Boulder Aug 7, 2020 (Thomson StreetEvents) -- Edited Transcript of Clovis Oncology Inc earnings conference call or presentation Thursday, August 6, 2020 at 8:30:00pm GMT
Clovis Oncology, Inc. - VP of IR
Clovis Oncology, Inc. - Executive VP & CFO
Clovis Oncology, Inc. - Executive VP of Clinical, Preclinical Development & Pharmacovigilance and Chief Medical Officer
* Patrick J. Mahaffy
Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director
RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research
Ladies and gentlemen, thank you for standing by, and welcome to the Clovis Oncology Second Quarter 2020 Financial Results Webcast and Conference Call. (Operator Instructions) I would now like to hand the conference over to your speaker today, Anna Sussman, VP of Investor Relations. Thank you. Please go ahead.
Anna Sussman, Clovis Oncology, Inc. - VP of IR [2]
Thank you, Judy. Good afternoon, everyone, and welcome to the Clovis Oncology Second Quarter 2020 Conference Call. And thank you for joining us. You've likely seen this afternoon's news release. If not, it's available on our website. As a reminder, this conference call is being recorded and webcast.
Our remarks may be accessed live on our website during the call and will be available on 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, our Chief Financial Officer, will cover the quarter's financial results in greater detail. Pat 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.
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 the 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 completion 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, please note that we'll be discussing cash burn, a non-GAAP financial measure, 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 Pat.
Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [3]
Thank you, Anna. Welcome, everybody. Appreciate your time. All that was new and unfamiliar at the time of our last call has now become all too familiar for most of us as we continue to try to adjust to the new normal. I hope that all of you on the call or webcast are safe and well. I'll also note that we are each of us doing this from home. And you may well hear a dog bark or the sound of the child and from the looks out my window, a thunderstorm. So I apologize in advance for that.
We remain tremendously grateful to the health care professionals on the frontline of this global pandemic. Also want to acknowledge the tremendous effort being made by our investigators and prescribers to maintain enrollment and safely manage ongoing patients in our clinical trials. And for their efforts to continue to prescribe and manage Rubraca commercial patients during the significant upheaval to their clinics and practices during the second quarter due to COVID-19.
And I'll begin with the quarter's commercial update for Rubraca. Last quarter, I described the advantages of Rubraca as an oral oncology treatment in the COVID-19 era, which we believe provides benefit for patients and practices.
Our global net revenue for the second quarter of 2020 was $39.9 million. This represents a 21% increase from Q2 2019 and still up slightly over Q4 2019. In the second quarter, however, it is evident that COVID-19 headwinds negatively affected revenues, largely related to reduced new patient starts due to fewer diagnosis and office visits, as oncology practices and patients adjusted to the impact of the virus in the United States and Europe.
Our sales reps began their virtual efforts beginning in mid-March in the United States, and we continue to adapt our marketing efforts and activities in order to engage with U.S. physicians during this period.
With the resurgence of cases occurring across several large U.S. markets, it is unclear how long access may remain restricted at least regionally. It is important to note that in many territories, our reps are beginning to make some in office visits. And while we hope this becomes more of a trend, predicting the course of this virus, of course, remains very difficult.
In Europe, access to hospitals and clinics was challenging throughout the second quarter and remain so today, although certain countries are permitting more access. When we look at the impact of COVID-19 on U.S. paid new patient starts, we saw no clear trend through May, but we saw a meaningful decline in June. In July, we saw a recovery back toward the previous levels, aided, of course, by prostate new patient starts. We are also seeing positive progress in the EU including our best sales performance in the EU coming in the month of July of this year.
Obviously, the COVID-19 situation remains quite fluid, and it is still too early to declare any trend in either the United States or Europe.
In addition to seeking Rubraca as the maintenance treatment option of choice in recurrent ovarian cancer, we also look forward to establishing Rubraca in the U.S. in advanced mutant BRCA-positive cancer, prostate cancer, which brings us to the third and newest indication for Rubraca in the prostate cancer setting. On May 15, the FDA-approved Rubraca as monotherapy treatment for patients with BRCA1/2 mutant recurrent metastatic castrate-resistant prostate cancer. The approval was based on data from the TRITON2 clinical program in advanced prostate cancer and addresses the approximately 12% of men with metastatic CRPC who have a mutation of BRCA in the tumor.
We commenced an all virtual U.S. launch upon the receipt of this approval. As noted earlier, access to oncology clinics and physicians has been challenging. A different non COVID-19 environment, our commercial team would be leading in person and engaging with the primary clinicians in prostate-focused oncology and urology practices. That, obviously, is not possible today.
Historically, BRCA testing has not been common in the prostate cancer treatment setting. Recent PARP inhibitor approvals and related disease education efforts should ultimately result in greater awareness of the importance of testing and its potential benefits for patients.
One issue affecting our prostate cancer marketing is that our partner, Foundation Medicine has not yet received FDA approval for the companion plasma-based diagnostic for Rubraca. While other plasma-based testings are available, we cannot actively promote them. We are not in a position to remark on the confidential discussions ongoing between FMI and FDA. But our understanding is that FMI is in the later stages of the review process, and they are prepared to launch FoundationOne Liquid CDx so that it will be available to physicians and patients promptly upon FDA approval.
It was very encouraging to see the rapid update of the clinical practice guidelines in oncology for prostate cancer by NCCN shortly after approval, which now include Rubraca as a Category 2A recommendation for patients with BRCA-mutant tumors or mutant CRPC under second line and subsequent therapy.
Now I'll briefly discuss our clinical pipeline for Rubraca and lucitanib as well as our plans for FAP-2286.
On the development front, the effects of COVID-19 in our clinical trial enrollment has been minimal. We, of course, adhere to the regulatory guidance that FDA and other agencies have provided regarding clinical trial conduct during 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. We successfully completed target enrollment in ATHENA, our Phase III 1,000-patient study in front-line newly diagnosed advanced ovarian cancer maintenance in June. Target enrollment of 1,000 patients was achieved in less than 2 years, and we could not have achieved this milestone without the active involvement of the Gynecologic Oncology Group, or GOG, and the European Network for Gynaecological Oncological Trial, or ENGOT, 2 of the largest cooperative groups in the U.S. and Europe dedicated to the treatment of gynecological cancers, and to them, we are grateful.
The LODESTAR study, our Phase II pan-tumor study to evaluate Rubraca in homologous
recombination repair genes, including BRCA, across tumor types, continues to enroll patients. The study will evaluate Rubraca in patients with recurrent solid tumors associated with a deleterious homologous recombination repair, or HRR gene mutation. Based on our interactions with FDA, the study may be registration-enabling for a targeted gene and tumor-agnostic label. And we could potentially file for approval in the United States for these indications next year.
The newest Phase III clinical trial for Rubraca is the CASPER study, which is sponsored by the Alliance for Clinical Trials in Oncology, which itself is a part of the National Cancer Institute. CASPER is a Phase III study comparing enzalutamide and Rubraca to enzalutamide and placebo as a novel therapy in all-comer frontline metastatic CRPC. The study, which is expected to begin enrolling in September, will enroll approximately 1,000 patients.
Next, I'll briefly highlight our combination studies with Bristol-Myers Squibb for both Rubraca and lucitanib and then discuss our newest compound, FAP-2286. We remain enthusiastic about our ongoing clinical collaboration with Bristol-Myers Squibb, and I'll take a moment to review certain of our combination studies for both Rubraca and lucitanib with nivolumab. I'll begin with Rubraca.
As I mentioned in our highlights for the quarter, we successfully completed target enrollment in the Clovis-sponsored ATHENA study, our Phase III 1,000-patient study in front-line newly diagnosed advanced ovarian cancer maintenance in June. 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 in the same patient populations. ATHENA is the first frontline switch maintenance study designed to show both PARP monotherapy and PARP PD-1 combination therapy in 1 study design.
I'll take a moment to remind everybody of the statistical analysis plan. First, expected in the second half of next year, we will see the results of Rubraca monotherapy versus placebo in all study populations. And then probably a year or more later, we will see the results of Rubraca plus Opdivo versus Rubraca in all study populations. In each of these analyses, we will first evaluate outcomes in the HRD population, including BRCA, and then step down to the entire intent-to-treat population. We believe this study, therefore, offers an opportunity to truly differentiate Rubraca in the frontline maintenance setting.
Beyond ATHENA, FRACTION-GC is a Bristol-Myers Squibb-sponsored multi-arm Phase II study evaluating the combinations of each of Opdivo and Yervoy with Rubraca as well as Opdivo, Yervoy and Rubraca in combination with the treatment of advanced gastric cancer. This is the first sponsored study to explore this triplet combination.
Now I'll turn to lucitanib. Lucitanib, of course, is our investigational inhibitor of tyrosine kinases, including VEGF receptors 1 through 3, PDGF receptors alpha and beta and FGF 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 plan combinations of Opdivo with lucitanib.
The Clovis-sponsored LIO study is a Phase Ib/II study evaluating lucitanib in combination with Opdivo. As we announced earlier this week, the Phase II portion of the LIO-1 study in gynecological cancers is now open for enrollment, and the first patient in the trial has been treated. I'm pleased to say that 2 abstracts related to LIO-1 were accepted as posters for the upcoming ESMO Virtual Meeting next month, including the initial data from the Phase Ib portion of the study as well as a Trial in Progress poster for the Phase II study.
As you may know or may infer from the name, the Trial in Progress poster does not contain study data but describe study design to build awareness for clinicians in support of study enrollment. It has long been our objective to present these initial clinical data at our fall 2020 medical meeting, and I'm grateful to the patients, clinicians and lucitanib team for their continued enthusiasm for this study during this challenging time.
We remain very enthusiastic about our peptide-targeted radiopharmaceutical therapy program, and in particular, our lead program or 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 believe that recent preclinical data for FAP-2286 in animal models, which will be the subject of a poster at the upcoming ESMO Virtual Meeting is very encouraging, and we look forward to sharing it with you next month.
In addition, we and 3BP, our partner, are collaborating on a discovery program directed at 3 additional targets for radionuclide therapy, to which we have global rights. We regarded to 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 ongoing discovery collaboration.
Clovis currently plans to submit 2 INDs applications for FAP-2286 in a relatively close succession during the fourth quarter of 2020 to evaluate FAP-2286 for use as both imaging and treatment agent, respectively. Upon activation of the INDs by the FDA, we intend to initiate a Phase I study to determine the dose and tolerability of the FAP targeting therapeutic agent with expansion cohorts planned in multiple tumor types as part of the global development program. The FAP targeted -- targeting imaging agent will be utilized to identify tumors that contain FAP for treatment in the Phase I study.
This fall, we also expect a leading U.S. academic institution to sponsor and initiate a separate imaging-only study with FAP-2286 to evaluate FAP expression and multiple tumor types. Results from this study, along with other preclinical data we are generating, will help direct our Phase II expansion cohorts to tumors with high FAP expression. And with that, I'll turn the call over to Dan to discuss second quarter financial results.
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Daniel W. Muehl, Clovis Oncology, Inc. - Executive VP & CFO [4]
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Thanks, Pat, and hello, everyone. We reported net product revenue for Rubraca of $39.9 million for Q2 2020, which included U.S. net product revenue of $36.7 million and ex-U. S. net product revenue of $3.2 million. This includes a modest amount of net revenue from our new prostate indication in the U.S. for the 6 weeks following the May 15 approval.
Second quarter 2020 net revenue represents a 21% increase over Q2 2019, in which we reported net revenue of $33 million including net product revenues in the U.S. of $32.7 million and ex U.S. of $0.3 million. The second quarter of 2019 represented the first quarter of Rubraca sales outside of the U.S.
For the first half of 2020, we reported net product revenue for Rubraca of $82.5 million compared to $66.1 million in the first half of 2019, an increase of 25%. Net product revenue decreased 6% sequentially from Q1 to Q2 2020, and we attribute this to the effects of COVID-19 during the quarter, principally due to reduced paid U.S. new patient starts as a result of fewer diagnoses and office visits.
The effects of COVID-19 on our business and operating results are difficult to assess or predict, in particular, given the increase in cases in major markets in the U.S. We may continue to see an impact on revenues related to COVID-19 for the remainder of 2020. Gross to net adjustments totaled 19.4% in Q2 2020 compared to 22.6% in Q1 2020.
The sequential decrease in gross to net adjustments reflects primarily a decrease in activity in the U.S. contracting and government-related programs. We expect gross to net adjustments to remain in the low 20% range, depending on revenue and distribution mix for the U.S. and Europe. The decrease in gross to net adjustments was mostly offset by an increase in our free goods percentage, which increased from 12.4% in Q1 to 16.2% in Q2 or $7.1 million in commercial value.
Distributor inventory was only slightly higher at the end of Q2 versus Q1, indicating minimal change in distributor inventory as a reaction to COVID-19. We currently have no issues with either drug supply or distribution of drug to the patient. We have described product supply cost as a meaningful part of our cash spend over the last couple of years as we transition to a new manufacturing facility and have significant supply available.
Turning now to a discussion of cash. As of June 30, we had $261.4 million in cash and equivalents. This includes the $82.8 million in net proceeds raised in an equity offering of 11.1 million shares of common stock in May 2020. Through the end of the second quarter, we have reduced our total outstanding convertible debt by $145.1 million and outstanding principal amount.
And as of June 30, we had drawn approximately $68 million under the TPG ATHENA clinical trial financing and had up to $107 million available to draw under the agreement to fund the expenses of the ATHENA trial through Q3 2022.
Based on the company's anticipated revenues, spending, available sources -- financing sources and existing cash and cash equivalents, we believe we have sufficient cash and cash equivalents to fund our operations into early 2022, including any cash repayment, unless refinanced earlier, of the remaining $64.4 million, an aggregate principal amount of the 2.5% convertible notes at their maturity in September 2021.
Net cash used in operating activities was significantly lower at $59.9 million for Q2 2020 compared to $98 million for Q2 2019. Similarly, net cash used in operating activities for the first half of 2020 was $142.4 million compared with $196.5 million for the same period in 2019.
Borrowings under the TPG ATHENA financing provided $17.7 million in cash in Q2 2020, and we paid a milestone payment to Pfizer of $8 million for the U.S. mCRPC approval. Cash burn in Q2 2020 was $50.1 million, a 25% decline from the Q1 2020 cash burn of $66.9 million.
We continue to manage cash carefully to extend our runway into 2022. And we expect cash burn to decrease in the second half of 2020 compared to the first half of 2020 and for the full year 2021 compared to 2020.
We reported a net loss of Q2 -- for Q2 2020 of $92.2 million or $1.15 per share compared to a net loss for the second quarter of 2019 of $120.4 million or $2.27 per share. We reported a net loss for the first half of 2020 of $191.6 million or $2.52 per share compared to a net loss of $206.9 million or $3.91 per share in the comparable period in 2019. Net loss for the second quarter and the first half of 2020 included share-based compensation of $13.3 million and $26.3 million compared to $14.1 million and $27.8 million for the same periods in 2019.
Research and development expense totaled $69.9 million for Q2 2020 compared to $70.7 million for the second quarter of 2019. R&D in the first half of 2020 totaled $138.1 million compared to $132.8 million in the first half of 2019. We expect research and development expenses to be lower than the full year 2021 compared to 2020.
Selling, general and administrative expenses totaled $41.9 million for Q2 2020 compared to $48 million for Q2 2019.
SG&A for the first half of 2020 was $84.85 million -- $84.5 million compared to $95.8 million for the first half of 2019. Selling, general and administrative expenses decreased during the second quarter and the first half of 2020, partly resulting from savings due to the COVID-19 situation globally and overall cost reduction efforts.
We continue to expect savings in selling, general and administrative expenses as a result of the COVID-19 situation globally.
As noted, we expect our R&D expenses to decrease in 2021 compared to 2020, SG&A expenses should continue approximately at this lower Q2 2020 level during the upcoming quarters through 2021. These factors, along with planned revenue, should contribute to a reduction in quarterly cash burn into and through 2021.
I'll turn the call back over to Pat.
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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [5]
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Thanks, Dan. In summary, we made progress in a difficult quarter despite the near-term headwinds that COVID-19 presents. We believe that Rubraca offers significant advantages as a maintenance therapy of choice for recurrent ovarian cancer patients and as a new therapeutic option for BRCA-mutant recurrent metastatic castrate-resistant patients in the evolving chronic COVID-19 environment as physicians continue to seek to reduce patient visits for clinics. As access remains challenging, we will continue to adapt our efforts to engage with clinicians during this period, which, of course, may be extended as resurgences of the virus continue in the U.S. and Europe.
I'm very pleased that we've completed target enrollment in the ATHENA study, which is the first frontline switch maintenance study designed to evaluate PARP monotherapy and PARP PD-1 combination therapy in 1 study design, for which we anticipate initial monotherapy data in the second half of 2021.
Organization is looking forward to next month's ESMO Virtual Congress, at which data for all 3 of our commercial or development stage products will be presented.
We also remain focused on continuing to manage our net cash utilized in operations. As an example of this commitment, even with a modest decline in sales compared to Q1, we reduced our cash burn by 25% in Q2 compared to Q1. And as Dan described, we believe we have sufficient resources today to fund our operations in the early 2022.
With that, I'll be happy to answer any questions you may have.
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Questions and Answers
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Operator [1]
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(Operator Instructions)
Our first question comes from the line of Kennen MacKay of RBC Capital Markets.
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Kennen B. MacKay, RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research [2]
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Maybe sort of 2 commercial questions. In ovarian, wondering if from your perspective, you do think things are beginning to come back to normal now that sort of a national lockdown has been eased, even if it is a little bit of sort of a voluntary rolling lockdown in various geographies across the country. And then second, in prostate, first off, congrats on the NCCN Category 2A listing, wondering if you can help us understand the current prescribing and reimbursement dynamic. What diagnostic is currently being used to prescribe Rubraca?
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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [3]
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Yes. So returning to normal in ovarian. Kennen, I'd say it's -- adaptations are being made in a new normal. Patient visits and diagnoses were down considerably in Q2 compared to Q1. But we do see evidence that -- and it's regional, that it is getting better. But I wouldn't say it's -- we are not, in our opinion, at sort of December-January levels yet. And the clinics are managing the patients far differently than they did before. Things you may have done in other or seen in other therapeutic areas. Patients waiting in their cars, getting a text to come in, doing their best to get them out of the clinic as fast as they can. So I wouldn't call it returning to normal. And definitely, normal would require a high amount of sales rep access. And while territory by territory, region by region, we do see some clinics open to this type of participation, I'm actually going to one of our sales leader's territories next week, and I will be making some office visits. So there will be some regions, territories where office visits are occurring. But as you read in the paper every day, there are parts of this country that are really struggling. And in most of those locations, there has not been a return to normal, and there's not a good amount of access.
With regard to prostate, reimbursement is no problem, but it's early days and only so many patients so far, but we have not had and do not anticipate an issue with reimbursement. There are germline tests, commercially available that can be used -- that are blood test, but that would only capture about 0.5% of our target population. To remind you, about half of our BRCA prostate cancer patients have a germline mutation, about half have a somatic mutation. And there are sort of CLIA lab like tests available, including from Foundation and including from a company called Guardant, also a very good company, but we can't promote to them. And so it's not the easiest dialogue they have. It has to be physicians who have experience with either of those organizations. The med onc community who is treating prostate is more likely to have done so. The urology community will not have had any experience with either Guardant or Foundation. So there -- it's a little tough with urologists right now.
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Kennen B. MacKay, RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research [4]
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Got it. And maybe just to expand on that, can you just remind us, in your current metastatic indication -- post chemo metastatic indications, what percent of targeted prescribers are urologists versus medical oncologist?
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Patrick J. Mahaffy, Clovis Oncology, Inc. - Co-Founder, CEO, President & Executive Director [5]
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It's probably around 20% are urologists and about 80% are med onc. It could be more like 25%, urologist. But right now we would say around 20% urologists.
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