preclinical data we are generating are expected to help inform selection of tumor types for our planned Phase 2 expansion cohorts.

In my experience, it’s fairly unusual that an academic institution would conduct a study so early in the development of a drug, and I think it speaks to the enthusiasm we see largely in academic settings about targeted radionuclides in general and more specifically to FAP as an actionable target.

And with that, I’ll turn the call over to Dan to discuss third quarter 2020 financial results.